In order to circumvent Cfius review and exploit the export-control system, China lures U.S. companies
into disadvantageous joint ventures on Chinese soil with promises of access to the opaque Chinese
marketplace. Through these arrangements and due to the Chinese government’s dominance over
industry, U.S. companies are pressured into sharing their technology with Chinese entities. Most don’t
take the bait, but news reports illustrate the highly troubling activities of a handful of U.S. companies in
China.
These same companies, particularly General Electric and IBM , are working aggressively to defeat the
Foreign Investment Risk Review Modernization Act and have employed an army of lobbyists to
preserve the status quo. Both companies have a history of business activities in China that include
extensive transfers of high-tech, military-applicable capabilities.
.
.
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Likewise, IBM has systematically transferred high-end computing technology to China. By 2016,
according to a working group of experts from the National Security Agency and Energy Department,
China had “attained a near-peer status with the U.S.” in high-performance computing. Without a doubt,
IBM’s technology transfers have contributed to China’s enhanced high-performance computing
capabilities. This same NSA working group also found that “loss of leadership in HPC will severely
compromise our national security.”
In 2015, IBM began implementing its “Open Power” business strategy in China, which included
arrangements under which it handed over high-end microprocessor and software technology to multiple
Chinese companies with strong connections to China’s military and defense industries.
In 2017, IBM formed a joint venture with a Chinese company, Inspur, handing over the capability to
manufacture its own computer servers. That same year, IBM established a partnership with the
state-owned China Telecom , agreeing to hand over cloud-computing technology. Additionally, there
was a 2012 partnership between IBM and Huawei.
These examples illustrate how our export-control system is sometimes a paper tiger when it comes to
problematic technology transfers within China, and the assumption that U.S. companies will self-police
has too often proved false.
Thanks so much Ginni for bolstering the Chinese military machine.
https://www.wsj.com/articles/how-china-pushes-the-limits-on-military-technology-transfer-1521068465
Robert Pittenger
March 14, 2018 7:01 p.m. ET
For years the Chinese government has evaded America’s technology-transfer safeguards and been allowed to vacuum up military-applicable technologies from U.S. companies. The Chinese have perfected the weaponization of investment as a legal means to achieve this massive transfer of dual-use technology, bolstering China’s military modernization. If the U.S. loses its military-technology advantage over China and other adversaries, it will one day cost American lives.
That was part of the rationale for President Trump’s decision to block Broadcom ’s hostile takeover of Qualcomm . In the race for 5G technology, this transaction would have placed the Chinese in a controlling position.
But many worrisome transactions fall through the considerable gaps in the review process of the Committee on Foreign Investment in the United States, or Cfius, which screens investments for national-security risks. And there are substantial practical limits to the reach of our export-control system, particularly on Chinese soil.
In November, Senate Majority Whip JohnCo rnyn and I introduced a bipartisan bill, endorsed by President Trump, called the Foreign Investment Risk Review Modernization Act to modernize the Cfius process and address these national-security issues in a targeted manner. Unfortunately, a handful of U.S. companies that have profited from these technology transfers now aggressively oppose our bill.
In order to circumvent Cfius review and exploit the export-control system, China lures U.S. companies into disadvantageous joint ventures on Chinese soil with promises of access to the opaque Chinese marketplace. Through these arrangements and due to the Chinese government’s dominance over industry, U.S. companies are pressured into sharing their technology with Chinese entities. Most don’t take the bait, but news reports illustrate the highly troubling activities of a handful of U.S. companies in China.
These same companies, particularly General Electric and IBM , are working aggressively to defeat the Foreign Investment Risk Review Modernization Act and have employed an army of lobbyists to preserve the status quo. Both companies have a history of business activities in China that include extensive transfers of high-tech, military-applicable capabilities.
In 2011, GE formed a joint venture with Aviation Industry Corp. of China—one of China’s premier state-owned enterprises and the primary supplier of aircraft for China’s military—sharing cutting-edge avionics technology. AVIC now has an enhanced capability to produce high-performance aircraft c---pit controls and displays, as well as communications and navigation systems, which it can adapt for Chinese warplanes.
Prior to GE’s technology transfer, avionics technology had been a weak spot for China. As documented in the Defense Department’s annual “ China Power ” report from 2011: “China’s ability to surge production in the aircraft industry will be limited by its reliance on foreign sourcing for aircraft engines and avionics, as well as the lack of skilled personnel and facilities.”
In 2016, GE formed a joint venture with another Chinese company, handing over advanced battery technology that could have battlefield applications such as powering heavy ground vehicles. The same year, GE formed a partnership with Chinese government-affiliated Huawei to develop cloud-based industrial applications for the Internet of Things. This arrangement could result in long-term cyber vulnerabilities for the U.S., in part because, like many so-called private companies in China, Huawei is beholden to the Chinese Communist Party and is functionally an arm of the Chinese government.
Likewise, IBM has systematically transferred high-end computing technology to China. By 2016, according to a working group of experts from the National Security Agency and Energy Department, China had “attained a near-peer status with the U.S.” in high-performance computing. Without a doubt, IBM’s technology transfers have contributed to China’s enhanced high-performance computing capabilities. This same NSA working group also found that “loss of leadership in HPC will severely compromise our national security.”
In 2015, IBM began implementing its “Open Power” business strategy in China, which included arrangements under which it handed over high-end microprocessor and software technology to multiple Chinese companies with strong connections to China’s military and defense industries.
In 2017, IBM formed a joint venture with a Chinese company, Inspur, handing over the capability to manufacture its own computer servers. That same year, IBM established a partnership with the state-owned China Telecom , agreeing to hand over cloud-computing technology. Additionally, there was a 2012 partnership between IBM and Huawei.
These examples illustrate how our export-control system is sometimes a paper tiger when it comes to problematic technology transfers within China, and the assumption that U.S. companies will self-police has too often proved false.
The status quo, defended by an army of lobbyists, has put America’s national security at risk. The clearest path to addressing these glaring national-security risks is for Congress to pass the Foreign Investment Risk Review Modernization Act and strengthen our Cfius review process to prevent further transfers of military-applicable technology to China.
Mr. Pittenger, a Republican, represents North Carolina’s Ninth Congressional District.