Ethan Gutmann, author of Losing the New China, gave the following address at the Tel Aviv Nine Commentaries Forum, November 10, 2005:
Thank you. I especially want to thank those individuals who made it possible for me to attend this important forum.
I don't use that word - important – just to be polite. I've attended similar forums in the US, Hong Kong, and Taiwan. The response to the Nine Commentaries in the mainland sent the world a flare from China, igniting an international response, reinvigorating the Chinese dissident movement, and astonished the CCP (Chinese Communist Party).
But this forum is particularly important because it's in Israel. And this is a country founded by individuals who experienced the worst that the twentieth century could offer. They emerged with a highly developed sense of tragedy, a unique moral sensitivity that has been tested under fire again and again. I want to speak to that sense today.
I'll focus on American companies, particularly their technical assistance in constructing China's "Big Brother Internet." I chose this subject, rather than say the Loral and Hughes cases - where the PLA (People's Liberation Army) also benefited from American technology - because the Internet is the lynchpin of the argument that unrestrained trade, and the growth of capitalism, will bring democracy to China.
Most findings flow directly out of my professional experience in Beijing. Through no special effort, I also ran across Israeli companies who were involved in similar activities. Most were in China to sell military technology.
The US and Israel have different national interests in trading with China. But the failure to achieve those interests shows a surprisingly similar dynamic. I don't claim any unique expertise, but I will close by venturing some comments – however preliminary - on Israel's China strategy.
I'll open with a quote from my book. It's from Peter Lovelock, a top Internet analyst in Beijing on the CCPs Internet strategy:
"These are Marxists. Control the means of communication. Embrace the means of communication. Fill it with Chinese voices. If they can block the outside and block relationships between Chinese voices, no one will listen."
As a Beijing business consultant for several years, I know that Lovelock's statement rings true because I saw it happen.
Back in 1999, working from my Beijing office, I received an e-mail from a US friend with the words "China," "unrest," "labor," and "Xinjiang" in weird half-tone brackets, as if the words had been picked out by a filter.
I'd never really seen anything like it. But I assumed it was a glitch, a remnant of a keyword search program from a Chinese State Security computer. And the electronic janitor had neglected to clean it up.
What I didn't realize at the time is that the capability to search inside my e-mail, primitive by the current standards, came from an American company operating in China. In the 1990s, few areas of American enterprise in China carried as much moral glamour as the Internet. Every technical advance and every market restriction lifted were not only business opportunities for American information technology companies, but potential advances for Chinese democracy.
The CCP had different objectives: Don't get left behind. Focus on science and technology. Modernize. Get rich.
Block the outside. As Zhu Rongji said: "Better to kill 1000 in error than to let one slip through." Instead, fill the Internet with Chinese voices and Chinese nationalism, and "make China dominant by 2005."
Use the Internet as a political tool. Create government websites to lend a veneer of sophistication, openness and accountability. Regulations that had never been on the books suddenly appeared online.
Monitor the Chinese Internet and preempt public concerns before they reached the boiling point. Identify enemies. Suppress them with formerly unheard-of speed and efficiency.
Modernize military communications and tactics, including the ability to wage Internet warfare. Even if American businessmen on the ground in Beijing were aware of these objectives, we underestimated the Chinese leadership's ability to carry them out: American business believed our technological and financial momentum would simply outpace the Chinese regulatory framework.
Computer engineers assured us that the Internet's architecture was too clever, too egalitarian; the message would always get through.
Human rights advocates touted the Internet as a reporting and organizing tool. Overseas dissidents saw a platform. Chinese dissidents saw a link to the global community.
As for surveillance, we all assumed that state security could acquire any routine communication they liked, but could they collate it? No, we thought.
The correct answer was: Not yet. With the construction of the first public access web by Global One in 1996, Chinese authorities became interested in keyword searching and "looking into the packets." The CCP wanted to selectively block the web, but Chinese users were doubling every six months. And the architecture of the Internet was not standardized. According to Chinese engineers, Cisco Systems agreed to produce a specially configured firewall box, which could block the forbidden web on a national scale. Cisco sold the firewall boxes at a discount, capturing eighty percent of China's router market, an unprecedented success story.
But new sites kept popping up. So the search engines had to be controlled too. Yahoo, the biggest portal in China at the time, responded by patrolling its chat-rooms, and disabling search phrases such as "Taiwan independence" and "China democracy."
A top Yahoo rep told me: "It was a precautionary measure. The State Information Bureau was in charge of watching and making sure that we complied. The game is to make sure that they don't complain… The crackdowns come in waves… It's normal."
"Normal" meant Great Wall Version 1.0. The first upgrade began in October 2000 to May 2001, as the Chinese authorities unveiled new laws:
Internal monitoring software installed in cybercafés and across the web.
Internet Service Providers were ordered to hold all Chinese user data (phone numbers, time online, and surfing history) for 60 days.
Proxy servers—a widely used method to circumvent the firewall—were hunted and blocked. Intensive construction of the "Gold Shield Project," a nationwide digital police and surveillance network.
Surveillance became the boom market. And although the picture gets complex here, with companies such as Nortel, Motorola, Nokia, and smaller companies, like Netfront, even some spyware companies - Chinese State Security ultimately acquired advanced encryption, location tracing, and 300 live computer viruses to play around with (provided by Network Associates, Symantec, and Trend Micro).
Censorship became selective, sophisticated and "voluntary." For example, Yahoo signed an Internet pledge to protect "social stability." Online news sites such as the South China Morning Post were punished for indiscretions by blocking for discrete time periods. Google was blocked.
US defense attachés confidentially expressed concern about Israeli companies (such as Gilat) transfer of high-end information technologies. Because I personally knew their rep, I was more concerned about an Israeli company named iCognito.
You might know them as PureSight. Smallish company. Recently sold to a larger concern in Boston, MA. But back in 2001, iCognito pioneered the use of evolutionary algorithms - "artificial intelligence" - as a censorship and tracking tool. ICognito surfed just ahead of the user, analyzing the content of a website before the user actually sees it on the screen, blocking access to adult content, shopping, and on-line gambling, making workers more productive. But the CCP didn't care about sex. They would always ask the iCognito rep: "Can it stop Falun Gong?"
When Google returned to the Chinese web, one observer noted: "The Chinese technology appears to be capable of learning as it goes. An initial search for "Tibet independence" yesterday on Google went through unchecked. When repeated a minute later, it was blocked." By the Shanghai "Gold Shield" trade show in December 2002, Nortel claimed to have a 100% packet capture system specifically designed "to catch Falun Gong." Sun Microsystems and a Chinese partner, Golden Finger, were hawking a national fingerprint and facial recognition system, "Facecatch," to be embedded in a national ID card.
Cisco scored top billing for its presentation; "The CISCO Network Solution for the Gold Shield Project," unveiled "Policenet," secure linkage to provincial security databases that allowed cross-checking and movement tracing. I'll make the brochures available after the forum.
A systems engineer from Cisco's Shanghai Branch, explained how a Chinese policeman or PSB agent using Cisco equipment could now stop any citizen on the street and remotely access their political and family history, and even read their e-mail.
Cisco went on to build the structure for the national PSB database, and as of June 2003, it was resident in every province of China, except Sichuan.
Policenet is significant. Western press interest has focused on Microsoft's refusal to let Chinese bloggers use the word "democracy" in their subject headings or Google's confession that its news site is tailored to CCP specifications, yet the heart of the Chinese strategy is overlooked.
The Chinese authorities don't want to block the web. They want Chinese users to censor themselves. Surveillance - and the awareness of surveillance - leads to self-censorship. And that's where Cisco comes in.
Recently Shi Tao, a Chinese journalist, was sentenced to 10 years in jail. According to the court records, Yahoo provided information to the PSB that assisted the conviction. The Western press reacted strongly. That's natural; the story grafted a human face onto the issue, even better, a journalist's face. And Yahoo's explanation – that they were just following orders - was repugnant. But dissidents are arrested every day in China using e-police methods. And you won't find Cisco in the court records. Why? Because Cisco's Policenet is the PSB.
The Internet was supposed to be a Trojan Horse – we funded it, built it, and pushed it into China. But the hatch may never fully open. True, the response to the Nine Commentaries tells us that the Internet wars are not over. But reports of Titan Rain and other PLA units hacking the Pentagon suggest there's a new battleground. "Blowback" – our own technology used against us – has begun.
Now let's turn to Israel's China strategy, which has centered on selling military technology to the PLA.
Allegations that Israel has been a conduit of US military technology to the PLA have received most of the attention. Experts disagree on sale specifications, scale, even if they actually took place. Chinese classified records will eventually settle that debate, but until that happy day when we can access those archives, I'm less interested in whether the technology had US origins, and more interested in the PLA's strategic goals.
From to ྜ, the goal was simply to respond to Desert Storm. To modernize military command, control, communications, and electronic intelligence, the Chinese emphasis shifted from building an advanced industrial base to the information sphere: semi-conductor manufacturing, and attracting investment in avionics and precision-guided munitions components.
Thus, Patriot anti-missile data was extremely desirable. US intelligence analysts claim – and the Israeli government denies – that Patriot components were made available for reverse engineering, enhancing the penetration and accuracy of the Chinese M-9 missile (aka CSS-6, Dong Feng-15). M-9s were tested around Taiwan during the elections of 1996, and now constitute a third of the Chinese short-range ballistic missiles aimed at Taiwan.
Another case of "may have happened" took place in the mid-90s. The Lavi (partially based on the US F-16,) bears a similarity to the Chinese prototype F-10 jet fighter (aka Chengdu J-10,) now coming into operation.
A sale that definitely happened: the Harpy Assault Drone (useful for an assault on Taiwan's air-defense and radar systems). Taken together, these assets fit into an emerging strategy for air superiority in the Taiwan Straits.
Israel was not alone. US companies became the dominant players and investors in China during this period, and the main target of systematic reverse engineering by companies such as Huawei. And with French, Russian and Israeli technology and training, military command centers full of sophisticated electronic equipment emerged.
ྜྷ to ྟ were dominated by a sense of crisis. During the Chinese missile test around Taiwan in ྜ, the US carrier battle group stationed near the Taiwan Straits got the attention, but the US AWACs flying all over China are what really spooked the CCP. Airborne early warning systems are crucial for command, control, and tactical surveillance of targets. The PLA refocused on ways to blind AWACS – or acquire them.
Enter the Israeli-built Phalcon airborne early-warning system. China wanted four of them, enough to stay in the air continuously during a conflict. The US pressured. Israel cancelled the sale.
From the aborted Phalcon sale to the present, the PLA has been pursuing AWACS, submarine technology, anti-satellite technology (optical tracking solutions, lasers, micro-satellites), MIRVs, and electronic surveillance. Thus the recent aborted Israeli upgrades on the Harpy Assault Drone – following the same US pressure as the Phalcon case – may not seem that important. But it wasn't about the PLA's ability to sniff Taiwan's radars as much as the EU's threat to lift the Chinese arms embargo. Israel's restraint bolstered the US argument. If the EU had lifted the embargo overwhelming pressure from American companies to compete in the China arms market would have followed. And American policymakers might well have given in. Perhaps that sounds hypocritical or perverse. But it's the reality.
Now there are two major Israeli arguments for selling arms to China. Let's start with the strongest.
Israel is perpetually outnumbered. Thus, Israel's defense technology must be superior. US technology is a starting point, but ultimately, Israel must have a reliable defense research and development base of its own. The IDF is not a large enough customer to support the R&D base (about 25% of sales). Israel must sell in volume (10% of the global arms market).
Now it may make some people ethically queasy to hear this, particularly those who don't live in Israel: but I think this is a good strategy. Hypothetically, if Taiwan had followed an Israeli-style defense development model, we might not be so concerned about China's looming offensive capabilities.
However, the argument is not China specific. The China-Harpy deal was potentially worth about 35 million US. Israeli weapon sales to Turkey have amounted to about 3 billion US since ྜ, not counting intelligence sharing and the relationship benefits.
Or look at India, where the Phalcons went. Diplomatic relations with India commenced in , and now Israel is its number two arms supplier: SAMs, drones, radar systems, avionics. Both have a common enemy in Jihad and state-sponsored terrorism and have shared intelligence, defense research and development, methodologies.
Is the Indian market saturated? No: Russia is number 1 because they sell for cheaper, but India is getting richer and more proactive. And when it comes to preemptively defeating terrorist insurgency: advantage, Israel.
If Japan changes its constitution does Israel have business contacts in place? I'm told yes, of course. OK, so let's say it, why not Taiwan? Which brings us to the second argument:
Israeli arms sales are a method to influence China (and theoretically, the UN Security Council), a method to share in Chinese military intelligence. Above all, arms sales are a method to rein in Chinese arms sales to Israel's enemies.
And here the similarity to American wishful thinking about the Internet becomes unavoidable. As American business has re-discovered again and again, and as Peter Enav from the Hebrew University points out: Chinese foreign ministry verbal assurances are basically meaningless. Arms sales are "conducted via fantastically intricate networks of dealers." Sounds plausible; after all this is China. There's always a corrupt element.
But ultimately China's strategy in the Middle East is structurally opposed to Israel's interests. The CCP's primary directive: oil for the lamps of China. The external strategy is to arm America's – and Israel's - enemies: Iran, Saddam Hussein's Iraq, until recently, the Taliban. Even Al Qaeda. Through the research of authors such as D.J. McGuire, the evidence on this point is now simply overwhelming.
For example, the newest plastic explosive, far more lethal than semtex, used in the Tel Aviv club bombing was created by the Chinese defense contractor ZTF. When it comes to oil, China does not see a spot market, but a zero-sum game.
It's ironic. Israeli discussions over cancelling the Harpy upgrades seem to center around American heavy-handedness, and the Israeli right to act independently. But these are style questions. The substantive question is: has the Israeli strategy worked? Can anyone make the case that China is a force for democracy in the Middle East? Or that China plays no part in Iran's militarization? Or that there will be no blowback from Israeli weaponry – dispersed throughout the Middle East under brand names such as Norinco - in the future?
There's been progress. Six months ago, Defense Minister Mofaz warned the top 50 defense firms that there must be "full transparency" – report every trip to China, every business negotiation.
Yet the Defense Ministry has not banned defense industries from marketing non-lethal systems and platforms to China. And therein lies a problem.
Dual-use technology transfer to the PRC was a constant throughout the ྖs. Starting about 2000, with the IT technology boom, it became a "floodgate." But that's not the real problem. In fact, you could have even made the argument that continued military technology transfer from Western companies was ,I>preferable to China building an indigenous research and development capability.
I put that statement in the past tense because IBM, Intel, Honeywell, General Electric, Lucent, and Microsoft all have built R&D plants in China. For example, Motorola has 25, with China investment surging to $10 billion, 5000 researchers and engineers by 2006.
These facilities are fully equivalent to Motorola's US centers, except that these are engaged in advanced research for the Ministry of Science and Technology's "863" project: 4th generation technologies with potential military applications. With no background checks on CCP membership or PLA experience, the technology goes straight out. Are Israeli companies doing this too? Well, the Israeli presence at every hi-tech or military trade show held in China suggests they are. And in 2003, the Ministry of Science and Technology in Beijing and its counterpart in Jerusalem began funding joint research in "advanced materials" for use in "telecommunication, optical data storage and space technologies" including lasers. These are surface indications of a much darker problem set. And again, Israel can't ignore the potential for blowback.
But the moral component can't be brushed aside either. Just as arms sales are not just a business for Israel but a component of survival, they cannot be divorced from their global implications either. The Israeli strategy brings responsibilities.
First, the responsibility of one small democracy to another: both Israel and Taiwan are systematically rejected by international institutions, surrounded by forces whose legitimacy is implicitly tied to their destruction – alive in the bitter sea.
I've spent some time in Taipei over the last couple of months. The mood is depressed and anxious, if not yet fatalistic. There's a potential tragedy of epic proportions forming – for the Chinese people, and for global democracy. Taiwan's fall, through technology transfer, through a loss of American resolve, through the smug callousness of the UN and Brussels – well, this is the blueprint for Israel's fall as well.
So I appeal to Israel's moral sense, but most of all to the reserves of historical memory and wisdom that run through Israel's culture.
Take a good look at the New China. Look at the current trends. Technology without the restraints of democracy. An e-police state whose legitimacy is built on Han Chinese nationalism without moral content, and expansionism without ideals. Look at the controlled economy, and the seamless absorption of investment and technology by the PLA. Look at the compulsive licking of old wounds, the Korean War, the Opium War, the Japanese. Look at the greater China territorial obsessions, where each resolution (Macau, Hong Kong) starts the clock ticking towards the next demand. Finally, look at the outwardly irrational - yet ruthlessly systematic - scapegoating, pursuit, and slaughter of Falun Gong practitioners.
Perhaps much of the world – regrettably including the majority of businessmen and politicians in my own country - has some trouble connecting those dots, but for a Jewish state, it should be an easy call.
It's well past time to correct the American business strategy in China, but it's time to reconsider Israel's China strategy as well. Perhaps that process can begin with your questions and comments. Thank you.
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