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Trends that are Changing the Future

Tuesday, December 6th, 2011

A trend is a pattern of gradual change in a condition, output, or process that moves in a certain direction over time.  There are many trends that have occurred this year, but some are changing the way we work and conduct business.   We will take a look at just a few of them that are beginning to have an impact and could dramatically impact our lies if they continue in the future.

Biomimicry:  Humans have always looked to nature for inspiration to solve problems. One of the early examples of biomimicry was the study of birds to enable human flight.  The Wright Brothers, who created and flew the first airplane in 1903, derived inspiration for their airplane from observations of pigeons in flight.

The term biomimicry was popularized by scientist and author Janine Benyus in her 1997 book Biomimicry: Innovation Inspired by Nature. Biomimicry is defined in her book as a “new science that studies nature’s models and then imitates or takes inspiration from these designs and processes to solve human problems”.  Today, biomimicry is changing the way we research, invent, design, develop, and manufacture products.

The San Diego Zoo started its biomimicry programs in 2007, and the Zoological Society of San Diego recently partnered with Point Loma Nazarene University on an economic impact report looking into the feasibility of bringing another spoke into the region’s burgeoning green economy.  The report titled Biomimicry: An Economic Game Changer and estimated that biomimicry would have a $300 billion annual impact on the US economy, plus add an additional $50 billion in environmental remediation.

“The completed report articulates a compelling case for making the San Diego region a global biomimicry hub,” said Randy M. Ataide, executive director of the Fermanian Business & Economic Institute at Point Loma Nazarene University.  “Biomimicry could represent a revolutionary change in our economy by transforming many of the ways we think about designing, producing, transporting and distributing goods and services.”

An informal alliance to transform an esoteric concept into what they hope is the beginning of a future industry cluster has formed the Biomimicry Bridge (Business, Research, Innovation, Development, Governance and Education).  A memorandum of understanding to facilitate growth of the Bridge organization has been in place since 2008 between the San Diego Zoo, the City of San Diego, CONNECT, UC San Diego, San Diego State University, Point Loma Nazarene University, and the University of San Diego.

“The key to biomimicry is the value we place on natural systems and species,” said Paula Brock, chief financial officer for the San Diego Zoo. “Biomimicry offers an opportunity to bring successful economics together with conservation. We hope this study will inspire new companies and entrepreneurs to focus upon the development of this field.”

A key finding of the report is that biomimicry holds the potential to attract sizable capital inflows, driven by the prospects of rapid growth and high rates of return, and that venture capital potentially could flow into the field at a pace at least equal to that of biotech, estimated to be about $4.5 billion in the U.S. in 2010.

The San Diego Zoo and San Diego Zoo Safari Park house nearly 8,000 animals representing 840 species, and the San Diego Zoo’s accredited botanical garden has close to 40,000 species.  Allison Alberts, chief conservation and research officer for the San Diego Zoo, said “We are poised to offer the opportunity to be a living laboratory in helping biomimicry-based businesses grow.”  She added that the inspiration that comes from studying animals and plants could also be a revenue generator for the zoo. The study determined that the zoo is the only facilities-based provider of biomimicry services in the world and a natural to drive research and commercial applications.

A range of businesses in the region already are incorporating aspects of biomimicry in the design of products or ones they have on the drawing boards, said Ruprecht von Buttlar, director of finance and commercialization programs at CONECT, which serves as a networking group for investors, entrepreneurs and high-tech and life sciences professionals.

The San Diego Zoo’s Biomimicry website features a page on the latest news, research, and development of biomimetic products, a few of which are:

GreenShield: An environmentally friendly stain-resistant fabric finish inspired by lotus leaves:

Mirasol®, a display innovation by Qualcomm, mimics the microstructure of a butterfly’s wing to generate color without pigment in their handheld display technologies:

Biomatrica has developed DNA and RNA preservation technology based on the process in nature called anhydrobiosis:

Columbia Forest Products developed PureBond by manipulating soy proteins to behave like mussel byssal threads. Is the only urea-formeldehyde (carcinogen) free plywood glue on the market:

Cloud Computing: Cloud computing has become one of the hottest buzzwords in technology and  its birth as a term can be traced “to 2006, when large companies such as Google and Amazon began using ‘cloud computing’ to describe the new paradigm in which people are increasingly accessing software, computer power, and files over the Web instead of on their desktops.  It is an expansion of what has been known as software as a service (SaaS) in which cloud computing providers deliver applications via the internet that are accessed from web browsers and desktop and mobile apps, while the business software and data are stored on servers at a remote location.

This type of data center environment allows companies to get their applications up and running faster, with easier manageability and less maintenance, and enables IT to more rapidly adjust IT resources (such as servers, storage, and networking) to meet fluctuating and unpredictable business demand.

Cloud computing is all the rage. “It’s become the phrase du jour,” says Gartner senior analyst Ben Pring, echoing many of his peers. The problem is that (as with Web 2.0) everyone seems to have a different definition.

On the Hyland blog, Glenn Gibson offers a simpler definition:  “The Cloud” is a term used to describe a wide range of technologies, which are accessible through high-speed connections to the internet and private networks.

Cloud computing is at an early stage, with a growing number of providers large and small delivering a variety of cloud-based services, from full-blown applications to storage services to spam filtering.  Today, for the most part, IT must plug into cloud-based services individually, but cloud computing aggregators and integrators are already emerging.

Cloud computing is a long-running trend with a far-out horizon.  This year, TechAmerica San Diego added the new category of SaaS/Cloud for the first time at the 2011 High Tech Awards held on October 28th.    Four companies were finalists, and the winner, ServiceNow develops and delivers a comprehensive suite of cloud-based services for enterprise IT management. For a single low subscription price, ServiceNow customers have access to nearly 20 native applications built on a common, extensible platform. ServiceNow supports all common ITIL processes including incident, problem, change, request fulfillment, service level management and others.  The three other finalists were:  Kyriba, Syntricity Inc., and The Active Network.

Cloud computing is also changing the way manufacturing companies can become ISO Certified at a price affordable for companies as small as less than 25 employees and under $1.5 million in sales.   ION Quality Systems provides an innovative Quality Management System designed to revolutionize businesses. Their customizable management tools, experience, and exemplary customer service make them a partner in quality assurance. They can prepare you to get your AS9100, ISO 9001:2008 or other certification more efficiently, economically, and effectively than a traditional quality system in as little as 90 days.

However, there are concerns about the cyber security of cloud computing, and the June issue of National Defense magazine featured an article on “Cloud Computing Trend Sparks Compliance Concerns.”   Because the Obama administration has focused on cloud computing for future information technology needs, there is concern that “data stored in the cloud must always be accessible from any location, thereby increasing hacker vulnerability and the need ? without degrading fast encryption and decryption ? for robust measures to deflect security breaches.” This same cyber security concern was the focus of a symposium on “CLOUD.GOV?

The Promise, Limits, and Reality” held by the San Diego chapter of the National Defense Industry Association on October 11-13, 2011.

Social Media:  Social networking is not new; social networks have been around for far longer than people have been online. Everyone has belonged to social networks, and they still participate in social networks whether they know it or not.  What is new is social media that provides online social networking.  In addition to the more popular, Facebook, LinkedIn, and Twitter, there are Foursquare, Yelp, Groupon, and Living Social.   The BLÜ Group – Advertising & Marketing has published a free social media guide to help businesses of all sizes, particularly small and mid-sized businesses, connect with customers and potential customers, stay engaged with them, and ultimately grow their bottom line.

LinkedIn, Facebook and Twitter:  Most of us have been adding to our social media network to expand business opportunities, express opinions, and keep connected with people who change from one job to another.  Now, it is literally changing the way people conduct business, and view customers’ opinions and product ideas.  .

In the September 2011 issue of Industry Week, the article “Fueling Auto R&D with Social Media,” reported that Kia Motors Corporation  “decided to modify the seat design for their 2012 Optima as a result of a groundswell of complaints from consumers and automotive writers percolating on the Internet.”  Kia uses business intelligence software to monitor online comments about it vehicles and determined that it was bigger problem than they realized and needed to be fixed before the next major change in the model in a few years.

Ford also pays close attention to what people say about its products on social media such as Facebook and Twitter, and elsewhere on the internet.  Nissan Motor Company is also trying to grow it fan base on social media sites such as Facebook and Twitter to leverage the maximum impact when it launches new models.  Nissan is also using social media as a research tool.  In August 2011, Nissan invited its more than 300,000 Facebook fans to suggest names for a new optional interior package for the Nissan Cube.  Eric Marx of Nissan said using social media to make ”real business decisions it absolutely the future. “  A cottage industry is emerging to aggregate the vast amount of online comments into actionable data.  Nielsen Online’s BuzzMetrics software promises to deliver consumer insights and real-time market intelligence, and WiseWindow’s MOBI (Mass Opinion Business Intelligence) software to predict consumer purchasing intent and behavior.

According to one of my friends that owns a staffing agency, LinkedIn is actually changing the way people seek and are being recruited for jobs.  Having a good LinkedIn profile can mean the difference between being hired or not.

Recruiters are searching the LinkedIn database to find candidates for specific positions.  They can use the free, “Advanced People Search” function available to all LinkedIn members. They can search members and activities within specific LinkedIn groups, and many others are using a paid service called LinkedIn Recruiter that provides significantly more search functionality.

In addition, similar to the way job seekers sign up for “job alerts” to get notified via email whenever a new job gets posted that meets a certain set of criteria, recruiters can also sign up for candidate alerts to notify them of new candidates who fit their requirements.

Unemployed people and those seeking better jobs need to learn how to optimize their LinkedIn profile to align with this process of job search and recruiting.  According to Marci Reynolds, CEO of J2B Marketing, a “Job Seeker 2 Business,”™ there are many things a job seeker can do to optimize their profile to help ensure that they “show up in the appropriate search results, show up higher than other candidates (LinkedIn SEO), and stand out among the search results. Some of her tips are:

  • Your profile should be 100% “complete,” per LinkedIn standards
  • Include a detailed work history, with clear job titles and well written job descriptions that describe both your responsibilities and your key accomplishments
  • Make sure your “industry” selection is tied to the job you want, not the job you had.
  • Make sure you have some recommendations from your connections
  • Use a professional, flattering profile photo that looks like you already have the role you’re seeking
  • Use a headline to effectively market your skills and abilities. Your LinkedIn headline is like your personal tagline

Klout: If you’re new to Twitter and haven’t heard of Klout, you will soon. Klout is the gold standard for measuring your influence on Twitter.  Klout uses several measurements to come up with a Klout Score for each and every Twitter user.

The Klout Score measures influence based on your ability to drive action. Every time you create content or engage you influence others. The Klout Score uses data from social networks in order to measure:

  • True Reach: the number of people you influence. When you post a message, these people tend to respond or share it.
  • Amplification: how much you influence people. When you post a message, how many people respond to it or spread it further? If people often act upon your content you have a high Amplification score.
  • Network Impact: the influence of the people in your True Reach. How often do top Influencers share and respond to your content? When they do so, they are increasing your Network score.

Klout assigns a number between 0 and 100 to represent how influential you are on Twitter.  This number may seem arbitrary, but it’s important for several reasons.

Firstly, Klout is a much better measurement of how “well” you’re doing on Twitter than your follower count. Not all followers may really be interested in what you have to say, so using this to measure your Twitter success is not a great strategy.  Klout uses a robust suite of different measurements – which includes engaged follower count – to come to one single Klout Score.

Secondly, Klout is important because it’s the standard measurement for influence in social media, and knowing your Klout score shows that you know a thing or two about tweeting.

Thirdly, focusing on increasing your Klout score will make you a better tweeter.  Klout emphasizes things like getting retweets and using @mentions to engage with your community. So if you change your Twitter strategy to try and increase your score, you will likely end up tweeting more frequently, replying to more users, and sharing more retweetable tweets.

There are several other contenders for influence measurement on Twitter, but Klout is the most talked-about, well-known influence measure out there, so it’s a good idea to familiarize yourself with it so you can join in the conversation.

Reshoring: Reshoring simply means returning manufacturing to America from offshore.

To help accelerate this trend, there is a new initiative with a plan to efficiently reduce our imports, increase our “net exports” and regain manufacturing jobs in a non-protectionist manner.  The Reshoring Initiative was founded by Harry Moser, retired president of GF Agie Charmilles LLC, a leading machine tool supplier in Lincolnshire, Illinois.  The Initiative shows how outsourcing within the United States can reduce a company’s Total Cost of Ownership (TCO) of purchased parts and tooling and offer a host of other benefits while bringing U.S. manufacturing jobs home.

Harry Moser said, “Reshoring breaks out of the waiting-for-policy-decisions problem, the economic zero-sum-game and the increases in consumer prices and assures that the pie grows to the advantage of all Americans.  Reshoring also focuses on the manufacturing sector that has suffered so many job losses for decades and the Small-to-Medium Enterprises (SMEs) that offer the best potential for job growth.”

The Initiative documents the benefits of sourcing in the United States for large manufacturers and helps suppliers convince their U.S. customers to source local.  Archstone Consulting’s 2009 survey showed that 60% of manufacturers use “rudimentary total cost models” and ignore 20% of the cost of offshoring.   If a manufacturer is not accounting for 20% of their costs to offshore, offshoring may not be the most economical decision.  In tough economic times and stiff global competition, no company can afford this.  To help companies make better sourcing decisions the Reshoring Initiative provides:

  • A free Total Cost of Ownership (TCO) software that helps manufacturers calculate the real offshoring impact on their P&L
  • Publicity to drive the reshoring trend
  • Access to NTMA/PMA Contract Manufacturing Purchasing Fairs to help manufacturers find competitive U.S. sources.

Manufacturing companies can reshore to:

  • Reduce pipeline and surge inventory impacts on Just-in-time operations
  • Improve the quality and consistency of products
  • Cluster manufacturing near R&D facilities, enhancing innovation
  • Reduce Intellectual Property and regulatory compliance risk
  • Reduce Total Cost of Ownership (TCO)

The Initiative has received increasing visibility and influence: recognition by Industry Week magazine through inducting Harry Moser into its 2010 Manufacturing Hall of Fame, inclusion of the TCO concept in Cong. Wolf’s (R VA) “Bring Jobs Back to America Act” (H.R.516); numerous webinars; dozens of industry articles; presentations in major industry and government policy conferences in Chicago and Washington, DC; and coverage by CBS, CNBC, WSJ, USA Today and the Lean Nation radio show.

The Initiative is succeeding in changing OEMs’ behavior. Companies have committed to reshore after reading Initiative articles.  Fifty-seven representatives from large manufacturers and 113 custom U.S. manufacturers attended the May 12, 2011 NTMA/PMA Contract Manufacturing Purchasing Fair, where OEMs found competitive domestic suppliers to manufacture parts and tooling.  Sixty-four percent of the OEMs brought back to the U. S. at least some work that was currently offshored.

Of all the trends mentioned above, the Reshoring Initiative has the potential to provide the most benefit for America as a whole by reducing our trade deficit and providing increased job opportunities jobs for the millions of unemployed.   Let’s embrace these present trends to create a better future!

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China Poses Increasing Threat to U. S. Economy and National Security

Tuesday, November 29th, 2011

Last week the U.S.-China Economic and Security Review Commission submitted their annual report to Congress.  The Commission was created on October 30, 2000, by the Floyd D. Spence National Defense Authorization Act of 2001.  The 418-page unclassified report reveals the increasing threat that China poses to the U. S. economy and national security, so one can only imagine how much more serious threats were detailed in the separate classified report that was also submitted.  The report covers the following areas (abbreviated):

•Proliferation Practices—The role of China in the proliferation of weapons of mass destruction and other weapons (including dual-use technologies);

• Economic Transfers—The qualitative and quantitative nature of the transfer of U. S. production activities to China, including the relocation of high technology, manufacturing, and research and development facilities, the impact of such transfers on U. S. national security, the adequacy of U. S. export control laws, and the effect of such transfers on U. S. economic security and employment;

• Energy—The effect of the large and growing economy of China on world energy supplies and the role the U. S. can play (including joint research and development efforts and technological assistance), in influencing the energy policy of China;

• U. S. Capital Markets—The extent of access to and use of U. S. capital markets by China, including whether or not existing disclosure and transparency rules are adequate to identify China companies engaged in harmful activities;

• Regional Economic and Security Impacts—The triangular economic and security relationship among the United States, [Taiwan] and China (including the military modernization and force deployments of China aimed at [Taiwan);

• U. S.–China Bilateral Programs—Science and technology programs, the degree of noncompliance by China with agreements between the U. S. and China on prison labor imports and intellectual property rights, and U. S. enforcement policies with respect to such agreements;

• World Trade Organization Compliance—The compliance of China with its accession agreement to the World Trade Organization (WTO);

• Freedom of Expression—The implications of restrictions on speech and access to information in China for its relations with the U. S. in the areas of economic and security policy.

Since it would difficult to summarize the key points of the whole report, this article only highlights the areas posing a threat to the economy and national security of the U. S.

The report states that China is now the second-largest economy in the world and the world’s largest manufacturer, surpassing the U.S. in this ranking for the first time.  Its market exceeds that of the U. S. in industries such as automobiles, mobile handsets, and personal computers.  China’s gross domestic product (GDP) has grown from $1.32 trillion in 2001 to a projected $5.87 trillion in 2011, representing an increase of more than 400 percent.

China continues to maintain an export-driven economy with policies that subsidize Chinese companies and undervalue their currency (renminbi or RMB).  While the RMB rose by roughly 6 percent over the last year, it is still widely believed to be undervalued by as much as 30-40 percent.  “For the first eight months of 2011, the U.S. trade deficit with China increased 9 percent over the same period in 2010.  The U.S. trade deficit with China is now more than half of the total U.S. trade deficit with the world.  In the year to date ending August 2011, the United States exported about $13.4 billion in advanced technology products to China, but imported over $81.1 billion in advanced technology products from China, for a deficit of about $67.7 billion.  This is a 17 percent increase in the advanced technology products deficit for the same period over the previous year, ending in August 2010.”

The Chinese economy and its product exports are moving up the value chain.  On a monthly basis, the U. S. now imports roughly 560 percent more advanced technology products from China than it exports to China.  Exports of low-cost, labor-intensive manufactured goods as a share of China’s total exports decreased from 37 percent in 2000 to 14 percent in 2010.

“China’s foreign currency reserves are skyrocketing. A major contributor to this phenomenon is China’s continued policy of maintaining closed capital accounts.  China’s foreign currency reserves exceed $3 trillion, three times higher than the next largest holder of foreign currency reserves, Japan.”  Building currency reserves is one of the main goals of China’s predatory mercantilism trade policies.

China’s domestic money supply is becoming out of control. “Between 2000 and 2010, China’s money supply grew by 434 percent.  China’s money supply is now ten times greater than the U.S. money supply, despite the fact that China’s GDP is only one-third as large.”

The Commission reported that China assumed a more assertive role on the global stage in 2011 as shown by a more aggressive trade agenda, a push for a larger role in international institutions, and provocative moves in the South and East China Seas.  These actions are a result of China’s growing economic prominence and resource needs, as well as China’s view that the U. S. is in decline while China is ascendant.  “Chinese policies have had an impact on the       U. S., ranging from a negative effect on the economy to increased pressure from some parts of the international community for the U. S. to ensure the security of the global commons.”

Last year, the Commission highlighted China’s backsliding from market reforms in favor of an increased role of the state in the economy, which continued in 2011. “China subsidizes its state-owned enterprises to the detriment of both private Chinese firms and international competitors. The Chinese government’s special treatment of state-owned enterprises (SOEs) is of particular concern to U.S. businesses, as it can overcome comparative advantages of competitors, harming American economic interests.  China’s SOEs are also an issue of contention in government procurement, as China seeks to wall off a large portion of its economy from foreign competition.” The Commission estimates the SOE sector accounts for nearly 40 percent of China’s economy, but if the output of urban collective enterprises and government-run proportion of township and village enterprises are considered, the broadly defined state sector likely surpasses 50 percent.

China appears to be reversing the privatization reforms of the past two decades and renewing use of industrial policies aimed at creating SOEs that dominate important portions of the economy, especially in the industrial sectors reserved for the state’s control.  “The Chinese government promotes the state-owned sector with a variety of industrial policy tools, including a wide range of direct and indirect subsidies, preferential access to capital, forced technology transfer from foreign firms, and domestic procurement requirements, all intended to favor SOEs over foreign competitors.”

In 2010, the amount of foreign direct investment (FDI) flowing into China jumped to $105.7 billion, up from $90 billion in 2009.  Foreign-invested enterprises were responsible for 55 percent of China’s exports and 68 percent of its trade surplus in 2010.  The value and scope of U.S.-China bilateral investment flows have expanded significantly in the past ten years.  However, U.S. direct investment in China is more than 12 times greater than Chinese direct investment in the United States.  Official U.S. statistics show that U.S. cumulative FDI in China was $60.5 billion in 2010.  What this means is that American companies and companies from other foreign countries are investing money in China through expanding, building or buying plants in China, buying equipment, and hiring workers.

On the other hand, there has been a more than 100 percent year-on-year growth of Chinese investment in the United States during the past two years.  Chinese investments have focused on manufacturing and technology, with an emphasis on brand acquisition. The report notes that some critics of China’s foreign direct investment in the U. S. contend that these investments are focused on acquiring and transferring technology to Chinese firms.  The Chinese Ministry of Commerce estimated that in 2010, cumulative Chinese FDI in the United States was $4.9 billion.

Due to the considerable government ownership of the Chinese economy, Chinese companies supplying products to the U.S. government or acquisition by Chinese companies of U.S. firms with sensitive technology or intellectual property could be harmful to U.S. national interests.  The Committee on Foreign Investment in the U. S. investigates the national security implications of mergers and acquisitions by foreign investors of U. S. assets.

In March 2011, China ratified its 12th Five-Year Plan (2011– 2015), a government-directed industrial policy that focuses on the development and expansion of seven strategic emerging industries:  new-generation information technology, high-end equipment manufacturing, advanced materials, alternative-fuel cars, energy conservation and environmental protection, alternative energy, and biotechnology.  The report predicts that China will likely continue to combine targeted investment with preferential tax and procurement policies to ensure that Chinese firms emerge as global leaders, or national champions, in these industries within the next five years.

China’s continuing lack of enforcement of intellectual property rights and indigenous innovation plans that limit government procurement to Chinese companies are problematic.  In addition, China maintains policies of forced technology transfer in violation of international trade agreements and requires the creation of joint venture companies as a condition of obtaining access to the Chinese market.

“Foreign-invested enterprises seeking to be considered for government procurement contracts or public works projects are expected to file for patents and copyrights within China in order to qualify for preferential treatment in government contracting.  Foreign affiliates risk the unintended transfer of their technology to Chinese firms if they do so, because of the nature of the Chinese intellectual property system and the lax enforcement of intellectual property laws and regulations in China.”  In 2001, China agreed to stop explicitly requiring foreign companies to surrender their technology in return for market access and investment opportunities, but the government still employs several tactics to coerce foreign firms to share trade secrets with Chinese competitors. China’s industrial policy seeks to circumvent accepted intellectual property protections and to extort technology from U.S. companies.

China continues to be one of the largest sources of counterfeit and pirated goods in the world (confirmed by the recent Senate hearings on counterfeit parts in the defense and aerospace supply chain.)  “The Chinese government itself estimates that counterfeits constitute between 15 and 20 percent of all products made in China and are equivalent to about 8 percent of China’s gross domestic product (GDP).  Chinese goods accounted for 53 percent of seizures of counterfeits at U.S. ports of entry in 2010, and the U.S. International Trade Commission estimates that employment in the U. S. would increase by up to 2.1 million jobs if China were to adopt an intellectual property system equivalent to that of the U. S.”

China progress in its military modernization efforts poses an increasing threat to U. S. national security.  “The People’s Liberation Army (PLA) is acquiring specific means to counter U.S. military capabilities and exploit U.S. weaknesses.  Since January 2011, China has conducted a flight test of its next-generation fighter aircraft, continued development of its antiship ballistic missile, and conducted a sea trial of its first aircraft carrier. These developments, when operational, will allow China to better project force throughout the region, including the far reaches of the South China Sea.”

The Commission reports that the PLA’s military strategy is designed to provide the army with the means to defeat a technologically superior opponent, such as the U.S. military. It focuses on controlling the regions surrounding China, especially the western Pacific Ocean, degrading an opponent’s technological advantages, and striking first in order to gain surprise over an enemy in the event of a conflict.  While U.S. bases in East Asia are vulnerable to PLA air and missile attacks, Japanese, Philippine, and Vietnamese bases are just as vulnerable, if not more so.

China has demonstrated progress in modernizing the PLA over the past year, and recent developments confirm that the PLA seeks to improve its capacity to project force throughout the region.  Continued improvements in China’s civil aviation capabilities, as first noted in the Commission’s 2010 Annual Report, enhance Chinese military aviation capabilities because of the close integration of China’s commercial and military aviation sectors.

Tensions continued in 2011 between China and other claimants in the South China Sea territorial disputes as well as with Japan over territory in the East China Sea.  China’s policy in the region appears driven by a desire to intimidate rather than cooperate.  Despite intermittent statements of cooperation, Chinese assertiveness in the South China Sea indicates that China is unlikely to concede its sovereignty claims. Many of China’s activities in the region may constitute violations of the United Nations Convention on the Law of the Sea and the Declaration on the Conduct of Parties in the South China Sea.  An implication of China’s growing assertiveness, especially its harassment and intimidation of foreign vessels, is the growing risk of escalation due to miscommunication and miscalculation. As chances of confrontation grow, so could the consequences for the U. S., especially with regard to the Philippines, with which the United States holds a mutual defense treaty.

In 2011, as in previous years, the U.S. government, foreign governments, defense contractors, commercial entities and various nongovernmental organizations experienced a substantial volume of actual and attempted network intrusions that appear to originate in China.  “Of concern to U.S. military operations, China has identified the U.S. military’s reliance on information systems as a significant vulnerability and seeks to use Chinese cyber capabilities to achieve strategic objectives and significantly degrade U.S. forces’ ability to operate.”

The report identifies China as one of the top space powers in the world today, and the implications of China’s civil and military space activities are dangerous to the U. S.  China’s leadership views all space activities through the prism of comprehensive national power, using civil space activities to promote its legitimacy in the eyes of its people, to produce spin-off benefits for other industries, and for military-related activities.  The nation’s capabilities, which are state of the art in some areas, follow from decades of substantial investment and high prioritization by China’s top leaders.  The prestige of space exploration and the national security benefits of space systems serve as primary motivators for Chinese decision makers.

China’s civil space programs have made impressive achievements over the past several decades.  “If Chinese projections hold, these programs are poised for continued accomplishments over the next ten to 15 years, such as the development of a space laboratory and eventually a space station. As part of an active lunar exploration program, China may attempt to land a man on the moon by the mid-2020s.”

China seeks new opportunities to sell satellites as well as satellite and launch services in international commercial space markets. Chinese firms’ prospects for greater success remain uncertain over the near term.  However, China’s international space-related diplomatic initiatives and their firms’ ability to offer flexible terms on sales to developing countries may provide additional opportunities.

China views all space activities in the context of ‘‘comprehensive national power.’’ This concept includes many dimensions, but military aspects are fundamental.   “PLA’s primacy in all of China’s space programs, including nominally civil activities, illustrates this emphasis.”  For example, China appears to be making great strides toward fielding regional reconnaissance-strike capabilities.  China has also continued to develop its anti- satellite capabilities, following up on its January 2007 demonstration that used a ballistic missile to destroy an obsolete Chinese weather satellite, creating thousands of pieces of space debris.  “In addition, authoritative Chinese military writings advocate attacks on space-to-ground communications links and ground-based satellite control facilities in the event of a conflict.”

“In the military sphere, China appears to seek ‘space supremacy.’  The PLA aims to implement this policy through two tracks.  First, they increasingly utilize space for the purposes of force enhancement.  The best example is China’s integration of space-based sensors and guided weapons.  Second, they seek the capabilities to deny an adversary the use of space in the event of a conflict.  To this end, China has numerous, active, counterspace weapons programs with demonstrated capabilities.”

These threats to America’s economy and national security need to be taken seriously.  Perhaps if the executives of American manufacturing companies would read this report, or at least the executive summary, they would change their minds about sourcing their R&D and manufacturing in China and investing in expanding, building or buying manufacturing plants in China.  China is no friend to the U. S. and Americans better wake up to that fact before it’s too late.

 

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