Sinking feeling engulfs China submarine program

China’s ambitions for naval dominance took a hit with the recent sinking of its most advanced nuclear submarine at a Wuhan shipyard, exposing critical vulnerabilities in its defense capabilities amid an intense military buildup and rising sea tensions with the United States and its Pacific allies.

Last month, multiple media outlets reported that China’s most advanced nuclear-powered attack submarine (SSN), the first of the new Zhou class built by China State Shipbuilding Corporation (CSSC), sank while docked at the Wuchang shipyard, according to US defense sources.

Satellite imagery revealed its presence at the pier, followed by the sighting of cranes, which analysts believe were used to recover the submerged vessel by early June. The US Department of Defense (DOD) confirmed the incident, marking a potentially significant setback in China’s bid to close the gap with US naval dominance.

The incident raises concerns about China’s training standards, equipment quality and internal accountability within its defense industry, which has long been affected by corruption. The Chinese government has not commented on the incident. At the same time, the submarine may be salvaged and repaired, although delays are expected.

Since at least 2016, foreign interference in American elections and civil society have become central to American political discourse. The issue is taken extremely seriously by the U.S. government, which has levied sanctions and called out foreign adversaries for sowing “discord and chaos” through their propaganda efforts.

But apparently Washington takes a different view when it comes to American propaganda operations in foreign countries. On Monday, the House passed HR 1157, the “Countering the PRC Malign Influence Fund,” by a bipartisan 351-36 majority. This legislation authorizes more than $1.6 billion for the State Department and USAID over the next five years to, among other purposes, subsidize media and civil society sources around the world that counter Chinese “malign influence” globally.

That’s a massive spend — about twice, for example, the annual operating expenditure of CNN. If passed into law it would also represent a large increase in federal spending on international influence operations. While it’s hard to total all of the spending on U.S. influence operations across agencies, the main coordinating body for U.S. information efforts, the State Department’s Global Engagement Center (GEC), has an annual budget of less than $100 million.

(...)

The document provides a case study (or “competition vignette”) of what an integrated effort to counter Chinese influence could look like in the fictional African country of Naruvu. In the vignette, members of a Special Forces Civil Affairs team spot a billboard with a picture of a port and Chinese characters. Quickly determining that the Chinese are investing in a new deep-water port in Naruvu, the 8th Psyop Group at Fort Bragg’s Information Warfare Center (IWC) works with local and U.S. government partners to immediately develop an influence campaign to “discredit Chinese activities.”

The influence campaign “empowered IWTF (Information Warfare Task Force), in coordination with the JIIM (local and U.S. government partners) to inflame long-standing friction between Naruvian workers and Chinese corporations. Within days, protests supported by the CFT’s ODA (Special Forces Operations Detachment Alpha), erupted around Chinese business headquarters and their embassy in Ajuba. Simultaneously, the IWC-led social media campaign illuminated the controversy.”

Faced with a combined propaganda campaign and intense labor unrest, the Chinese company is forced to back down from its planned port. (Although the vignette continues to an even more Hollywood-ready ending in which U.S. special forces break into the construction company’s offices, confiscate blueprints for the port, and discover that it is actually a Chinese plot to emplace long-range missiles in Naruvu to threaten U.S. Atlantic shipping). (...)

"The U.S. has imposed export controls to deny China access to strategic technologies {but} we find no evidence of reshoring or friend-shoring. As a result of these disruptions, affected suppliers have negative abnormal stock returns, wiping out $130 billion in market capitalization, and experience a drop in bank lending, profitability, and employment. {U.S. firms'} total number of customers declines, potentially inflicting collateral damage upon the same U.S. firms whose technology export controls are trying to protect."

They also highlight that "the benefits of U.S. export controls, namely denying China access to advanced technology, may be limited as a result of Chinese strategic behavior. Indeed, there is evidence that, following U.S. export controls, China has boosted domestic innovation and self-reliance, and increased purchases from non-U.S. firms that produce similar technology to the U.S.-made ones subject to export controls."

In other words, it's almost a pure loss for US firms who lose customers, revenue and market capitalization whereas the affected Chinese firms find alternative suppliers and China boosts its domestic innovation and self-reliance.

(...) The irony is that while police officers, firefighters and rescue workers across the country embrace Chinese drones, Washington is warning that the technology poses a material risk to the U.S. This has opened up a heated debate over local safety versus national security, complicating Washington's efforts to establish a hawkish yet pragmatic China policy.

Lawmakers in Washington introduced the Countering CCP Drones Act in March and the Drones for First Responders (DFR) Act in May to ban DJI and hike tariffs on Chinese drones in general. Revenue from those tariffs would be used to fund purchases of American drones for public safety departments. (...)

DJI denied allegations that the Chinese government has backdoor access to its data or the company is unfairly subsidized.

"The DFR Act's proposal to increase taxes and eventually ban drones manufactured in China is xenophobia wrapped inside a national security cover," the company said in a statement.

Public safety agencies are already barred from using federal grants to buy Chinese drones, but a number of them, including in Kentucky, New Jersey and Connecticut, have made purchases using their own budgets. Many say they would buy them even with higher tariffs. (...)

Luis Figueiredo, a detective with the Elizabeth Police Department in New Jersey, says new tariffs would be "bad news" for users."

DJI is not going to discount the tariff off, (so) the customer is going to pay more money for a DJI drone," said Figueiredo, who flies five or six drones a day. "In the end, who's really funding that? It's going to be public safety."

And price — or more accurately what you get for that price — is one of the biggest pieces of the puzzle.

Several officers and drone dealers told Nikkei Asia that U.S. drones cost three to four times more than Chinese models without offering even the same level of technology.

"Would you rather drive a Cadillac Escalade that has all the comforts and tools you need to make your job a lot easier? Or would you rather pay more money and drive a Ford Escort that has no options at all?" said Cook, the Kentucky sergeant. "It is what it is."

American drone makers, however, strongly support these bills.

The Association for Uncrewed Vehicle Systems International (AUVSI), which represents U.S. drone manufacturers, acknowledges the technological gap but blames it on DJI's dominance of the U.S. market and Chinese government subsidies.

"It's hard for a lot of drone manufacturers to raise capital to scale their production (because) the demand signal from so many users is still defaulting to the cheap Chinese drones," said Michael Robbins, president and CEO of AUVSI. "You've got a competitor in the marketplace that is heavily subsidized, it's very hard to compete with that, particularly on cost factors."

According to AUVSI, Chinese drones control 92% of the first responder market in the U.S. (...)

"When the U.S. government identifies the technology that is critical to U.S. national economic security and puts policies in place to put some federal funding, that is a signal to private capital that they too, should invest," Robbins told Nikkei Asia. "And they often invest at a rate significantly higher than the federal government investment."

DJI has denied it has an unfair advantage. "Despite claims of subsidization from our critics, in reality, DJI is able to offer its products in more than 100 countries at competitive prices because we manufacture at scale," it said in its statement.

DJI did not disclose how much revenue it generates in the U.S., but said the country is still one of its largest markets outside China.

Seattle-based BRINC, America's second-largest drone manufacturer, said labor costs, scale of production and the cost of custom chipsets were the main roadblocks to lower prices for U.S. players.

"(Drones) are generally built by hand in the States, whereas in China, they're built in very automated ways," said Blake Resnick, founder and CEO of BRINC.

As a former intern at DJI, Resnick said the Chinese drone giant has the money to invest in developing its own chip for custom radios, which allows video encoding, encryption, transmission and other functions to perform well. BRINC, he said, had to buy more expensive, off-the-shelf chips.

BRINC has 110 staff and has raised $82 million in funding. The company has sold drone programs at prices ranging from five figures to millions of dollars, according to Resnick. (...)