Chinese Peril

How China Will Take Over The World.
By Tatiana Koffman

There is a new cold war on the horizon. 

But instead of oil, the space race, or nuclear weapons, this one is being fought through the penetration of currencies, specifically the US Dollar against the Renminbi, also frequently referred to as the Chinese Yuan. 

Since Facebook announced its new stablecoin project Libra, in June of 2019, Mark Zuckerberg has been tried in the court of public opinion. 

Both Congressional and House Financial Services Committee hearings have essentially made a mockery of our government and showed just how technologically outmoded many of our politicians are.
But while Congressional Representative Katie Porter was commenting on Zuckerberg’s haircut and Congressman Warren Davidson was asking about “shitcoins,” China has been enjoying the spectacle from afar and making its own move. 

Namely, The People’s Bank of China (PBOC) is only a few months away from launching the digital version of the Chinese Yuan, making China the first country in the world to have a digital central bank currency. 

This historical move has been 80 years in the making, and is the ultimate checkmate in the game of economic expansion.

Post-War Economics
The single most transformational economic event over the last century was World War II (1939-1945). 

As governments overprinted and overspent money on defense, many European nations were faced with financial bankruptcy and saw their currencies significantly devalued. 

And when the war was finally over, their balance sheets were far too weak to rebuild infrastructure or meaningfully participate in international trade.
In 1944, in an effort to stabilize the global economy, many of the world's leaders came together at a gathering in Bretton Woods, New Hampshire to introduce the Gold Standard. 

It was decided that most of the world’s currencies would become tied to the US Dollar at a fixed exchange rate, which in turn would be backed by gold held in vaults. 

A new entity, the International Monetary Fund (IMF) was created to police these exchange rates, while all participating countries would ship their gold to the U.S.
The IMF then created the Special Drawing Right (SDR) which, rather than representing a currency per se, was designed to represent a unit of account or exchange. 

For example, at the time of writing, 1 SDR = 1.38 USD. 

Today, the SDR is based on a basket of currencies which includes the US Dollar, the Euro, Japanese Yen, the Pound Sterling, and most recently, the Chinese Yuan.
After the Gold Standard was introduced, the post-war period between 1945 and 1970 was perhaps the greatest period of economic stability and prosperity of the last century. 

Countries were investing heavily in infrastructure and manufacturing, which provided well-paying jobs, giving rise to the middle class popularized by suburban America. 

It was during this time that the U.S. assumed its world dominance in the political sphere, largely due to the lingering weakness of recovering European economies and their lack of infrastructure and manufacturing capacity.
In 1971, Nixon abolished the Gold Standard to continue funding war efforts in Vietnam, and the world has not been the same since. 

The US Dollar remained widely regarded as the global reserve currency. 

But beginning in 1995, many European countries started using the Euro instead, which was meant to unify the European region through trade.
China started working on its own currency ascension plan to stimulate its trade and economic growth between 1994 and 2005, when it pegged the Yuan to the US Dollar. 

China embraced widespread centralized economic reforms, averaging a GDP growth of 10% annually and lifting half of its 1.3 billion people out of poverty. 

China is projected to surpass the United States as the world’s largest economy in the next decade. 

In 2016, the Chinese Yuan was the first emerging market currency to be allowed into the IMF SDR basket and by 2019 became the 8th most traded currency in the world.

The New Cold War
The growing might of China has put Western powers on high alert. 

But, the next cold war will not be fought by exerting dominance in the physical world, but rather in the digital one. 

Data has become more valuable than oil. 

Modern societies are now powered using oceans of data, with Facebook and Google at the forefront, and companies like Palantir in the background. 

These companies have more knowledge and power than governments have ever had, but lack the same level of responsibility to its ‘citizens’. 

They are our new multinational multilaterals.
In the physical world, the U.S. is known for weaponizing its currency, using sanctions (12 countries today and counting) to alter global behavior. 

But in the digital world, it simultaneously wages war on its own tech companies with regulations, effectively and unwittingly disabling the very tools that could help it achieve lasting global dominance. 

One such effort is the proposed Democrat house bill “Keep Big Tech out of Finance Act.” 

This bill directly targets companies such as Facebook, Amazon, and Google to prevent them from creating their own ‘corpo-currencies’. 

A similar effort to fight U.S. big tech was undertaken in Europe with the GDPR.
While our governments increasingly make attempts to regulate data, they haven’t quite figured out how to regulate money that isn’t tied to borders. 

Governments can forbid the usage of bitcoin and other cryptocurrencies, as Russia and China recently did, but since the transactions are designed to disintermediate central authority, the ban has only made its citizens more drawn to it.
China’s answer was not just to ban bitcoin, but to give its people an alternative -- the DCEP (Digital Currency Electronic Payment). 

China becoming the first country to create a central bank backed digital currency shouldn’t come as a surprise. 

After all, this is a country that has a wider penetration of digital payments than any other region in the world.
WeChat, a popular Chinese chat and peer-to-peer payment app, has surpassed 1 billion users and accounts for 34% of total mobile traffic in China. 

The app appears to be popular among non-Chinese users as well, particularly in Asia and Africa. Consumers can pay for their every day expenses and make peer-to-peer payments with WeChat. 

As one of the 5 entities committed to using the DCEP, it is already accepted by most merchants, with paper bills rarely used. 

Even the homeless proudly display their QR codes in the streets.

China has already penetrated the global market by manufacturing the majority of the world’s consumer products. 

What happens when it creates the most efficient (and legal) payment system in the world and forces us to use it when buying its goods?
And just like that, the U.S. faces a real threat of no longer being the global reserve currency.
Digital Payments in Emerging MarketsEnter Facebook, a company with 2.4 billion users and a reputation for misusing user data. 

The giant also owns a popular messaging app, WhatsApp, with 1.5 billion users. 

The company has proposed its own solution to unite the world -- a digital stablecoin which, upon closer inspection, seems to be modelled after the SDR. 

Libra’s basket is based on 50% USD, and the rest in Euro, Japanese Yen, Pound Sterling, and the Singapore Dollar, as well as other stable non-currency assets. 

Facebook has made a point of excluding the Chinese Yuan, drawing a noticeable line in the sand. 
Zuckerberg has acknowledged that Facebook may not have been the best candidate to bring forth a new international currency given its recent issues with privacy and the Cambridge Analytica scandal. 

But the necessity of such a currency still remains if we hope to slow down the Chinese global footprint.
As far as the U.S. is concerned, the DCEP will be a much greater threat to the ‘western hegemony’ than a Libra coin. 

A western-led digital currency like Libra would have kept the majority of the planet that lives outside of China’s firewall aligned. 

But Zuckerberg’s team made two crucial mistakes. 

First, it did not fully align with the U.S. government before launch, the way WeChat is aligned with the Communist Party of China, and second, perhaps more crucially, it did not take full advantage of Libra’s impact story in emerging markets. 
One had to delve into the Libra white paper to discover the problem Libra was actually trying to solve --  “1.7 billion adults globally remain outside of the financial system with no access to a traditional bank, even though one billion have a mobile phone and nearly half a billion have internet access.” 

This is a valuable statistic, but it is missing a much more important point. 

Many people who do have access to a traditional bank account, don’t want to use it. 

Workers in the developing world routinely line up at bank terminals to cash their paycheck the day it arrives, either because they do not trust their institutions or they find that their banks have predatory fees. 

Many rural communities are still cash-based, with ATMs located hours away. 

Libra would have allowed for liquidity in these communities, in a stable method of exchange, increasing the overall velocity of capital. 
Libra could have solved these issues and more. 

For example, many U.S. immigrants run businesses back in their home countries using WhatsApp. Libra would have allowed workers, suppliers, and managers to receive payments straight to their mobile phone and then spend it within their communities using the same app.
Libra could have made global financing accessible for small businesses and farmers in the developing world. 

One area of impact is Nigeria, which has the highest concentration of arable land in Africa and remains underdeveloped because of struggles with financing. 

For example, a young woman needs a small loan to launch her chicken farming business to support her family. 

There are several government programs in place, but they cannot effectively and securely deploy the capital to reach her. 

She has family in the U.S. and the U.K., but they cannot efficiently send her capital. 

Non-profit grants exist but they also cannot effectively reach her. 

And so, her capital options are limited, and are likely to result in letting go of her dream towards self-reliance.
Ignoring impact stories such as these was a crucial oversight by Facebook. 

And if we are unable to rally behind Libra, capital and liquidity issues in emerging markets will be solved through WeChat, extending the economic influence of the Chinese Yuan. 

Emerging markets will likely become the battleground for the next cold war. 

And as such, the U.S. government will need to ask itself what it fears more, a home-grown technology giant or a world led by China.

Google to move Pixel smartphone production out of China into Vietnam

• The U.S. internet giant plans to move most of its American-bound hardware out of China, including the Pixel phones and its smart speaker Google Home
• The move comes as labor costs are rising in China along with added pressure from spiraling tariffs.

By Reuters

Google Pixel 3a XL.

Alphabet’s Google is shifting its Pixel smartphone production to Vietnam from China starting this year as it builds a cheap supply chain in Southeast Asia, the Nikkei business daily reported on Wednesday.
The move comes as labor costs are rising in China along with added pressure from spiraling tariffs due to the ongoing Sino-U.S. trade tensions.
The U.S. internet giant plans to move most of its American-bound hardware out of China, including the Pixel phones and its smart speaker Google Home, Nikkei said.
The company plans to ship about 8 million to 10 million smartphones this year, double from a year ago, making Vietnam a key part of Google’s drive for growth in the smartphone market, the newspaper added.
Google will shift some production of the Pixel 3A phone to Vietnam before the end of this year, Nikkei reported citing sources.
For its smart speakers, some production is likely to be moved to Thailand but the company’s new product development and initial production for its hardware lineup will still be in China, the newspaper said.
Google did not immediately respond to a request for comment on the matter, outside regular business hours.

Supreme Tech Quisling

U.S. Must Put a Ban on Google Helping China Develop a Global Digital Dictatorship
Google is paving the way for Beijing’s digital dictatorship. Washington must criminalize such collaboration.

By Gordon G. Chang

General Joseph Dunford, America’s top military officer, has announced he will be meeting with Google representatives to talk about the company’s assistance to China’s People’s Liberation Army.
Dunford, chairman of the Joint Chiefs of Staff, first stoked the controversy over Google during his appearance before the Senate Armed Services Committee. 

“The work that Google is doing in China is benefiting the Chinese military,” he said.

“We watch with great concern when industry partners work in China knowing that there is that indirect benefit,” he added later. 

“Frankly, ‘indirect’ maybe not be a full characterization of the way it really is. It’s more of a direct benefit to the Chinese military.”
Google issued a firm denial in response to Dunford’s comments. 

"We are not working with the Chinese military,” a spokesperson said. 

“We are working with the U.S. government, including the Department of Defense, in many areas including cybersecurity, recruiting and healthcare.”
But Dunford is correct. 

The denial, even if technically accurate, is nonetheless misleading. 

Google maintains arrangements that it either knows or should know directly benefit the Chinese military.
For instance, in December 2017 the company announced the formation of the Google AI China Center in Beijing.
Due to Chinese dictator Xi Jinping’s announced policy of “civil-military fusion,” there is no longer any meaningful distinction between civil and military research, especially in areas like AI that Xi has determined China must dominate. 

As Bob Work, once U.S. deputy defense secretary, said of the new facility in the Chinese capital, “Anything that’s going on in that center is going to be used by the military.”

“The fusion of commercial business with military is significant,” he said. 

“The technology that is developed in the civil world transfers to the military world. It’s a direct pipeline. Not only is there a transfer, there’s also systematic theft of U.S. technology that facilitates even faster development of emerging technology.”

Dunford pointed to the requirement of having Communist Party cells in companies. 

The cells, he said, will lead to the transfer of intellectual property to the Chinese military.
The Daily Beast asked Google if its AI China Center hosts a Communist Party cell but has not received a reply.
Google’s AI center in Beijing is not the only project of concern. 

“Google is partnering with several state entities for various projects to expedite their research,” Brandon Weichert, a national security analyst specializing in emerging technology, told The Daily Beast.
The company is already participating in AI research at Tsinghua University, one of China’s two premier institutions, and is cooperating with Peking University, the other top institution, and the University of Science and Technology of China.

Google’s work with the University of Science and Technology of China is the most sensitive. Weichert, who publishes the Weichert Report, told radio host John Batchelor that Google has expressed interest in investing in and contributing personnel to a new Chinese quantum computer center in Anhui province, slated to be operational next year.
The National Laboratory for Quantum Information Sciences, a multi-billion-dollar facility taking up 86 acres, will conduct both civilian and military research and, according to Weichert, has close links with the People’s Liberation Army. 

The University of Science and Technology of China is a participant in the lab’s projects.

Google’s AI efforts in China, Weichert says, will require the company to expand its cloud computing capabilities in the country—it is exploring cooperation with China’s Tencent in this area—and it will need quantum computing. 

Google will be making substantial contributions to China’s advancement of these critical technologies.

Of all companies, Google should know that any research conducted in China will find its ways into the hands of the Communist Party and the Chinese central government. 

Theft for Google is not a theoretical concern. 

China, after all, stole Google’s source code back in 2010. (The Chinese government said Google’s claim about an attack by hackers based in China was “groundless.”)
Google must know that China’s military, which reports to the Party, will benefit directly from its research.
As Weichert told me, “China has been anticipating this for a few years and they are making moves to coopt Google research on quantum as best as they can, just as they did with Western manufacturing firms 20 years ago.”
“The Chinese,” he said, “are replicating the very same behavior they used to gut the manufacturing sector from the United States, and they are applying those techniques and capabilities in gutting America’s high tech sector.” 

Enticement, theft, and forced transfer are commonplace in both multi-decade efforts.
As Google moves closer toward work with China’s military, it is distancing itself from the U.S. military. 

The company bowed to protests from thousands of its employees last June, issuing a statement committing itself not to “design or deploy AI” for "weapons or other technologies whose principal purpose or implementation is to cause or directly facilitate injury to people."

As a result, Google is walking away from the Pentagon. 

It is not renewing the Project Maven contract, an AI project, and it has decided not to compete for the JEDI cloud computing project.
“By refusing to help the U.S. government to obtain necessary advantages to defend freedom, Google is only accelerating the day in which China achieves its goal of a global digital dictatorship,” Richard Fisher of the Virginia-based International Assessment and Strategy Center told The Daily Beast.
So Google is helping the Chinese military in applications that are certainly lethal while not participating in similar American efforts. 

The company deserves condemnation for this choice.
As questionable as Google’s decision appears, this matter is ultimately not a Google issue. 

Corporate executives are not charged with defining and implementing national security policy.
This is a U.S. leadership issue. 

Until the American political system identifies China as an enemy or merely a foe—something that should have been done some time ago—Google is free to work for Beijing, however wrong that cooperation is.
President Donald Trump has mentioned the problem on Twitter, but what’s required is far more comprehensive than a tweet.
The way to get Google to stop working for China is to make it illegal to do so. 

That’s up to 536 individuals who are often found in Washington, D.C.: President Trump, 100 senators, and 435 members of the House of Representatives.

Supreme Tech Quisling

Good for China and Google, Bad for America.
Google is sharing a military technology with America's monstrous enemy.
By Peter Thiel
DeepMind drew attention in 2016, when its AlphaGo software beat Lee Sedol, champion of the game Go.

A “Manhattan Project” for artificial intelligence is how Demis Hassabis, the founder of DeepMind, described his company in 2010, when I was one of its first investors. 

I took it as figurative grandiosity. 

I should have taken it as a literal warning sign, because that is how it was taken in foreign capitals that were paying close attention.
Now almost a decade later, DeepMind is the crown jewel of Google’s A.I. effort. 

It has been the object of intense fascination in East Asia especially since March 2016 when its AlphaGo software project beat Lee Sedol, a champion of the ancient strategic board game of Go.
Such feats notwithstanding, DeepMind, having now gone on three times longer than the original Manhattan Project, is not clearly any closer to its core goal of creating an “artificial general intelligence” that rivals or replaces humanity. 

But it is finally becoming clear that, as with nuclear fission before it, the first users of the machine learning tools being created today will be generals rather than board game strategists.
A.I. is a military technology. 

Forget the sci-fi fantasy; what is powerful about actually existing A.I. is its application to relatively mundane tasks like computer vision and data analysis. 

Though less uncanny than Frankenstein’s monster, these tools are nevertheless valuable to any army — to gain an intelligence advantage, for example, or to penetrate defenses in the relatively new theater of cyberwarfare, where we are already living amid the equivalent of a multinational shooting war.
No doubt machine learning tools have civilian uses, too; A.I. is a good example of a “dual use” technology. 

But that common-sense understanding of A.I.’s ambiguity has been strangely missing from the narrative that pits a monolithic “A.I.” against all of humanity.
A.I.’s military power is the simple reason that the recent behavior of America’s leading software company, Google — starting an A.I. lab in China while ending an A.I. contract with the Pentagon — is shocking. 

As President Barack Obama’s defense secretary Ash Carter pointed out last month, “If you’re working in China, you don’t know whether you’re working on a project for the military or not.”
No intensive investigation is required to confirm this. 

All one need do is glance at the Communist Party of China’s own constitution: Xi Jinping added the principle of “civil-military fusion,” which mandates that all research done in China be shared with the People’s Liberation Army, in 2017.
That same year, Google decided to open an A.I. lab in Beijing. 

According to Fei-Fei Li, the executive who opened it, the lab is “focused on basic A.I. research” because Google is “an A.I.-first company” in a world where “A.I. and its benefits have no borders.” All this is part of a “huge transformation” in “humanity” itself. 

Back in the United States, a rebellion among rank and file employees led Google last June to announce the abandonment of its “Project Maven” A.I. contract with the Pentagon. 

Perhaps the most charitable word for these twin decisions would be to call them naïve.
How can Google use the rhetoric of “borderless” benefits to justify working with the country whose “Great Firewall” has imposed a border on the internet itself? 

This way of thinking works only inside Google’s cosseted Northern California campus, quite distinct from the world outside. 

The Silicon Valley attitude sometimes called “cosmopolitanism” is probably better understood as an extreme strain of parochialism, that of fortunate enclaves isolated from the problems of other places — and incurious about them.
A little curiosity about China would have gone a long way, since the Communist Party is not shy about declaring its commitment to domination in general and exploitation of technology in particular. 

Of course, any American who pays attention and questions the Communist line is accused by the party of having a “Cold War mentality” — but this very accusation relies on forgetfulness and incuriosity among its intended audience.
Since 1971, the American elite’s Cold War attitude toward China’s leaders has been one of warm indulgence. 

In the 1970s and 1980s, that meant supporting China against a greater adversary, the Soviet Union. What is extremely strange is that this policy of indulgence continued and even deepened after the Soviet Union’s collapse in 1991.
A few years after the Cold War ended, American leaders started treating China the way they had treated West Germany and Japan. 

We tolerated punishing trade deficits in the 1970s and 1980s to support those two allies, and we had strategic reasons to do it. 

As for building up China in the 1990s and 2000s, America’s generosity was supposed to somehow lead to China’s liberalization. 

In reality, it led to the transfer of our industrial base to a foreign rival.In this sense, a zombie “Cold War mentality” never went away — though it certainly stopped making sense. 

Only recently, with help from Xi Jinping’s decision last year to, in effect, declare himself potential leader for life, has Donald Trump become the first president since Richard Nixon to pay attention and run a reality check on China.
Silicon Valley is not alone in its inattention to geopolitical reality; Wall Street has been eager to make excuses for Google’s naïveté. 

The timing is not coincidental; just this week American officials met their Chinese counterparts in Shanghai to negotiate a trade deal.
The flip side of China’s huge trade surplus has been America’s huge current account deficit. 

All of the dollars we send abroad that never get used to buy American goods have to go somewhere, and most go through New York’s money center banks on their way to buying financial assets. 

Since upsetting this imbalance is a threat to profits, Wall Street would prefer to cave on trade and keep Google’s stock price high while they’re at it.
But the banks’ experience of the last few decades of globalization has not been representative. 

The trade deficits that brought flows of money to Wall Street took jobs and bargaining power away from the median worker.Wages have been stagnant since the 1970s. 

The difference between our post-1971 era of globalization and the post-1945 midcentury boom is a breakdown in the relationship between the parts and the whole: An archipelago of inward-looking, parochial places like Wall Street and Silicon Valley have done exceedingly well for themselves while their fellow citizens have been left behind in a stagnant economy.
In the 1950s, the cliché was that “what’s good for General Motors is good for the country.” 

Google makes no such claim for itself; it would be too obviously false. 

Instead, Google says it is “committed to significantly improving the lives of as many people as possible”— a standard so vague as to defy any challenge.
By now we should understand that the real point of talking about what’s good for the world is to evade responsibility for the good of the country.

Tech Quisling

Google defeats shareholders on ‘Dragonfly’ censored search in China

By Zack Whittaker

A shareholder resolution aimed at halting Google’s efforts to bring a censored version of its search engine to China has failed.
Shareholders tabled a resolution to demand Google put the brakes on its controversial search engine efforts in China. 

The program, internally dubbed “Dragonfly,” is a censorship-friendly search engine with the capability to hide results at the behest of Beijing, which administers one of the most restrictive internets in the world.
The project remains largely secret, amid an internal upheaval and political pressure from the Trump administration over the project, but was later acknowledged by Google chief Sundar Pichai, describing China as an “important” market.
The resolution, which failed to pass during the meeting, would have instructed Google to conduct and publish a human rights impact assessment examining the impacts of a censored Google search engine in China.
It’s not immediately known what was the breakdown of the vote.
“The Chinese government already employs invasive, data-driven surveillance to track its citizens,” said Joshua Brockwell, an investment communications director at Azzad Asset Management, which supports the resolution. 

“The potential for it to weaponize data from Google searches could allow the government to expand its human rights abuses, including mass detentions of the Uighur minority.”
Among recent crackdowns, China has come under international pressure in the past year for targeting Uighur Muslims and holding more than a million in detention.
Google opposes the resolution, saying in its proxy statement: “Google has been open about its desire to increase its ability to serve users in China and other countries. We have considered a variety of options for how to offer services in China in a way that is consistent with our mission and have gradually expanded our offerings to consumers in China, including Google Translate.”
Open Mic, a nonprofit representing shareholders worth $3 billion in Google assets, brought the resolution.
Capital Research & Management Company, the shareholder in the top 10 with the least amount of shares, still has $3.9 billion in stock.

Don't be Huawei

Google has just killed Huawei's bid to become the world's top smartphone brand

By Sherisse Pham

Hong Kong -- Google is restricting Huawei's access to its Android operating system and apps after the Trump administration blacklisted the Chinese tech firm.
The move is a huge blow to Huawei, whose goal is to be the top smartphone brand by the end of 2020.
Last week, the Trump administration barred American companies from selling to Huawei without a US government license in a significant escalation of the trade war with China.
"We are complying with the order and reviewing the implications," a Google spokesperson said on Monday.

Huawei, the world's No. 2 smartphone seller, relies on a suite of Google services for its devices, including the Android system and the Google Play app store.
The Silicon Valley giant is suspending much of that access, according to multiple reports, after Washington placed Huawei on a list of foreign firms deemed to undermine American national security or foreign policy interests. 

Listed companies are barred from receiving components and software unless the trade is licensed.

Existing Huawei phones unaffected
Huawei will only be able to use the public version of Android and will not be able to access apps and services from Google. 

The news was first reported by Reuters.
Google said consumers who already own Huawei smartphones will be largely unaffected for now.
"Google Play and the security protections from Google Play Protect will continue to function on existing Huawei devices," the spokesperson added, without providing further details.

The ban threatens Huawei's supply chain and could delay the rollout of 5G services around the world. But the most immediate headache for Huawei is what the decision means for future smartphone sales.
Most of Google's most popular products — like Gmail, YouTube and Google Maps — are banned in China, where Huawei offers domestic alternatives like Tencent's WeChat and Baidu Maps.
But the company is hugely dependent on countries other than China. 

Roughly half its smartphone sales last year were made outside China, according to research firms Canalys and IDC.
Huawei said it is "examining the implications from the US actions for consumers," adding that it will continue to provide "security updates and after sales services" for all existing smartphones and tablets, including its Honor budget brand.
The Chinese tech company said it has spent at least three years working on its own operating system.
"Huawei has been building an alternative operating system just in case it is needed," said Huawei spokesperson Glenn Schloss. 

"We would like to be able to continue operating in the Microsoft and Google ecosystems," he added.
Huawei licenses Microsoft's operating system for its laptops and tablets. 

Microsoft did not immediately respond to a request for comment.
Beijing has repeatedly criticized the US-led campaign against Huawei, and called the addition of the company to the trade blacklist a political move.

Killing Huawei outside China
Being cut off from the Google ecosystem would be a huge blow to Huawei's ambitions to overtake Samsung as the world's biggest smartphone maker.
The consumer business — which includes smartphones, laptops, tablets and wearable devices like smart watches — was the biggest contributor to Huawei's earnings last year. 

The division made nearly 349 billion yuan ($50 billion) in 2018, accounting for more than 45% of revenue.
For the millions of users outside of China, being cut off from Google's apps and services "kills the attractiveness of a Huawei phone," said IDC analyst Bryan Ma.
"It kills the usability of a Huawei phone outside of China, thus rendering them dead in the water," he added.

Theoretically, Huawei can try to win over consumers with its competitive hardware and innovation, and then convince them to download Google apps after they buy a Huawei phone, said Nicole Peng, an analyst with Canalys.
But evidence shows that "after sales installation is very challenging for users, unless they know what they're doing," said Peng.
Moreover, when customers start finding out that Huawei can't get Google's ecosystem on their phones, "it will affect trust, they will question if anything is wrong with the device," she added.
Even if customers were able to independently download Google apps on Huawei phones, the phones may still not have access to so-called Google Mobile Services.
Many third party apps, like ride hailing and food delivery platforms, rely on services like Google Maps. 

Most of those apps may no longer be supported on Huawei devices, said IDC's Ma.
Without that access, "the Huawei phone is a brick," he said.

Wikipedia Is Now Banned in China in All Languages

BY HILLARY LEUNG

An error message for the blocked Wikipedia website page is seen on a computer screen on March 23, 2018.

China has expanded its ban on Wikipedia to block the community-edited online encyclopedia in all available languages, the BBC reports.
An earlier enforced ban barred Internet users from viewing the Chinese version, as well as the pages for sensitive search terms such as Dalai Lama and the Tiananmen massacre.
According to Open Observatory of Network Interference (OONI), an internet censorship research group, the block has been in place since late April.
The Wikimedia foundation said in a statement that it did not receive any notice of the censorship.
Wikipedia joins a growing list of websites that cannot be accessed in China, which in recent years has tightened its grip on access to information online. 

Google, Facebook and YouTube are among the sites already banned, forcing Internet users to use virtual private networks, or VPN, to bypass what has become known as the “Great Firewall” of China.
Reporters Without Border’s 2019 World Press Freedom index ranks China at 177 on a list of 180 countries analyzed. 

China is not just issuing censorships locally, but is also attempting to infiltrate foreign media in an attempt to deter criticism and spread propaganda.
Wikipedia is also blocked in Turkey.

Chinese Peril

China's military is using espionage to steal secrets
By Ryan Browne

China is using student spies to steal secrets

China is continuing to modernize its armed forces in order to transform its military into a major global power and using espionage to steal cutting edge technology for military purposes, according to a newly released Pentagon report on China's military.
"China uses a variety of methods to acquire foreign military and dual-use technologies, including targeted foreign direct investment, cyber theft, and exploitation of private Chinese nationals' access to these technologies, as well as harnessing its intelligence services, computer intrusions, and other illicit approaches," the Congressionally mandated Department of Defense report said.
"China obtains foreign technology through imports, foreign direct investment, the establishment of foreign research and development (R&D) centers, joint ventures, research and academic partnerships, talent recruitment, and industrial and cyberespionage," the report added.
The Chairman of the Joint Chiefs of Staff, Gen. Joseph Dunford, recently warned Congress that US companies that did business in China were often indirectly benefiting the Chinese military, citing Google as an example.
The report said that China had used these techniques to acquire sensitive, dual-use, or military-grade equipment from the United States, including aviation and antisubmarine warfare technologies.
Beijing is also exploiting its citizens and foreigners of Chinese descent living abroad to further the aims of the Chinese Communist Party the report says, saying that a "cornerstone of China's strategy includes appealing to overseas Chinese citizens or ethnic Chinese citizens of other countries to advance CCP objectives through soft power or, sometimes, coercion and blackmail."

Beijing developing advanced weaponry
Some of the more advanced technology China is developing includes hypersonic missiles, weapons that travel at least five-times the speed of sound.
"China has tested hypersonic glide vehicles. In August 2018, China successfully tested the Xingkong-2 (Starry Sky-2), which it publicly described as a hypersonic waverider vehicle," the report says, referencing a missile that can travel close to the water to avoid detection and missile defense.
The report also details the growth in China's defense budget and its military capabilities, saying "China's defense budget has nearly doubled during the past 10 years."
Much of that money is being spent on beefing up the Chinese navy, with the report saying that China commands "the region's largest navy, with more than 300 surface combatants, submarines, amphibious ships, patrol craft, and specialized types."

Top US general says Google is benefiting the Chinese military

The report calls the Chinese navy an "increasingly modern and flexible force," saying that the "modernization of China's submarine force remains a high priority."
It says China's total submarine force "will likely grow to between 65 and 70 submarines by 2020" and that China will field a new guided-missile nuclear attack submarine "by the mid-2020s" providing Beijing with "a more clandestine land-attack option."
China's first domestically built aircraft carrier will also "likely join the fleet by the end of 2019" and its second domestically built carrier is projected to be operational by 2022.
Beijing is also rapidly building up its Coast Guard to help enforce its claims over disputed islands in the South China Sea, according to the report.
Since 2010 the Chinese Coast Guard has doubled its fleet of large patrol ships and now commands some 130 large vessels, "making it by far the largest coast guard force in the world and increasing its capacity to conduct simultaneous, extended offshore operations in multiple disputed areas."
The report also says China uses its People's Armed Forces Maritime Militia, a reserve force of civilians available for mobilization, "to achieve China's political goals" in the South China Sea without fighting.
China has attempted to increase its control over the features and waterways of the South China Sea where some 78 percent of its oil imports and 16 percent of natural gas imports sails.
"In the South China Sea, China has continued militarization. Anti-ship cruise missiles and long-range surface-to-air missiles have been deployed to Spratly Islands outposts, and China's strategic bombers have conducted take-off and landing drills on Woody Island in the Paracel Islands," the report said, adding that the missiles deployed to the Spratly Islands in 2018 are the "most capable land-based weapons systems deployed by China in the disputed South China Sea."
"China states that international military presence within the South China Sea is a challenge to its sovereignty. China has continued to escalate coercive tactics to enforce its claims within the South China Sea," it added.

Google Makes Wall Great Again

Google blocks China adverts for sites that help bypass censorship 
Visitors and locals rely on virtual private networks to access global internet 
By Yuan Yang in Hong Kong

Google has stopped distributing advertisements in China for two websites that review anti-censorship software, in a move that signals the US tech giant’s efforts to curry favour with Beijing.
Last week, VPNMentor, a company that reviews virtual private network services that allow users to bypass China’s internet controls and avoid surveillance, said that Google had refused to sell its adverts to Chinese users, after doing so for more than two years. 
 On Wednesday, Top10VPN, another review site, said it had received the same notice after advertising with Google for several months.
 VPNMentor posted a screenshot of an email to Twitter, appearing to be from Google, saying “it is currently Google policy to disallowed [sic] promoting VPN services in China, due to the local legal restrictions”.
 Foreign businesses and visitors to China, as well as local citizens, rely on VPNs to access the global internet, including platforms such as Google and Facebook, which are blocked by China’s “Great Firewall” of internet controls.
Google runs adverts on third-party websites in China.
 Google said it had “longstanding policies prohibiting ads in our network for private servers, in countries where such servers are illegal”, adding that bans on VPN adverts in China had been in place for several years.
 On Friday, China’s market regulator demanded that internet platforms step up their censorship of adverts.
 However, there is no blanket ban on selling VPNs in China.
Chinese regulators issued a notice in 2017 stating that VPN providers would need to be licensed in order to operate in China.
Regulators told the Financial Times last year that the situation was “complex” and that they were still “researching” how to apply the measures.
 Charlie Smith of GreatFire, a censorship monitoring organisation, criticised Google’s blunt action in relation to VPNMentor and Top10VPN as being too broad.
He said: “There are legally registered VPNs operating in China, so either Google has not kept up to date with local regulations or they are overstepping their boundaries.” 
 David Kaye, the UN special rapporteur on the promotion and protection of the right to freedom of opinion and expression, said that Google’s move “deprived [Chinese users] of the choice to find uncensored material”. 
 “If Google is in the business of expanding access to information, why do they not conceive of their business in those terms in China?” he asked.
 Mr Kaye also questioned whether Google had researched the legal status of the review sites, or “sought ways to ameliorate the impact on expression” before deciding to enforce a ban against them as regards all VPN-related adverts.
 Mark Natkin of Marbridge Consulting, a tech research group in Beijing, said that Google “may be trying to comply with the spirit of the regulation”.
 “Google’s situation is that, based on their past decisions in China, they have a more delicate relationship with the Chinese authorities and feel compelled to make additional efforts to curry favour and get back in the good graces to get approval to re-enter the market,” he added.
Lee Jyh-An, associate professor of law at the Chinese University of Hong Kong, agreed, saying the move was a “signal to show kindness towards the Chinese government”. 
 “Google have withdrawn from China before and that scene wasn’t pleasant, so if they want to come back again, they have to show a stronger ‘kindness’ signal.”
 Google closed its China search engine in 2010 after suffering cyber attacks and periodic blocks from the government.
The company announced that it was no longer willing to censor search results, devastating its relationship with Beijing at the time.
 Google said its decision to block VPNMentor’s adverts was “completely unrelated” to trying to re-enter China.
 “As we’ve said for many months, we have no plans to launch Search in China and there is no work being undertaken on such a project,” the company added, referring to its previously leaked “Dragonfly” plan to bring a censored Google Search back to China.

Tech Quisling

GOOGLE IS CONDUCTING A SECRET “PERFORMANCE REVIEW” OF ITS CENSORED CHINA SEARCH PROJECT
By Ryan Gallagher

GOOGLE EXECUTIVES ARE carrying out a secret internal assessment of work on a censored search engine for China, The Intercept has learned.
A small group of top managers at the internet giant are conducting a “performance review” of the controversial effort to build the search platform, known as Dragonfly, which was designed to blacklist information about human rights, democracy, religion, and peaceful protest.
Performance reviews at Google are undertaken annually to evaluate employees’ output and development. 

They are usually carried out in an open, peer review-style process: Workers grade each other’s projects and the results are then assessed by management, who can reward employees with promotion if they are deemed ready to progress at the company.
In the case of Dragonfly, however, the peer review aspect has been removed, subverting the normal procedure. 

In a move described as highly unusual by two Google sources, executives set up a separate group of closed “review committees,” comprised of senior managers who had all previously been briefed about the China search engine.

The existence of the Dragonfly review committees has not been disclosed to rank-and-file Google employees, except for the few who have been evaluated by the committees because they worked on China search. 

Fewer than a dozen top managers at the company are said to be looped in on the review, which has involved studying documents and technical work related to Dragonfly.
“Management has decided to commit to keeping this stuff secret,” said a source with knowledge of the review. 

They are “holding any Dragonfly-specific documents out of [employees’] review tools, so that promotion is decided only by a committee that is read in on Dragonfly.”

Executives likely feared that following the normal, more open performance review process with Dragonfly would have allowed workers across the company to closely scrutinize it, according to two Google sources.
If some of the documents about Dragonfly had been made more widely accessible inside the company, according to the two sources, it would probably have led to further controversy about the project, which ignited furious protests and resignations after it was first exposed by The Intercept in August last year.
The decision to carry out the review in secret, however, is itself likely to stoke anger inside the company. 

During the protests over Dragonfly last year, a key complaint from employees was that the China plan lacked transparency and went against the company’s traditionally open workplace culture. 

Until it was publicly exposed, knowledge about Dragonfly had been restricted to a few hundred of Google’s 88,000 employees — around 0.35 percent of the total workforce.
Facing pressure from both inside and outside the company, Google CEO Sundar Pichai told his staff during an August crisis meeting that he would “definitely be transparent [about Dragonfly] as we get closer to actually having a plan of record. We definitely do plan to engage more and talk more.”
But Google employees told The Intercept this week that company bosses have consistently refused to provide them with information about Dragonfly — leaving them in the dark about the status of the project and the company’s broader plans for China.
Late last year, amid a firestorm of criticism, Google executives moved engineers away from working on the censored search engine and said publicly that there were no current plans to launch it. 

Earlier this month, however, The Intercept revealed that some Google employees were concerned that work on the censored search engine remained ongoing, as parts of the platform still appeared to be under development. 

Google subsequently denied that Dragonfly remained in progress, insisting in a statement that there was “no work being undertaken on such a project. Team members have moved to new projects.”

Google previously launched a search engine in China in 2006, but pulled out of the country in 2010, citing concerns about Chinese government interference. 

At that time, Google co-founder Sergey Brin said the decision to stop operating search in the country was principally about “opposing censorship and speaking out for the freedom of political dissent.”
Dragonfly represented a dramatic reversal of that position. 

The search engine, which Google planned to launch as an app for Android and iOS devices, was designed to comply with strict censorship rules imposed by China’s ruling Communist Party regime, enabling surveillance of people’s searches while also blocking thousands of terms, such as “Nobel prize,” “human rights,” and “student protest.”
More than 60 human rights groups and 22 U.S. lawmakers wrote to Google criticizing the project. 

In February, Amnesty International met with Google to reiterate its concerns about the China plan. “The lack of transparency around the development of Dragonfly is very disturbing,” Anna Bacciarelli, an Amnesty researcher, told The Intercept earlier this month. 

“We continue to call on Google’s CEO Sundar Pichai to publicly confirm that it has dropped Dragonfly for good, not just ‘for now.’”
Google did not respond to a request for comment.

Tech Quisling

Dunford to meet with Google for debate on Chinese ties
By Aaron Mehta 

It is safe to say that the Pentagon and Google are very different places. But that gap could harm U.S. national security. 

WASHINGTON — For the second time in a week, the Pentagon’s top uniformed officer has taken a shot at Google, warning that the tech company’s investments in China are doing long-term damage to America’s security.
But Gen. Joseph Dunford, chairman of the Joint Chiefs of Staff, said he also plans to meet with the tech giant to debate about its roles and responsibilities as a commercial enterprise versus how much the firm owes to America as its home nation.
“In my judgment, Google assisting the Chinese military in advancing technologically is not in U.S. national interests, so it’s a debate we have to have,” Dunford said at a Thursday event hosted by the Atlantic Council.
His comments followed up on statements made in a Senate hearing last week, where he said Google was benefiting the Chinese military by its operations in the communist nation. 

Asked to follow up on those conversations Thursday, the chairman expressed the belief that no company can do work in China without it being siphoned off.
“If a company does business in China, they are automatically going to be required to have a cell of the Communist Party in that company,” he said. 

“And that is going to lead to that intellectual property from that company finding its way to the Chinese military. It is a distinction without a difference between the Chinese Communist Party, the government and the Chinese military.”
“Ventures to help develop artificial intelligence in China are going to do two things. They are going to help an authoritarian government to assert control [over] its own population. Again, our country exists for the individual. China exists for the Chinese communist party,” he continued.
“The second thing it’s going to do is it’s going to enable the Chinese military to take advantage of the technology that is developed in the United States. Why is it developed in the United States? Why is Silicon Valley in the United States? Because of our system of government in enabling of individual ideas to bubble up and advance the world, whether it’s medically, education, artificial intelligence, you name it.”

Dunford added that he has plans to meet with Google executives in the near future, likely next week.
“I just think we need to have a debate about that. We ought not to think that it is just about business when we do business in China,” he said. 

“This is about us looking at the second- and third-order effects of our business ventures in China, the Chinese form of government, and the impact it’s going to have on the United States’ ability to maintain a competitive military advantage and all that goes into it.
“I’m happy to have that debate. This is not about me and Google.”
The issue Dunford identifies is indeed wider than Google, with China a prime target for just about every major American industrial concern. 

His comments also come from a situation where members of the tech and defense communities appear to often talk past each other and regard the other with suspicion.
That said, Google is an easy target inside the Pentagon. 

Not only did parts of the company revolt against working on the department’s Project Maven last year, leading to Google’s exit entirely from the program, but the company has opened a major AI center in China — despite statements from Eric Schmidt, then the head of parent company Alphabet, that the U.S. and China are in an AI arms race.
“In the case of Google they were highlighted because they have an artificial intelligence venture in China. I think it is a reasonable assertion, even in an open venue like this, to assert the benefit of that venture for artificial intelligence for China, one of many ventures of our companies that are there, indirectly benefits the Chinese military and creates a challenge for us to [maintain] a competitive advantage,” Dunford said.
It’s not just AI where China’s influence on the commercial sector is butting up against the Pentagon’s interests.
Asked about the potential risks of a Chinese-built 5G network, Dunford called it a “critical national security issue” that needs to be addressed not just in the U.S. but with allied nations.
“Our relationships rely on trust, and that trust, in part, is the assurance that the data that we exchange, the intelligence we share, the information we share can be done in a way where it’s not compromised. And the issue of 5G addresses both potential vulnerabilities in our systems due to how reliant we will be on 5G for the internet of things, our combat systems, but also exchanging information with our allies and partners,” he said.
"So we very much believe that any future capability along the lines of 5G has to be trusted, and we’re concerned that we’re moving in the direction where if we don’t get out in front in that regard we won’t be able to trust 5G and will be at a competitive disadvantage,” the chairman concluded. 

“I think American industry needs to step out and dominate 5G because it will be in our national interest to do so.”

Blood Money

U.S. Firms Are Helping Build China’s Orwellian State
BY LINDSAY GORMAN, MATT SCHRADER
When a Dutch cybersecurity researcher disclosed last month that Chinese security contractor SenseNets left a massive facial recognition database tracking the movements of over 2.5 million people in China’s East Turkestan colony unsecured on the internet, it briefly shone a spotlight on the alarming scope of the Chinese surveillance state.
But SenseNets is a symptom of a much larger phenomenon: Tech firms in the United States are lending expertise, reputational credence, and technology to Chinese surveillance companies.
The SenseNets database logged exact GPS coordinates on a 24-hour basis and, using facial recognition, associated that data with sensitive personal information, including national ID numbers, home addresses, personal photographs, and places of employment. 
Nearly one-third of the individuals tracked were from the Uighur minority ethnic group.
In a bizarre juxtaposition of surveillance supremacy and security incompetence, SenseNets’ database was left open on the internet for six months before it was reported and, according to the researcher who discovered it, could have been “corrupted by a 12-year-old.”
The discovery suggests SenseNets is one of a number of Chinese companies participating in the construction of a technology-enabled totalitarian police state in East Turkestan, which has seen as many as 2 million Uighurs placed into “re-education camps” since early 2017. 
Eyewitness reports from inside the camps describe harsh living conditions, torture, and constant political indoctrination meant to strip Uighurs of any attachment to their Islamic faith. 
Facial recognition, artificial intelligence, and speech monitoring enable supercharge the Chinese Communist Party’s drive to “standardize” its Uighur population. 
Uighurs can be sent to "re-education" camps for a vast array of trivial offenses, many of which are benign expressions of faith.
The party monitors compliance through unrelenting electronic surveillance of online and physical activities. 
This modern-day panopticon requires enormous amounts of labor, but is serving as a testing ground for new technologies of surveillance that might render this process cheaper and more efficient for the state.
Toward this goal, the party is leveraging China’s vibrant tech ecosystem, inviting Chinese companies to participate through conventional government-procurement tools.
Companies built the "re-education" camps.
Companies supply the software that watches Uighurs online and the cameras that surveil their physical movements.
While based in China, many are deeply embedded in the international tech community, in ways that raise serious questions about the misuse of critical new technologies. 
Foreign firms, eager to access Chinese funding and data, have rushed into partnerships without heed to the ways the technologies they empower are being used in East Turkestan and elsewhere.
In February 2018, the Massachusetts Institute of Technology (MIT) announced a wide-ranging research partnership with Chinese artificial-intelligence giant and global facial-recognition leader SenseTime.
SenseTime then held a 49 percent stake in SenseNets, with robust cross-pollination of technical personnel. 
SenseNets’ parent company Netposa (also Chinese) has offices in Silicon Valley and Boston, received a strategic investment from Intel Capital in 2010, and has invested in U.S. robotics start-ups: Bito—led by researchers at Carnegie Mellon University—and Exyn, a drone software company competing in a Defense Advanced Research Projects Agency (DARPA) artificial-intelligence challenge.
This extensive enmeshing raises both moral and dual-use national-security questions.
Dual-use technology is tech that can be put to both civilian and military uses and as such is subject to tighter controls.
Nuclear power and GPS are classic examples, but new technologies such as facial recognition, augmented reality and virtual reality, 5G, and quantum computing are beginning to raise concerns about their dual applicability.
Beyond SenseNets, Chinese voice-recognition leader iFlytek is also supplying software to monitor electronic communications in East Turkestan.
A 2013 iFlytek patent identified by Human Rights Watch specifically touted its utility in “monitoring public opinion.” 
Nonetheless, like SenseTime, iFlytek recently established a multiyear research partnership with MIT. 
These partnerships lend reputational weight to activities that undermine freedom abroad.
Equally concerning is that the details of technical and research collaborations with Chinese companies can be opaque to international partners, concealing ethically objectionable activities.
When Yale University geneticist Kenneth Kidd shared DNA samples with a scientific colleague from the Chinese Ministry of Public Security’s Institute on Forensic Science, he had no idea they would be used to refine genetic surveillance techniques in East Turkestan.
Massachusetts-based company Thermo Fisher is also implicated: Until it was reported last month, the company sold DNA sequencers directly to authorities in East Turkestan for genetic mapping.
Western companies and institutions must be far more vigilant in scrutinizing how Chinese partners are using their products, especially emerging technologies.
Facial recognition is a good place to start.
The industry needs to establish global standards for appropriate applications—use that respects human rights and the rule of law. 
In the United States, Microsoft has been an industry leader in calling for regulation and has tapped employees, customers, public officials, academics, and civil society groups to develop a set of “principles for facial recognition,” which it plans to launch formally this month.
When it comes to building out regulation, the devil may be in the details.
But the principles—fairness, transparency, accountability, nondiscrimination, notice and consent, and lawful surveillance—are sound.
Surprisingly, SenseNets lists Microsoft itself as a partner on its website, along with American chip manufacturer AMD and high-performance computing provider Amax.
In the case of SenseNets, these partnerships could be false claims by a company looking to boost credibility, unwitting collaboration on the part of U.S. tech firms, or true business relationships.
“We have been able to find no evidence that Microsoft is involved in a partnership with SenseNets,” a spokesperson for Microsoft told the authors, “We will follow up with SenseNets to cease making inaccurate representations about our relationship.”
But if these partnerships are real, they would violate all six of Microsoft’s principles.
California-based Amax, which specializes in high-performance computing for deep-learning applications, touts a partnership with Chinese state-owned Hikvision, the world’s largest supplier of video surveillance products. 
AMD is also involved in a Chinese joint venture supplying proprietary x86 processor technology.
Despite a general awareness of the ways American companies and individuals are abetting surveillance in East Turkestan, U.S. Congress and government officials have yet to call for a review of the extent of U.S. investment and research partnership entanglements. 
The Commerce Department’s proposed rule-making on controls for certain emerging technologies is a start, but its scope remains unclear.
The international tech community can help guide the ethical application of its developments.
After employee protests, Google reportedly suspended plans to launch Dragonfly, a censored version of its search engine custom-built for China, although there are suspicions the project may not be entirely dead. 
Authoritarianism has proven it can use emerging technologies to undermine democratic norms and freedoms.
As such, U.S.-based research-and-development organizations should perform basic due diligence on partnerships to assess their connection to surveillance regimes.
International scientific exchange has yielded awe-inspiring achievements, from the discovery of the Higgs boson to the eradication of smallpox.
And cooperation is growing faster than ever.
But by taking basic steps to understand their partners, investors can mitigate some of the unintended risks of that cooperation.
If they fail to do so, they will end up owning some of the responsibility for human rights abuses in East Turkestan and elsewhere.

Tech Quisling: Google’s work in China benefits Beijing’s military

• America’s top two defense officials slammed Google’s work with China, saying it has benefited Beijing’s military.
• Marine Corps Gen. Joseph Dunford, chairman of the Joint Chiefs of Staff: “We watch with great concern when industry partners work in China knowing that there is that benefit.” 
• The latest revelation comes as the U.S. trade battle with China marches on, with intellectual property theft proving to be a major sticking point between the enemies.

By Amanda Macias

Acting U.S. Secretary of Defense Patrick M. Shanahan and Marine Corps Gen. Joe Dunford, chairman of the Joint Chiefs of Staff, give testimony on the Department of Defense budget posture in review of the Defense Authorization Request for Fiscal Year 2020 and the Future Years Defense Program at the Dirksen Senate Office Building, March 14, 2019.

WASHINGTON — America’s top two defense officials slammed Google’s work with China on Thursday saying it has “indirectly benefited” Beijing’s military.
“We watch with great concern when industry partners work in China knowing that there is that indirect benefit,” Marine Corps Gen. Joseph Dunford, chairman of the Joint Chiefs of Staff, told members of the Senate Armed Services Committee hearing.
“The work that Google is doing in China is indirectly benefiting the Chinese military,” Dunford said. “The way I describe it to industry partners is, ‘look we’re the good guys and the values that we represent and the system we represent is the one that will allow and has allowed you to thrive,’” he said.
Dunford’s comments come in the wake of the tech giant’s decision not to pursue some of the Pentagon’s lucrative contracts while considering projects in China.
In October, Google said it would no longer compete for the Pentagon’s Joint Enterprise Defense Infrastructure, or JEDI, cloud computing contract, an award that could be worth $10 billion. Google said that the contract may conflict with its corporate values.

In addition, the company also said it would not renew a Pentagon contract that analyzed aerial drone imagery for the military.
Meanwhile, it was revealed last year that the tech giant was studying the idea of working with the Chinese government on “Project Dragonfly,” a censored search engine that would block certain sites and search terms. 

More recently, after pushback from politicians and activists, Google said it had dropped those plans.
But Google Chief Executive Sundar Pichai has said the company will continue to invest in China while also considering projects with the U.S. government.
Acting Secretary of Defense Patrick Shanahan, also speaking before the Senate committee, echoed concerns that China has gamed American innovation.
”$5 trillion of their [China’s] economy is state-owned enterprises. So the technology that has developed in the civil world transfers to the military world, it’s a direct pipeline. Not only is there a transfer, there is systemic theft of U.S. technology that facilitates even faster development of emerging technology,” he said.
“The talent is in this country, we need to use the talent in this country and the talent in this country needs to support our great power competition,” Shanahan added.
The criticism comes as the U.S. trade battle with China marches on, with intellectual property theft proving to be a major sticking point between the world’s two largest economies.
U.S. officials have long complained that intellectual property theft has cost the economy billions of dollars in revenue, thousands of jobs and threatens national security.
“If China successfully captures these emerging industries of the future, America will have no economic future and its national security will be severely compromised,” White House trade advisor Peter Navarro said in June.
For the Pentagon, there is no better example of Navarro’s comments than the most expensive U.S. weapons system: the F-35 Joint Strike Fighter.

Lockheed Martin’s F-35 Lightning II fighter jet 

On Oct. 26, 2001, the Pentagon awarded Lockheed Martin a contract worth more than $200 billion to build the next-generation stealth strike fighter.
As America’s next fighter jet came to life, some of its sensitive design and electronics data were compromised in 2009.
Chinese hackers were behind the cyberintrusion since its stealth Shenyang J-31 jet bears a remarkably striking resemblance to the F-35.
And before the J-31 mimicked the F-35, there was the curious case of the J-20 and the F-22.
In another instance of industrial espionage, the prototypes of China’s Chengdu J-20 stealth fighter jet looked suspiciously similar to the sleek design of Lockheed’s F-22 Raptor.
While the U.S.-made Lockheed Martin jets are believed to have better computer software, more sophisticated sensors and sensitive stealth coating, the theft of intellectual property gives adversaries the opportunity to avoid the expense and delays involved with research and development.
Last March, President Donald Trump signed an executive memorandum that penalized China for trade practices such as industrial espionage.
The measures impose retaliatory tariffs on about $60 billion in Chinese imports.
On hand for the signing was Lockheed Martin CEO Marillyn Hewson, who oversees the F-35 Joint Strike Fighter.
Hewson said intellectual property is the “lifeblood” of the defense industry and welcomed the action taken by the Trump administration.
“This is a very important moment for our country, in that we are addressing a critical area for the aerospace and defense industry and that is protecting our intellectual property,” she said.
Meanwhile, on Wednesday, President Donald Trump said he was in no hurry to come to a trade deal with China and gave no indication of when he would meet with Chinese dictator Xi Jinping.
“I’m in no rush. I want the deal to be right ... I am not in a rush whatsoever. It’s got to be the right deal. It’s got to be a good deal for us and if it’s not, we’re not going to make that deal,” Trump told reporters at the White House.
Trump decided in February that he would not increase tariffs on Chinese goods at the beginning of March.

China’s Online Censorship Stifles Trade, Too

When the Chinese government blocks foreign internet companies for political reasons, the United States should treat the tactic as the anticompetitive economic strategy that it is.
By Tim Wu

As China and the United States engage in high-level negotiations over a possible trade deal, it’s puzzling to see what’s been left off the table: the Chinese internet market. 

China blocks or hinders nearly every important foreign competitor online, including Google, Facebook, Wikipedia in Chinese, Pinterest, Line (the major Japanese messaging company), Reddit and The New York Times. 

Even Peppa Pig, a British cartoon character and internet video sensation, has been censored on and off; an editorial in the Communist Party’s official People’s Daily newspaper once warned that she could “destroy children’s youth.”
China has long defended its censorship as a political matter, a legitimate attempt to protect citizens from what the government regards as “harmful information,” including material that “spreads unhealthy lifestyles and pop culture.” 

But you don’t need to be a trade theorist to realize that the censorship is also an extremely effective barrier to international trade. 

The global internet economy is worth at least $8 trillion and growing, yet the Trump administration has focused chiefly on manufacturing, technology transfers and agriculture, and does not seem to have pressed for concessions on this issue.
Sheltered from American, Japanese and European competition, Chinese internet businesses have grown enormously over the past decade. 

Nine of the world’s 20 largest internet firms, by market value, are now Chinese. 

Some of this growth reflects the skill and innovation of Chinese engineers, a vibrant start-up culture and the success of Chinese business in catering to local tastes. 

But it’s hard to believe that this has been unaided by censorship.
And the barriers to foreign competition have more than just economic effects. 

Without any better options, Chinese users are forced to put up with companies like Tencent, which owns the private messaging app WeChat, and the online payment company Ant Financial, whose privacy violations are, amazingly, even more troubling than those of Facebook and Cambridge Analytica. 

By tolerating Chinese censorship, the United States encourages other countries to do the same.
When it joined the World Trade Organization in 2001, China agreed to a broad liberalization of trade in services, including data processing and telecommunications. 

China’s internet policies must be understood as a violation of these commitments. 

China will presumably counter that its internet policies are “necessary to protect public morals or to maintain public order,” invoking the relevant exception to the World Trade Organization’s rules. 

But while that exception might justify bans on gambling sites or even Peppa Pig, in the case of most of China’s internet barriers the real purpose seems to be the protection of homegrown business interests.
Why is the United States not demanding change? 

It’s not as if we lack leverage. 

Chinese firms like Tencent and the online retailer JD.com have aggressively pursued operations in the United States, seeking to take advantage of our open internet and open market. 

The Office of the United States Trade Representative even cited Chinese internet blocking as a trade barrier in 2016. 

Why allow a country to do business here if it won’t let us do business there? 

The basic principle of trade policy is reciprocity: Lower your barriers and we’ll lower ours. 

When it comes to the internet economy, the United States has unilaterally disarmed and is being played for a fool.
Particularly baffling is the attitude of the major American internet firms, the victims of China’s internet trade policy, whose strategy has largely been one of appeasement. 

Google did retreat from the Chinese market in 2010 because of concerns about censorship and industrial espionage, and it did complain for a while about Chinese obstructions. 

Yet last year we learned that Google was effectively giving up the fight, building a censored search engine for the Chinese market and begging for access.
Also disappointing has been Facebook’s approach. 

Even though Facebook has been banned in China for years, Mark Zuckerberg, its chief executive, has made embarrassing efforts to ingratiate himself with Chinese dictator Xi Jinping. (At one point gossip pages even reported that Zuckerberg asked, in vain, for Xi to give an honorary Chinese name to his unborn child.)
Appeasement does not make effective foreign policy or trade policy. 

The United States, with the world’s largest economy and its most important internet sector, should be negotiating from a position of strength. 

If the Trump administration wants to be tough with China on trade, it should demand meaningful access to the Chinese internet market, on pain of denial of access to American markets for Chinese firms.
That is how trade negotiation has always proceeded, and the internet ought to be no exception. 

We otherwise run the risk of winning the battle for the past while surrendering the battle for the future.