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The People’s Liberation Army (PLA), Global Supply Chains and Chinese Military-Civil Fusion (MCF)

As we previously reported, the U.S. DoD has embarked on a strategic transformation based on changes in organizational structure, putting nuclear once again at center stage, a renewed commitment to the U.S. and allied military capabilities in the Indo-Pacific region, strength through power in Europe (in the form of U.S. and NATO military capabilities), and the maintenance of superiority by the U.S. in conventional weapon technologies.

Central to this transformation are supply chains. Specifically, an understanding and reduction of the reliance by U.S. military systems on foreign components, subcomponents, materials, and software. Supply chain security concerns have also been reinforced by the Biden Administration’s Supply Chain Disruptions Task Force, which has recently delivered its final report. In the next year, supply chain security assessments are due for a variety of industry sectors.

“Made in America” is an objective, rectifying supply chain security concerns with American-made components, subcomponents, materials, and software. And technology will play a role in tracking supply chains and global commodities using multiple sources of data (geospatial, etc.) used to evaluate supply chain disruptions and security, all of which can be applied to military operations.

The prevailing problem for both DoD and the private sector is the transparency, openness, and subsequent vulnerability of American supply chains. Due to our decades of ‘heavy lifting” – building the post-war economic order and making the market inroads which became the global economy – we have global supply chain tentacles everywhere, with the subsequent dependencies and vulnerability.

The Chinese have the opposite problem:  opaque supply chains, that will either remain problematic or cause unforced errors by the Chinese in their effort to construct a world-class military-industrial base on which to build 21st-century military superiority – just as the post-WWII American industrial economy was the foundation of 20th Century American military dominance.

Military-Civil Fusion (MCF)

As it turns out, supply chain transformation is a central military operational activity of the Chinese Communist Party (CCP) – and they want their supply chain to be “Made in America” too.

The CCP calls this effort Military-Civil Fusion (MCF). The Center for Advanced Studies (C4ADS) – a research NGO with a commitment to data-driven and evidence-based research and analysis of global threats worldwide – has applied their non-traditional investigative techniques and emerging analytical techniques to generate a report on these CCP defense supply chain efforts. According to the report (entitled Open Arms: Evaluating Global Exposure to China’s Defense-Industrial Base):

“Military-Civilian Fusion (MCF) seeks to harness the sophistication and output of China’s civilian economy for the benefit of defense supply chains. MCF is ushering Chinese companies into the defense economy…For MCF to succeed, the PLA and China’s defense apparatus must radically alter their opaque postures to operate in a market environment. MCF compels China’s defense supply chains to become increasingly transparent, creating visible indicators of participation in the defense economy that can be evaluated using publicly available information (PAI).”  It is in these “increasingly transparent…visible indicators” where we should be looking for China’s unforced errors.

For the private sector, the threat is that the MCF effort fuses with the already established Beijing policy encouraging Chines companies “to innovate by acquiring and adapting foreign technology” – what they call IDAR: “Introduce, Digest, Absorb, and Re-Innovate.” MCF fused with IDAR presents a growing need for the public and private sector in the U.S. to further their vigilance to prevent the acquisition by the Chinese of “American Made” technologies when considering a supply chain partnership with Chinese entities.

For now, the C4ADS report has used this potential crisis as an opportunity to harness currently available PAI for an exhaustive analysis of activities that may speak to the inappropriate use of traditional commercial Chinese supply chains means to a military supply chain operational end.  Again, from the report:

“To do so, the report analyzes China’s defense ecosystem and the activities and characteristics of Chinese companies participating in military supply chains by:

Mapping: China’s defense-industrial ecosystem using research by Chinese scholars, international experts, official Chinese media, and policy documents

Examining: 8,430 military procurement announcements for trends in the goods acquired by the Chinese military and offered by their suppliers

Analyzing: 65,727 import records and 429 investment transactions related to a sample
of 1,655 companies linked to China’s defense industrial base

Diving: Into three commercial networks in China’s defense-industrial base that exhibit multiple risk signals and have international partners”

The Executive Summary of the report highlights results the MCF and IDAR have already produced for the People’s Liberation Party:

  • The case of China South Rail demonstrates how PAI can be used to trace how a commercial deal was co-opted for military purposes.
  • The case of Beijing Highlander exemplifies how an openly pro-MCF company has historically developed technologies with international partners for the PLA Navy and continues to do so.
  • The case of Bright Laser Technologies highlights how relationships within the defense industrial base can entail increased exposure to China’s defense supply chains.

Risk Signals: A C4ADS Risk Assessment Tool  – and Action Items

For governments and companies alike, who do business with Chinese companies, this report is inventive and impressive and worth a further look. The report includes a risk assessment tool for use when considering a business relationship with a Chinese company. In their conclusion to the report, the authors also offer up the sources and methods used by the C4ADS to generate the report as an approach decision-makers should consider using to address this unique and very real military/industrial supply chain threat vector.

Direct Link to the C4ADS Report:  Open Arms: Evaluating Global Exposure to China’s Defense-Industrial Base

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Daniel Pereira

Daniel Pereira

Daniel Pereira is research director at OODA. He is a foresight strategist, creative technologist, and an information communication technology (ICT) and digital media researcher with 20+ years of experience directing public/private partnerships and strategic innovation initiatives.