Beijing’s strategy around technology and power is so different from that of the West, that mature economies must begin to adopt a longer-term perspective if they want to stay competitive with China, according to a US cybersecurity executive on a visit to Australia.
Unlike Western telco infrastructure companies, Chinese telco companies can forego robust profits if the products they sell give Beijing a geopolitical advantage in digital espionage or soft power influence, FireEye executive vice president John Watters said.
“For mature economies, it’s time to play the long game,” Watters told Fairfax Media. “We can’t be looking at near-term economic advantage and sacrifice the integrity of our communications infrastructure.”
Fire-Eye executive vice president John Watters
Watter’s comments come as China responds with disappointment to Australia’s government decision to block Chinese company participation in the construction of Australia’s 5G network.
“China is swapping margin for intelligence costs,” said Watters. “With this model, you don’t build in backdoors [to networks]; you become part of the fabric of the local infrastructure.”
The strategy means that not only does China have a price advantage in scale, but it has a political incentive in offering cheaper goods, especially to developing nations in need of infrastructure.
“They can go in as the low-cost bidder… and then have access to it,” he said.
Watters, without directly commenting on any specific company, said his cybersecurity firm has seen “a tremendous number of supply chain infections, primarily software, as a means to infect downstream customers.” FireEye owns Mandiant, one of the companies that confirmed Russian hackers attacked the Democratic Party in during the 2016 US election.
China’s state-economic model contrasts with the Western model, in which the telco companies operate independently from the government. In that framework, spy agencies must develop their own ways to snoop on users, as the Edward Snowden revelations demonstrated.
Western security experts have expressed significant concerns about the risks to security posed by China-made equipment. The issue has complicated the trade relations between nations, including Australia, have with China.
With the election of Donald Trump and the rise of nationalism, geopolitical competition has started to drive economic, trade and technology decisions to a degree not seen since the Cold War.
China’s ministry of commerce criticised Australia’s decision on Huawei as “wrong”, suggesting it would impact the broader trade relationship between the two countries.
Australia should “look at the big picture of bilateral economic and trade cooperation, rather than easily interfere with and restrict normal business activities in the name of national security," a commerce ministry spokesman said.
The Communist Party-owned China Daily ran an editorial that said the ban on Huawei was "disappointing as well as poisonous to bilateral cooperation".
"The ill-advised move again casts a shadow over bilateral ties, which had been showing some signs of improvement recently," the China Daily editorial said.
Australia’s decision highlights the fear of malign foreign interference in democracies in recent years, making the issue a bigger factor in technology sales and trade.
A spokesperson for Huawei said: "The Australian government's decision to block Huawei from Australia's 5G market is politically motivated, not the result of a fact-based, transparent, or equitable decision-making process."
"The Australian government's actions undermine the principles of competition and non-discrimination in fair trade," he said, adding the government "has not issued any specific concerns about Huawei's governance, security, or suitability to safely and securely conduct business in Australia"
UNSW professor Greg Austin rejected the idea that Chinese telcos would or could lower prices in exchange for intelligence access as "preposterous."
Austin said fears of Chinese espionage or techno-nationalism posing a threat to open democracies were ill-informed.
There wasn't a strong case that "Chinese espionage through Huawei would be more damaging than existing Chinese espionage or is in character any different from United States espionage through a variety of places", he said.
China's lower prices are linked to its lower currency rate, Austin says, which is manipulated.
The debate around the use of Chinese telco equipment in the West is driven by the perception that “we see China as our political enemy", he said.
But even western states don’t consider China an enemy he said, referring to the US National Security Strategy document from late last year which said: "China’s infrastructure investments and trade strategies reinforce its geopolitical aspirations."
"That's exactly what all states do," Austin said.