Foreign Investments: China & US Read it here before you see it on 60 Minutes tonight

Recent Initiatives by the People’s Republic of China to Establish an Expanded Economic Influence Within the Critical National Infrastructure of the United States 

Anacortes Wa. |Richard Kaplan | October 7, 2012

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, then 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.

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This article was prepared by Richard Kaplan. Mr. Kaplan is currently a Member of the Advisory Board of the Economic Warfare Institute. He recently retired from the U.S. Government after 27 years of service in various intelligence assignments with the U.S. Army Intelligence and Threat Analysis Center, the Army Intelligence and Security Command, the Office of the Undersecretary of Defense for Intelligence, and the Department of Energy, Office of Intelligence and Counterintelligence where he maintained responsibility for the protection of the United States “Critical National Assets” within the Department of Energy’s Laboratory Complex, and he worked extensively with the Federal Bureau of Investigation, and the Office of the Director of National Intelligence, National Counterintelligence Executive to develop comprehensive planning guidance for the overall protection of the U.S. National Critical Infrastructure.


4 thoughts on “Foreign Investments: China & US Read it here before you see it on 60 Minutes tonight

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  2. Very interesting comment by politicalhornets. On the one hand, foreign investment is important to the U.S. economy as is U.S. investment overseas. However, one must consider the “National Security” implications of a “potential foreign adversary” operating any part of the U.S. critical national infrstructure, and especially one as sensitive as in the cyber arena. What has alarmed the Senate Select Committee on Intelligence, and the Department of Defense about the potential Chinese interest in the American cyber market, is the extensive Computer Network Exploitation that China has been conducting against sensitive DOD computer networks, as well as in other Federal Government computer systems and those of major defense contractors. These Chinese cyber intrusions are referred to as Quiet Storm, Titan Rain and other names, and have been going on for years with the resultant loss of literally tens of millions of documents. It is both prudent and responsible on the part of the U.S. Government to initiate the actions they have taken against China in this instance, because if they had not, China would have been in the position to gain a major foothold in the critical cyber communications sector of the U.S. Critical National Communications Infrastructure along with the inevitable loss of additional military and commercial sector data that would provide a significant advantage for the Chinese in both the defense and commercial sectors. As to your comment about seizing Chinese assets like we did with Iran, well, the assets we siezed from Itan were financial assets and not commercial assets that would not have been seized but “Nationalized,” which the U.S. has never done with foreign business assets. During World War II, the only foreign economic assets that were not seized but manipulated, were those belonging to Japanese Americans on the West Coast. They were forced to sell there personal and business assets at a significant personal loss before being placed into relocation camps. In sum, this is a very difficult topic to get ones head around when one lives within a free enterprise system. However, the U.S. Government does have an obligation to protect the Nations “Critical National Infrastructure” from potential foreign adversaries that would use commercial access to a sector of our economy to gain a economic and military advantage over our country.

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  3. Aside from being able to plant bugs into electronics or things of that nature, in general I am in favor of foreign investment, even investment by China or in the case of the port by the Saudi sovereign wealth fund.Why? They can’t take it with them and as WWII shows, we can just seize it as we did German assets. Or later what we did to Iranian assets

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