In Tibet China uses New Forms of Coerced Labor and Micromanaging

Before Xinjiang, there was Tibet. Repressive policies tested there between 2012 and 2016 were then applied to the Uighurs and other ethnic minorities in northwestern China: entire cities covered in surveillance cameras, ubiquitous neighborhood police stations, residents made to report on another other.

Now that process also works the other way around. Xinjiang’s coercive labor program — which includes mandatory training for farmers and herders in centralized vocational facilities and their reassignment to state-assigned jobs, some far away — is being applied to Tibet. (Not the internment camps, though.)

Call this a feedback loop of forcible assimilation. It certainly is evidence of the scale of Beijing’s ruthless campaign to suppress cultural and ethnic differences — and not just in Tibet and Xinjiang.

I analyzed more than 100 policy papers and documents from the Tibetan authorities and state-media reports for a study published with the Jamestown Foundation this week. Photos show Tibetans training, wearing fatigues. Official documents outline how Beijing is rolling out for them a militarized labor program much like the one in place in Xinjiang: Tibetan nomads and farmers are being rounded up for military-style classes and taught work discipline, “gratitude” for the Chinese Communist Party and Chinese-language skills.

More than half a million workers have been trained under this policy during the first seven months of the year, according to official documents.

Reuters has confirmed these findings, uncovering more relevant documents. (The Chinese government has denied the charges, including that it is enlisting forced labor in Tibet.)

Tibet has long posed a particular challenge for the Chinese authorities. The region is very far from Beijing and strategically important because of its long border with India. Its people’s culture is distinct, and the devotion of many Tibetans to the Dalai Lama, who simultaneously embodies religious and political power — with a government in exile in India — is a double threat in the eyes of the Chinese Communist Party.

The people of what the Chinese government refers to as the Tibet Autonomous Region — about 3.5 million, mostly nomads and farmers scattered throughout the vast Himalayan plateau — have resisted its encroachment for decades. Notably, riots broke out in the capital, Lhasa, in 2008, just weeks before the Olympic Games in Beijing, following years of tightening restrictions on cultural and religious freedoms.

There reportedly have been more than 150 cases of self-immolation carried out in protest since 2011. (Chinese troops patrolling Tibet carry fire extinguishers as part of their riot-control equipment.)

The Dalai Lama is 85, and the Chinese authorities in Beijing have been trying to shape his succession, asserting, for example, that Buddhist reincarnations must “comply” with Chinese law.

This is but one of the many ways in which Beijing has been doubling down on imposing state controls over Tibetan traditional ways of life.

Tibet, like Xinjiang, nominally is an autonomous region, yet in 2019, its government mandated that all Tibetan nomads and farmers be subjected to what some government directives call “military-style” training for vocational skills and then be assigned low-skilled jobs, for example in manufacturing or the services sector.

Some of the reports I have reviewed, including one by Tibet’s Ethnic Affairs Commission, claim that Tibetans’ religion cultivates “backward thinking.” The city of Chamdo claims to have “carried out the transfer of surplus labor force in agricultural and pastoral areas” in order to overcome Tibetans’ purportedly “poor organizational skills.”

According to a major policy paper by the Tibetan regional government, “The 2019-2020 Farmer and Pastoralist Training and Labor Transfer Action Plan,” the military drill-style skills training, coupled with what the government calls “thought education,” will supposedly compel Tibetans to voluntarily participate in the poverty alleviation efforts prescribed by the state.

As of this year, Tibet’s labor plan has explicitly included the transfer of Tibetan workers to other parts of China, with target quotas for each Tibetan region. Local officials who fail to meet those quotas are subject to punishment.

The main action plan also states that Tibetans are to be “encouraged” to hand over their land and herds to large-scale, state-run cooperatives and become shareholders in them. One state-media account from late July about progress with poverty alleviation describes the program as an effort to get Tibetans to “put down the whip, walk out of the pasture and enter the market.”

Becoming wage laborers forces Tibetans to give up herding and farming, and cuts them off from ancient traditions and sacred landscapes. And that’s just the point.

Many of the program’s main features, and objectives, bear a striking similarity with the plan in place in Xinjiang.

So do other measures designed to marginalize Tibetan culture.

For example, Beijing has drastically accelerated in recent years its efforts to minimize the teaching of the Tibetan language, including outside Tibet.

In late 2015, Tashi Wangchuk, a Tibetan from the remote nomadic region of Yulshul in Qinghai Province, tried to sue his local government over the curtailment of Tibetan language education. In 2018, he was sentenced to five years in prison for “inciting separatism.”

I reviewed official recruitment notices for teaching jobs in Yulshul and noticed that the number of advertisements for posts for Tibetan and subjects to be taught in Tibetan declined by 90 percent between 2014 and 2019.

Between 2010 and 2018, other Tibetan regions in Qinghai had recruited as many teachers for subjects taught in Tibetan as for subjects taught in Chinese. But in 2019 and this year so far, those regions advertised more than three times as many teaching positions for classes taught in Chinese than for classes in Tibetan. Similar shifts have happened in other Tibetan areas of China, like Ngawa Prefecture in Sichuan Province.

Tibetan Buddhism is also under attack. In the spring of 2019, the mayor of Lhasa claimed that the year before “the number of days major religious activities were held and the number of people attending them both reduced to below 10 per cent.” Last fall, Beijing started forbidding former government officials from practicing circumambulations at sacred sites.

The authorities of the Chamdo region of Tibet, after announcing in 2017 plans to set up video surveillance systems in main Buddhist temples, have spent 275 million yuan (more than $40 million) on a cloud computing system that enables, among other things, what they call “intelligent temple management” — a euphemism for comprehensive digital surveillance and control.

This strategy has old roots.

Back in 1989, the eminent Chinese anthropologist Fei Xiaotong wrote that through a long process of “mixing and melding,” the Han majority and other ethnic groups in China would eventually combine into a single entity: the Chinese nation-race. In Fei’s view, the Han would be at the center of this fusion, because they were the superior culture into which so-called backward minority groups would inevitably assimilate.

The Chinese government adopted Fei’s vision, and for a time tried to help it along with a large dose of top-down economic development.

In 2000, President Jiang Zemin launched the Great Western Development Campaign, bringing infrastructure — and numerous Han — to the western part of China. Local ethnic minorities would benefit from the new economic activity and employment opportunities so long as they were willing to assimilate culturally and linguistically.

Many resisted. Local expressions of ethnic identities flourished. Tibetans and members of other minority groups flocked to schools that taught their languages, and kept their distinct religions alive.

In a speech in the fall of 2019, President Xi Jinping reaffirmed Fei’s vision of ethnic fusion. But Beijing’s means to achieve it have changed.

Forget organic and voluntary assimilation facilitated by economic incentives; now, minorities, especially in Tibet and Xinjiang, are being forced to comply by way of intrusive micromanaging by the state — a police state — armed with sophisticated surveillance systems, detailed databases and intense forms of social control.

Today, poverty alleviation, a pet project of Mr. Xi’s, is a cover for reshaping not only people’s livelihoods, but their entire lifestyles — their languages, religions, cultures and families.

In both Xinjiang and Tibet, teams of government officials are inserting themselves into homes. They are paired with and assigned to households, and work, eat and sleep with the people who live there.

Every Tibetan has a detailed file showing their income, employment status — and the state-approved solution for their situation. Tibetans who are sent to labor in workshops, often far from their families and places of worship, are easier to control. The children they leave behind grow up in boarding schools.

The purpose of these policies is clear, as are the stakes, and targeted groups are trying to push back. The central government’s recent efforts to replace Mongolian with Chinese as the main teaching language in schools in Inner Mongolia has triggered major protests there.

In Fei’s vision, ethnic fusion would happen slowly, naturally. That has failed. In Mr. Xi’s vision, the assimilation of minority groups must be coerced by the state. That, too, will fail.

Adrian Zenz (@adrianzenz) is a senior fellow in China Studies at the Victims of Communism Memorial Foundation, in Washington, D.C.

Originally published in The New York Times.

CHINESE AUTHORITIES ARRESTED AND DISAPPEARED MY FATHER

A young Chinese woman in red aims her bow and arrow off screen.

The last time I saw my father was in 2013. We were on our way to Indiana University, where he was scheduled to begin a fellowship. He was arrested before boarding the plane and taken away. A mild-mannered, studious professor of economics, his life’s work was using his influence to promote peaceful coexistence between the Uyghur people—our people—and the Han ethnic majority that rules China. That went against the interest of the Chinese Communist government, and in 2014 they sentenced him to life in prison. The last time I spoke to him was the day before his arrest. I still don’t know if he is even alive—the last time I heard anything of his whereabouts was in 2017.

In many ways, I can identify with the title character in Disney’s Mulan films, based on the ancient Chinese legend. In the story, as China calls up the men from every family to defend against a foreign invasion, Mulan dresses as a boy and fights in the place of her father, who is too old to go himself. As a child growing up in Beijing, I loved the legend and the fun Disney cartoon version produced in 1998. Little did I know that I, like Mulan, would later be fighting for my own father—helping to carry on his work while he is unjustly imprisoned. I hope, like her, to achieve victory by one day gaining my father’s release.

Today, sadly, a new retelling of the Mulan story, once again by Disney, is profiting from the oppression of my people. This live-action version was filmed partly in the Uyghur region—officially known in China as “Xinjiang Uyghur Autonomous Region”—where the Chinese Communist government is holding at least one million members of Turkic ethnic minorities in concentration camps as part of a coordinated genocidal campaign. My father, if he is alive, may be among them—nobody will allow us to visit him, or even tell us where he is.

Despite widespread international condemnation of China’s brutal tactics in Xinjiang, Disney still chose to go there to film this movie, delivering money and the prestige of an international “family” brand to those directly engaged in genocide. Adding insult to injury, in the closing credits, they even made sure to thank the local government “bureau of public security” (also known as state police) and “publicity department” (or propaganda). These are the very same government agencies in the Uyghur region that are imprisoning Uyghurs and other Turkic minorities, and then telling their families and the international press they are merely being held in “training centers.” The “public security” office is currently under sanctions by the U.S. government for human rights abuses.

Disney still chose to go there to film this movie, delivering money and the prestige of an international “family” brand to those directly engaged in genocide.

Our people are no strangers to persecution and exploitation. Starting in the 1950s, the Communist government started pushing Han Chinese to move to the Uyghur region in a purposeful move to solve their own overcrowding and speed up the “Sinicization” of the Uyghur population. Their tactics have only become more aggressive since.

What is more disheartening is the West’s complicity, and specifically the major multinational corporations that are enabling the cultural genocide of the Uyghurs. China routinely uses its political prisoners as a source of forced labor in factories, and Uyghur prisoners have reportedly been put to work making products for major brands like Nike, Apple, and Gap. Recently the Trump administration announced plans to ban certain agricultural products from China due to concerns about their use of forced labor.

Hollywood isn’t immune from the charms of Beijing either. The promise of access to the massive Chinese market is irresistible for a movie industry desperate for revenue in the COVID era when movie ticket sales are down. While many theaters in the United States remain shut down, Mulan will be opening in Chinese theaters.

It appears, sadly, that Disney is the latest in the long and disappointing line of Western people and companies taken advantage of by China. We can hope, at least, that the outcry against Disney on behalf of the Uyghurs and freedom-loving people everywhere will not only lead others to #BoycottMulan in the short term, but in the long term demand that Western companies cease cooperating with Chinese oppression.

At the same time, I have learned to be positive. Disney has a chance to respond constructively to this issue. They could at least acknowledge the controversy, and maybe even donate some of their profits from Mulan and its merchandise to Uyghur families and survivors of the cultural genocide. In the end, we may even thank them for raising awareness of this issue—because the more the world knows, the less the Chinese Communist government can get away with.

Jewher Ilham is the Uyghur Human Rights Fellow at the Victims of Communism Memorial Foundation in Washington, D.C.

Originally published in Daily Beast.

Revealed – DHS Fusion Center China Problems

Revealed – DHS Fusion Center China Problems
  1. Over 100 DHS Fusion Center siteswere involved in the recent #BlueLeaks database breach. All of the sites were ultimately hosted on a computer server in a Data Foundry data center in Houston. Data Foundry, also called GigaNews, is a central Texas based operator of several data centers.
  2. Despite its small size, Data Foundry appears to be one of the larger distributors of child pornography in the world via the Usenet groups it hosts. This claim was already made before in some detail back in2014 by a former engineer, as well as in 2018 by theOAG of New Mexico.
  3. Data Foundry at one time served as one of the world’s largest bulk intel metadata collection points for the NSA program “BOUNDLESS INFORMANT” and was given the codename WAXTITAN. This was revealed as part of the Snowden leaks in 2013.
  4. Data Foundry has an unusual history with mainland China. The Yokubaitis family, which runs the company (along with other related firms) have frequently attendedPeking University. This school is probably the 2nd most prestigious in all of China (behind Tsinghua), and has developed most of the breakthroughs for China’s nuclear weapons program over the last three decades. During SXSW 2015 it was mentioned that their 2nd largest customer base is in China. This is unusual as no effective marketing seems to take place there, raising the question of how these customers are acquired. The sysadmin who first made claims against Data Foundry in 2014 alleged that their facilities would follow requests made from the datacenter in Hong Kong they colocate with, Powerline HK. Such requests could only come from the government of China, which raises serious questions regarding the independence and what could and could not be accessed.
  5. We find thestory of Nick Caputohighly credible as all of the technical information can be verified, even years later. Other messages throughout the years on UseNet, Reddit, and elsewhere seem to corroborate the general story / character of the firm as well. Additionally the unregistered FBI office address he provides in his original message (12515 Research Blvd) actually turns up dozens of times in the #BlueLeaks files for FBI agents. We are unsure if these are police impersonators or simply a unit that is operating out of scope and without authority (more likely the latter). We have reached out to law enforcement officials in Australia and Britain in the meanwhile out of an abundance of caution.

dan.ehrlich@12security.com

FBI Counterintelligence Note Warns About Chinese Talent Programs

FBI Counterintelligence Note Warns About Chinese Talent Programs

 

Chinese Talent Programs are a vital part of Chinese industry. Talent programs recruit experts to fill technical jobs that drive innovation and growth in China’s economy. National, provincial, and municipal talent recruitment programs provide opportunities for experts to work in industry and academic organizations supporting key areas deemed critical to China’s development. The talent programs recruit experts globally from businesses, industry, and universities with multiple incentives to work in China. Associating with these talent programs is legal and breaks no laws; however, individuals who agree to the Chinese terms must understand what is and is not legal under US law when sharing information. A simple download of intellectual property (IP) or proprietary information has the potential to become criminal activity.

(U//FOUO) The large number of foreign students, researchers, scientists, and professionals in the United States, combined with current technological capabilities, allows foreign governments to contact and recruit individuals with the hopes to acquire advanced technology without research costs. While the majority of the population are law abiding individuals, anyone has the capability to acquire information. The theft of information can come from current or former employees, business partners, consultants, contractors, temporary hires, foreign agents, suppliers, or even vendors who have access to proprietary information.

(U) Recruiting these individuals allows China to:

  • (U//FOUO) Gain access to research and expertise for cutting edge technology
  • (U//FOUO) Benefit from years of scientific research conducted in the United States supported by US Government grants and private funding
  • (U//FOUO) Severely impact the US economy.

(U) The goal of this SPIN is to provide an overview of the potential threats posed by the Chinese Talent Programs.

(U) THOUSAND TALENTS PROGRAM

(U//FOUO) China’s most prominent national talent recruitment program is the “Recruitment Program of Global Experts,” which is commonly known as the Thousand Talents Program. It focuses on identifying key national-level organizations and associ-ated personnel involved in implementation and management.

(U) Its goal is to recruit ethnic Chinese experts from Western universities, research cen-ters, and private companies to boost China’s national capabilities in the science and technology (S&T) fields and to move China forward as an innovative nation. The pro-gram also implemented sub-programs for both young and foreign (non-ethnic Chinese) experts.

(U//FOUO) Originally, this program had a five-to-ten year goal of recruiting 2,000 profes-sionals worldwide who could lead innovation and pioneering work in key technologies, and promote the development of emerging industries. However, this program expanded its scope — recruiting far more than the initial goal of 2,000 individuals — and extended its life through at least 2020.

(U) In order to be eligible as a candidate for the Thousand Talents Program, an individual must be in a field of study the Chi-nese Academy of Science (CAS) deems critical or meet the following criteria:

  • (U) Expert or scholar with full professorship in a prestigious foreign university or research and development (R&D) insti-tute
  • (U) Technical managerial professional in a senior position at an internationally known company or financial institution
  • (U) Entrepreneur holding IP rights or key technologies and possesses overseas experience

(U) THREAT TO US BUSINESS AND UNIVERSITIES

(U//FOUO) Chinese Talent Programs pose a serious threat to US businesses and universities through economic espionage and theft of IP. The different programs focus on specific fields deemed critical to China, to boost China’s national capability in S&T fields. These subject mat-ter experts often are not required to sign non-disclosure agreements with US entities, which could result in lost of unprotected information that jeopardizes contracts or research funding. One of the greatest threats toward these experts is transferring or transporting proprietary, classified, or export-controlled information, or IP, which can lead to criminal charges.

(U//FOUO) The threat not only targets businesses or universities but potentially targets the researchers or scientists themselves. The technology researched or developed not only costs millions of dollars but costs years, if not decades to develop. Additionally, the theft of informa-tion or IP creates a risk that someone else could take credit for the researcher’s efforts. The information stolen can be recreated, resold or claimed by others, which in turn will cost the originator creditability and potential funding for future endeavors.

(U) Theft of intellectual property is an increasing threat to organizations and can go unnoticed for months or even years. In today’s society, technology affords easier access to every aspect of academia and business. Some of these tools have become effective for recruiting, such as social media. Social media websites often display large amounts of personal data, such as who an individual works for, phone numbers, known associates, previous jobs, and locations. Additionally, websites like LinkedIn have full resumes, detailing the history of an individual’s achievements and accomplishments.

(U) The FBI assesses each year the United States loses billions of dollars due to technology transfer. While it is important to conduct collaborative research, it is vital for the survival of US businesses and universities that they protect their information and mitigate lost or stolen in-formation.

Prohibiting Procurement from Huawei, ZTE, and Other Chinese Companies

Prohibiting Procurement from Huawei, ZTE, and Other Chinese Companies

The National Reconnaissance Office (NRO) Acquisition Manual is hereby amended by adding new sub-part N4.21, Prohibition on Contracting for Certain Telecommunications and Video Surveillance Services or Equipment, to implement a provision of the 2019 National Defense Authorization Act prohibiting the procurement and use of covered equipment and services produced or provided by Huawei Technologies Company, ZTE Corporation, Hytera Communications Corporation, Hangzhou Hikvision Digital Technology Company, and Dahua Technology Company. New provision N52.204-016, Representation Regarding Certain Telecommunications and Video Surveillance Services or Equipment, is prescribed for use in all solicitations in lieu of FAR provision 52.204-24, and new clause N52.204-017, Prohibition on Contracting of Certain Telecommunications and Video Surveillance Services or Equipment, is prescribed for all solicitations and contracts in lieu of FAR clause 52.204-25. These revisions are effective immediately, and will be incorporated into NRO Acquisition Circular 2019-03.

Joint Chiefs of Staff Briefing about China’s “System Attack”

This paper explores the PLA’s theory of victory in modern warfare and its implications for how China plans to fight the United States. It is a primer on the theory’s foundational concepts, and on what the theory reveals about China’s strategic intent and ambitions.

(U) Executive Summary

(U//FOUO/RELIDO) China plans to defeat powerful adversaries by systematically targeting the linkages and nodes that hold an advanced network-centric force together as a cohesive whole. The PLA calls this theory of victory “systems attack and destruction warfare,” hereafter, “system attack. Authoritative PLA doctrine emphasizes importance of system attack as China’s “basic operational method” of warfare. System attack is perhaps best remembered as “the American way of war with Chinese characteristics,” since the PLA developed the concept based on observing U.S. military victories In the 1990s. Some of the PLA’s writings on systems attack are clearly aspirational, but this does not preclude the effectiveness of the approach, and the doctrine shows that the Pl.A is thinking seriously and realistically about how to defeat.an advanced adversary. The requirements of system attack are actively driving PLA reform, acquisitions, operations and training, and the doctrine telegraphs how Chine intends to fight.

(U) China’s Theory of War: “‘Systems Confrontation•

• (U//FOUO/RELIDO) 1 +1>2. Operational Systems are Greater Than the Sum of their Parts. Fundamental to China’s theory of victory is the PLA’s concept that modem military forces are “‘systems of systems” which are stronger and more efficient than their components would be in isolation because they are linked and networked together through communications and information systems architecture.

• (U//FOUO/RELIDO) Systems Confrontation: The PLA’s theory of modern warfare, therefore, is “systems confrontation,” or competition between these rival “systems of systems,” rather than as a linear contest between discrete units or services of competing armies.

(U) China’s Theory of Victory: System Attack – Win by Fragmenting the Enemy’s Force

(U//FOUO/RELIDO) Create the Conditions for Winning the War: Make 1 +1<2. The PLA plans to defeat an advanced adversary by thoroughly fragmenting the adversary’s system into isolated component parts. The first step of systems attack, therefore, Is to break the essential links and nodes that promote system cohesion in order to sow confusion, degrade communications and disorient adversary leadership. System attack’s ultimate goal ls to paralyze the adversary force, degrading its ability to resist, eroding leadership will to fight and slowing adversary decision-making. China believes that whichever side has a more networked, integrated and cohesive force will have a shorter OODA loop, be able to act more efficiently, and have a better likelihood of victory. Attacks will take place across all domains to degrade the system as a whole rather than focusing on attrition.

• (U//FOUO/REUDO) Fragment the Force: Degrade Data-Flow and C2. The PLA prioritizes degrading or denying an adversary’s use of information early in a crisis and with greater intensity through a conflict. The PLA envisions using kinetic and non-kinetic operations to target an opponent’s data links, communications, military networks, and information systems architecture early in the conflict. Degrading adversary communications amplifies the effects of missile and air strikes against command and control (C2) nodes, including command centers, flagships, and military and civilian leadership.

• (U//FOUO/REUDO) Blind the Enemy. Deny ISR and Early Warning. China will try to degrade adversary decision-making and awareness by targeting its intelligence, surveillance and reconnaissance (ISR) and early warning capabilities, including key space-based collection systems, theater ISR platforms, intelligence centers and satellites.

• (U//FOUO/RELIDO) Own the Initiative: Getting Inside the Adversary OODA Loop. China plans to seize first mover advantage by initiating conflict when the adversary is not prepared. The PLA will try to maintain battlefield initiative by forcing adversaries into a reactive cycle driven by a rapid tempo of unexpected long-range strikes, asymmetric attacks, and harassing attacks.

• (U//FOUO/RELIDO) More Return on Investment Precision Strikes Enable Outsized Effects. The PLA will rely on highly targeted precision strikes against key links and nodes to achieve an outsized effect on the enemy force’s overall stability and effectiveness. Kinetic precision strikes will be complemented by non-kinetic attacks, especially against adversary networks, datalinks, and information systems.

(U/FOUO/RELIDO) Using the Full Against the Fragmentary, Defeating the Slow with the Rapid. System attacks are designed to enable following operations. Once system attacks have fragmented the adversary military so that it cannot operate as a cohesive force, the PLA will commit its broader intact and networked force to combat. Having tilted the battlefield In its own favor, the PLA will carry out supplemental attacks that ensure the adversary•s system does not recover while gradually attriting the adversary’s aircraft, ships, submarines, and other long-range-strike platforms. Sequencing system attacks first enables the PLA to achieve greater effect with lower risk to its force or mission.

• (U//FOUO/RELIDO) China Expects to Have Its System Targeted Too. China expects that the U.S. will try to degrade the PLA’s ability to operate as a coherent force, having developed the systems attack doctrine described above by watching how the United States fights. The PLA therefore is training and equipping the force to operate independently, autonomously, and resiliently, with a notable emphasis on operating in a complex electromagnetic environment.

(U//FOUO/RELIDO) Aspiration Does Not Equal Capability, but It Signals Intent. In PLA doctrine, the rough sequence of operations enabled by systems attacks would be familiar to U.S. military operators: achieve air superiority, then use air superiority to seize maritime superiority and enable ground operations, then use maritime superiority to execute attacks from the sea to the land. The last part of this sequence is aspirational, since China does not currently field ship-launched land attack cruise missiles and its nascent aircraft carrier program is unable to carry out strike warfare. It is, however, how the PLA says it wants to be able to fight, and its acquisitions and training reflect this ambition. China’s doctrine is reflected in its acquisitions and training patterns today. Tomorrow it will be reflected in its operations. The PLA is progressing rapidly. This is how they will fight.

(U) A Note on Sources:

(U//FOUO) The findings of this paper are derived from China’s most authoritative government and military doctrinal writings: The Importance of system of systems confrontation is evident in its inclusion In the 2015 Defense White Paper on Military Strategy. All other details are derived from the 2015 and 2013 editions of the Science of Military Strategy, and .from an unclassified 2018 RAND Corporation study, Systems Confrontation and System Destruction Warfare: How the Chinese People’s Liberation .Army Seeks to Wage Modem Warfare. General assessments on PLA acquisitions, training and operations are reflected in a wide body of unclassified open source materials from 2000 through the present For ease of sourcing, we cited the 2017 Department of Defense Annual Report to Congress on Military and Security Developments Involving the People’s Republic of China.

Analysis of Chinese Investments in the USA

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Once hardly noticeable, Chinese investments in U.S. companies are now rising sharply. Cumulative Chinese investments in U.S. companies remain modest compared to those of other major countries. However, a combination of “push and pull” factors are moving China’s annual investment levels closer to levels consistent with China’s current economic stature.

First, the Chinese government has made a conscious decision to diversify its foreign currency assets into hard assets. This has led to the creation of sovereign wealth funds that make portfolio investments in U.S. equities, private firms, and real estate.

Second, the Chinese government has altered its policy guidance toward foreign direct investment (FDI). Whereas it previously encouraged investments almost exclusively toward energy and resource acquisition in developing countries, it now also encourages investments in advanced countries. The government’s goals for these investments include securing energy and mineral resources and acquiring advanced technologies in industries where China wishes to leapfrog existing competitors.

Third, U.S. state governments and, to a lesser extent, the federal government are vigorously trying to attract Chinese greenfield investments in the hope of creating jobs and jump-starting local economies.

Fourth, Chinese investments are being drawn to the United States by the availability of financially weak firms, some of which possess potentially useful technologies for China.

Fifth, some firms that are already competitive with U.S. producers are investing to enhance their U.S. market shares or in response to trade remedies proceedings against unfair trade practices, such as Chinese subsidies.

Economic Benefits

On an aggregate basis, the economic benefits of Chinese investments in the United States have been modest. The precise benefit is difficult to measure due to the convoluted ownership structures of many Chinese investments and the time lags in official U.S. data. Still, based on a combination of official and private data, it is reasonable to conclude that jobs in Chinese-owned companies in the United States increased by 10,000 to 20,000 workers during the past five years.

While hardly significant relative to overall U.S. employment and even to jobs in other countries’ U.S. affiliates, any job creation is welcome given continued slackness in the U.S. labor market.

Chinese FDI in U.S. companies has helped stabilize some financially troubled firms. Portfolio investments by sovereign wealth funds also have helped the economy by solidifying the financial system and providing liquidity to certain property markets.

Chinese investments have occurred in all U.S. regions and in many sectors. According to one private data source, they have been especially prominent since 2007 in the Southwest, Great Lakes, Southeast, and Far West regions, and in the fossil fuels and chemicals, industrial machinery, and information technology industries. According to another private source, as well as government data, the financial sector is also a major recipient of Chinese FDI.

Policy Challenges

These welcome, though still modest, economic benefits are counterbalanced by policy challenges tied to Chinese FDI. First, U.S. affiliates of Chinese companies are not pure market actors and may be driven by state goals, not market forces. China’s outward investments are dominated by state-owned and state-controlled enterprises (SOEs). These entities are potentially disruptive because they frequently respond to policies of the Chinese government, which is the ultimate beneficial owner of U.S affiliates of China’s SOEs. Likewise, the government behaves like an owner, providing overall direction to SOE investments, including encouragement on where to invest, in what industries, and to what ends.

Second, SOEs may have unfair advantages relative to private firms when competing to purchase U.S. assets. SOEs benefit from substantial subsidies in China and their investments in developing countries also receive ample financial support from the national and sub-national governments, state-owned financial institutions and local governments. Government pronouncements out of China suggest that investments in the United States and other advanced countries will also receive ample financial support. This raises the possibility that Chinese largesse could determine market outcomes for purchases of U.S. businesses.

Third, an increased SOE presence may be harmful to the U.S. economy. In China, SOEs are a major force but as a group they are less efficient and profitable than private firms. To the extent that SOEs purchase U.S. companies on the basis of artificial advantages and operate inefficiently, they may not be beneficial to long-term U.S. economic performance.

Fourth, Chinese investments will create tensions related to economic security and national security if they behave in accordance with China’s industrial policy as articulated in the 12th Five Year Plan, government pronouncements, and official investment guidance. China’s current policy guidance directs firms to obtain leapfrog technologies to create national champions in key emerging industries, while investment guidance encourages technology acquisition, energy security, and export facilitation. Based on this juxtaposition, some will conclude that Chinese FDI in the United States is a potential Trojan horse. Indeed, this study describes three investments in new energy products after which production utilizing the desired technology was shifted to China.
Other Findings

U.S. data collection efforts related to FDI are substantial. However, they likely undercount Chinese FDI due to the complicated ownership structures of many Chinese investments. Moreover, although Chinese-owned companies report their data to the U.S. government, many data points are not publically disclosed due to standard U.S. reporting procedures that protect the identities of individual firms. This issue will resolve itself in the coming years if Chinese FDI grows as expected because limits on disclosure will no longer apply.

The United States is relatively open toward FDI, though there are some sectoral restrictions and a national security review undertaken by the Committee on Foreign Investment in the United States (CFIUS). There are a host of laws that subject foreign investors to rules on antitrust, foreign corrupt practices, and trade in arms and sensitive technology products. However, there is no procedure that explicitly considers issues related to economic security, one of the major concerns about Chinese FDI.

Portfolio investments in equities fall under the purview of the Securities and Exchange Commission (SEC). SEC disclosure requirements and practical considerations make it highly unlikely that Chinese SOEs could successfully collude to accumulate significant equity positions in important U.S. firms.

Reverse mergers offer a back door into U.S. capital markets but are not an effective way to acquire important U.S. assets. Indeed, the target of a reverse merger is typically a shell company devoid of meaningful assets. This technique is typically used by private firms that have difficulty accessing capital in China or by provincial SOEs trying to support restructuring efforts in China. There is no indication that any major SOE has used or plans to use this technique to enter the U.S. capital market.

The Chinese legal and regulatory framework for outward FDI requires approvals by three agencies at sub-national and/or national levels. For SOEs, the primary gatekeeper is the State-owned Assets Supervision and Administration Commission (SASAC), though for some investments approval from the State Council is required. The process is widely considered to be cumbersome and is being reformed to facilitate outward FDI.

 

Chinese Cyber Hackers Launch Malicious Bot

Chinese Cyber Hackers Launch Malicious Bot

In March 2018, an identified financial services corporation received a thumb drive infected with the bank credential-stealing Qakbot malware variant, targeting information from networked computers and financial institution web sites. The financial services corporation purchased bulk thumb drives from a US online retailer of computer hardware. The thumb drives were originally manufactured in China. According to FBI forensic analysis, the Qakbot malware was on the infected thumb drive before the drive arrived in the United States. Qakbot is extremely persistent and requires removal of all malware from every device. Failure to remove even one node of malware may result in re-infecting previously sanitized systems possibly costing the victim hundreds of thousands of dollars in malware removal and system downtime.

Threat

Qakbot is an information stealing worm—originally discovered in 2007 with a major update in 2017—that propagates through removable drives, network shares, and Web pages. The most common vector of intrusion for Qakbot is malicious attachments to phishing emails. Once executed, Qakbot spreads to other shared folders and uses Server Message Block (SMB) protocol to infect other machines. Qakbot has keylogging capabilities, and is able to propagate across network environments through a single instance within that network. It is capable of remaining on a device through the use of registry keys and by scheduling recurring tasks to run at timed intervals. Every device connected to the network and every piece of removable media which has been attached needs to be scanned for the malware and cleaned of the infection before it can be reconnected. The most recent updates in 2017 allows Qakbot to lock users out of the active directory, preventing them from being able to work. It also deploys malicious executables into network shares, registering them as services.

Cyber actors have the capability to infect devices with malware at nearly any point in the manufacturing process. The FBI has historically seen cases of infection with malware capable of stealing credentials, gathering data on the users of a computer or network, dropping other types of malware, and serving as a “backdoor” into a secure network. It is difficult to know at which point the malware infection occurred or whether the infection was intentional, due to the international nature of hardware manufacturing.

Recommendations

To mitigate the threat of a potentially infected thumb drive, the following measures should be taken at a minimum:

Ensure the use of approved, trusted vendors for hardware purchases.

Scan all hardware, especially removable storage media, on an external system prior to its insertion into a network environment.

For signature-based intrusion detection systems, ensure that the hash value for known Qakbot variants are included. The MD5 value for the variant identified in this PIN was: ff0e3ec80faafd04c9a8b375be77c6b6. This hash value can change, so be prepared to use other advanced detection systems.

Users should protect themselves and organizations by practicing good browsing habits, ensuring they do not respond to or click on unsolicited email, and to not plug unknown USB devices into
their workstations.

If you don’t have the expertise to properly handle or identify potential cyber threats please seek out an expert who can provide the expertise needed to secure your organization.