Chinese Missiles and the Walmart Factor

By Lieutenant Commander Matthew Harper, U.S. Navy

The weapon at the heart of Kraska’s cautionary tale, the DF-21D (also known as the CSS-5), is a medium-range ballistic missile theoretically able to target U.S. carriers at sea. It is currently a cause of significant concern in U.S. military circles. The common belief is that the ability to draw a bead on the centerpiece of American power projection will prevent any effective U.S. response in a conflict over Taiwan. The DF-21D, along with China’s increasing numbers of modern quiet submarines, long-range air-defense surface ships, and fourth-generation fighter aircraft, is at the forefront of the U.S. Navy’s, and to a lesser extent the U.S. Air Force’s, consciousness. Andrew Erickson and David Yang articulated the worries in the Naval War College Review , claiming “even the mere perception that China might have realized an ASBM capability could represent a paradigm shift, with profound consequences for deterrence, military operations, arms control and the balance of power in the Western Pacific.” 3

Whether the concern is over the status of Taiwan or Chinese territorial ambitions in the South China Sea, U.S. strategic thinkers, academics, and military planners are increasingly apprehensive over China’s growing ability to prevent U.S. naval freedom of movement in the region—often referred to as China’s “anti-access capability.”

Through a Spyglass, Distortedly

In a strategic sense, “How should the United States counter Chinese anti-access capabilities?” is the wrong, or at least incomplete, question. Looking at relations with China through a naval-warfare lens alone clouds our strategic thinking, which prevents analyzing the issue effectively.

In the 21st century, qualifying naval tonnage or tallying up missile ranges and submarine numbers does not adequately inform our overarching view of the situation. In a world where a Taiwanese company in mainland China makes half of the consumer and business electronics in the world, it is insufficient to scrutinize military actions alone. 4 To further our strategic understanding, a Sino-American confrontation scenario must scrutinize military timelines, and more important, implications for the U.S. and world economies.

We live in Thomas Friedman’s “flat world,” one of increasing interconnectedness. But do we really understand what this implies?

In the current literature surrounding the Chinese military threat, there is little to indicate our methods of strategic thinking have changed. Kraska’s piece clearly highlights the shortcomings of our current mindset regarding Chinese military capabilities. He describes the buildup to the sinking of the George Washington in one sentence: “The incident—could it really be called a ‘war’?—had been preceded by a shallow diplomatic crisis between the two great powers.” 5 While Kraska warns of a Chinese rise and U.S. decline, he fails to fully examine factors that led to his scenario and therefore continues to hamper our analysis.

Erickson and Yang ask whether Chinese leaders have considered the dangers of a lopsided focus on technical capabilities, “without a proper understanding of the potential strategic risks involved.” 6 While they ask if the Chinese leadership understands the strategic risks, they fail to ask if the United States has considered the strategic and, more important, the economic risks resulting from any conflict with China.

In Red Star Over the Pacific (Naval Institute Press, 2010), Naval War College professors Toshi Yoshihara and James Holmes examine the rise of the Chinese military. However, they also appear to dismiss the wider ramifications of a Sino-American conflict. In describing the Chinese advantages of firing antiship missiles deep from inland China, the authors write, “the United States would risk a limited naval conflict escalating into a full-blown war against China, its leading trading partner.” 7 While they note that China is America’s largest trading partner, they still imply a limited naval conflict over Taiwan is possible.

Globalization touches every facet of our modern world and would play a central role in the event of U.S.-China hostilities. It is not enough to posit “a shallow diplomatic crisis” or to believe there could exist a limited naval conflict around Taiwan. Highlighted by the preceding examples, present-day literature examining possible U.S. conflict with China over Taiwan entirely dismisses the notion of an integrated world, and the larger economic risks and consequences of those actions. Whether we are analyzing this issue from a strategic, great-power, or military perspective, understanding of globalization and the interconnected nature of the United States and China is critical.

Economic Links to China and Taiwan

U.S. concern over China’s anti-access capabilities primarily center on a China-Taiwan scenario. A number of military options are open to China in responding to a Taiwan crisis. The Department of Defense report, Military and Security Developments Involving the People’s Republic of China 2010 , examined four conventional military methods China could use to force Taiwan’s acquiescence: blockade, limited force or coercive option, air and missile campaign, or invasion. However, all of these options require, at minimum, some preparation if for no other reason than to fuel ships, assemble soldiers, and prepare rockets. There is no feasible way to immediately attack or invade Taiwan overnight.

If there can be no instantaneous coercion of Taiwan, then there must be an understanding of the buildup to a China-Taiwan conflict and a wider Sino-American war. If we appreciate the interconnected nature of the world and recognize how a conflict might occur, we will better comprehend how our strategic questions must change.

Most people know that we rely on China for much of what we consume, yet perhaps few fully understand the immensity of that reliance. Writing in The Atlantic , James Fallows gives a partial run-down of what China produces:

computers, including desktops, laptops, and servers; telecom equipment, from routers to mobile phones; audio equipment, including anything MP3-related, home stereo systems, most portable devices, and headsets; video equipment of all sorts, from cameras and camcorders to replay devices; personal-care items and high-end specialty-catalog goods; medical devices; sporting goods and exercise equipment; any kind of electronic goods or accessories; and, for that matter, just about anything else you can think of. 8

U.S. angst over the outsourcing of jobs overseas rests primarily with the label “Made in China.” Tainted dog food, lead-based paints on children’s toys, and the recent suicides at high-tech assembly plants all keep Chinese production in our consumer consciousness. As the steady march of global integration continues, the U.S. public is continually surprised by what else it learns. Only after a number of suicides in Shenzhen did many become aware that a Taiwan-based electronics manufacturer named Foxconn employs more than 920,000 people in China and produces electronics for IBM, Cisco, Microsoft, Nokia, Sony, Hewlett-Packard, and Apple. 9

While Foxconn is the Taiwanese and Chinese face of globalization, Apple Computer, which is inexorably linked to both China and Taiwan, is an international face of the United States. The backs of iPads, iPhones, and iPods are all stamped “Designed by Apple in California, Assembled in China.” For Apple, currently the second largest company in the world by market capitalization, most of its parts and final production travels through the Western Pacific. An iPod’s hard drive is built in both China and the Philippines, its display module is built in Taiwan, and all of its components are shipped to China for final assembly. A Foxconn plant in Longhua, China, produces 137,000 iPhones a day, or about 90 a minute. And if the iPod and iPhone are not enough to illustrate the importance of China, the Apple iPad begins its shipping route in Shenzhen, China, and then goes to a Federal Express shipping facility in Hong Kong. 10

These examples, which do not even account for the $900 billion that China holds in U.S. government debt, along with countless other globalization facts, dictate that easy separation between military analyses and wider economic and political factors is insufficient in advancing our strategic thinking. To accurately examine a possible military conflict over Taiwan, a full understanding of the buildup to a conflict is required. Here is one way a Taiwan Strait Crisis might unfold.

Sino-American War = Plummeting Economy?

A blockade or invasion of Taiwan likely would arise from a regional diplomatic or military incident, or a return to the policies of former Taiwanese President Chen Shui Bian. While a declaration of independence by Taiwan is widely seen as the catalyst for a Sino-American conflict, an unforeseen episode between China and Taiwan is perhaps just as likely to escalate into an international incident. As evident in the November 2010 diplomatic confrontation between China and Japan after a Chinese fishing vessel rammed into a Japanese coast guard ship, relatively minor episodes in this region can quickly escalate into international crises.

In the event of such escalation, domestic tensions in both China and Taiwan would fuel diplomatic rhetoric, preventing either government from backing down. As Susan Shirk, a former deputy assistant secretary of State, has written, “it is universally believed in China that the Chinese Communist Party would fall if it allowed Taiwan to become independent without putting up a fight.” 11

Therefore, the Chinese would have to make an overt statement and convey their resolve to prevent a unilateral declaration of independence emanating from Taiwan. One way to show such resolve would be to announce increased readiness of Chinese rocket forces, and preparations to put People’s Liberation Army Navy surface ships and submarines to sea. This would demonstrate the seriousness of the military threat to Taiwan and make a clear statement to a domestic audience that only China will decide the fate of Taiwan. The United States would respond in kind militarily, if for no other reason than to ensure an adequate deterrence posture.

International economic markets would watch these events closely, and any announcement of military activities would set off a downward spiral in the international stock markets. Both Apple and Walmart, which receive most, if not all of their production from China, would see their stock prices plummet. Although a majority of Americans do not watch the stock market regularly, approximately 50 percent of the U.S. population owns stocks either outright or through mutual funds and 401Ks. Companies such as Apple, Walmart, and hundreds of others are heavily invested in China, Taiwan, and the rest of the Western Pacific. The resulting dive in the stock market would make Americans acutely aware of just how connected their financial well-being is linked to China and Taiwan.

As tensions mount, it is not hard to imagine a lone commander making a rash decision that escalates the situation. In response to such an act, or out of a need to please a domestic audience, either China or Taiwan might pursue a military option. If events continue to spiral, Chinese leadership would feel they have no choice but to take steps to ensure Taiwan remained part of One China, thus ensuring the Communist Party remained in power. In this scenario, China would declare a maritime- and air-inspection zone (or to the rest of the world, a blockade) around Taiwan.

The U.S. government would not be immune to the nationalist pressures confronting the Chinese Communist Party. Right-wing bloggers and political pressure groups would wave the Taiwan Relations Act (regardless of what it says) and use this opportunity to confront China and protect U.S. hegemony.

The American political establishment would not allow China to forcibly coerce a multiparty democracy to bend to its will, and in the worst-case scenario, U.S. political pressures and the need to reassure allies would force a retaliatory trade embargo. Both Chinese and U.S actions would significantly impact seagoing and airborne trade in the vicinity of China, Taiwan, South Korea, Japan, and the Strait of Malacca. Even without a formal blockade, the civilian response to this scenario would be the same. Once a threat of a military strike against Taiwan became a possibility, or if Chinese submarines were to put to sea in large numbers to enforce a blockade, commercial shipping in the area would drop off dramatically of its own accord.

Instant Fallout

The impact to the world economy would be instantaneous. Apple, along with other technology firms that rely on China, would face disaster. Foxconn could not be expected to continue production, even if it were somehow able to get to its components during the crisis. As a Taiwanese company, Foxconn would have no room to maneuver. Within days, if not hours, half of the world’s supply of consumer and business electronics would dry up.

Walmart, even more broadly reflective of the wider U.S. economy, would fare little better. In the era of “just-in-time logistics,” when shipping companies act as Walmart’s warehouse, it only would be a few days before the United States would start seeing eerily empty shelves, not only at Walmart but at other stores across the country. Companies in the Dow Jones Industrial Average that are dependent on sales and growth in China—including Alcoa, Caterpillar, General Electric, McDonald’s, and Boeing, to name a few—would see huge losses. The technology-heavy NASDAQ companies would lose even more of their stock-market value.

This scenario is not meant to be a scare tactic, and it is not based on the fear of a militarily capable China. It simply represents the reality in which we live. The vital economic links between the United States and China mean that even the buildup to a military conflict would have dire effects. The United States should be alarmed about “Chinese strategic writings, which often express considerable confidence that China can manage strategic escalation in measured increments with a high degree of certainty.” 12

Conflict with China would not be an isolated or limited affair. In any type of Sino-American war scenario there should be no expectation that political leaders could manage the economic fallout. Both sides, and the entire world economy, would be devastated by the economic consequences, and the ramifications would affect all facets of U.S. society.

Asking the Right Question

Concerns over China’s ostensibly peaceful rise still highlight how critical it is for the United States to manage its relations with China. As China analyst Andrew Scobell states, “To China’s leaders the potential for a conventional conflict with the U.S. is highly unlikely in the near future, with the notable exception of Taiwan.” 13

So where does this leave the vital discussion about U.S.-Chinese relations? As China becomes more of a potential military rival, U.S. strategic thinking needs to evolve beyond the age-old question of “How do we counter?” Perhaps the real question is, “How do we prevent any type of military conflict with China?” While this may appear a subtle distinction, it cannot be dismissed, given 21st-century realities.

The United States cannot allow the DF-21D missile to dominate and deflect its strategic thinking about China. A Taiwanese businessman and his company, Foxconn, have taken care of any “carrier-killers.” What the United States truly needs to fear, and do everything in its power to prevent, is a China that believes it has nothing to lose by opposing America in some type of military engagement. In this case no amount of deterrence would prevent a catastrophic conflict.

The United States must make it clear that if China were to try to use coercive military means to prevent Taiwan from declaring its de facto independence, there would be no strategic winner. Once this is understood, then the question of how to prevent a military conflict with China takes on new importance.

According to Susan Shirk, “preventing war with a rising China is one of the most difficult foreign policy challenges our country faces.” 14 Ensuring the development of a mature, self-confident China is the responsibility of the U.S. government through the State Department. Providing specific recommendations for this delicate and long-term task is beyond the scope of this article, but as a minimum, the U.S. military needs to ensure it does not stand as an impediment to this crucial task. The United States will need to do everything it can to help manage China’s transition and ensure it is done with minimal disruption to the world’s political and economic order. The world has changed dramatically since the fall of the Soviet Union. Nations are intertwined as never before, and the dynamics of the world economy and international society have changed the way we interact with the world community. The United States needs to ensure its strategic thinking changes in response.

1. “China’s Carrier Killers,” Newsweek , 4 October 2010; “China’s Anti-Ship Missiles Aren’t Effective Yet, U.S. Navy Says,” Bloomberg News , 4 January 2011; “China’s Push to Modernize Military is Bearing Fruit,” The New York Times , 6 January 2011.

2. James Kraska, “How the U.S. Lost the Naval War of 2015,” Orbis , vol. 54, no. 1 (Winter 2010), pp. 35–45.

3. Andrew S. Erickson and David D.Yang, “Using the Land to Control the Sea? Chinese Analysts Consider the Antiship Ballistic Missile,” Naval War College Review , vol. 62, no. 4 (Autumn 2009), .

4. Thomas Dinges, “Foxconn Rides Partnership with Apple to Take 50 Percent of EMS Market in 2011,” iSuppli, 27 July 2010, .

5. Kraska, “How the U.S. Lost.”

6. Erickson and Yang, “Using the Land.”

7. Toshi Yoshihara and James R. Holmes, Red Star Over the Pacific: China’s Rise and the Challenge to U.S. Maritime Strategy (Annapolis: Naval Institute Press, 2010), p. 75.

8. James Fallows, “China Makes, the World Takes,” The Atlantic , July/August 2007, .

9. “A Look Inside Foxconn, Where iPhones are Made,” Bloomberg Businessweek , 12 September 2010.

10. “The iPod has Global Value,” The New York Times , 28 June 2007; “The Man Who Makes your iPhone,” Bloomberg Businessweek , 9 September 2010.

11. Susan L. Shirk, China, Fragile Superpower: How China’s Internal Politics Could Derail Its Peaceful Rise (New York: Oxford University Press, 2007), p. 186.

12. Erickson and Yang, “Using the Land.”

13. Andrew Scobell, “Is There a Civil-Military Gap in China’s Peaceful Rise?” Parameters , vol. 39, no. 2 (Summer 2009), pp. 4–21.

14. Shirk, p. 268.

Lieutenant Commander Harper has served multiple tours on Aegis destroyers and was an operational planner for the U.S. 7th Fleet based in Yokosuka, Japan. His most recent assignment was as a special assistant to the Commander of U.S. Africa Command.

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