China and its recent technology problem | The Daily Star
12:00 AM, February 02, 2019 / LAST MODIFIED: 11:35 AM, February 02, 2019

China and its recent technology problem

Nowadays, hardly a day goes by without another news of Chinese technology companies running into trouble in North America, Europe or Australia. In its quest to become a technology giant, China has allegedly used an assortment of practices over many years that troubled western companies and raised eyebrows among officials in the US, Canada, Germany, Japan, Australia, Poland and UK.

China's major telecommunications equipment manufacturing conglomerate Huawei Technologies Co. has been blacklisted in some countries and its Chief Financial Officer arrested in Canada. The US Federal Bureau of Investigation (FBI) announced on January 28 that Huawei has been indicted on charges of bank fraud, wire fraud, conspiracy to defraud the US, and theft of trade secrets, among other crimes. There is a concerted effort afoot to slow down China's quest to replace US as the global technology frontrunner because of concerns about the motives and security risks posed by possible Chinese domination in the high-tech arena.

China's ascendency from a middling Asian power in the 1970s to a global mover and shaker has been facilitated by its phenomenal economic growth and galloping technological change. According to IMF, the Chinese economy grew by an average of 9.6 per cent per year between 1990 and 2010. Lately, its GDP growth has shrunk, but China is speeding ahead to become the number one economic superpower in the coming decade. Despite the slowdown in economic activities during the last few years, China's Communist Party led by President Xi Jingping is not relenting on its desire to make China a technology behemoth. Chinese leaders saw the world economic slowdown following the 2008 financial meltdown as an opportunity to steer the economy away from its dependence on manufacturing and export of consumer goods to one where it is based on artificial intelligence, robotics, and energy-efficient vehicles.

A few years ago, Xi launched the “Made in China 2025” initiative with the goal to become a key player in the international marketplace with an array of high-tech products. “China's strategy is to give large government subsidies to state-owned companies and supplement their research with technology stolen from American and other Western companies. This theft includes using the internet to invade the computers of foreign firms and forbidding companies to do business in China unless they share their technology with Chinese firms.”

In a stinging op-ed written for the Wall Street Journal in December, Martin Feldstein, professor of economics at Harvard University, wrote that “Tariffs should target Chinese lawlessness, not the trade deficit.” Professor Feldstein chaired President Ronald Reagan's Council of Economic Advisers from 1982 to 1984 and is on the board of directors of the Council on Foreign Relations, the Trilateral Commission, and the Group of 30, a non-profit, international body that seeks greater understanding of global economic issues. A highly influential voice in the US policy-making circles, Feldstein cites an FBI finding that Chinese theft of American technology through the internet as the greatest threat to US national security.

Concern over China's attempt to acquire advanced technology by arms-twisting, copying, wheeling-dealing or even stealing is raising red flags in many European countries. Last November, European Commission (EC) Vice-President Andrus Ansip warned that EU should be worried about Huawei and other Chinese technology companies. Ansip, who is EU's technology commissioner, told the European GovTech Summit at Paris last November that these companies pose a risk to the EU's industry and security, “echoing concerns raised elsewhere in the world” according to Reuters. Ansip said he was concerned because Chinese technology companies were required to cooperate with Chinese intelligence services, on issues such as “mandatory back doors” to allow access to encrypted data.

Huawei, the telecommunication giant, has been seriously affected by this “witch-hunt” carried out by the EU and US government. It condemned Ansip's comments and has indicated its determination to fight back. But the company suffered a major setback in early December when its Chief Financial Officer (CFO) Sabrina Meng Wanzhou was arrested in Canada. She's the daughter of Huawei founder Ren Zhengfei. For months, American law enforcement had wanted to arrest the Huawei CFO for violating US sanctions laws against Iran and Syria.

Another Chinese technology company ZTE also faced accusations of illegal dealings with Iran. In April, the United States blocked ZTE from buying US parts. The Trump administration said that ZTE had lied to US officials about punishing employees who violated US sanctions against North Korea and Iran. But the Trump administration lifted the export ban on ZTE in July after striking a deal with the company.

EC last year filed a complaint with WTO against China for its laws and practices compelling EU companies to share its proprietary technology. EC said that China violated a commitment it made when it joined WTO that foreign companies operating in China would not be forced to meet selective requirements. “The so-called performance requirements force or induce European companies to transfer technology to their joint ventures with Chinese partners in exchange for the necessary administrative approvals by the Chinese authorities,” EC said in its complaint. “Foreign companies are also required to carry out research and development activities in China,” it continued.

The competition between Chinese and Western technology companies are coming to a head over the much-heralded 5G mobile communication technology. It is expected that 5G network will revolutionise many emerging technology areas including artificial intelligence, machine learning, and internet of things. The race to develop the 5G infrastructure and devices has led Chinese companies to run afoul of Western security protocols. New Zealand and Australia took action to prevent telecommunications companies from using Huawei equipment for their 5G mobile networks. Germany, one of Huawei's largest European clients, is considering tightening existing security requirements for the 5G “in a way that would make it impossible for operators to use Huawei equipment”, a German official said.

China, as expected, is fighting tooth and nail any attempt by the US and its allies to thwart its national aspirations to achieve economic and technological superiority. In its view, Western accusation of malfeasance is a ruse in an attempt to isolate China, damage China's effort to bring about a sea change in the national and third-world's economic landscape, and to stymie its march towards a new industrial revolution using its technological knowhow. “China's offer to the world has been straightforward,” says a policymaker in Beijing. “Foreign companies are allowed to access China's markets but they would need to contribute something in return: their technology.”

Dr Abdullah Shibli is an economist, who works in information technology. He is Senior Research Fellow, International Sustainable Development Institute (ISDI), a think-tank in Boston, USA.

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