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The American Contribution to China’s Cyber Power

Sep 04 , 2014
  • Greg Austin

    Professorial Fellow at the EastWest Institute

This year is the 20th anniversary of the first meeting between Bill Gates, then the Microsoft boss, and a General Secretary of the Chinese Communist Party, at the time Jiang Zemin. This meeting, one of several between the pair, was a launch pad for a deeper American involvement in the development of China’s cyber power. For all of the techno-nationalist heat coming out of both the United States and China on issues of cybersecurity in recent years, the two countries have in the main benefited from a deepening relationship in the ICT sector for more than two decades.

China cannot achieve its ambitions of becoming and advanced information society by 2050 unless it nurtures this relationship. Leading American corporations see China as an essential part of their future. Miscrosoft’s Asia Pacific R&D lab, set up in Beijing in 1998, is now its biggest such center outside the United States. Yet to date, the level of dependence of China on the United States has been higher than in the reverse direction.

Without U.S. good will and open trade in most high technology products with China, the latter’s cyber power would be much more backward than it is today. Yet there is little analysis in detail of the interdependence between the two countries in the cyber domain. The relationship is not just about buying and selling, but about the business regimes, legal structures and international norms under which technology transfer occurs. In this regard, it may be tempting to focus on the issue of industrial espionage from China on U.S. corporate secrets. That is an important issue but it is only a small part of a much bigger and on the whole more positive story. This more upbeat story is not necessarily one that involves a smooth ride. The history of U.S. transfer of information and communications technology to China has been a very bumpy and challenging road, and that remains the case. In 2014 alone, Microsoft has become the target of a number of administrative and legal actions inside China.

There is an organization in Beijing little known outside specialist circles which has been a forceful influence on China’s ability to work with U.S. corporations in this sector. The organizations stands as a metaphor of the success of the relationship. It is the United States Information Technology Office, formally registered in China in 1995 as a non-profit organization. (It was established in part with a U.S. government grant.) It is a membership- based lobby group representing four industry peak bodies in the United States (semiconductors, information technology, software, and communications) and an additional 50 individual firms with business interests in the ICT sector in China. One of its main missions, apart from promoting the opening of the China market to U.S. technology, has been to promote the development in China of appropriate laws for open commerce, including intellectual property rights protection. USITO comments regularly on draft domestic legislation in China and is the main policy interface between the ICT sector in the United States and Chinese agencies. The claim on its website to be a trusted organization is one that can be taken at face value in part because of the depth and consistency of its engagement, including on sensitive negotiations with China’s Ministry of Public Security on cryptography and source codes.

News this week that China will soon release a new operating system with the aim of quickly displacing foreign models sounds like the entrenchment of a techno-nationalist vision that portends the decline or weakening of China’s dependence on the United States in the ICT sector. There is however considerable countervailing news, including a new partnership, also announced this week, between China Telecom and IBM on cloud computing services. Based on UN figures for 2012, China (including Hong Kong) led the world in ICT exports (41 per cent share by value), but it also led the world in ICT imports (29 per cent share by value). These gross figures disguise a multitude of detail and subtlety. But the real measure of trade in those things on which cyber power depends cannot be measured just by statistics on traded goods in that sector. Cyber power depends on the computer technologies in a variety of modern equipment in many sectors (health, agriculture, transport, and aerospace to name a few) that are not included in ICT trade statistics. Moreover, as the IBM/China Telecom agreement suggests, trade in services, including education services in information technology, from the United States to China remains essential for the latter’s modernization. As Xi Jinping said in February on 214, when he became the first General Secretary to head the appropriate Leading Group, “there can be no modernization without informatization”.

The intent of raising this question of interdependence is to highlight the proposition that in spite of large differences in policy preferences between China and the United States on management of cyberspace, the two countries have a relationship of dependence in the technologies (knowledge as well as equipment or infrastructure) that needs to be better understood. As argued in my new book released this month, Cyber Policy in China (Polity Press, Cambridge UK), the government of Xi Jinping may actually need to increase its dependence on the United States, and adopt more “information friendly” values if it wants to increase its cyber power.

Greg Austin is a Professorial Fellow at the EastWest Institute.

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