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US tech giants may blur national security boundaries in China deals

Each Chinese company counts one of America's tech giants as a partner

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Paul Mozur And Jane Perlez Hong Kong
One Chinese technology company receives crucial technical guidance from a former People's Liberation Army rear admiral. Another company developed the electronics on China's first atomic bomb. A third sells technology to China's air-to-air missile research academy.

Their ties to the Chinese military run deep, and they all have something else in common: Each Chinese company counts one of America's tech giants - IBM, Cisco Systems or Microsoft - as a partner.

Such links, which are generally not well publicised, are now at the centre of a debate among some in the American defense community, including former United States military officials, analysts and others. While the cross-border partnerships, under which American tech companies share, licence or jointly develop advanced technologies with Chinese counterparts, are a growth area for business, security experts are increasingly questioning whether the deals harm United States national security.

While the capabilities shared in the partnerships are commercial in nature, such technologies have also become more critical to defense. That is spurring concerns that widespread cooperation with Chinese companies could quickly increase China's fundamental technological capabilities in a way that could easily help military research and operations.

A report made public this week from a security firm with longstanding ties to the Department of Defense, the Defense Group, said IBM's partnerships in China, which are part of a global initiative that the company calls Open Power, are already damaging American national security.

Edward Barbini, an IBM spokesman, rejected the report's conclusions, saying Defense Group "wholly mischaracterises IBM's initiatives in China."

But other security experts defended the study by the firm, which was founded in 1987 by a former Defense Department official, James P Wade, who was one of the authors of the military doctrine known as "shock and awe." Defense Group is known to be tough on China but is used by the government to produce classified military analysis and intelligence, and works with groups including the US-China Economic and Security Review Commission, which examines the national security implications of trade between the United States and China.

"We need to pay more attention to the judgments on whether advanced technology should be sold," said Adm Dennis C Blair, who was the United States director of national intelligence from 2009 to 2010 and who headed the Pacific Command. "If you don't pay attention, you can have damage to your national security."

Admiral Blair said the United States government operates on the principle that companies should be able to sell technology that is generally available on the world market but that they should be prohibited from selling advanced technology that can be put to military use. Government agencies in charge of foreign acquisition of technology need to be strengthened, he said.

There is nothing to suggest that the partnerships have broken American laws. With IBM's programme, many elements have been vetted and approved by the United States government, which is empowered through a review process to decide whether American tech companies are giving away too much advantage to military rivals.

Still, the reviews have resulted in two decisions this year that commercial technology could threaten national security. In February, the Department of Commerce said that four supercomputer sites in China receiving chips from Intel through its Chinese partner, Inspur, "have been involved in activities contrary to the national security and foreign policy interests of the United States." Intel has said it stopped selling the chips in China and that it was in compliance with United States law.

In May, the United States Navy also said that it needed new server computers for one of its systems after the server provider, IBM, sold the computing unit to the Chinese company Lenovo. IBM said the sale had passed the United States government's review.

The issue is tricky because cooperation between American companies and Chinese ones allied with the military is a natural outgrowth of globalisation.

"It's so difficult to keep tech away from China commercially given how large China's market is," said Scott Kennedy, an analyst at the Center for Strategic and International Studies.

IBM and other American tech companies said they are not harming national security through the partnerships, they follow United States laws carefully and they treat the endeavors the same as for any commercial venture in a foreign country.

Barbini, the IBM spokesman, said the Open Power programme was not specific to China, and the technology provided through it "is commercially available, general purpose, and does not require a US export licence."

Microsoft has said it is handling its partnership with a Chinese government-owned defense company as it would other system integrators globally. A Cisco spokesman said technology developed in a new Chinese partnership would be done with approval from the American and Chinese governments.

While American tech companies have long worked with the Chinese government, Beijing has over the last two years pushed companies for tighter relationships, like joint ventures and agreements to transfer technology, with Chinese companies. Chinese officials have used the carrot of market access to spur more American collaboration.

That has led to a rising number of partnerships. IBM began working with Chinese companies including CCore, Beijing Teamsun Technology and Inspur. Each Chinese company works to develop advanced technology for the government and sells to military clients.

Last month, during a visit by China's president, Xi Jinping, to the United States, Cisco also announced a joint venture with Inspur, a server maker that counts China's air-to-air missile research academy as a client.
©2015 The New York Times New Service
 

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First Published: Oct 31 2015 | 9:07 PM IST

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