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Economic Statecraft: How China Legally Accesses Foreign Technologies to Build Military Capabilities

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Technical Report

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Center for Naval Analyses Arlington United States

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The Peoples Republic of China PRC pursues its national security objectives through a wide variety of cross-domain activities. The PRCs legal economic statecraft activities are directly connected to Chinas growing military power and Chinas legal means of obtaining technology damages the technological superiority of the United States and its partners and allies. This report illustrates the pathways by which China legally acquires foreign technology and built capabilities in support of its national security and defense objectives. We highlight four types of economic statecraft tools that China uses to legally access foreign technology, including 1 trade, 2 market access requirements, 3 overseas investment, and 4 the transfer of human capital. Additionally, this report identifies several key challenges for the United States in countering Chinas efforts to obtain foreign technology. First, Chinas technology acquisition goals are ambitious and the PRC adapts it tactics and techniques to deal with changing regulatory environments. Second, the United States has multiple leakage points that provide avenues for the PRC to access emerging technology. Third, the US and countries at risk of technology loss may need to re-align the incentive structures for industry and academia to prevent technology loss. Chinas state directed efforts to acquire technology takes advantage of some of the best aspects of the US economy, academic environment, and openness with allies and partners. A comprehensive strategy for technology protection will be critical to counter Chinas efforts.

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