The head of a major U.S. defense contractor said his company is too dependent on Chinese manufacturers to ever break off all business ties despite increasing national security concerns about Chinese economic dominance, according to the Financial Times.
Western manufacturers can “de-risk” China-based operations, Greg Hayes, chief executive officer of Raytheon Technologies, told FT in a recent interview, but “decoupling,” or pulling out from China completely, is “impossible.” Even as successive presidential administrations have emphasized building up American domestic production to boost competitiveness with China, Western firms struggle to navigate growing tensions between the U.S. and China.
“Think about the $500 [billion] of trade that goes from China to the U.S. every year. More than 95% of rare earth materials or metals come from, or are processed in, China,” Hayes told the FT.
“There is no alternative,” he added. (RELATED: Pentagon Seeks Ways To Buy Massive Amounts Of Munitions For Conflict With China Under Biden’s Defense Budget)
Raytheon relies on several thousand suppliers based in China, Hayes said.
For the U.S., “decoupling” means reducing U.S. dependence on Chinese products and supply chains, repatriating jobs and ensuring America has the domestic capacity to sustain military and civil needs, according to the Harvard Business Review. China, meanwhile, takes advantage of its industrial might to consolidate global reliance on its industrial strength, affording Beijing outsized control over the international economy.
“If we had to pull out of China, it would take us many many years to re-establish that capability either domestically or in other friendly countries,” Hayes told FT.
The company is looking to establish sources outside of China for some of its more sensitive and critical supplies, but it wouldn’t be able to pull all operations out of China the same way it did with Russia after Moscow’s full-scale invasion of Ukraine, Hayes told the outlet.
Two of Raytheon’s subsidiaries, engine maker Pratt & Whitney and aviation systems specialist Collins Aerospace, have expansive operations in China and about 2,000 direct China-based employees, according to FT.
However, Raytheon reached the top-two slot of U.S. defense contractors in 2022, making $41.9 billion — 65% of its total revenue — from deals with the U.S. Department of Defense, Department of Homeland Security and intelligence agencies and from defense sales to foreign governments, according to Defense News.
Beijing sanctioned Raytheon and competitor Lockheed Martin in February over weapons sales to Taiwan, but those sanctions do not apply to the company’s commercial wings, according to FT.
Liberal internationalism believes in universal rationality, that everyone weighs the costs and benefits in their self interest — and that self interests overlap and result in shared interests.
This belief is hamstringing America’s ability to compete with the CCP.
— Michael Sobolik (@michaelsobolik) June 19, 2023
The Biden administration grasped on to the concept of “de-risking” instead of cutting all economic ties, promoting “diversified” and “resilient” supply chains while thwarting China’s ability to acquire U.S. weapons technology.
“We are for de-risking and diversifying, not decoupling,” National Security Adviser Jake Sullivan said in April remarks.
“Our export controls will remain narrowly focused on technology that could tilt the military balance. We are simply ensuring that U.S. and allied technology is not used against us,” he added.
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