Chinese spy balloons have been dominating headlines over the past few days. As the New York Times reported, “Balloon Incident Reveals More Than Spying as Competition with China Intensifies.” While the U.S. recovers the balloon and takes a closer look at the findings, it will not only be interesting to know what may have been communicated to China, but also what technology was used to do it. For example, were there any chips from China’s bellwethers (SMIC, YMTC, and CXMT)? All that said, this is not the only news of China spying that should have us up in arms.
Late last month, The Telegraph and others reported, “China Can Use People’s Fridges and Laptops to Spy on Them, UK Warned.” That’s a takeaway from a new report by OODA, a UK technology-focused consulting group. Let’s dig in.
Much has been written in recent years about the “Internet of Things” (IoT). We see it in our own lives as it seems like, increasingly, everything is a connected device. It’s not just our cell phones and laptops, it’s also our refrigerators, washing machines, thermostats, and other “smart” devices – even our cars, factories, etc.
Smart devices surely have benefits, but they also afford China new access points by which it can spy, surveil, steal, and conduct cyberattacks. This should alarm policymakers, especially since China aims to dominate 5G networks and other high-tech areas. To date, Chinese companies – Quectel, Fibocom and China Mobile – hold 54 percent of the global market for smart devices. As the report warned, “It’s time to wake up – free and open countries should ban Chinese-manufactured modules from their supply chains as soon as possible.”
The emerging IoT threat is all the more alarming in light of how China already has a foothold within U.S. state government tech ecosystems. Previously, China Tech Threat examined how Lexmark and Lenovo products have posed a threat to information stored by state governments. Fortunately, states are starting to identify and counter these threats. Last year, both Georgia and Florida passed legislation restricting Chinese companies from acquiring state government contracts. In 2023, that momentum continues to grow as several states have sponsored legislation toward restricting China’s access to state contracts as well.
Smart policymakers know that governments will have to continue to channel that momentum if they want to remedy technological vulnerabilities. As Alicia Kearns, Chair of the Commons Foreign Affairs Select Committee in the UK Parliament, stated:
“We are not looking at this strategically… National security considerations have been woefully inadequate when it comes to industrial strategy. … I think there are a number of Huawei-sized decisions that we haven’t made yet, and we need to put national security and strategic resilience at the heart of what we do as a country.”
One of the solutions to countering China’s technological dominance is to use export controls to restrict Chinese companies’ access to technologies to fuel the CCP’s ambitions. For example, last year, the Commerce Department’s Bureau of Industry and Security (BIS) added Yangtze Memory Technologies (YMTC) and several other Chinese entities to the Entity List, restricting their access to U.S. chipmaking equipment. Momentum toward further restricting China grew. In addition, the Netherlands and Japan are joining the United States in restricting chipmaking tools to China. Also, the Wall Street Journal recently reported that the Biden Administration is considering additional export controls targeting Huawei Technologies Co. from U.S. suppliers over national-security concerns. If China doesn’t have the components to make critical technologies, the country won’t be able to penetrate Western systems with the same effectiveness it has in recent years.
China’s capacity to spy, commit espionage, and sabotage will only continue to grow and remain a threat to national security if action isn’t taken – or is too slow to be taken. There is not an one-size-fits-all approach. Rather, a government-wide approach is needed to help turn the tide against a CCP that is bent on exploiting Western technologies for its own military and domestic repression.