Elections in Hong Kong have just given a major win to pro-democracy supporters. Reports are that members supporting the pro-democracy movement took 201 of the first 241 seats declared, with pro-Beijing candidates winning just 28. Turn out in the election was over 71%, up from 47% last election. Local candidates mostly deal with local issues, like bus routes and garbage collection, but they do have influence on other issues and clearly this is a huge signal to the Chinese Communist Party and President Xi Jinping. This signal comes on the heals of over 5 months of protests.

The tightly controlled Chinese media and famously censored Internet makes it hard for stories like the election to proliferate in China, but we have no doubt that word is getting to some there. Consider the impact this may have on segments of the Chinese population that are fed up with the Communist leaders in Beijing. It is hard to see the future, but clearly tensions will rise.

There are many other challenges in China right now. Most of the world has woken up to their never ending tactics of stealing intellectual property, hacking systems for gain, abusing trade agreements, manipulating currency, illegally claiming territory etc. The final resolution of trade disputes is far from over, and the current situation is hurting their economy. Once the trade disputes are resolved, it is hard to believe their economy will return to its previous high growth.  For over a year now there have been horrible stories of concentration camps being used for millions of Muslims (most in the Northwest province of Xinjiang) and cultural genocide of Uyghurs. More data is leaking out on the scale of this atrocity (the latest leak is called the China Cables, which includes official government documents).

And, on top of all this, Hong Kong citizens are not giving up on their goals for self determination. The more that people in China learn of what is going ton in Hong Kong, the harder it will be on the Communists.

And since one leader in particular, Xi Jinping, has done everything possible to make himself the sole power in charge of everything, if things are going really bad for the Chinese Communists, Xi will be the one to either fix the problems or take 100% of the blame (some are speculating that the leaks of the China Cables detailing the Uyghur cultural genocide could have been done by someone who wants to take Xi’s place as the boss).

What does all these mean for you and your business?

Business leaders, strategists, financial planners and policy makers should evaluate what the current situation in Hong Kong and China and the continuing trade war/tech war impacts you. As an aid in your planning process, here is a list of recommendations for you to evaluate:

1. Perhaps the greatest, most important recommendation we have for your business is that you should continue to make yourself aware of the strategic importance of the situation in China and Hong Kong, as well as the most relevant aspects of the ongoing trade and tech tensions. Be sure that you, and all members of your team, are on distribution for the free OODA Daily Pulse. OODA Loop members also have access to several strategic reports written to provide insight on China and these can help level set your entire team (start with our special report on The China Threat).
2. Continuously consider your cybersecurity preparedness.  Cyberattacks will almost certainly shift as the trade conflict progresses, and it is hard at this time to predict how. Some adversaries may decide to make direct attacks against U.S. manufacturing to degrade and disrupt production. So stay agile in defense. Ensure your team is following Cybersecurity Best Practices. Red Team your defenses. Leverage deception in your defenses. Protect the communications of your executive team.
3. Analyze your exposure to shifts in market buying power. It is time to review scenarios that will include not just a devalued Yuan, but scenarios where multiple nations devalue their currencies. This could not only make your products and services more expensive, but could cause a slowing in the global economy.
4. Analyze your technology dependencies. Who do you license software from? Who does your support come from? Analyze whether or not support will suffer as the trade war and tech war heats up.
5. A key dependency is always the supply chain. What parts of your supply chain will be impacted by the gathering storm? Will small businesses that serve you be under pressure because of the trade war? Will any be bought by larger firms? Will they be bought by overseas firms? Will investors supplying cash to your supply chain be under pressure? Will it cause an impact on your technologies?
6. Review your current intensions regarding M&A or divestiture. Consider that the U.S. government has changed the regulations around financial transactions with firms influenced by foreign powers (not just China) and has also put many specific restrictions on doing business with China.
7. If you sell technology or tech related services (don’t we all?) analyze your markets carefully. Now is a great time to review and decide whether you should diversify into other markets, withdraw from markets where you have less hope of dominance, or focus on markets where you have a greater chance of significant growth.
8. If your business is in the defense sector, or if you are a government leader, you especially need to be aware of China’s doctrine of Destruction Warfare.
9. All businesses should consider their dependency on space systems for communication, Geo-Location, weather and other information. These are highly susceptible to Chinese interference and may be targets attacked by Chinese hackers in an attempt to send signals to Washington in the current trade war or in many other escalatory scenarios. There are ways to mitigate risks to your company if you plan in advance. See our OODA Research Report: What Business Needs To Know About Security In Space.

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About the Author

Bob Gourley

Bob Gourley is an experienced Chief Technology Officer (CTO), Board Qualified Technical Executive (QTE), author and entrepreneur with extensive past performance in enterprise IT, corporate cybersecurity and data analytics. CTO of OODA LLC, a unique team of international experts which provide board advisory and cybersecurity consulting services. OODA publishes OODALoop.com. Bob has been an advisor to dozens of successful high tech startups and has conducted enterprise cybersecurity assessments for businesses in multiple sectors of the economy. He was a career Naval Intelligence Officer and is the former CTO of the Defense Intelligence Agency.