WASHINGTON, February 18, 2020 – Panelist and Anthony M. Solomon Senior Fellow at the Peterson Institute Nicholas Lardy sparred with Hudson Institute Senior Fellow John Lee on Tuesday over Lee’s recently published reports on China’s economy.
As opposed to China’s communist party’s past approach to underscoring “vulnerability and the challenges facing their country,” now they are “concealing rather than highlighting Chinese vulnerabilities,” suggested Lee.
Lee argues that China cannot be “the dominate power” without a sustainable, strong economy, which he believes has considerable structural flaws. “The main way Beijing has maintaining adequate growth is to support its companies with cheap credit,” said Lee.
Lardy pushed back against Lee’s portrayal of China’s economy.
Lardy said the report fell short of recognizing that “China’s efforts to slow down the growth of credit since 2017 have met with some success.”
“Debt to GDP is no longer rising” in China, said Lardy.
China’s Belt and Road Initiative “began as a scheme to export excess capacity and lock in new regional market for Chinese firms, especially those involving construction, industrial products, infrastructure, and related services,” said Lee.
According to Business Insider, the Belt and Road Initiative (which was announced in 2013) “is a massive trade and infrastructure project that aims to link China to dozens of economies across Asia, Europe, Africa, and Oceania.”
Lee deems this an “attempt to create external commercial opportunities for largely protected and unreformed Chinese firms without the need to reform the country’s economic or political institutions.” Lee sees a deep flaw in China’s economy as the leaders aim to “permanently forestall reform,” said Lee.
In response to Lee’s suggestions in his report to crack down on technology ties with China and limit visas to Chinese students studying in “sensitive areas,” Lardy disagreed. Lardy felt Lee did not acknowledge how such policies would significantly affect the U.S, perhaps more than China, said Lardy.
Lee said that for a long time the U.S. has tried to entertain the idea that there is a “cost-free strategy” to dealing with China, and that is impossible.
Panelists contend with the power of storytelling, especially for a communist regime
Lee pointed out four narratives that “play into the hands of the communist party.”
First, Lee said, “Xi Jinping and the communist party begin from a position of unprecedented strength and national resilience.” However, Lee believes that Jinping is pursuing a risky approach to economic growth and obscuring weaknesses.
Second, “there is a unique economic and governance competence that you have to attribute to the Chinese communist party compared to what we see as the chaos and disfunction of liberal democracy, such as the United States.” But Lee believes that China is reluctant to face grave issues or learn from the past.
Third, the narrative that “China does not need the United States or other advanced economies to achieve its objectives.” However, Lee believes that China cannot attain economic goals without the U.S. and other advanced countries.
Forth, “the United States and other countries have very little ability to influence domestic Chinese politics, especially when it comes to challenging Xi’s authority.” Nevertheless, Lee proposed the idea that there is “internal angst” due to Xi’s approach, and “China is deterrable,” said Lee.
In regards to the Coronavirus, panelists agreed that the outbreak exposed the discomfort that many have with accepting Chinese data and trusting the government. They agreed that China’s focus was on stemming the flow of information and controlling the narrative, rather than openly exposing the issue.
Report Urges States, Local Governments Follow Federal Rules on Prohibited Equipment Purchases
Only a handful of states have crafted their purchasing decisions after federal rules banning certain companies’ equipment.
WASHINGTON, November 14, 2022 – A think tank is recommending state and local governments align their rules on buying technology from companies with federal guidelines that prevent agencies from purchasing certain prohibited foreign technology, such as ones from Chinese companies.
The Center for Security and Emerging Technology at Georgetown University notified the Federal Communications Commission late last month of a report released that month regarding what it said was a concerning trend of state and local governments having outdated procurement policies that are seeing them purchase equipment banned for federal purchase.
“State and local policymakers should not be expected to independently analyze and address the threats posed by foreign technology, but it would behoove them to align their own procurement practices with the rules set by the federal government,” the report recommends.
The FCC has a list of companies, as required by the Secure and Trusted Communications Networks Act of 2019, that it updates on a rolling basis through commission votes that it says pose a national security threat to the country’s networks. It last updated the list in September, when it added Pacific Network Corp. and China Unicom Operations Ltd. to the growing list that already includes Huawei and ZTE.
Chinese companies and following Communist Party directions
U.S. officials and experts have warned that Chinese companies operating anywhere in the world must follow directions of the Chinese Communist Party, which they say could mean anything from surveillance to American data falling into the hands of that government.
The report notes at least six state governments had their networks breached by a state-sponsored Chinese hacking group between May 2021 and February 2022.
The only states that have enacted local regulations aligned with federal provisions are Florida, Georgia, Louisiana, Texas, and Vermont, the report said. Provisions in Georgia and Texas prohibit private companies from entering into agreements with the covered companies. Vermont, Texas and Florida provisions block state entities from purchasing equipment from countries like China, Russia, Iran, North Korea, Cuba, Venezuela and Syria. Louisiana and Georgia provisions ban public-funded schools from buying prohibited technology.
The remaining 45 states do not explicitly target the equipment and services they produce, nor are they directly responsible for following federal provisions, the report said, leaving state entities vulnerable in obtaining equipment from third party contractors that could pose a security risk.
“Many government entities also lack the in-house technical expertise and procedures to understand and address such threats in the first place, and those that do may prioritize addressing immediate threats like ransomware over the more abstract risks posed by foreign ICTS,” the report said.
Section 889 of the 2019 National Defense Authorization Act is one out of four federal provisions addressing the issue, prohibiting federal agencies from using equipment and services from Huawei, ZTE, Hikvision, Dahua and Hytera as well as working with contractors that use the equipment.
Prohibited products finding their way in
In some cases, the report said, the listed companies will sell their products to third party contractors that are not listed on Section 889 to bypass regulations, according to the report. Due to the low cost of Chinese equipment, public schools and local governments will purchase from the third-party entities that are unknowingly selling prohibited equipment, it added.
“These ‘middle-man’ vendors can mask the origin of their products, which creates major challenges for organizations aiming to keep certain equipment and services off their networks”, the report reads.
“Currently, contractors are responsible for self-certifying that their products and internal networks do not contain covered [products]” and “… inspecting the IT infrastructure—equipment, services, and components – of every contractor that does business with the federal government would require a staggering level of resources, making it difficult for agencies to conduct effective oversight.”
FCC Orders China Telecom to Stop Providing Services in the U.S. Over National Security Concerns
The move is in line with FCC’s tough posture on national security risks emanating from China.
WASHINGTON, October 27, 2021 – The Federal Communications Commission voted Tuesday to revoke the operating authorizations of China Telecom’s U.S. subsidiary, effectively ending its ability to provide services in the country.
The company had initially challenged the process of revoking its authorizations that started last year under the Donald Trump presidency, but lost in court.
The FCC found that China Telecom Americas’ ties to the Chinese government raises “significant national security and law enforcement risks” to U.S. communications. The telecom must discontinue any services within sixty days after the order is released.
The FCC’s analysis concludes that “the present and future public interest, convenience, and necessity” is no longer served by allowing the company’s operations in the U.S. The commission found that China Telecom Americas is “subject to exploitation, influence, and control by the Chinese government and is highly likely to be forced to comply with Chinese government request without sufficient legal procedures subject to independent judicial oversight.”
The order also found that the company’s conduct toward the commission demonstrates “a lack of candor, trustworthiness, and reliability that erodes the baseline level of trust that the Commission and other U.S. government agencies require of telecommunications carriers.”
FCC Chairwoman Jessica Rosenworcel praised the vote, calling the decision to stop China Telecom “ an important and necessary step” to protecting U.S. communications infrastructure.
“This is not a decision we make lightly. It has support from each of my colleagues. It has support across the federal government,” she said. Continuing to allow China Telecom Americas to operate in the U.S. “could lead to real problems with our telecommunications networks through surveilling information, misrouting traffic, or disrupting service,” she added.
Revocation in-line with FCC focus on weeding out threats
The vote to block China Telecom’s services also comes as the FCC fields comments about its proposal to blacklist products and services that pose national security threats.
The U.S. government is also responding to China’s influence over digital services. In July, the Biden administration formally accused the Chinese government of hacking Microsoft’s email system. Digital policy experts have raised concern about how China’s use of digital tools threatens human rights agendas and democracy around the world.
Last June, the permanent subcommittee on investigations released a report finding the Chinese government engages in cyber efforts against the U.S. and may use telecommunications carriers to interfere with U.S. network systems.
The ban on China Telecom follows a Canadian order to ban another company — China Mobile — from operating in the country, citing similar national security concerns. The company, which had an agreement to resell services of telco giant Telus, was told in August that it couldn’t continue operations. The company has since filed an appeal in the federal court.
Hytera and Huawei Respond to FCC Blocking Chinese Equipment as U.S. Players React
Companies, industries, and associations chime in on FCC equipment blacklist proposal.
WASHINGTON, September 21, 2021 – Hytera, a company with ties to China that has been the subject of a national security blacklist proposal and whose partners have vouched for its innocence, said Monday that its United States radio equipment is being unfairly maligned.
Meanwhile, several key industry trade groups – including the leading wireless industry and consumer technology associations – urged a lighter-touch approach to “compliance challenges” involving Chinese companies, saying that under hardline Federal Communications Commission rules, burdens “may be passed on to consumers.”
But other U.S. advocates aren’t satisfied and want even stricter rules by the FCC to weed out alleged threats in America’s networks.
Hytera says that is has been unfairly targeted by the FCC
Hytera US, a supplier of radio equipment to emergency first responders, said in a submission to the FCC on Monday that it has been unfairly targeted because of confusion over the FCC’s authority in its blacklist, which is a product of Congress’ Secure Networks Act of 2019.
The FCC in March proposed a list of equipment and services from certain vendors from which to revoke or to deny future equipment approvals due to the “unacceptable risk” to the country’s national security. Included in the list is video surveillance and telecommunications equipment from Hytera, as well as equipment and services from Huawei, ZTE, Hangzhou Hikvision, and Dahua. Part of its process is to ask the industry for comments on its proposal.
Hytera said in its submission Monday that its radio equipment does not connect to the internet or otherwise can’t be compromised by a foreign government. And it argued Monday that the FCC only has authority to blacklist certain equipment, not paint whole entities as threats.
Hytera has said that its competitors in the radio equipment space have allegedly been using this narrative to paint it as a risky company to deal with, which has resulted in Hytera dealers suffering “greatly, losing deals, being barred from bidding for projects, being maligned.”
Hytera asks for clear distinction between radio equipment and broadband
Hytera is recommending the FCC make the distinction clear to the public and to specifically clarify that the blacklist “only includes equipment and services providing broadband service having a connection speed of at least 200 [kilobits per second] in either direction.”
Diversified and Alpha Prime have argued that Hytera radio equipment does not transmit data over the internet and so cannot be a threat under the FCC’s rules.
In a letter accompanying its submission, Hytera US vice president of sales Thomas Wineland said the FCC’s list has “destroyed our dealers’ ability to sell Hytera. Even if they can convince their customers that the two-way radios they plan to buy are not on the Covered List, the customers, in turn, answer to their bosses.
“They tell the dealer they ‘just can’t take the risk’ that the FCC will demand that Hytera equipment be removed and replaced,” he said. “They see Hytera’s name on the Covered List and choose a different manufacturer.
“Certainly this anti-competitive impact in the two-way radio marketplace was not what was contemplated in creating the Covered List,” Wineland continued. “Hytera US is a good citizen in each of its communities. It does not market broadband equipment in the US. A clarification that the Covered List reaches only broadband equipment would give Hytera the ability to neutralize the Covered List’s anti-competitive impact and allow the free market to operate.”
Huawei says FCC hasn’t shown proof its equipment is a threat
In its own submission on Monday, Huawei said the FCC has allegedly shown no evidence of a threat from its equipment, and its decision makes little sense on a cost-benefit analysis.
“The Commission has no evidence that Huawei has violated any of these rules,” the submission said. “Huawei’s equipment has been recognized by independent third parties, world leading carriers, major enterprise and industry customers as being of the highest technical quality. The identity of a manufacturer, by itself, cannot rationally be connected to any of the purposes of the equipment authorization rules.”
Huawei is one of the world’s largest telecommunications equipment manufacturers. It supplies equipment all over the world, with part of its allure being its relatively low cost.
“The rules would impose substantial costs on carriers, end-users, distributors, suppliers, and resellers of Huawei equipment,” the company said. “Revoking existing equipment authorizations and prohibiting new ones would require these United States entities to divert limited resources, threaten service quality, and increase the cost of service, without equivalent benefits.”
The company also argued that the FCC is exceeding its authority by proposing to prohibit the “importation, marketing, or sale of a company’s products based on the identity of the manufacturer without regard to the technical characteristics of a particular product.”
On the proposal, FCC Commissioner Brendan Carr said the commission, “through its current equipment authorization process, continues to approve for use in the U.S. thousands of applications from Huawei and other entities deemed national security threats.
“The FCC has approved more than 3,000 applications from Huawei alone since 2018…We are launching this proceeding with a simple and important goal in mind—to protect America’s communications networks and, in turn, our national security. The rules we propose are simple: equipment from entities that pose a national security risk will no longer be eligible for FCC approval.”
Industry associations say list could have ‘unintended consequences’
A number of associations that represent the broadband and wireless industries said in a combined submission on Monday that there could be “unintended consequences” with the proposal, including difficulty in implementation, harm to American consumers, and weaker supply chains.
Those groups include the ACT – The App Association, Consumer Technology Association, the Council to Secure the Digital Economy, the USTelecom broadband association, the Internet Association, the Information Technology Industry Council, the Telecommunications Industry Association, and the CTIA.
The CTIA said the FCC should consider more tailored approaches, including addressing “compliance challenges” and observe the costs and benefits of the proposed changes, including “burdens that may be passed on to consumers.”
The proposal “extends far beyond national security concerns, contemplating sweeping regulatory oversight of the cybersecurity features of the connected devices and systems that will drive the 5G future and beyond,” the submission added.
“Cybersecurity is best addressed through public-private partnerships and flexible, risk-based solutions, not prescriptive mandates,” it said. “Rather than duplicating the ongoing work of its federal partners, the Commission should support industry-led efforts, promote the National Institute of Standards and Technology’s leadership on voluntary and flexible guidance for [internet of things] security, and look to the Communications Security, Reliability and Interoperability Council for input.”
China Tech Threat, Blue Path Labs press FCC for more
China Tech Threat, a research institution that focuses on threats from China, and Blue Path Labs, an organization that studies China and that has clients in the federal government, filed a joint submission Monday recommending the commission broaden the list and said all information technology emanating from China is “vulnerable to that government’s intrusion.”
The submission recommends adding to the list laptop manufacturer Lenovo and memory chip maker Yangtze Memory Technologies.
“The FCC has made a good start to propose prohibiting equipment authorizations from 5 Chinese military aligned companies, but there are many more entities operating in the US which pose an unacceptable national security risk,” the submission said.
“The FCC needs to apply these restrictions to all the equipment from vulnerable Chinese government owned and military aligned entities which operate in the U.S. today, as described by the US- China Economic and Security Review Commission, the Department of Commerce Bureau of Industry and Security (BIS) Entity List, and the Department of Defense list of Communist Chinese Military Companies (CCMC).”
Co-founder of China Tech Threat, Roslyn Layton, told Broadband Breakfast following Diversified Communications plea that the ban list isn’t about Hytera per se, but what the Communist party in China requires of its companies.
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