China and the US
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China's Expanding Economic Influence Within the Critical National Infrastructure of the United States
|Richard Kaplan||October 7th 2012|
Economic Warfare Institute
In June 2012, the People's Republic of China held approximately $1.1643 trillion in U.S. Government debt, which was up slightly from the $1.1640 trillion in debt during the previous month of May. However, Chinese ownership of U.S. Government debt hit an historical peak of $1.3149 trillion in July 2011. The slight decline in U.S. debt to China is attributed to increased purchase of U.S. Government debt by Japan during the past twelve months.
The U.S. financial debt to China has only been one area of concern during the past several years. Events during the last six months for example, have given rise to new concerns regarding China's interest in expanding its economic influence in the United States. These concerns include the purchase by the Chinese National-owned Ralls Corporation and its interest in the Oregon wind farms it had purchased earlier this year, and its planned development and expansion of state-of-the-art telecommunications facilities within the U.S.
The alternative energy wind farm facilities in question were apparently located too close to a U.S. Naval Weapons Systems Training Facility, where the U.S. military originates Top-Secret training missions and flies unmanned aerial drones from. Apparently a Chinese presence so near to a sensitive military installation was to close for the White House's comfort. This explanation notwithstanding, there was a second, and I believe more important reason for the White House decision. During the past twenty-four months, the Department of Defense has embarked on a "Greening Campaign" to develop "Clean, Secure and Renewable Energy Resources" for U.S. military bases throughout the Continental United States. Under recent Department of Defense procurement initiatives, commercial sector entities have been developing power generation capabilities at their expense, than essentially selling power back to the Department of Defense at a specific rate, thereby eliminating the burden on the Department of Defense to bear this expense, in addition to the cost savings of not having to provide engineering personnel and maintenance. This approach has dramatically reduced the cost of energy production for the Department of Defense, and addresses its requirement for "Clean, Secure and Renewable Energy Resources." If you factor in Chinese ownership of wind power farms that are considered to be a "Clean and Renewable Energy Resource" that would be utilized by the Department of Defense to supply power to a sensitive military installation for example, the Department of Defense would in effect be relying on a potential future adversary to supply power to a critical military installation vital to the national defense of the United States.
The President had cited national security concerns as his reason to reject China's wind farm purchase, the first such action to be taken by the White House in 22 years. This action is the latest salvo in escalating tensions between the U.S. and China over trade and other issues. The U.S. Treasury Department in a statement on the White House's action emphasized that the President's decision in this instance applies only to this specific case. The Treasury Department statement also suggested "We hope it's just the first of many to prevent foreign companies from benefitting from American ingenuity." This was an interesting statement on the part of the Treasury Department given the fact that "Wind Power" was not developed in the United States, but by various companies located overseas.
A more significant national security concern is China's attempted expansion into a major sector of the U.S. National Critical Infrastructure, the "Telecommunications Industry." Members of the U.S. House Permanent Select Committee on Intelligence have recently stated that Huawei, a global Chinese telecommunications equipment manufacturer already doing business in the U.S., poses a threat to national and corporate security. The world's largest maker of telecommunications equipment has been under investigation for the past year by the Committee, which will issue its report on the Chinese company on Monday 7 October. The Committee's Chair, Representative Mike Rogers (R-Mich.), has stated "If I were an American company today and you are looking at Huawei, I would find another vendor if you care about your intellectual property, if you care about your consumers' privacy, and you care about the national security of the United States of America." Representative Dutch Ruppersberger (D-MD) adds, "One of the main reasons we are having this investigation is to educate the citizens in business in the telecommunications world."
The Committee believes that allowing Huawei to build and maintain large swaths of America's telecommunications infrastructure opens a door for the Chinese Government to spy on the U.S. Government and our "Technology Sustaining Base," and engage in military and industrial espionage. Jim Lewis, a former U.S. Government foreign technology analyst has stated the following, "Telecommunications is a strategic industry in the sense that an opponent can gain a serious advantage from being able to exploit the telecommunications network." Over the past several years, the United States Government and especially the Department of Defense, along with major defense contractors, the Department of Energy Laboratory Complex, and private sector technology companies, have been subjected to numerous "Computer Network Exploitation" intrusions from China that have resulted in the theft of millions of documents related to advanced technology, and other vital areas that have direct applicability to the security of the "National Critical Infrastructure" of the United States.
Huawei is currently doing business in Kansas, among a few other small rural markets. Among its current initiatives, Huawei is providing fast wireless Internet communications. The President of United Wireless, Craig Mock, has stated that he has done business with Huawei because he doesn't know of any other American company that makes the equipment that he needs. Mock was visited by federal agents after signing an agreement with Huawei.
The U.S. invented and expanded several areas of the telecommunications industry, but is largely out of business in several of them. The only U.S. supplier that competes with Huawei is Cisco, and they don't make every component that is necessary for today's 4G networks. There have been charges of industrial espionage against Huawei which have since been settled with Cisco and Motorola. Jim Lewis, who is now a Fellow at the Center for Strategic & International Studies, says that Huawei has grown to its current enormous size with massive financial help from the Chinese Government. This of course begs the question about the influence the Chinese Government and its Foreign Intelligence Services maintain over Huawei in the areas of offensive military and industrial espionage against the assets that comprise the "Critical National Telecommunications Infrastructure of the United States.
If the U.S. Government allows a Chinese telecommunications company to operate freely within the Continental United States, and to provide services that support the effective operation of a key sector of the critical telecommunications infrastructure, the U.S. is essentially providing China with open and unrestricted access to sensitive data that would provide the Chinese with not only unprecedented access to Government and private sector industrial propriety data, but would certainly provide China with a massive technological edge within the international economic marketplace for the sale of high technology and other items developed through the efforts, the ingenuity, and the financial investment of the "U.S. Technology Sustaining Base." Are these initiatives on the part of the People's Republic of China a subtle form of Economic Warfare designed to provide an "adversary" with unique access to a potential enemy's financial and technological sectors, or are China's actions designed at some point in the future to allow it to exert "Economic Leverage" against the United States. In numerous scenario's, such leverage could possibly be employed at some crucial point at which the U.S. finds itself on an opposite side of a foreign policy dispute with China, such as over
Taiwan for example. It is interesting to speculate exactly what China's future intentions and motivations are, but, you can be sure that China's actions are carefully calculated to achieve an eventual economic or military advantage, perhaps not immediately, but years or event decades in the future.
Richard Kaplan is currently a Member of the Advisory Board of the Economic Warfare Institute, from where this article is adapted.