China’s targeting of international companies in geopolitical competition

International businesses and corporate decision-makers cannot ignore geopolitics, as companies, their supply chains, and customers are increasingly targeted in cyber and non-cyber efforts to secure the national objectives of governments around the world. Companies must monitor the nexus between their business activities and countries’ perceptions of national security — particularly as “great power competition” intensifies — and plan to mitigate geopolitically driven risk. China is currently among the leading sources of such risk, given Beijing’s engagement in an escalating rivalry with the United States (US), assertive role in many potential flashpoints in Asia, and prioritization of national security over economics. Geopolitical competition involving China since 2017 has cost (or had the potential to cost) international businesses hundreds of millions of USD in revenue. In some cases, China’s treatment of businesses during geopolitical disputes and subsequent financial losses has further prompted companies to scale back operations in or exit the country.

Notable risks to businesses operating in China or exposed to the Chinese market include changing laws, new export controls, and potential supply-chain disruptions if regional conflict erupts. In responding to perceived threats to China’s national security, human rights record, technological advancement, and territorial and sovereignty claims, Beijing has taken — and is very likely to continue taking — 8 types of actions that create special risks for international businesses: Cyberattack, Boycott, Embargo, Exit Ban, Law Enforcement Action, Product Ban, Regulatory Action, and Sanctions.

Although planning for these risks is made difficult by Beijing’s ill-defined laws and regulations, broad government powers, and lack of an independent judiciary, businesses should establish constant Monitoring teams, pursue supply-chain and market Diversification strategies, and increase Resilience through broad crisis management planning.