In recent years, the Chinese Communist Party has waged an aggressive economic campaign against the United States and Australia in the Indo-Pacific to achieve economic and technological dominance. Through predatory economic policies, coercive Belt and Road Initiatives (BRI), and large-scale industrial espionage, China is working towards regional hegemony in the Indo-Pacific. Given China’s notion of unrestricted warfare—which includes economics, trade, finances, and technology as domains—the United States and Australia must adapt and respond to this threat.

China’s Economic Warfare Tactics

The CCP’s campaign for economic and technological dominance is a strategic effort to alter Western responses without risking direct military conflict. This approach, often termed “gray zone” activities, blurs the lines between peace and war. By exploiting the lack of a comprehensive Western strategy, China seeks to circumvent U.S. dominance in conventional warfare, as evidenced in the Indo-Pacific, where the United States struggles to maintain focus and where Australia’s efforts are overstretched and uncoordinated with allied initiatives.

Beijing employs economic coercion as a primary tool. For example, the CCP’s control over critical mineral markets allows it to crush competition, as demonstrated by its attack on Australia’s export industries in May 2020 and the recent price manipulation that forced the closure of Australian nickel mines. Additionally, China commercially penetrates strategic geographic areas through the militarization of parts of the South China Sea and the construction of maritime facilities across the Indo-Pacific. The BRI has facilitated this effort by expanding the CCP’s reach in the Indo-Pacific and securing access to critical infrastructure such as ports and railroads. In 2017, for example, after Sri Lanka’s government failed to repay China for their BRI loans on the Hambantota Port Development Project, the government handed over the port to the Chinese state-owned port operator, China Merchants Port Holdings, for ninety-nine years.

China also seeks control of supply chains to ensure its own security while limiting Western access to resources. Moreover, by inserting surveillance and facilitating technologies, such as low-cost Huawei infrastructure, in the Indo-Pacific’s 5G telecommunications environment in Indonesia, the Philippines, and Thailand, China increases its capacity for espionage and sabotage.

Redefining Unconventional Warfare in the Economic Domain

Given China’s approach, the West must recognize the economy as a domain of war and take concrete steps to counter China’s economic warfare while preventing escalation to physical conflict. The United States and Australian governments must collaborate to develop a strategy and unconventional tactics that leverage the West’s strengths in mobilizing private capital as well as more conventional tools such as development aid, sanctions, tariffs, and industrial policy while still retaining at least a patina of defending a “free and open Indo-Pacific.”

Through the Cold War and the Global War on Terror (GWOT), the West has developed relatively inexpensive, unconventional warfare (UW) techniques that the United States and its allies can use to impose asymmetric costs on the CCP. The U.S. Department of Defense defines UW as activities enabling a resistance movement or insurgency to “...coerce, disrupt, or overthrow a government or occupying power…” The UW planning framework focuses on achieving defined effects, making it suitable for both defensive and offensive actions, such as exploiting interconnectivity in the information sector and countering politico-economic forms of occupation in the economic domain.

Moreover, while the Department of Defense may provide the framework, the most useful tools may reside outside the government. China’s BRI, for instance, presents a target-rich environment for UW. The BRI’s structure, which often leads to debt traps, reliance on Chinese firms and labor, environmental degradation, resource extraction, and political corruption, generates local grievances. These factors have led to violent attacks on Chinese interests in countries like Pakistan. The United States and Australia could harness their strengths in private capital to counter-invest in sustainable, quality projects that increase local prosperity while reducing CCP influence.

Principles for an Economic UW Framework

A few key principles should guide a UW framework for the economic domain.

First, the United States and Australia must define a strategy outlining their preferred outcomes, including economic competition and UW to combat China in the Indo-Pacific. These strategies cannot simply be reactions to Chinese behavior or capacity but rather should achieve the United States and Australia’s goal of deterring China from continually seeking to dominate the international order, therefore defending the current role played by the United States and its allies.

Second, the focus should not be on overthrowing governments but on imposing sustained economic costs on the CCP by bleeding out the competitor, considering that a resistant or insurgent movement is not practical in an era of great power competition since remaining clandestine is increasingly difficult. Mobilizing private capital to invest in commercially viable infrastructure with military use cases in the Indo-Pacific can force China to counter-invest or divert resources to undertake surveillance, as can be seen with the 2022 Cerberus Capital investment in Subic Bay, Philippines.

Third, while the CCP’s intelligence, surveillance, and reconnaissance (ISR) capabilities may challenge covert military tactics, given that the United States and Australia are slow to incorporate non-kinetic approaches such as cyber and information tools, they can use commercial platforms and private capital to deny access to key logistics hubs. This approach requires developing ISR support for the allied private sector by connecting them with experts who observe and collect precise and timely intelligence.

Fourth, the new UW framework should counter-economic occupation, manifested through economic domination, such as debt traps, rather than military control. This would add to the five classic components of UW: espionage, political warfare, sabotage, guerilla warfare, and direct action. This can be achieved by promoting investment strategies that address local economic and security concerns, such as economic displacement, the effects of extreme weather events, inadequate education systems, and poor public health.

A Strategic Imperative

The United States and Australia must recalibrate their campaign strategies to include a UW approach to secure their strategic interests in the Indo-Pacific. Adapting GWOT and Cold War-era strategies to today’s geopolitical landscape will enable them to impose costs on China while providing benefits to states across the Indo-Pacific.

Mariana Rosado-Rivera is an Analyst Intern at ASPI DC, specializing in economic warfare in the context of China. As a Bachelor of Science in Foreign Service at Georgetown University, she focuses on international security with a strong emphasis on economic analysis. Her research, combined with her experience as a Teaching Assistant for Georgetown’s Department of Economics, positions her uniquely to analyze and address the economic strategies employed by China on the global stage.

Adam Leslie, the Director of ASPI’s Washington, DC office, has over thirty years of experience in national security, defense, and diplomacy. He spent fifteen years at the Australian Department of Foreign Affairs and Trade and twelve years as an intelligence officer and helicopter pilot in the Australian Army. Prior to joining ASPI, Adam founded Levenhall, a national security innovation consultancy dedicated to providing dual-use technology to Intelligence Operators and Warfighters by leveraging new technologies and developments based on national security needs.

Image: YashSD / Shutterstock.com.