February 07, 2019

We Can’t Tell if Chinese Firms Work for the Party

By: Ashley Feng

On Jan. 28, the U.S. Justice Department announced two indictments against China’s largest telecommunications company, Huawei, alleging that the company tried to steal information from T-Mobile and committed fraud to evade U.S. sanctions against Iran. During the announcement of the indictment, FBI Director Christopher Wray clarified that while there was no alleged illegal conduct by the Chinese Communist Party, it is public record that, under China’s Cybersecurity Law, Huawei and other Chinese companies must furnish Chinese government access to its data, undermining U.S. national security. This statement encapsulates a new broadly held view of U.S. policymakers: All Chinese companies are controlled by the party.

Western governments should not automatically conclude that Chinese companies are acting as agents of the party because such firms are ultimately still in charge of their own business decisions. But the lines have been dangerously blurred. Chinese domestic laws and administrative guidelines, as well as unspoken regulations and internal party committees, make it quite difficult to distinguish between what is private and what is state-owned.

Foreign companies and governments began paying closer attention to China’s domestic regulations on the relationship between the company and the state in 2015, when China’s National Security Law came into effect, and the next year, when a Cybersecurity Law was enacted. The National Security Law requires all parties, including citizens, state authorities, public institutions, social organizations, and enterprises, “to maintain national security.” More specifically, and worryingly for the telecommunications industry, Article 28 of the Cybersecurity Law states that network operators, which include telecommunications companies such as Huawei, have to provide “technical support and assistance” to government offices involved in protecting national security. U.S. government officials, including at the FBI, interpreted this vague language to mean that all Chinese companies, including Huawei, are subject to the direct orders of the Chinese government.

Read the full article in Foreign Policy.

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