Communication plays a fundamental role in all facets of national and international business activity. It is therefore crucial that the communication structures we use, remain safe and effective. Unfortunately these structures attract wide spread espionage activity from non-democratic countries, like China.

China’s espionage focus

In China, human rights defenders continue to endure arbitrary detention, imprisonment, and enforced disappearance. The government maintains tight control over the internet, mass media, and academia. Authorities increasingly deploy mass surveillance systems to tighten control over society. In 2018, the government the Chinese government applied the following methods to tighten its grip on the nation.

  1. Collecting, on a mass scale, biometrics including DNA and voice samples;
  2. Use such biometrics for automated surveillance purposes;
  3. Develop a nationwide reward and punishment system known as the “social credit system”;
  4. Develop and apply “big data” policing programs aimed at preventing dissent.

All of these systems are being deployed without effective privacy protections in law or in practice. Often people are unaware that their data is being gathered, or how it is used or stored. These methods of surveillance do not stop at China’s borders.

Ways of infiltrating an IT network

In general, there are two major ways for spies to alter the core of computer equipment.

  1. Interdiction. This method consists of manipulating devices when they are in transit from manufacturer to customer. This approach is favored by Western national security agencies to defend the West to terrorism and other threads.
  2. Seeding. This method requires making changes from the very beginning of the manufacturing process. China in particular has an expert knowledge regarding this kind of cyber attack. United States investigators found that in a number of motherboards used by Western communication companies certain miniscule spy-chips had been inserted during the manufacturing process. The company involved in this process is Supermicro. Chinese People’s Liberation Army had forced Supermicro’s Chinese sub-contractors to add microchips with hardware backdoors to its servers. United States investigators found that it eventually affected almost 30 companies, including a major bank, government contractors, and Apple Inc. The latter was an important Supermicro customer. In the summer of 2015, Apple found malicious chips on Supermicro motherboards. Apple broke ties with Supermicro the following year.

The Netherlands

In 2018 the Dutch Parliament announced it will seek to build a 5G network. The reason puzzles me as I think there are more important economic issues to solve, like for example the vulnerability of the banking sector and the consequences thereof for the national economy. The Dutch government will probably auction the frequencies at the end of 2019 or in early 2020.

The Netherlands are expected to follow other European nations and the United States, Canada and Australia to restrict the Chinese telecom firm’s operations, because of the risks of espionage. Chinese company Huawei (formed by Ren Zhengfei, a former military engineer in the People’s Liberation Army’s Information Technology Research Unit) currently delivers equipment to nearly all the Dutch telecom providers. Only a blind man would ignore the fact that the company – next to numerous other Chinese companies, is a facilitator for China’s communist government to spy on Western governments and companies. The fact that the smartphone maker has repeatedly denied any involvement in spying on China’s behalf is unbelievable, since the Communist party controls and funds Huawei.

US Ambassador to The Netherlands, Dutch-born Pete Hoekstra, has warned The Netherlands that Chinese companies are required by Chinese law to give its government access to all of their products and services (De Telegraaf, 26 February 2019):

Volgens Hoekstra is dat niet slechts een vaag risico; het is immers voor Chinese bedrijven een wettelijke verplichting om Pekings omvangrijke inlichtingenapparaat toegang te geven tot netwerken of apparatuur. „Door zogenaamde backdoors zijn ook grootschalige digitale aanvallen mogelijk.”. Volgens de ambassadeur is het moment aangebroken dat de VS, Nederland en andere NAVO-landen hun telecom-infrastructuur gaan beschermen door gezamenlijk standaarden op te stellen waaraan software en IT-infrastructuur moeten voldoen. „Dat kan betekenen dat we bepaalde producten uit bepaalde landen niet toelaten.”

Other facts to be taken into consideration

Apart from security concerns, two other important perspectives should also be taken into account.

  • A 2014 French television report denounced the subcontractors of a number of major smartphone brands which use child labour on their production lines. Among the telecoms giants involved was the Chinese company Huawei. From this perspective alone, European consumers should avoid using Huawei and the EU should ban the company from building a G5 network in Europe.
  • Huawei’s market share in the European Union has increased ten-fold in less than 10 years, thanks to state aid which enables it to offer prices which are much lower than those of its European and American competitors. The state aid is part of a program approved by China’s State Council in 2015, called “Made in China 2025”. The program specifically targets 10 high-tech industries for China to not simply surpass but replace other high-tech economies like the United States, Germany, South Korea, and Japan. The Chinese government is investing heavily in the program through subsidies, loans, and other policy incentives to support companies focusing on high-tech research, innovation, and acquisition of overseas technologies. The central government funding exceeds $1.5 billion. Local governments are matching that amount between 2016 and 2020. This way, companies like Huawei gain an unfair advantage over their European and American competitors.

Conclusions

Most Western intelligence and national securities agencies have warned against Chinese espionage. In my opinion, an international probe should be carried out as soon as possible into the Western telecom sector’s dependency on foreign technology. Adequate measures should be taken to replace Asian with European and American information technology. In the mean time, we should follow Pete Hoekstra’s advice: ask Ericsson and Nokia to build the next generation of our communication infrastructure.

The Chinese companies that are state-funded thus cleverly evade the Treaty on the Functioning of the European Union that generally prohibits State aid. European and American victims of this unfair competition could consider filing lawsuits against such businesses and could be rewarded for monetary damages caused by the business.

Sources

 

Author: R.A.U. Juchter van Bergen Quast