US Draws the First Blood Against China

by May 20, 2019 0 comments

By signing an executive order to protect its networks from foreign espionage, the US has drawn the first blood on what was hitherto whispered as a need to counter Chinese ambitions

US President Donald Trump recently signed an executive order on ‘Securing the Information and Communications Technology and Services Supply Chain’ that effectively walked the talk on clamping down on the growing Chinese presence and influence. While the order itself was ostensibly country-agnostic and company-agnostic, the unmistakable target was a leading Chinese company, Huawei. Predicated under security concerns, the statement from the White House said that the order, “declares a national emergency with respect to the threats against information and communications technology and services in the United States (US) and delegates authority to the Secretary of Commerce to prohibit transactions posing an unacceptable risk to the national security of the US or the security and safety of its people.” Soon, the US Commerce Department added Huawei to the ‘entity list’ of banned organisations. Against the backdrop of the ensuing US-China trade wars, this latest American salvo has huge implications for Chinese products and services going forward, as it questions the construct of “Made in China,” given the inextricable and complex Government-industry interlinkages that beset the ownership, interests and operations of major Chinese organisations.

Unlike most unilateral decisions initiated by Trump, this executive order had bipartisan support across the political divide, symbolising the overwhelming threat perceptions within the US that are emanating from China. The Huawei action was looming for some time and the US had been sabre-rattling on the same with other Western powers. While Australia had acceded to the warning and banned the organisation earlier, the European nations were sceptical about the US’ seriousness. Given that the Chinese multi-national had outmanoeuvered the European companies like Ericsson and Nokia in grabbing market shares across emerging markets of Africa, Latin America and Asia — the expectation of reciprocal protectionism would rise within Western capitals to support their own organisations as the Chinese state does.

The US went as far as threatening its allies to withdraw “intelligence” inputs unless they stopped using the Chinese manufacturers like Huawei for building their 5G infrastructure. At the heart of the fears is the new internet architecture that could possibly “link” industrial equipment, personalised data, security cameras and civic facility details among others and transport the data dump to a repository in China, from where a apocalypse-like situation of a virtual “shutdown” of American military-economic-civic infrastructure could be effected if China so wanted in a crisis!

Given the Chinese ambition, investments and strategic outlook, such fears of data protection are not entirely unfounded. Expectedly, the Chinese have likened the US move to a “cold war mentality” and alluded to the US fears as unsubstantiated paranoia. Given the construct of the organisation itself and the rules governing its principal place of origin and headquarters ie, China, it is certainly obliged and vulnerable to the diktats of its Ministry of State Security.

Like most Chinese offerings, the winning appeal of Huawei was in its cost-effective technology and terms of trade. However, the recent move has added a ‘non-commercial’ angularity of dealing with Chinese companies. Last year, the global list of top 500 companies, as measured by Fortune magazine, had an unprecedented 120 Chinese companies making the cut (just shy of 126 by the leading nation, US). This sudden emergence of Chinese companies owes its success in huge measure to the complex commercial-political wiring of Chinese organisations that baffles most corporate-watchers as to their real ownership and control structures. Founded in 1987 by a former People’s Liberation Army (PLA) officer, Ren Zhengfei, who now owns only one per cent of share, it has grown into a $106 billion global conglomerate with a mammoth $14 billion dedicated towards R&D. Despite its immense size, scale and the competitive intensity of its domain, it still grew at a staggering 21 per cent over the previous year. Today, it serves 45 of the top 50 telecom operators worldwide and its network already reaches one-third of humankind. Somewhere, questions abound about such rapid rise, access and the ‘invisible-hand’ that drives such surreal growth. Given its formidable presence and invaluable necessity in the infrastructure of some third-world countries, it will not be easy to ‘ban’ its products across such countries — though it certainly marks the beginning of larger implications for ‘Made in China’ that go beyond a corporate entity.

Partly on account of genuine fears and partly on account of the escalating trade war, the recent US move has drawn the first blood on what was hitherto whispered as a need to counter the Chinese juggernaut. In a barely veiled threat, the Chinese have reminded the US about its own vulnerabilities with American organisations like Qualcomm, who generate over half of their revenues from China, as indeed the likes of Intel and Apple, who rely on Chinese parts and market! Many of China’s strategic sovereign imperatives like the ‘One Belt, One Road’ or in this case, the ‘Digital Silk Road’, which promises hyper speeds and capacities of 5G (promoting ‘Internet of Things’) communication, envisages a pivotal role for organisations like Huawei. The sovereign intent on becoming a Cyber and Artificial Intelligence (AI) superpower has fuelled the Chinese State to support and fund many aggressive and audacious investments that make the world nervous, given the known Chinese ambitions and penchant for means. The temerity and commitment behind developing cutting-edge technology that could have multiple “spin-off” usage and data-sharing has the Western world worried.

The Chinese are past masters in reverse engineering and sourcing technology licitly and illicitly, especially in matters of defence equipment and overall security preparedness. However, due diligence and care has to be ensured with evidentiary proof of potential misuse or “leakage” before censuring or ascribing any questions on the Chinese organisations as it should not violate the principle of fairplay in the global economy. The onus is now on  China to demonstrate transparency and unveil its control and command structures behind its corporates as also convince the wary world of its intentions and ambitions. Unfortunately, it will be an uphill battle for China given its history and its prevailing instincts to convince the world, otherwise.

(The writer, a military veteran, is a former Lt Governor of Andaman & Nicobar Islands and Puducherry)

Writer: Bhopinder Singh

Courtesy: The Pioneer

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