THE NATIONAL SECURITY agency got wind of the attack almost immediately. A massive cyber hack was underway last month into Microsoft’s Exchange email server, and within hours the NSA had determined where the assault had originated: the People’s Republic
of China. The PRC had over the years repeatedly forsworn any intention to hack into U.S. corporate computer systems and steal intellectual property. President Xi Jinping, in fact, had given Barack Obama his word, in September 2015, that China would not engage in commercial cyber espionage.
That had been a lie, and now the Biden White House was fed up. While refraining, for the moment, to impose new sanctions against Beijing, it immediately contacted key allies, led by Japan, and asked them to join Washington in issuing a formal joint complaint to Beijing, which they did in late July.
This marked a difference from the aggressively unilateral approach on trade that the Trump administration took, and was the first significant demonstration that the Biden administration meant it when it said it would work closely with allies to respond to China’s economic predations.
In government offices in Tokyo and in European capitals, the change was welcome. “Now, on cybersecurity, we will be working closely with the United States, as well as other like-minded countries, to take countermeasures,” Japanese Prime Minister Yoshihide Suga told Newsweek in an exclusive interview during the Tokyo Olympics. “This is going to be a public-private effort. And in that, we’ll be working closely with the United States.”
For multinational companies, the ever increasing tension between Beijing and its trading partners complicates the already-difficult challenge of doing business in China. Given how intertwined Tokyo’s economy is with China’s, Japanese companies are very much in the crosshairs. Japan over the past 30 years has poured $140 billion in direct investment into China, compared to $110 billion from the U.S. Tokyo now trades more with China than with the United States, as does Washington’s other key East Asian ally, South Korea.
Ever since Deng Xiaoping reopened China to the world in 1979, the country has seemed a promised land for businessmen and women around the world. First as a source of virtually limitless low wage labor with which to make their products, then as a vast market itself, the allure of the China Dream was unmatched.
To some extent—as the trade and investment statistics illustrate—that dream has been realized. But now, with escalating friction over trade and human rights, doing business with China is fraught. As the West squares off with Beijing in the 21st century’s version of the Cold War, multinational companies are caught in the middle. As Matt Pottinger, President Trump’s Deputy National Security Adviser says, “the ideological dimension of the competition [between China and the West] is inescapable, even central.” CEOs—in the U.S., Japan and across the developed world—“need to come to grips with how much the situation has changed over the past few years and acknowledge that those changes are almost certainly here to stay.”
This is the last place most CEOs ever thought they would be. Many companies have invested decades of time and millions of dollars setting up business in China. Auto companies like Volkswagen, Toyota and General Motors have joint ventures producing cars all over the country. In 2013, China became GM’s largest market, and it has remained so ever since. Intel spent $2.5 billion on a new computer chip factory in Dalian in northeast China.
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