Chinese promises never delivered

Europe Holds Summit With China, Less Naively This Time

By Steven Erlanger

Li Keqiang, center, with Donald Tusk, the European Council president, left, and Jean-Claude Juncker, the European Commission president, on Tuesday in Brussels.

BRUSSELS — The European Union, which does more than 1.5 billion euros a day in two-way trade with China, came late to the industrial, political and security threats China poses. 

For a long time, Europe saw China as another Japan, only with some human-rights issues.
But with the outspoken ambitions of the Chinese leader, Xi Jinping, and continuing battles over technology transfer, closed markets and industrial espionage, that is changing.
On Tuesday, the European Union and China met in Brussels for their 21st annual summit. 

The challenge for Europe is to forge a united front in the face of a China that only last month it labeled an “economic competitor” in critical industrial fields and a “systemic rival” politically.
The mood is certainly tougher now, especially after Italy last month became the first Group of 7 country to join China’s vast Belt and Road project, which the French analyst François Heisbourg described as “China’s own concept on how to organize the global space.”
In difficult negotiations, the Europeans had a hard time finding agreement on a joint statement with the Chinese that is serious about substance. 

They succeeded up to a point, but the commitments made by China are more about further talks than specific actions.
Donald Tusk, the European Council president, pointed to China’s agreement to discuss reform of the World Trade Organization’s rules on industrial subsidies, which he termed a “breakthrough.”
But Jean-Claude Juncker, who leads the bloc’s bureaucracy as president of the European Commission, said tartly that “progress is slower than we like.’’
The Europeans did succeed, by threatening not to sign a joint statement, in getting a promise to conclude a long-discussed bilateral investment deal by the end of 2020, which would improve market access, and a "promise" to limit forced technology transfers.

The port of Trieste, Italy, could benefit from a new economic accord between Italy and China.

But a senior European official also pointed to a statement finally reached after the last summit, in Beijing in July, which was full of promises not delivered, especially on issues like investment ground rules and market reciprocity, which are sources of tension now.
If anything, there has been backsliding and more vivid violations of human rights, like the detention of foreigners and the settlement camps for Uighurs.
If China is now a “systemic rival,” the joint statement did not reflect that new view, but tried to preserve a sense of partnership, said Theresa Fallon, director of the Centre for Russia Europe Asia Studies in Brussels.
Last month, President Emmanuel Macron of France said that the European Union had finally woken up to China. 

“China plays on our divisions,” he said. 

“The period of European naïveté is over.”
But the bloc was slow to respond to Belt and Road, just as it was slow to react to China’s effort in 2012 to sow divisions on the Continent with its “16 plus 1” initiative — itself and 16 Central and Eastern European nations.

Prime Minister Giuseppe Conte of Italy and Xi Jinping in Rome last month. Italy has become the first Group of 7 country to sign on to China’s Belt and Road infrastructure project.

They are to hold their own meeting starting Thursday in Croatia, and Li will go there as well. 

At the end of the month, many European Union member states will also go to Beijing for a Belt and Road forum.
The 16 plus 1 group contains 11 European Union member states, five of which use the euro, and four of which are formal candidates for membership in the bloc. 

And Greece is reported to be looking to join.
All have been eager for Chinese investment, which carries fewer demands, if higher risks, than Western banks or development funds. 

And already countries with significant financial ties to China, like Greece and Italy, have blocked European consensus on resolutions condemning Chinese behavior.
“China will attempt to use every opportunity, including the E.U.-China Summit, and the 16 plus 1 meeting in Croatia, to pit Europeans against each other and against the United States,’’ said Jamie Fly, the director of the Asia and Future of Geopolitics Programs for the German Marshall Fund in Washington.
‘‘It would be foolish and shortsighted to take the bait,” he added.
Avoiding that may not be easy. 

Trump sees the European Union as an economic “foe.” 

On Tuesday, Trump threatened an additional $11 billion in tariffs in response to European subsidies to Airbus. 

“The EU has taken advantage of the U.S. on trade for many years. It will soon stop!’’ Trump tweeted.

Donald J. Trump
✔@realDonaldTrump
The World Trade Organization finds that the European Union subsidies to Airbus has adversely impacted the United States, which will now put Tariffs on $11 Billion of EU products! The EU has taken advantage of the U.S. on trade for many years. It will soon stop!

China, on the other hand, works hard, despite recent conflicts, to be attractive to European businesses, both for investment and trade. 

“China uses honey while the U.S. is using vinegar,” said Mr. Heisbourg, the French analyst. 

“The U.S. is pushing Europe in China’s direction.”
China also emphasizes its agreement with Europe on issues Trump has opposed. 

Those include climate change, as well as commitment to the Iran nuclear deal, which Trump has abandoned.
The relationship is crucial for both Brussels and Beijing, and the honey is difficult to resist. 

The European Union is China’s biggest trading partner, and China is the bloc’s second-biggest after the United States.

Trucks at Trieste’s port this month. The northeast Italian city could become a terminus for Chinese goods shipped through the Suez Canal.

Ivan Hodac, the former head of the European Automobile Manufacturers’ Association, which has major interests in China, says the new European wariness is coming late.
“The E.U. is divided,” Mr. Hodac said. 

“Each country has its own financial interest. So long as there is no free trade agreement or investment deal with China,” he said, Europe is vulnerable. 

“And the Americans need to understand we are really in it together.”
Washington and Brussels share similar goals with China. 

But Trump has favored trying to reach his own deals with China while also, the Europeans argue, undermining the W.T.O., whose rules China has at least "promised" to obey.
There are also new security concerns, with the United States warning allies away from Huawei, the large Chinese telecommunications company, as the world moves to 5G wireless networks.
With defense and industry increasingly dependent on 5G and artificial intelligence, areas where China is innovating and investing heavily, Washington and other allies, like Germany and France, see dangers.
Yet Huawei is cheaper than its competitors, attractive to smaller countries and central European ones, and there is no large American alternative.
Nor is there a European Union version of the Committee on Foreign Investment in the United States, or Cfius, an interagency group that carefully screens Chinese and other foreign investments to protect national security. 

There is a new investment screening mechanism by Brussels, but it has no enforcement framework.

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.

Cease-Fire

After Trump summit, no mention in China of 90-day deadline or trade concessions

By Anna Fifield

In this Dec. 1, 2018, photo, President Trump and Chinese dictator Xi Jinping attend their bilateral meeting at the G-20 Summit in Buenos Aires, Argentina.

BEIJING — China seems to have a markedly different view of the trade war cease-fire reached with the Trump administration over the weekend, with state media making no mention Monday of the 90-day time frame or the reduction in tariffs on imported American cars or indeed any specifics about buying more American products.
That raises the prospect that the two sides have come away from their meeting in Buenos Aires, on the sidelines of the G-20, with very different ideas about what comes next.
“Do we have another Singapore summit, where the North Korean delegation went home with a very different set of perspectives?” asked Paul Haenle, a former Asia adviser to former presidents George W. Bush and Barack Obama, now running the Carnegie-Tsinghua Center in Beijing. 

He was referring to the summit between President Trump and North Korean leader Kim Jong Un, which seemed to produce different definitions of the word “denuclearization.”
In the absence of a joint statement or a joint news conference after their meeting, each side has been putting their own spin on the summit and its outcome.
President Trump portrayed the agreement as a second chance for Chinese dictator Xi Jinping, saying he would give the Chinese leader 90 days to deal with the structural issues in the trading relationship — like forced technology transfer and industrial espionage. 

If no deal is reached in that time frame, the American president said he would go ahead with his previous plan to raise tariffs on $200 billion in Chinese products from 10 to 25 percent, which had been due to kick in on Jan. 1.
President Trump had been threatening to increase the existing tariffs and also to impose new tariffs on the remaining $267 billion worth of goods that China sells to the United States each year.
President Trump tweeted late Sunday night that China “has agreed to reduce and remove tariffs on cars coming into China from the U.S. Currently the tariff is 40%.”
But there was no mention of any of this here on Monday.
The People’s Daily, the official newspaper of the Chinese Communist Party, ran a photo of Trump and Xi shaking hands and smiling at the top of Monday’s front page. 

But the story, while stressing agreement and cooperation, had nothing about buying “very substantial” amounts of agricultural, industrial goods and energy products, as the White House said, and nothing about the 90 day deadline. 

Nor was there anything about tariffs on car imports into China.
Nor did news bulletins on CCTV, the state broadcaster, include any mention of buying more American goods or coming to an agreement within 90 days. 

Only the nationalist Global Times tabloid mentioned the time frame, and then the attributed it to the White House alone.
Neither was there any sign of the White House contention that Xi had promised to reconsider Qualcomm’s bid to buy NXP Semiconductors, a Dutch rival. 

The $44 billion deal collapsed after Qualcomm, the American smartphone-chip maker, failed to get Chinese regulatory approval.
What Chinese state media did say, however, was that the two sides would work to “gradually” to decrease the trade imbalance — a statement that appears to be at odds with the rapid progress that President Trump wants.
Chinese Foreign Ministry spokesman Geng Shuang did little to clear up the discrepancies on Monday, saying that the two sides’ readouts from the meetings spoke for themselves.
“I only want to stress that the two leaders reached important consensus and the teams on the two parts will follow through on the consensus,” he said at a press briefing. 

The two sides would “speed up” their talks and “attempt to conclude a mutually beneficial agreement at an early date.”
Asked specifically about the 90-day deadline, the spokesman demurred. 

“I think you should focus on that we discussed and agreed,” he told reporters. 

“We agreed to hold off on imposing new tariffs. This agreement is quite significant since it has stopped our trade dispute from escalating and also opens up new prospects for win-win cooperation.”
Chances are that both sides are “cherry picking” the details that suit them, said Zhao Hai, an economics specialist at the Chinese Academy of Social Sciences in Beijing.
While Trump has come under fire from industries that are suffering from the Chinese tariffs, like soy beans and pork, so too is Xi navigating sensitive economic terrain at home. 

The Chinese economy was already slowing before the trade war erupted.
Stock markets, at least, seemed relieved at the truce, however temporary. 

China’s benchmark Shanghai composite index closed up 2.57 percent Monday.
“This is hopefully a turning point for both sides to stop and rethink the direction they were heading in,” Zhao said. 

But the “downside” was the 90-day time frame set by Trump. 

“The U.S. needs to lower its expectations,” he said.
Indeed, other analysts said that the delay in tariffs appeared to be win for China.
“The Chinese are always playing for time and any pause that involves more talking is a victory for Beijing, as it only adds to the chances they have for a shift to a more favorable US domestic political environment,” wrote Bill Bishop, publisher of the influential Sinocism newsletter.
“As we have learned with the waning ‘maximum pressure’ campaign on North Korea, once you step back from the brink it is difficult to marshal the support to return to it if the talks do not bear fruit,” Bishop said.
The real question now is whether the world’s two biggest economies can make progress on substantive matters in the next three months. 

Just having China buy more American goods and shrinking the trade deficit will not solve the broader structural problems in their economic relationship.
“Is China going to make the changes that the international community desperately hopes that China makes, so that foreign companies can complete on a level playing field?” asked Haenle of Carnegie-Tsinghua.
These changes include allowing greater access to the Chinese market and stopping foreign companies from having to hand over their technological secrets as a condition for operating in China.
Mei Xinyu, a researcher at the Chinese Academy of International Trade and Economic Cooperation, doubted that the truce would lead to a solution to the long-term trade problems.
“The two sides seem to have a very different understanding of the priorities when it comes to handling the structural problems,” Mei said. 

“The United States think it’s all about unfair trade practices while China believes it’s about low national savings. It’s one problem with two interpretations.”
Given that, Mei was not optimistic about what would come after the 90-day truce. 

“I think we should be prepared for the protracted war,” he said. 

“Personally, I’m preparing for the U.S. to impose tariffs on all Chinese exports.”

Nation of Thieves

The lie behind the ‘Made in China’ claim
By Dinny McMahon

CHINA makes 80 per cent of the world’s pens, producing about 38 billion a year, yet, according to Premier Li Keqiang, none of them are up to snuff.
While attending the 2015 World Economic Forum in Davos, Switzerland, Li purportedly enjoyed using Swiss ballpoint pens so much that, when he returned to China, he went looking for an explanation as to “why China can’t produce a pen that writes as smoothly and easily”.
The key to producing a quality ballpoint pen is the tiny ball bearing fitted into the pen’s nib. 

It spins as it rolls across the paper, picking up ink that’s distributed from the cartridge via tiny grooves carved into the nib.
Interviewed on state television in a soul-searching program into China’s pen-quality deficit, Qiu Zhiming, the chief executive of Beifa Group, China’s biggest pen maker, explained that not only do the balls require high-quality steel but also producing them requires state-of-the-art machinery and computerised measuring equipment that leaves no space for error.
If the ball is too big, it won’t spin in the nib. 

One that’s too small will allow the ink to leak. 

One that’s not perfectly round won’t write smoothly. 

One that’s too smooth won’t turn as it runs along the paper. 

And the bottom line was that China was incapable of producing the balls.
“Even though we’re suffering from overcapacity in the steel industry ... we still don’t possess the ability to produce the type of steel used in the ball bearings that go into ball-point pens. We still need to import them,” an exasperated Premier Li said early in 2016.
China’s 3000 pen manufacturers import almost all of the ball bearings they need from Germany and Japan. 

Moreover, much of the ink used in pens is imported as well.
In fact, China doesn’t make pens so much as merely assemble them. 

That was once done by hand, but with the cost of labour rising, it’s now done by machines that are typically made in Switzerland.
In fact, much of what we think of as being “Made in China” is only assembled there.
While hundreds of thousands of people are employed to “make” iPhones in China, they contribute only a sliver to the overall value of the end product.
According to a 2010 paper from the Asian Development Bank Institute, 34 per cent of the value of an iPhone came from Japan, which supplied the screen and flash memory; 17 per cent from Germany, which made the camera and power-management integrated circuitry; and 13 per cent from South Korea, which made the SDRAM.
China contributed only 3.6 per cent — primarily the labour. 

The ratio has gone up since then, but it’s still less than 10 per cent.
Enter supply-side structural reform. 

At its heart, it is an import-substitution scheme. 

The aim is for China to make a significantly larger share of the components that go into products like iPhones, which are assembled in China.
By 2025, Beijing wants Chinese companies to produce 70 per cent of basic core components and basic materials used in goods manufactured locally. 

(By way of comparison, in 2015, China was still importing about 80 per cent of the chips that were used in locally assembled mobile phones.)
If China is to reach its targets, then its success must come at the expense of those countries which currently produce the guts of an iPhone or the more technologically advanced parts of a pen.

While your iPhone was probably assembled in China, most of the parts weren’t made there. 

However, there’s a major reason why China doesn’t already make those components.
Like China, Switzerland also has a thriving disposable-pen industry, but while China’s pens are typically produced in packs to be sold in stationery stores, the biggest Swiss companies focus on making promotional pens — the sort that the World Economic Forum can put its logo on. 

Moreover, Swiss pens are typically made entirely in Switzerland — “from cap to nib,” in the words of one company — using the companies’ own proprietary technology, which the Chinese can’t buy.

****

So, rather than rely solely on the creativity of its indigenous innovators, Beijing is taking a few shortcuts.
“There are two kinds of big companies in the United States. There are those who’ve been hacked by the Chinese and those who don’t know they’ve been hacked by the Chinese,” said James Comey, then-director of the FBI, in a 2014 interview on 60 Minutes. 

They’re looking for “information that’s useful to them so [Chinese firms] don’t have to invent” it.
China engages in industrial espionage on a vast scale. 

But stealing cutting-edge research from foreign firms before they’ve had a chance to commercialise it is just a small part of a broader campaign to acquire intellectual property developed overseas.
China has long required that foreign companies wanting to sell their products in China must share their proprietary technology with local firms by setting up joint ventures. 

Cars sold in China under GM’s brand, for example, are produced by a company owned half by GM and half by a Shanghai-based state-owned firm.
Such has been the price of admission to the world’s most populous market. 

Foreign companies have tried to hand over only old technology, but Beijing has been raising the price of admission.
“It is now an increasing requirement for more advanced technologies to be shared,” the European Union Chamber of Commerce in China (EUCCC) said in a 2017 paper on China’s industrial policy.
“In the past, some foreign companies managed to at least partially limit transfers ... and therefore did not compromise their long-term competitiveness. But this has become increasingly difficult.”
Chinese firms have also been going out and acquiring foreign companies that have the technology they want.
According to the EUCCC paper, Chinese companies invested €35 billion ($AU56 billion) in Europe in 2016, up 77 per cent from the year before, and more than four times the amount of European investment going into China.
Much of that money has gone into areas like high-end robotics, which the Chinese government had ruled off-limits to foreign companies looking to buy Chinese firms.
Making such acquisitions possible is a massive war chest of state-sponsored funding.
“China’s strategy relies in particular on large-scale spending, including $US150 billion in public and state influenced private funds over a 10-year period, aimed at subsidising investment and acquisitions as well as purchasing technology,” the Obama White house said in a 2017 report on China’s strategy to become a world leader in semiconductors.
“China also places conditions on access to its market to drive localisation and technology transfer.”
Of course, once you have the technology, you then need to build a competitive business around it. 

On the face of it, it would seem that China has no natural advantage over the Japanese, or Koreans, or Germans, or even Americans when it comes to building a world-class robotics or semiconductor industry.
What is making foreign companies and governments so nervous is that China has a disconcerting track record of becoming globally dominant in industries in which it has no natural advantage.

China's Great Wall of Debt is out now

Chinese theft of sensitive US military technology is a huge problem -- Defense analyst

• One of the reasons China is narrowing the military-technology gap with the U.S. is because of the theft of designs and other sensitive data.
• Donald Trump may bring up China's theft of American intellectual property during his talks with his Chinese counterpart this week
• Beijing is still up to its old tricks and using various ways to camouflage its cyber-warfare

By Jeff Daniels 

A J-20 stealth fighter of China flies at the 11th China International Aviation and Aerospace Exhibition in Zhuhai, south China's Guangdong Province, Nov. 1, 2016.

As Donald Trump uses his meeting with Xi Jinping to address trade and North Korean issues, he also may bring up China's theft of American intellectual property.
Despite a cyber-warfare truce, one defense analyst said China is probably still engaged in the theft of sensitive U.S. military technology. 

Hacking over the years is one of the reasons China has been able to narrow the gap with the U.S. in advanced missiles, drone technology and even stealth aircraft.
Also, a report predicts that by 2030 the Chinese could dominate artificial intelligence and exploit it for military purposes.
At the same time, China is pressing its domestic tech firms to help the country's military "to speed up" the application of advanced technology.
For example, when China wanted to build the J-20, a new stealth fighter jet, they were reportedly helped by industrial espionage. 

The J-20 became operational in September.
There were said to be several prototypes of the plane, but the final sleek design resembles the F-22, a stealth fighter made by Lockheed Martin. 

China's smaller stealth fighter, called the FC-31 Gyrfalcon, in development is seen as a knockoff of Lockheed's F-35.
"What Beijing has been very good at is targeting U.S. defense contractors, getting into their computer systems through various types of essentially cyber warfare and stealing the designs of America's best military assets," said Harry Kazianis, director of defense studies at the Center for the National Interest, a think tank founded by former President Richard Nixon.
Although a U.S.-Chinese cyber-hacking truce was announced in 2015, Kazianis and others remain skeptical it will matter over the long term. 

He says China has agents in other countries still doing hacking or "camouflage" such activity through various methods.
"So we don't even have a good idea if they stopped," he said. 

"It's obviously a huge, huge problem."
According to Kazianis, the Chinese have been able to hack into computer networks to steal designs and other information on U.S. carriers, advanced defense systems as well as the F-22 and F-35 jets.
Indeed, a federal grand jury in 2014 indicted a Chinese national for a computer hacking scheme that involved the theft of trade secrets from Boeing's C-17 military transport aircraft. 

The individual, who last year entered a guilty plea, also was accused of working with two co-conspirators based in China to steal military data about the F-22 and F-35 jets.
The concern is China's supersonic J-20 could one day become a threat to the F-22 and the smaller F-35 fighters.
The Center for Strategic and International Studies, a think tank based in Washington, said Beijing's "J-20 has the potential to considerably enhance China's regional military strength."
For one, the J-20's could give China an advantage should it want to use the warplane in a dogfight with the U.S. or allies. 

Also, depending on its stealth capabilities, the J-20 could be used for strikes on Taiwan or U.S. airbases.
Then again, the J-20's design may make it susceptible to detection. 

It features angles that allow it to deflect radar emissions from the front but reports suggest its signature reduction falls short elsewhere. 

Portions of the J-20's engines also "may work against its stealth capabilities," according to CSIS.
"Almost every fighter in the world has some kind of emissions that come out with radar or communications devices just like radios that we can detect," said John JV Venable, a senior research fellow for defense policy at the Heritage Foundation, a Washington conservative think tank. 

"When we can pick those [emissions] up, then we can actually find, fix and kill that fighter."
Venable, a retired Air Force colonel, said the U.S. military's ability to "mask emissions is very good, and our ability to detect is very good. We just don't know what theirs is [with the J-20]."

Rotten Apple

Apple’s Dangerous Kowtow
By DIPAYAN GHOSH

Apple announced last week that it will open a data center in Guizhou, China. 

This is a first-of-its-kind action by a major United States tech company since the passage last month of strict new Chinese digital commerce regulations that require foreign companies with operations in China to store users’ data in the country. 

These events could threaten to disrupt the free flow of information over the internet.
The Chinese government claims its new rules will enhance domestic security efforts, providing privacy protections for Chinese nationals while also safeguarding “national cyberspace sovereignty and security.” 

It would be naïve, however, to think of these new regulations as anything but a severe restriction on the right to free information.
China’s claim that the regulation is meant to enhance individual privacy rights is a facade. 

The government wants to quell international competition by raising the barrier to entry for outside players. 

In turn, China hopes to monopolize the market for technology services for its huge domestic consumer market. 

Consider the numbers: China’s 1.4 billion people, many of whom are just now getting access to smartphones and the internet, present a major commercial opportunity for the digital sector. 

Twitter, Google and Facebook together have billions of daily active users, and a hypothetical expansion into China could bring hundreds of millions more users to those platforms, raising their market values by many billions of dollars. 

But these and many other services are already blocked in China, and this new security regulation will only create further hurdles for foreign entry into the Chinese market.
Requiring that any “sensitive data” — a heretofore undefined term — has to be stored on servers that are physically located in China is known as “data localization.” 

China’s localization efforts are hugely problematic for two main reasons. 

First, localization is a tremendously expensive exercise for companies that deal in data, so much so that only the world’s richest firms can afford it. 

Second, a history of snooping by Chinese entities means not only that firms should be wary of the potential for industrial espionage, but also that the Chinese people should be worried about their right to privacy, because the Chinese government may now be able to gain access to their data whenever it desires. 

This is especially true because China has pronounced that if firms wish to transmit data out of China — for example, to other people, governments or overseas data headquarters — the transmittal must clear a security review by Chinese authorities, directly implicating individual privacy and free speech.
China may hope to replace its flailing manufacturing-based economy with one focused more on technology services to bring jobs and business to the nation’s many struggling metropolises, but this is not the way to do it. 

First, as colossal as they may be, data centers rarely result in as many new jobs as locals might expect. 

But perhaps even more critically, this kind of digital protectionism is unfair to the international community and to the people of China. 

The government’s argument that the regulation will protect privacy is invalid. 

In the world of privacy, there are two threats: corporations and government. 

This regulation will create a system by which firms will try to serve China’s regulators as efficiently as they can. 

The firms that rise to the top in such a system will necessarily have to be close to the Chinese government.
Why, then, was Apple so quick to announce the new Guizhou data center, in effect signaling its compliance with the aggressive new rules? 

It’s simple: Apple hopes to protect its market share in China. 

Many internet companies — like Facebook — stand to be shut out forever under these rules, and smaller companies will avoid the market altogether because they lack the capital to stomach the compliance costs.

The internet is all about openness and seamless sharing. 

Restricting Chinese citizens’ access to online information through arbitrary regulations is an attack on human rights and innovation, and it will disrupt digital commerce around the world. 

The people of China should take note and push for fairer standards. 

But placing a check on China’s industrial policy will require more than just the outcry of Chinese activists.

Indeed, the international community, and particularly the corporate sector, must stand up and hold China accountable. 

Unless we do so now, the government will continue to consolidate and centralize industry, jeopardizing the future of the global economy.

Chinese Peril

Espionage risk to US heightened as China's military presses its domestic tech firms
By Jeff Daniels

A J-20 stealth fighter of China flies at the 11th China International Aviation and Aerospace Exhibition in Zhuhai, south China's Guangdong Province, Nov. 1, 2016.

China is taking a page from the Pentagon's playbook under the Obama administration: it's partnering with tech companies to develop more cutting-edge weapons.
But China's innovation-focused strategy could elevate the espionage risk to the U.S.
Ironically, this new threat emerges as the Trump administration is expected to slow its outreach to the tech firms.
Over the weekend, Xi Jinping made an address to the country's national legislature where he urged the People's Liberation Army "to speed up" the application of advanced technologies, according to the Chinese military's official web portal. 

Jinping sees "integrated military and civilian development" as one of the drivers of science-tech innovation and key to upgrading China's military capabilities.
"If you were to look at reports like Chinese military power over time, it's obvious that China is closing the gap more quickly than, for example, we probably would have estimated five or three years ago," said Anthony Cordesman, a national security expert and Arleigh A. Burke Chair in Strategy at the Center for Strategic and International Studies think tank in Washington, D.C.
The communist nation's military has made major technology strides in the past decade in missile, laser weapon, advanced sensor and stealth aircraft development with the help of Chinese firms in the civilian sector.
Its rapidly developing missile technology is seen as a threat to the West. 

Other major strides have been made in stealth aircraft design and follow state-sponsored cyber and industrial espionage.
"China's overall effort toward civil-military integration will provide great benefits to China's already very aggressive espionage programs," said Richard Fisher, a senior fellow on Asian military affairs at the International Assessment and Strategy Center in Alexandria, Virginia.
According to Fisher, the close ties between military development and the civilian side of China's economy "is one of the highest policies" of the central government in Beijing. 

As an example, Xi Jinping was named earlier this year to chair a new central commission to promote this effort.

Xi Jinping (L) and Li Keqiang attend the third plenary session of the fifth session of the 12th National People's Congress (NPC) at the Great Hall of the People in Beijing on March 12, 2017.

There are "vast new incentives as well as requirements for the actors in the civilian economy to come up with ways to examine anything innovative that they come up with that can be applied to the military," Fisher said.
A year ago, Su Bin, a Chinese identified as "a businessman in the aviation and aerospace fields" pleaded guilty in the U.S. to participating in a conspiracy to hack into computer networks of major American defense contractors to steal military and export-controlled data. 

Court documents show the conspiracy group's targets included the Boeing C-17 military cargo aircraft as well as Lockheed Martin's F-22 and F-35 fighters.

Su Bin admits hacking US defence firms to steal plans for fighter jets. He conspired with two other Chinese and translated stolen data.

"It's fairly obvious from patterns of industrial espionage that it isn't always the government which has been, for example, seeking data on defense activities in the United States and Europe," said Cordesman. 

He added that in some cases it appears "to be people with some kind of private sector or industrial ties."
The espionage organs in China set the priorities and come up with lists of targets. 

If a civilian company offers possible linkages to military companies, then the espionage leadership is likely to pursue those leads.
China's major investment in its military comes at a time when President Donald Trump also is calling for "one of the largest increases in national defense spending in American history." 

Trump had previously been critical of the Obama administration for "deep cuts in our military, which only invite more aggression from our adversaries."
Given Trump's animosity to Barack Obama's policies, it's probably no surprise that the billionaire president has shied away from endorsing the past administration's so-called Third Offset concept, an innovation push and outreach to Silicon Valley firms. 

The initiative was designed under Ashton Carter, the former Defense secretary, to promote cutting-edge tech innovation and give the Pentagon more expertise outside the traditional defense industrial sector.
However, one Pentagon official who was hired in the Obama administration said this week during a South by Southwest panel in Austin, Texas, that the military needs to work and learn from the non-defense side.
"Once we have those bridges built, we're going to have to keep them strong and treat them as a strategic resource," Will Roper, the director of the Pentagon's Strategic Capabilities Office, said during a Wired panel at SXSW on Monday. 

Roper, who has held the post since 2012, indicated that the U.S. military's learning could include something as basic as a better understanding of total logistics from a package delivery company or capabilities in development by major tech firms.
Even so, Trump's Defense Secretary James Mattis — a retired Marine general — appears more focused these days in the nuts and bolts of military readiness rather than an outreach to tech.
To be clear, China's outreach to the civilian side is broader than the Obama administration's Third Offset, which included setting up so-called Defense Innovation Unit Experimental (or DIUx) tech hubs in Silicon Valley, Austin and Boston. 

China's military-civilian industry efforts include working in at least eight regions of the country with companies engaged in everything from advanced chip production and information technology to aerospace manufacturing.
One area where DIUx could make a major difference is helping the U.S. military develop technology to better protect against cyber attacks and breaches from adversaries such as China and Russia.
The rapid development of stealth fighter aircraft by China's military coincided with reports back in 2009 of a cyber breach of sensitive national security information from Lockheed's F-35 Joint Strike Fighter program.
The F-35 stealth fighter is the Pentagon's costliest weapons program and includes the acquisition of aircraft for all three of the U.S. military services. 

Foreign allies such as Japan, the U.K., Italy, Israel and others also are participating in buying the aircraft.
"China has already copied major sub-systems for the F-35, especially its advanced optical detection systems, which until recently helped give it a major combat advantage," said Fisher. 

"These optical systems appear to now be in production in China."
As a result, Fisher expects the overall advantage the F-35 will give American and allied forces will be "much less" over time than might have been originally anticipated.
Several reports last week indicated that China's new J-20 stealth fighter entered into service, a major milestone for China's military. 

The J-20 resembles the F-22 Raptor air-to-air combat aircraft introduced into the U.S. Air Force in 2005.
Also, China's smaller stealth fighter called the FC-31 Gyrfalcon in development is seen as a knockoff of the F-35. 

Then again, some observers suggest even the Russians have had their Su-35 Flanker fighter copied by Chinese state-owned firms.