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China’s MSS Calls for Heightened Cybersecurity to Combat Foreign “Cyber Spies”

Chinese officials are pushing a society-wide “anti-espionage” campaign targeting the cyber sector. China’s Ministry of State Security (MSS) says that cyberspace has become an “important battleground” for foreign spy agencies conducting espionage against China, worsening the country’s cybersecurity.

A recent MSS article titled “How Do ‘Cyber Spies’ Take Advantage of the Situation?” says foreign “cyber spies” targeting Chinese organizations and enterprises have been able to exploit security oversights, workplace negligence, and employees’ “pursuit of convenience.” By various means, they attack information systems to establish hidden data channels and steal sensitive data, jeopardizing China’s data and network security.

The article cites several cases. One involves a military-civilian enterprise whose outdated, vulnerable software systems were hacked by “cyber spies.” They allegedly stole important production, business, and customer data, threatening military tech development and security.

The article also says that foreign “cyber spies” heavily target Chinese “software supply chain” companies via phishing and network scanning. In particular, they steal secrets by attacking system administrators who are authorized to manage networks.

The article concludes by stressing the importance of preventative measures to promote counterintelligence security. It urges key Chinese units to strengthen their daily security management of technology per preventative counterespionage requirements and standards. The goal is to bolster prevention measures for key department networks, facilities, and information systems.

Source: Radio Free Asia, February 16, 2024
https://www.rfa.org/mandarin/Xinwen/1-02162024104133.html

Briefings | | |   Social Stability

CCP Expands Military Recruitment, Especially in Rural Areas

The Chinese Communist Party (CCP) is expanding its military recruitment, particularly in rural areas.

Recently-leaked CCP recruitment documents state that the CCP’s recruiting focus should be on college students, while also recruiting widely in the countryside, “leaving no dead zones” (no unrecruited rural areas). For those Chinese citizens who leave their city of residence to travel for work or school, it is mandatory that they register with the military regarding their travel plans. Expert observers believe this expanded recruitment activity is preparation for large-scale war.

The CCP is focused on recruiting college graduates, who are suitable for adaptation to modern information warfare. Rural recruits are also targeted to provide a large pool of soldiers whose casualties may have less immediate economic and political impact. There are reports that the CCP has been recruiting discharged soldiers back into service only 5 years after they leave the military, as well as relaxing requirements to allow military service by people with criminal records.

New military recruitment regulations enacted in May 2022 have enabled this expansion. The new regulations include allowing retired soldiers to re-enlist, as well as directives to recruit students with high-tech skills. The CCP has completed a nationwide military service registration covering the country’s entire population, signaling preparation for war.

According to expert Yuan Hongbing, a Chinese legal expert living in exile in Australia, the CCP under Xi Jinping is waiting to see what will happen in the 2024 US presidential election. The CCP believes that, regardless of who wins, the result will divide America for years, creating a window of opportunity for the CCP to attack Taiwan. Yuan says China’s war preparations are likely focused on seizing this window of time in 2025-2027. Expanded recruitment from rural areas in particular will provide “cannon fodder” for large-scale combat operations against Taiwan planned for this period.

Source: Epoch Times, February 12, 2024
https://www.epochtimes.com/gb/24/2/12/n14179638.htm

Briefings | | |   Defense/Military

China’s Pension Funds Struggle with Widespread Losses amid Stock Market Slump

China’s pension-targeted funds, which aim to provide stable returns for retirement savings, have seen continued poor performance over the past year with widespread losses. Data from Wind shows there are currently 462 such funds in China. Of the 345 funds established before 2023, only 35 (10.14%) have realized positive returns over the last year. Additionally, only 11 funds achieved returns above 1% over the past year, while 34 funds saw returns decline by more than 10%. Seven funds have even been liquidated.

China’s pension-targeted funds experienced rapid growth after the first batch was approved for issuance in August 2018. However, since the beginning of 2022, performance has declined dramatically, a situation which has not improved in 2023.

According to a senior Chinese public fund researcher, the poor returns of China’s pension funds is largely due to the overall weak stock market, which has severely impacted pension funds. This highlights the factor that must be recognized – China’s pension-targeted funds are heavily tied to the performance of the broader financial markets. With the markets performing poorly over the past year, China’s pension funds have unsurprisingly also struggled to generate positive returns for retirement savers.

Source: Radio Free Asia, February 12, 2024
https://www.rfa.org/mandarin/Xinwen/3-02122024104433.html

Briefings | | |   Economy/Resources

BASF Withdraws from Xinjiang Joint Ventures After Reports of Human Rights Abuses

German chemical company BASF announced on February 9th that it will withdraw its stake from two joint ventures in Xinjiang, China after human rights groups accused its local partners of participating in the crackdown on ethnic minorities. The two joint ventures are Xinjiang Markor Chemical and Markor Meiou Chemical. BASF says it initiated the sale in late 2023 for other reasons but will now accelerate the process, subject to local approval.

In its statement, BASF said recent allegations indicate the joint ventures were engaged in activities inconsistent with BASF’s values. The two ventures employ about 120 people locally, with BASF holding roughly half the shares. Markor Chemicals produces butanediol, used to make fibers, plastics and rubber.

Last week, reports revealed Markor and its employees were directly involved in surveillance and repression of Uyghurs by the Communist Party, leading to arrests. BASF said it was unaware and does not condone such actions, emphasizing they only involve its partners, not BASF itself.

Human rights groups have long accused China of systematically cracking down on Uyghurs in Xinjiang by sending over a million to detention camps for “re-education.” Beijing denies this, claiming it is combating extremism.

Several Western companies like Volkswagen operate in Xinjiang. VW recently said a third-party investigation found no evidence its factories use forced labor after facing such allegations.

BASF stated that despite withdrawing from Xinjiang, its other China businesses will continue normally. It is spending $10 billion on a new production base in Guangdong province. The company says it remains fully committed to its investments in China.

Source: Deutsche Welle, February 10, 2024
https://p.dw.com/p/4cFeL

Briefings | | |   Geo-Strategic Trend

China Developing Integrated Antenna-Solar Satellites to Enable Cell Phone Connectivity with Space Networks

Chinese satellite internet startup GalaxySpace is developing a new generation of communication satellites with advanced technologies to support direct connections from satellites to cell phones, according China’s official Xinhua news agency. These satellites integrate phased array antennas and solar panels into a “wing array” design that greatly reduces satellite size and cost.

The key “wing array integration” technology hides the antenna within the solar wings. By unfolding the wings and antennas together in a two-dimensional plane spanning several square meters, GalaxySpace can reduce the volume satellites occupy in space while improving network efficiency.

Continued research aims to enable highly efficient cooling and distributed power supply for the integrated wing array satellites. This new compact, power-efficient design will facilitate affordable large-scale satellite constellation networks.

China has now designated commercial spaceflight as a strategic emerging industry after it was included in the 2023 Central Economic Work Conference. Flexible high-efficiency solar wings make possible satellites with abundant onboard power. Accelerated satellite infrastructure development is enabling ambitious space-based global information networks.

GalaxySpace Chief Scientist Zhang Shijie stated that direct satellite-to-cell phone connectivity will likely be an essential component of 6G networks. He said GalaxySpace will drive further innovation in low-cost, high-performance satellites for intelligent omnipresent space networks that integrate communication, computing, and sensing capabilities.

Source: Xinhua, February 12, 2024
http://www.xinhuanet.com/20240212/3f562115eeb44efa9f5f382883b9bcad/c.html

Briefings | | |   Information/Technology

China Hacks and Leaks Confidential Japanese Diplomatic Cables

Japan’s Kyodo News reported that in 2020 China conducted a cyberattack on the Japanese Ministry of Foreign Affairs’ system for exchanging diplomatic messages with foreign embassies, resulting in classified information being leaked. The messaging system, called the “International IPVPN,” operates on a virtual private network separate from the general internet. Leaks of confidential diplomatic communications are extremely rare.

At a press conference, Japan’s Chief Cabinet Secretary Yoshimasa Hayashi said he could not answer questions about the cyberattack due to information security issues. He also said that he was unaware of any classified information from Japan’s Ministry of Foreign Affairs having been leaked.

The compromised diplomatic messages include sensitive reports and instructions exchanged between the Ministry’s headquarters and embassies abroad. They may have also contained private information that Japan collected regarding foreign governments. The Japanese government has not disclosed the extent of the leak, the specific contents of the messages, or how the attack was discovered.

The hacking demonstrates the increasing importance of cyberspace as a theater for espionage and geopolitical confrontation. Japan’s diplomatic communications likely contain valuable intelligence for other countries seeking greater influence in the region. The Japanese government’s lack of transparency around the attack makes it difficult to assess the full implications of the incident, however. Going forward, Japan’s government plans to make a top priority of bolstering cybersecurity in its confidential diplomatic relations with strategic partners.

Source: Kyodo News, February 5, 2024
https://china.kyodonews.net/news/2024/02/5147b37c47db–.html

Briefings | | |   Geo-Strategic Trend

Chinese Commercial Spaceflight Industry Poised for Liftoff Despite Lagging 10 Years Behind SpaceX

China’s official state news agency Xinhua has published a long article on the country’s commercial spaceflight industry.

The Chinese rocket industry saw significant growth in 2023. Twelve out of thirteen rocket launches by private companies reached orbit successfully, a record among the 8 years that private rocket companies have been operating in China. However, there still remains a gap between these Chinese companies and SpaceX, which launched 96 times in 2023. SpaceX also dominates in terms of launch mass, accounting for 80% of the 2022 global total. Experts estimate China’s commercial space industry lags SpaceX by about 10 years.

Looking forward, China’s private rocket companies are poised to accelerate development. The central government’s fourteenth 5-year plan puts a strategic focus on commercial aerospace. Multiple commercial companies like i-Space and Blue Arrow are aiming to launch reusable liquid-fueled rockets capable of dramatic cost reductions by 2025. The future holds huge demand for satellite launches, with China Satellite Network Group Co planning a constellation of 13,000 satellites. Further policy and financial support for the industry is expected as well.

Financing remains a current bottleneck for the industry, as innovation within the industry requires costly continuous testing and design and iteration are required. Local governments are now the main investors in commercial spaceflight companies. The industry also hopes to tap public capital markets for funding.

China’s economic work conference specifically called out commercial space as a strategic emerging industry. Experts foresee strong momentum for China’s commercial space industry in the next few years as companies move toward mature reusable rocket technologies. Key players are concentrated in Beijing, which aims to build a strong base for the industry centered around China’s Economic Development Zone.

Source: Xinhua, January 24, 2023
http://www.xinhuanet.com/20240124/4dd09cfced3d4931aee94c0e0ca2ef44/c.html

Briefings | | |   Defense/Military

Chinese Tech Giants Ramp Up Lobbying in Face of US Government Scrutiny

Chinese tech companies like TikTok and SHEIN have rapidly increased their spending on lobbying efforts within the United States. TikTok’s parent company ByteDance spent $8.74 million on lobbying in 2023, a 77% increase over the previous year. SHEIN spent $2.12 million in 2023 on lobbying, a 760% increase. The moves come as the U.S. government ramps up scrutiny and rhetoric targeting the companies amid broader U.S.-China tensions. The statistics on lobbying expense come from mandatory disclosure reports that the companies filed with Congress. TikTok and SHEIN aim to expand in the massive U.S. consumer market as growth slows at home in China.

TikTok now has 170 million U.S. users, gaining popularity despite previous bans. An e-commerce feature was added to the platform in 2023. TikTok’s lobbying focuses on pushing back against bills in Congress that would restrict the company’s U.S. business or ban use on government devices. Starting after U.S. regulator discussion of a possible ban in 2020, TikTok has grown its lobbying staff to about 14 people. TikTok lobbying was likely successful in slowing momentum for a ban as public opposition fell.

SHEIN lobbies on apparel, e-commerce, and trade controls. The company reportedly hired a former U.S. Trade Representative employee to argue SHEIN’s economic benefits to Congress as the company plans a U.S. IPO. Some in Congress claim that SHEIN uses a customs loophole to sell goods that have been produced with forced labor.

Both companies aim to expand within the U.S. while facing more scrutiny over data and economic security.

Source: Nikkei, February 2, 2024
https://zh.cn.nikkei.com/china/ccompany/54759-2024-02-02-10-55-24.html

Briefings | | |   US-China Relations