China’s mind-altering grain of rice

Last weekend my 11-year-old daughter had a rite of passage. She gave away a trove of picture storybooks, including the wonderful grain of rice fable. Parental Swampians will know it as the most enchanting illustration of exponential growth ever written. An Indian raja asks a wandering sage to name his reward for being honest. He asks for a grain of rice to be placed on the first square of the chessboard and then doubled for each of the 63 remaining squares. The king laughs at the sage’s innumeracy and immediately grants the request. Long before the raja has reached the far corner of the board, his royal stock is exhausted. The final number of rice grains exceeds 18tn.

I thought of that fable the moment I saw Bloomberg Businessweek’s investigative scoop on China’s infiltration of Apple, Amazon, and dozens of other US companies via an improbable feat of hardware manipulation. According to the investigation, the microchips that units of the People’s Liberation Army installed on motherboards that were used to operate big corporate data servers are smaller than a grain of rice and thinner than the tip of a sharpened pencil. China’s apparent feat is so hard to pull off that it was likened by a professional hacker to getting a unicorn to jump over a rainbow. It would take years, and the deepest knowledge of how to manipulate the most cutting edge technology across the global supply chain, for China to do this. Hats off to the People’s Liberation Army — or something.

In reality, our new knowledge about China’s prowess has game-changing potential. Rarely has a single news story had such an immediate impact on our worldview. I don’t pretend to understand the technology behind it. Nor can we know how exponentially China’s stealth access into America’s deepest technologies has multiplied. What we do now know is how little we know of what such super-espionage can do, which is unnerving. According to Bloomberg, China may have infiltrated US military hardware, including drones, fighter jets, and so on. The investigation is ongoing. What I feel better able to assess is the impact on geopolitics. By coincidence, Mike Pence gave a crassly Sinophobic speech in Washington on Thursday a few hours after the story broke. China was attempting to interfere in US midterm elections, Pence said. It wanted to replace Trump with another US president because Trump was so effective. Eight in ten of the counties affected by retaliatory Chinese tariffs had voted overwhelmingly for Trump in 2016, he said. And so on.

Prospects for a continued nosedive in US-China relations were already dire. Now they look bleak. Earlier this week, China cancelled a meeting with Jim Mattis, the US defence secretary, who was due to fly to Beijing for the annual bilateral national security dialogue with his counterparts. A day later, China loudly complained after a US destroyer, the USS Decatur, sailed within 12 miles of the contested Spratly Islands in the South China Sea — atolls over which China proclaims full sovereignty. Trump was already on course to extend punitive tariffs to all China’s US exports — from just under half now. That would cover the motherboards and semiconductors that we now know the PLA has been able to doctor. It will now be even harder for either side to back down.

All countries do espionage. But Trump can now make a far stronger case that China’s spying poses a kinetic threat to US national security. Roughly 75 per cent of US smartphones and 90 per cent of semiconductors are made in China. Here’s one safe prediction: China’s grip on those products can only go down. Here’s another: superpower rivalry is returning. We’re in the early stages of a new cold war. The global supply chain will be its first theatre. Let’s hope it will be the last. Rana, your thoughts on this are particularly sought. If you can weave in a reassuring childhood fable that would be super.

Recommend reading

• My column this week looks at another investigative bombshell, this one from the New York Times, about how much wealth Trump inherited and the tax-avoiding lengths to which he and his father went to disguise its origins. In many respects, I argue, Trump is a fitting president for an economy increasingly influenced by the inheritors of great wealth.
• The other side of the coin is the continued decline in median wage earnings. Robert Shapiro lays out the bare statistics in this Washington Post piece. Don’t be fooled by averages — those are distorted by how well people at the top are doing. Real median earnings have actually fallen since Trump took office.
• Finally, Graham Allison has written a useful corrective in Foreign Affairs to overuse of the phrase “liberal international order” — a term that was only coined a few years ago, but has now become the idealised description for how the world worked before Trump. To be sure, Trump’s presidency is a big setback to global stability, possibly a catastrophe. But that’s no excuse for amnesia about what went before. So far Trump has done nothing that compares to the damage caused by the Iraq war.

Rana Foroohar responds

Ed, all I can do is nod sadly. I’m not at all surprised that this has happened, given the clear messaging from China that there are no boundaries between state interests, and commercial ones. I suspect that the Pentagon white paper that’s been sitting on the president’s desk now for months, advising that the US should consider insourcing various aspects of the supply chain, may soon get a close read. I also wonder if there may be new rules for US companies doing business in the Middle Kingdom.