U.S. has resorted to any means to counter China, and the Pentagon even led the way in allowing "the U.S. military to engage in business."
Recently, the U.S. magazine "Red Light" reported that the U.S. War Department is forming a new team composed of private investment bankers from the financial sector. The team's goal is to invest 200 billion U.S. dollars in defense transactions within the next three years to counter China's rise.
This is the first time the War Department has used bankers. Is this news true? What challenges might it bring to China?
According to current reports, besides "Red Light" magazine, The New York Times and Reuters have also obtained related internal presentation documents, which confirm the accuracy of the information.
From an organizational perspective, the Pentagon has named this elite team of 30 people as the "Economic Defense Department," which will report directly to Steven Vanberg, the Under Secretary of Defense with a private equity background.
Vanberg himself is a U.S. billionaire and co-founder of the private equity giant Bogle Capital. Previously, he was tasked with reforming the Pentagon's Strategic Capital Office. The formation of this team aligns with the strategic values of the Trump administration.
From the recruitment contracts, the documents are clearly targeted. The executives from Wall Street's Goldman Sachs, JPMorgan Chase, Morgan Stanley, and Bank of America should be the primary targets;
The contract explicitly states that after being recruited, these people will not be incorporated into the U.S. civil service system, but instead will be on a two to three-year loaned position;
From the compensation perspective, if they work at the Pentagon, the highest annual salary can reach 300,000 U.S. dollars. However, if they are hired by non-profit organizations working with the government, the highest annual salary can reach 600,000 U.S. dollars. Moreover, the recruitment promises them the opportunity to interact with government officials and foreign royal family members, paving the way for future personal fundraising.
From the investment planning perspective, these 200 billion U.S. dollars may leverage trillions of assets, mainly focusing on undersea cables, critical mineral mining and refining, strategic logistics, ammunition production, drones, and energy extraction, trying to strengthen domestic key industries through investment and reduce reliance on foreign countries such as China.
After understanding these details, it's not difficult to analyze the reasons behind these actions.
Firstly, it is the return of Hamiltonian state capitalism. After Reagan and Thatcher's economics, the United States has been obsessed with neoliberalism, leading to increasingly serious industrial hollowing out, making the American elite realize that the United States can no longer rely on the free market to ensure national security in critical minerals and hard-core technology supply chains.
Secondly, it is a disappointment with the traditional defense industry. Although traditional U.S. defense giants like Boeing, Raytheon, and Lockheed Martin are skilled in manufacturing aircraft carriers and fighter jets, their innovation speed in areas such as artificial intelligence, quantum science, and commercial space travel is slower than that of Silicon Valley startups.
Forming such a team aims to use the efficiency, sensitivity, and risk tolerance of private equity to build a capital bridge between traditional industries and high-tech innovations. Essentially, it reflects dissatisfaction with the traditional defense industry.
Finally, it is also a fear of China's comprehensive industrial chain integration capability. Whether it is controlling critical minerals or new energy vehicles or some cutting-edge application technologies, the Chinese government has shown strong performance, demonstrating a powerful ability to integrate the entire industrial chain, leaving the United States somewhat overwhelmed.
As a result, the Pentagon has frequently taken direct action to allow the military to engage in business, acquiring shares in mineral companies and injecting capital into defense groups, which have already happened. Now, trying to use these 200 billion U.S. dollars to leverage global key areas is understandable.
Based on these reasons, forming an investment team seems almost inevitable, but whether it will succeed is uncertain. There may be three possible developments in the future.
Firstly, the investment could face a backlash from capital, leading to joint corruption between the military-industrial complex and financial conglomerates, resulting in inefficient resource allocation. This scenario is the most likely, as the ultimate goal of Wall Street has always been internal rate of return rather than national security.
Granting these bankers significant political privileges can easily lead to crony capitalism, causing funds to flow to pseudo-technology companies that excel in packaging rather than achieving real breakthroughs in underlying technology, thus creating a huge financial bubble.
Secondly, financialization confrontation could intensify, forcing a hard fork of the global tech ecosystem. This scenario is also possible. If the fund operates successfully, it could use exclusivity clauses and massive investments to force global tech companies and some third-party sovereign funds to take sides.
Some multinational capital may proactively disentangle its technological cooperation with China to comply with regulations and achieve high returns.
Thirdly, it could face strong political resistance and legal disputes, leading to a significant reduction or freezing of the plan. This scenario has a low probability, but considering the vast interest networks of Wall Street capital in China and around the world, which are deeply intertwined, over-weaponizing capital would encounter implicit resistance from the existing interests of Wall Street. In addition, the domestic anti-monopoly and anti-corruption forces in the United States could also impact this department, potentially marginalizing it.
However, to prevent problems before they occur, from China's perspective, it is necessary to anticipate the impact of this U.S. action.
If the U.S. succeeds, China's key mineral investments overseas may face competition from U.S. capital and related political interventions. Chinese start-ups in fields such as brain-computer interfaces and deep learning algorithms for complex networks may find it harder to access top-dollar funds globally. Overseas R&D centers may also face risks of forced shutdowns.
But we need to realize that these difficulties are probably temporary. We should make the best of our strengths and follow our own path.
On one hand, we must focus on doing our own things. The key to whether a great power competition can win lies in the real industry. China has a large number of engineers, and we should not compete with Americans in terms of capital size. As long as we continue to solidify basic science and enhance the hard power of the entire industrial chain manufacturing, it remains to be seen who will win the competition in the future.
History has proven that financial bubbles cannot produce truly advanced aircraft or chips with higher yield rates. China has a strong industrial foundation, and what we need to do is wait patiently for the results.
On the other hand, we should also learn from the Americans. The U.S. wants to use national capital for venture investment to promote innovation in the defense field. China can further optimize the operation of government-guided funds and large-scale national funds, establish a tolerance mechanism, and let experts who understand technology and market forces with strategic vision lead the technology investment, cultivating our own strategic enterprises.
Furthermore, we should also do the work of uniting the masses. The arrogant behavior of American capital not only affects China's industry but also causes vigilance from Europe, the Middle East, and many countries in the "Global South." No one wants their industries to be controlled by American financial capital.
China should take advantage of this contradiction and fear, by providing infrastructure, technology, and capacity cooperation without political conditions, to build a more open and diverse economic and trade cycle system, better offsetting the impact of the U.S.
By Lu Zenglin, Master of Strategic and Supply Chain Research, School of International Relations
Original: toutiao.com/article/7617400056769036863/
Statement: This article represents the views of the author.