Strategic investments by the Chinese Communist Party (CCP) in naval technical expertise supported by military-civil fusion (MCF) programs and military public-private partnerships (PPP) are driving the People’s Liberation Army’s (PLA) advancements in maritime technology.
Concerns are mounting among the United States and its Allies and Partners over the CCP’s rapid development of dual-use maritime technologies through MCF and PPPs. The CCP’s maritime ambitions pose significant risks and challenges to maintaining regional and global stability.
The CCP officially articulated MCF in its 2015 National Security Law and the 2017 Guideline on Military-Civil Fusion Development. MCF projects and PPPs are governed by a regulatory framework designed to align private sector activities with national strategic goals. MCF is a core component of the CCP’s strategy to develop the PLA into a “world class military” by 2049.
The CCP plays a central role in these partnerships, not only as a regulator but also as a participant. Government agencies, such as the transport ministry and the National Development and Reform Commission, are involved in planning, approval and oversight to ensure projects enhance the PLA Navy’s (PLAN) maritime capabilities and secure the CCP’s maritime interests.
Although MCF and PPPs aim to strengthen the PLAN’s capacity by engaging private sector firms in developing and supplying military technologies and services, MCF can be more covert. MCF often involves strategically using civilian research, technology and infrastructure for military purposes, sometimes without the knowledge or consent of the civilian entities involved. At the same time, private companies, domestic and international, are encouraged to participate in PPPs through a combination of incentives, including subsidies, tax breaks and preferential treatment in government contracts.
Over the past decade, nations have exposed the CCP’s exploitation of civilian technologies for espionage and sabotage worldwide. In 2018, for example, CCP-linked hackers breached U.S. Navy defense contractors’ systems and stole data related to undersea warfare and missile programs. In 2021, investigators determined that Huawei, a major Chinese telecommunications firm, had been transmitting sensitive data to servers in China for more than five years from surveillance systems installed at the African Union headquarters. In recent years, the CCP has increased its cyber spying activities.
Meanwhile, the CCP continues to illegally acquire technological innovations through exports, foreign direct investment and acquisitions, cyber and traditional espionage, research collaboration, talent acquisition, and influence operations, according to analysts. As a key example, engines manufactured in Germany and exported for commercial purposes now power PLAN submarines and frigates. Such unethical and illegal acquisitions reveal the insidious nature of the threats posed by the CCP’s MCF programs.
Countering MCF
To ensure a competitive edge in maritime technology, the U.S. and its Allies and Partners must focus on significant investments in research and development, especially in areas such as uncrewed systems, advanced propulsion, cyberwarfare and artificial intelligence, which are critical to outpacing Beijing’s advances. Democracies should leverage PPPs to encourage innovation while providing strict oversight to prevent unauthorized technology transfers. The U.S. and its Allies and Partners should also advocate for international norms and agreements to prevent exploitation of civilian technologies for military purposes without proper disclosure.
Additionally, the CCP’s cyber-enabled theft of foreign technologies has drawn international condemnation, leading to legal and diplomatic repercussions. This has impeded China’s ability to collaborate on global research projects and access innovative foreign maritime technologies. Widespread mistrust over the CCP’s disregard of intellectual property and international law also hampers its MCF efforts. Intellectual property theft and reverse-engineering of foreign technologies have strained relations with other countries, while the CCP’s aggressive maritime activities, especially in the South China Sea, have spurred legal disputes and global condemnation.
Intellectual property rights enforcement and counterespionage are crucial to safeguard technological advantages and reduce the risk of the CCP exploiting other nations’ research for military gains. Since MCF often involves the covert transfer of civilian technologies into military applications, the U.S. and its Allies and Partners must prioritize strengthening cybersecurity across defense and private sectors to protect sensitive information and critical infrastructure that could benefit the CCP’s military-industrial complex.
Moreover, export controls and sanctions against entities involved in MCF activities are critical to limiting CCP access to crucial technologies. Countries including members of the European Union, Japan, the United Kingdom and the U.S. have imposed such measures to prevent the misuse of civilian technologies for military purposes.
The U.S. has introduced rules to control export of advanced semiconductors, which the CCP requires for next-generation weapon systems, surveillance and other military modernization technologies. The U.S. Commerce Department maintains an Entity List of companies designated national security concerns that can no longer receive U.S. goods or technology without a special license. In the Indo-Pacific, countries such as India, the Philippines and Vietnam are apprehensive about the implications of the CCP’s MCF, especially concerning territorial disputes and military buildup. This has led to increased regional military cooperation and stronger strategic partnerships, such as the Quadrilateral Security Dialogue, or Quad, comprising Australia, India, Japan and the U.S. Regional powers also are investing in their military capabilities and collaborating with the U.S. to counterbalance the CCP’s influence.
U.S. Navy USS Dewey.
Petty Officer 1st Class Gregory Johnson/U.S. Navy
Threat Implications
The CCP continues to integrate its military and civilian sectors under the banner of MCF, growing capabilities that are not only reshaping the strategic landscape in the Indo-Pacific but also challenge the existing existing international laws and norms.
The CCP’s expanding maritime ambition has heightened tensions with neighboring countries. Among the most pressing threats is the potential for the CCP’s enhanced military capabilities to disrupt regional stability, especially in the South China Sea, of which Beijing claims about 90% despite an international tribunal’s 2016 ruling to the contrary. The CCP’s rapid maritime developments undermine the rule of international law and could lead to an arms race and increase the risk of military confrontations. There is growing alarm about coercion in the region, as the CCP’s assertive policies could force concessions or alignments that compromise sovereignty.
The pursuit of strategic autonomy in key technologies, coupled with the outsized role of CCP-linked companies in global supply chains, poses economic and military risks to other nations. Via MCF, the CCP systematically applies know-how acquired abroad for military purposes. The potential for the CCP to leverage its technological capabilities for geopolitical gain, whether through cyber espionage, intellectual property theft or supply chain disruption, threatens the stability of the global economy and the security of nations that rely on these technologies.
Consider Shenzhen DJI Sciences and Technologies Ltd. (DJI), the world’s largest manufacturer of civilian drones. The drones originally were designed for recreational and commercial purposes, but they are now increasingly used by the CCP’s military and law enforcement for surveillance and reconnaissance. Similarly, fears persist that Beijing could use equipment from Huawei for espionage and intelligence gathering. To prevent data collection on sensitive infrastructure, the U.S. Commerce Department added Huawei in 2019 and DJI in 2020 to its Entity List.
The CCP has also expanded its dual-use technology acquisitions internationally. The Chinese company Midea Group acquired Kuka, a German robotics company whose products potentially have dual-use applications for maritime military purposes, particularly in autonomous systems and smart manufacturing. The acquisition illustrates the CCP’s trend of integrating commercial acquisitions into its military development strategies.
Many nations are working to reduce illegal and unintended technology transfers to the CCP, including limiting CCP-linked investment in sensitive technologies, reducing investments in China, restricting scientific partnerships with CCP-affiliated researchers, expanding counterespionage efforts and teaming with like-minded states on export controls. The U.S. and its Allies and Partners should expand current measures into a broader, more coordinated campaign, security experts contend.
In January 2025, the U.S. Defense Department updated its list of China-based companies operating in the U.S. that it believes are promoting the CCP’s strategic military goals. The list, which was initiated in 2021 under the National Defense Authorization Act as a direct counter to Beijing’s MCF strategy, named 134 Chinese military companies, including 57 firms and 77 subsidiaries operating “directly or indirectly” in the U.S., according to Newsweek magazine. The U.S. Commerce Department also updated its Entity List in that month, adding 14 Chinese companies considered national security risks. “By including them in the list, the U.S. administration is signaling that it is convinced that these companies, mainly through their [research and development], are contributing to China’s military modernization in such an immediate way that they should ultimately be considered military companies,” Jakob Hensing, a research fellow at the Berlin-based Global Public Policy Institute, told Newsweek.
Shipbuilding and Maritime Engineering
The Chinese naval shipbuilding industry exemplifies the impact of MCF and PPPs. In little more than a decade, the CCP has rapidly advanced its naval capabilities, producing sophisticated warships such as aircraft carriers, destroyers and frigates. Analysts largely attribute its progress to the integration of civilian shipbuilding infrastructure for military purposes.
The CCP has directed civilian shipyards operated by state-owned enterprises (SOE), such as China State Shipbuilding Corp. and China Shipbuilding Industry Corp., to construct advanced military vessels. Technologies developed for civilian shipping, such as modular construction techniques and advanced materials, have been incorporated into military designs to enhance performance and stealth. For example, the PLAN Type 055 Renhai-class destroyer, one of the CCP’s largest and most advanced surface combatants, has benefited from innovations in civilian ship design and construction.
The destroyer’s vertical launch system, dual-band radar systems and combat management systems illustrate the integration of civilian electronics innovations into military applications. The Type 055 serves as a command ship within the PLAN’s fleet, providing air defense and contributing to power projection capabilities. It shows the strategic significance of the MCF in allowing the PLAN to broaden its maritime influence worldwide.
Submarine technology represents another critical area where the CCP’s MCF strategy and PPPs have integrated civilian advancements in acoustics, materials science and energy storage. This has enabled progress in nuclear and diesel-electric submarines, enhancing their capabilities in endurance, stealth and overall performance. Breakthroughs in battery technology and fuel cells, originally developed for civilian applications, have been adapted to improve the endurance of CCP submarines, making them quieter and harder to detect, and more comparable to U.S. capabilities.
The Type 094 and Type 096 nuclear-powered submarines exemplify this integration. These developments also increase future risks as they enable PLAN submarines to explore strategic areas.
Inefficiencies, Stifled Innovation
The MCF strategy faces limitations and vulnerabilities. One major challenge is bureaucratic inefficiency. MCF relies heavily on coordination among government agencies, SOEs and private companies, which often struggle with overlapping responsibilities and miscommunication. Although SOEs may excel at scaling production, they often lag private companies in terms of innovation. This can stifle development of next-generation technologies crucial for maritime dominance, such as naval combat systems and autonomous underwater vehicles.
Additionally, inefficiency and corruption can lead to project delays and increased costs, undermining the overall effectiveness of MCF. Some private companies are hesitant to collaborate with the military due to concerns over intellectual property and market competitiveness, which can further complicate the integration of civilian innovations into military projects.
Another significant vulnerability lies in the CCP’s technological dependencies. Chinese industry relies on foreign technologies for key components in its maritime systems, such as advanced sensors and propulsion apparatus. However, export controls and sanctions have restricted the CCP’s access to critical dual-use technologies.
Overall, the international response to the CCP’s MCF strategy has significantly fostered diplomatic relations and strategic alliances. The U.S. and its Allies and Partners continue to build coalitions that challenge CCP efforts to dominate maritime domains through coercion or unfair practices, while also promoting a nternational norms and ensuring that international waters remain open and governed by agreed-upon principles.
