Register For Our Mailing List

Register to receive our free weekly newsletter including editorials.

Home / 619

Welcome to the grey war

There is lots of speculation about the risks of China and the United States going to a hot war. But a close examination suggests that China has already been in a ‘grey war’, a cyberwar, with the United States for several years now.

What is the grey war? It is obviously between black and white. We should not think of war and peace in binary terms, but along a spectrum where there are degrees of war and peace.

Propaganda and disinformation, the key instruments of the grey war, have always been features of international relations. But China and other authoritarian regimes also buckled down on efforts to destabilize the United States and other democracies by propaganda disseminated through social and other media.

China’s narrative of dominance

China’s grey war narrative is that it is on an unstoppable path to overtaking the United States. It is trying to demoralize the United States and the West. The Chinese want the United States to believe it is in irreversible decline, and the United States should not even try to contain China. It should just accommodate China.

China is highly motivated because it sees the very ideas of democracy and freedom as a regime threat. China is keen to create a world that is safe for the Chinese Communist Party.

It is of course deeply ironic that China and other authoritarian governments are often using U.S. technology to defend and export autocracy around the world.

The grey war is fundamentally different from the Cold War in that there are deep economic, technological and person-to-person connections between the United States and China, which was not the case between the United States and the Soviet Union.

The Arab Spring as a turning point

An important trigger for the grey war was the Arab Spring. Indeed, it was a super-wakeup call for China and other authoritarian states. They saw Egyptian protesters in Tahrir Square who were organizing their protests and communicating to the world using social media.

So, China began working hard to use the Internet and other technologies as vehicles for social and political control at home, especially for China’s Uyghur population. It began centralizing political control over the Internet such as through China’s Great Firewall and its banning U.S. tech companies like Google and Facebook from the Chinese market.

There is both a ‘front end’ and the ‘back end’ of the grey war. The front end refers to information operations through applications, news information and social media platforms. China now leads the way as state-sponsored news outlets push very aggressively narratives to discredit democracy and the US government.

Hardware as a weapon

The back end refers to the physical infrastructure of the Internet, namely cellular phones, satellites, fiber-optic cables, 5G networks, wires and antennas.

And in this space, there are only two countries — the United States and China — which have the hardware companies and expertise to be major players. Through the technology company, Huawei, China’s authoritarian government has access to everything that runs across its network.

In a way, the United States is at a disadvantage to China’s state capitalism in the grey war. China’s civil/military doctrine basically fuses its private companies with the government. Thus backend infrastructure produced by Huawei or ZTE can be used as instruments of the Chinese state for accessing and censoring information.

Censorship, surveillance and exporting control

For example, the Chinese government requires Chinese Internet companies to do things like censoring Winnie the Pooh (who resembles Chinese leader Xi Jinping!) or maps showing Taiwan as an independent territory or content that paints democracy in a flattering light.

China has over between two and three million employees, known as the 50 Cent Party, whose job is to monitor and censor the Chinese online information environment.

Moreover, China is creating a “techno-block” with countries (especially in Africa) to which it is supplying back-end information infrastructure. It is also exporting closed-circuit television (CCTV) surveillance technology for monitoring and controlling their societies.

China’s authoritarian Internet model is part of its strategy to promote autocracy around the world with the ultimate objective of making the world safer for the Chinese Communist Party.

The U.S.’s structural disadvantage

In sharp contrast to China, the US Internet environment is mostly decentralized with no control. People can basically say whatever they want online, unless it is illegal. But the US government does not have the nation’s tech industry at its beck and call like China does — although it does have the advantage of an open, more innovative system.

Looking ahead, the United States faces many challenges in the grey war zone. Donald Trump’s anti-migration narrative will undermine Silicon Valley, whose innovation has depended greatly on US-educated migrants.

Another important issue is deindustrialization and outsourcing of tech production to China have left the United States strategically vulnerable. In this new gray war, a deindustrialized United States can be a disarmed United States. COVID-19 highlighted the risk of being vulnerable to coercion.

Bridging the Silicon Valley-Washington divide

But reshoring all of outsourced manufacturing is not feasible, as the United States has very limited manufacturing capacities — despite Trump’s exhortations to bring manufacturing back to the United States.

One option is some reshoring of products which are critical to national security, along with 'friend-shoring' of some production to close and trusted allies.

Unfortunately, the United States has suffered in recent years from a rift between Capitol Hill and Silicon Valley. But today, the United States’ tech and policy-making communities need to work much more collaboratively to address the important challenges of technological competition with China. After all, Silicon Valley was born from contracts and close cooperation with the US government.

Part of the problem is the immense size of US tech companies which enables them to do their thing. Other factors are generational and cultural. The average age of an employee at Google and Apple is in the early 30s, whereas the average age of Senators is 63.

These people came of age at very different times, have had very different life experiences and view technology very differently.

The stakes: A divided world order

This tech-fuelled political warfare will shape the world’s balance of power for the coming century as autocracies exploit 21st-century methods to redivide the world into 20th-century-style spheres of influence.

The United States has all the ingredients to confront this. Perhaps the greatest challenge that the United States faces in this grey war is domestic politics, especially Donald Trump and the MAGA movement.

The United States needs well-managed immigration, strong investments in education and technology, an open trade system and positive relations with allies.

Above all, it needs to resist cronyism. However, at the present moment, all of these are risks.

 

John West is Executive Director of the Asian Century Institute and author of the book, “Asian Century … on a Knife-edge”. He has had a long career in international economics and relations, with major stints at the Australian Treasury, OECD, Asian Development Bank Institute, and Tokyo’s Sophia University. This article was originally published as a new Strategic Assessment Memo (SAM) by the Global Ideas Center in Berlin on The Globalist.

 

  •   9 July 2025
  • 6
  •      
  •   

RELATED ARTICLES

Engineers vs lawyers: the US-China divide that will shape this century

Concerns about China's rise to power seem overblown

The pivotal fight between China and the US

banner

Most viewed in recent weeks

The strange effect of the 30% minimum capital gains tax

The 30% minimum tax on capital gains sits at the heart of the budget's proposed reforms. Yet the mechanics reveal anomalies that introduce unexpected distortions that raise questions about its design.

Does your will qualify for the discretionary testamentary trust exemption?

Treasury has confirmed the exemption many families were hoping for. But buried in the fine print are two conditions that could leave some wills on the wrong side of the exemption, despite years of careful planning.

Ranking three common retirement strategies

The defining challenge of retirement isn't just about building wealth, it's about converting your lifetime savings into sustainable income. A holistic understanding of different strategies can improve long-term outcomes.

Are you making these SMSF mistakes?

After four decades advising investors, there are a few common mistakes I've seen SMSF investors make. From holding too much cash and chasing yield to overtrading and trusting tips. Are these errors costing you?

Why Australian shares are falling behind the world

Australia’s market boasts a long record of outperformance, but recent results tell a different story. Is the ASX’s lagging performance a temporary setback or evidence that structural forces will keep global markets ahead?

Australia has saved $4.5 trillion for retirement. Here's what matters more

Most Australians approaching retirement can tell you the exact dollar value of their super account. But success depends on more than a sizeable balance. Here's four key questions to ask yourself at the start of the financial year. 

Latest Updates

Economy

Why have Australian living standards 'fallen' and how do we fix it?

For the last few years there has been much talk of a 'cost-of-living' crisis in Australia and of 'falling living standards'. Lately this has flared up again with the pickup in inflation resulting in a renewed fall in real wages.

Latest from Morningstar

Four options for an income investor’s next dollar

What if Australia’s golden age of dividends is ending? Rather than overhaul your portfolio, it may be worth considering where new capital can work harder. I discuss four income strategies and the trade-offs behind each.

Taxation

Completing the reform of CGT: tax real losses like real gains

Recent CGT reforms tax real gains by indexing capital gains to inflation. However, the reform fails to index losses, leading to higher tax on assets that do not keep pace with inflation, creating inefficiencies in the tax system.

Investment strategies

Blockbuster AI debt issuance coming to a bond market near you

With Australia likely to attract a growing share of AI-related issuance, investors should prepare for increasing influence from AI funding demands, evolving credit fundamentals and changing valuation dynamics.

Investment strategies

Active managers: Bringing a gun to the gunfight

When data arrived, basketball abandoned the mid-range shot, Formula 1 reinvented the pit stop and chess embraced humans working with machines. Active managers confronting today's markets may learn from the same path.

Retirement

What Australian super funds can learn from the UK

Most people want answers to three retirement questions: What have I got? Is it enough? What can I do with it? A leading UK pension innovator shares his lessons on helping members better understand and prepare for retirement.

Investment strategies

What the market may be missing in FY27

We asked ten fund managers the same question following FY26. While their investment styles differ dramatically, their answers revealed several surprising areas of agreement about where markets may be heading next.

Sponsors

Alliances

© 2026 Morningstar, Inc. All rights reserved.

Disclaimer
The data, research and opinions provided here are for information purposes; are not an offer to buy or sell a security; and are not warranted to be correct, complete or accurate. Morningstar, its affiliates, and third-party content providers are not responsible for any investment decisions, damages or losses resulting from, or related to, the data and analyses or their use. To the extent any content is general advice, it has been prepared for clients of Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892), without reference to your financial objectives, situation or needs. For more information refer to our Financial Services Guide. You should consider the advice in light of these matters and if applicable, the relevant Product Disclosure Statement before making any decision to invest. Past performance does not necessarily indicate a financial product’s future performance. To obtain advice tailored to your situation, contact a professional financial adviser. Articles are current as at date of publication.
This website contains information and opinions provided by third parties. Inclusion of this information does not necessarily represent Morningstar’s positions, strategies or opinions and should not be considered an endorsement by Morningstar.