China’s leaders increasingly see the path to strategic advantage running through economic power, not just military might. From shipyards to semiconductors, and robotics to unmanned systems, Beijing is mobilizing its entire economy to win what one expert calls a contest for “economic victory” that lets it rewrite rules and norms in its favor across the Indo-Pacific and the Global South.
Breaking Defense spoke with Shihoko Goto, vice president of programs and director of the Asia Program at the Foreign Policy Research Institute, about what it will take to build a regional unmanned-systems industrial base that complements US strengths, how trust and predictable rules underpin co-production, and why lessons from Ukraine’s drone war must be applied now to potential flashpoints in the Indo-Pacific.
Breaking Defense: When you talk about unmanned technology as part of China’s broader vision of ‘economic victory,’ what’s the significance of that?
Goto: All of that shipbuilding, ports, technology [is] geared toward [their] idea of how we propel China to become this big, dominant force. I should preface this by saying in 2010, China overtook Japan as the world’s second largest economy and it hasn’t looked back since.
China has grown successfully by taking advantage of the liberal international economic order, but they are looking to overhaul that even though they have been able to benefit tremendously, if not benefit the most from it. They are also looking to grow out of simply being the factory to the world.
The rise of China to be the number two in the world, second only to the United States, [is] not good enough for them. The question is: where does China want to go moving forward? How do they see themselves as winning in this global competition?
We can define ‘winning’ from a security perspective, but from the foundation of China’s strengths, it’s the economy. This is not Russia or the pre-Cold War Soviet Union. Its foundation has been the ability for it to dominate economically. Already in the Indo-Pacific it is undoubtedly the region’s hegemon, even though there are many risks to the Chinese economy from population to real estate crises. There are risks, but the momentum is going forward.
China recently released its latest five-year plan that builds on its earlier Made in China 2025 strategy. What does it tell us?
They want to be the technology superpower. If we are in a Fourth Industrial Revolution that is focused on the digital economy, they want to be able to dominate and call the shots. What that means is establish the rules and norms of governance and not simply be a production site.
They are prepared to invest the money, the people, the infrastructure, an all-across-the-country type of mobilization toward this goal. If they are able to do so, what does that mean? It means that not only is the gap between the United States and China in producing advanced semiconductors going to continue to shrink and perhaps China actually overtakes, they are also going to be able to dominate when it comes to establishing data centers.
One of the most important things that I should highlight is China’s focus on what they call ‘dual circulation strategy,’ which comes in two parts. One is to make sure that the Chinese economy is resilient to external pressures like sanctions, being cut off by export controls, so that their domestic economy is big enough and rich enough so that they can be self-contained.
The second part is that their systems, their infrastructure, and their rules and regulations and norms will be the dominant force, especially in Africa and the Global South that will be dependent on Chinese technology and not just Chinese money.
The African nations’ technology dependence on China is only growing and it will continue in that vein. That’s where I see the vision of China saying: we can push back against any retaliatory effort that Europe, the US is pushing, and also other countries, other emerging markets. The Global South is more dependent on China now than on the United States.
Let’s turn to the rest of the region. How are Japan, Taiwan, and South Korea thinking about unmanned systems and economic security in light of this?
You hear a lot about drone technology, you write a lot about drone technology, because we’re at the forefront of seeing how drone technology is being used in real time in Ukraine. The technology is coming from Europe, the United States, it’s coming to some extent from South Korea and the like, but we’re not seeing a lot of words about what’s happening in Asia.
We also don’t hear a great deal about what Chinese capabilities are. One of the reasons why we don’t know about Chinese capabilities is because they’re not necessarily engaged in war right now, and there isn’t a lot of open-source information about what is happening there.
As we go back to this idea of the five-year roadmap that China has come up with, there is great focus on robotics and unmanned technology for its defense capabilities, and robotics for defense, as well as for industrial growth.
China is not cooperating with other countries except [for] cooperation with Russia [and] that’s a one-way street. There could be lessons learned, but the actual advanced technologies that are being created stem from China and not from Russia.
Now, what is the regional response to how a war in the Indo-Pacific could play out? What kind of role can drone technology play in that? That’s one of the biggest questions that we have.
In terms of the Taiwan cross-strait relations, drone technology is certainly seen as an integral part of the defense system. We focus a great deal on the possibility of Chinese invasion into Taiwan, but I personally would say that is a highly unlikely scenario except by accident. It’s highly unlikely that the Chinese would deliberately invade Taiwan.
That does not take away from the fact that they are taking other actions, not necessarily kinetic, but other actions. They come in the form of cyberattacks and the like. Drone technology in terms of surveillance, drone technology in terms of the capabilities it has to be on the offense, these are areas that China is building up, but countries like Japan and Korea are, as well.
Korea, as you know, has emerged as one of the biggest exporters of armaments to the world and that ranking is expected to continue to rise. Japan is not, but there are expectations for Japan to have greater coordination between its manufacturing and military capabilities.
We will see greater integration more broadly, more development on drone technology. But for now the lead comes from the United States, and the question is more about sharing information, sharing technology, and then going to this idea of coordinating efforts to make use of that technology.
What conditions need to be in place in countries like Japan and South Korea for partnering and co-production with the US, especially on dual-use technologies?
I can give you a specific example of Japan’s economic security legislation which was introduced a couple of years ago. One of the key tenets of that was to focus on enhancing security clearances within Japanese companies and to ensure that proprietary information by the government was not diffused across companies.
That kind of standardization and harmonization of corporate security clearance and the need for coordination regarding the protection of sensitive technologies has been something that Japan had often been criticized for by the United States by both [political] parties over the years. It has taken steps to abide by US standards on that, and that has allowed greater cooperation by the Japanese companies to work with their US counterparts. But there’s still more to do. The more there is, the more information sharing and the more sensitive information can be shared. We are moving in that direction.
Japan, Korea, they’re not part of the Five Eyes. There’s excitement about AUKUS Pillar 2 and coordination on technologies, but we don’t know where AUKUS is going. Certainly what I can say with confidence is that Japanese companies, as well as Korean companies, are looking for more opportunities to work together with the United States.
I have to say this: it’s all based on trust. There’s a lot of concern about the United States’ economic policy more broadly. When we talk about tariffs and the unilateral approach that the United States has, that has been very disconcerting to even the staunchest of US allies in the region. There is also concern about greater protectionism and industrial policies that are being adopted that would preclude foreign investors from partnering with their US counterparts.
This goes far beyond the specific companies, specific industries, specific sectors and what kind of cooperation can be had. This is an opportunity for the United States to reassure its allies and partners that there is opportunity for both. There is a win-win for US companies to work together with their Asian counterparts and to share information, coordinate, and have interoperability of their technologies for the shared common goal, which is pushing back against China.
At the end, what you want as an investor, as a business, is predictability and for the rules to remain constant. The problem arises when those factors, those variables, continue to move, and that makes it difficult for businesses to be able to have that stable environment to make the necessary long-term investments.
One final concluding thought is workforce. Workforce is always going to be this issue when it comes to advanced technology industry development. It’s certainly the case in manufacturing advanced semiconductors. It’s going to be the case in advanced robotics and in development of drone technology, as well. There is great opportunity for that kind of cross-pollinization of talent, and that should also be part and parcel of any negotiation that moves forward.
In the US, we’ve seen a wave of non-traditional defense companies emerge, especially for unmanned systems. How does that compare with Japan and South Korea?
The United States is dynamic in that way. Oftentimes in this space it’s more of a spinoff from a traditional company. It’s companies like Mitsubishi Heavy which spin off and create a new subsidiary, but the parent is clearly there.
In the United States it’s very much startups and new companies that are being built. But there are pros and cons to both ways. Again, that’s another way where you can have synergy.
The US approach is seen as more risky but at the same time more dynamic that can actually create new technologies and new ways of operation. Whereas the Japanese approach or the Korean approach would be more about slow and steady, but you don’t regress. So very different cultures.
From an economic standpoint, what would it take to build a regional drone industrial base in the Indo-Pacific that can complement US capabilities and deter China?
The consensus is drone technology is the future of warfare and that there’s going to be more drones, not less, so you need to invest in this much more.
The United States is ahead of the game so it can actually call the shots. Therefore, the need for Asian companies and governments to work together in tandem with the United States is incredibly important.
We also have to bear in mind that for the United States, too, just like supply chain resiliency, there are pockets of excellence from each country. There is greater efficiency to be had by working more closely with other countries, even though they may be the dominant force in drone technologies. There are components and parts that other countries can augment in US technology.
Just as we have joint exercises to enhance military capabilities, we can do that with the drone technologies and assume that there is going to be interoperability for the sake of efficiency and the ability to coordinate from the get-go.
The way that the Ukraine war has developed has redefined how we look at warfare. I focus on economic security, but that’s another form of economic warfare. We are seeing technology being used in a different way and there are lessons to be learned from Ukraine that can be used in the Taiwan potential situation or regarding North Korea. We need to start using those lessons now. There is discussion, but there isn’t necessarily a lot of coordination and there is scope to do more.
One final thought: when we talk about NATO and its preoccupation with Ukraine right now, and obviously the North Atlantic is their name and they are not looking to the Pacific. Nonetheless, they too are increasingly looking for Indo-Pacific partners to get engaged in Ukraine, but also they are looking at China as a shared challenge.
There’s also great opportunity for those types of established institutions to look into the possibility of greater coordination and investment in new technologies, as well. We’ve had NATO investing in innovation funds. We have efforts for the United States to work closely with Japan on infrastructure development and investment in new technology. This is certainly one of the areas that is ripe for coordination.