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Richard A. D'Aveni is Bakala professor of strategy at Tuck School of Business atDartmouth College. Strategic Capitalism, his fifth book, was just published. ProfessorD'Aveni is listed in the top 25 of the Thinkers 50, a global ranking of the topmanagement thinkers in the world.

Read the recent report by Congress on China's Huawei Technologies and ZTE Corp. andyou could be excused for a sense of dj vu. It sounds like it came from the U.S.-Sovietera. One passage: "The opportunity exists for ... espionage by a foreign nation-statealready known to be a major perpetrator of cyber espionage."Many are worried that Congress has gone too far. But the truth is it hasn't gone farenough.Once the world admitted China to the World Trade Organization in 2001, we welcomedthe country into our free-markets. We trusted the global economy would evolve towardfree and fair trade. We then set our policies on cruise control, assuming the world wouldfollow the U.S. model.Instead, China got a hand on the steering wheel: It turned the rules of global business in

its favor. We woke up to find a hijacking of our free-market system. China wasmanipulating its currency, subsidizing its firms, undermining nascent U.S. firms, erectingtrade barriers, and stealing intellectual property. China was using its firms as instrumentsof state capitalismit even coordinated them to monopolize critical resources such assteel and rare earths.We are now at odds with China. We are essentially in an economic cold war. The Huaweireporta notable bipartisan effortdocuments as much. After hollowing out manymanufacturing industriestires, consumer electronics, auto parts, steelChina has goneafter tech-heavy industries like telecommunications.The report focuses on national-security risks posed by Huawei and ZTE: spying viabackdoor software implants, cyber attacks on key networks, and inserting malicious

software in security systems. These are serious allegations: Imagine if China usedHuawei equipment to shut down American water and electrical systems.But if we open both eyes, we can see the sun rising on a new reality: China has inventednew economic rules to give it an edge. It is not pursuing Western capitalism. It neverplans to.After the Tiananmen Square massacre, Deng Xiaoping said China should "observedevelopments soberly, maintain our position, meet challenges calmly, hide our capacitiesand bide our time, remain free of ambition, never claim leadership." China has taken thatapproach politically and economically. By hiding its capacities, it had hoped not to wakethe sleeping giant.But the U.S. giant may finally awaken given the report's implications. Let me recast threerecent developments to show how they fit the notion of an economic cold war.[Read the U.S. News Debate: Should Congress Interfere with China's Currency Policies?]Huawei's and ZTE's expansion. Huawei and ZTE had hoped to expand into the UnitedStates from places like Canada and the United Kingdom. This would foster American-style competition. But Congress has suggested Huawei's and ZTE's designs could be aruse to pierce the integrity of the U.S. telecom system.Bankruptcy of solar-panel makers. Critics blame the U.S. government for investingrecklessly in renewable energyespecially the $527 million of loans to Solyndra.

http://www.usnews.com/debate-club/should-congress-interfere-with-chinas-currency-policieshttp://www.usnews.com/debate-club/should-congress-interfere-with-chinas-currency-policies

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Though justified, the criticism ignores China's strategy to underprice and gut the U.S.solar-panel industry. Whatever its economics today, the industry figures prominently infuture U.S. energy security.Approval of Chinese bank expansion in the United States. The Federal Reserve in Maygave unanimous approval for three state-controlled Chinese banks to expand in the

United States. This gave China an opening to gather U.S. depositors' money to fund itseconomywhile gaining access to intelligence on U.S. corporate borrowers and anavenue for cyber warriors to cripple the U.S. banking system.It's time to expose China's real plan: To unseat the U.S. as a global leader, a strategy Idetail in my book, Strategic Capitalism. The spin masters in China tell Americansotherwise, but we can't ignore recent history. Back in 2001 people thought China, byembracing capitalism, would move toward free markets and democracy. But it embracedwhat I call "strategic capitalism," a mix of free-market and state-managed capitalismintegrated into a strategy to attack the U.S. economically and disrupt our competitiveadvantages.Big businesses like Huawei are one resultand often serve, as Congress noted, as state-

supported "national champions" for dominating global markets. Such firms defer tointernal Communist Party committees, watchdogs that monitor their compliance withgovernment requests.Many U.S. leaders thought that if we could ride through an uneven patch with thesecompanies, they would mature into American-style enterprises, participants in free andfair global markets. This was nave. Huawei's proposed incursions are but further movesto weaken the United States.It's a good thing that Congress has rung the alarm bells. The United States needs astrategic capitalism of its ownand before it's too late. Economic cold wars often evolveinto military ones, and China already stirs up more trouble than we care to deal with inIran, North Korea, Pakistan, and Syria. By fighting an economic cold war now, we headoff something worse later: fighting a military one with a much richer and more powerfulChina.