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China’s Unholy Umbrage

Unfortunately, the Chinese authorities have made it a habit to shout about their hurt and righteousness, whenever their business entities are caught indulging in illegal and nefarious activities. Illegal activities are, of course, not specific to Chinese entities. Others also engage in it, but when caught they quietly withdraw. The Chinese authorities want to claim through propaganda that the world owes them everything including their sensitive and security areas.

However, recent reports of Chinese-made “shoddy goods” flowing into various developing countries, including India, cannot be the fault of Chinese companies alone. Equally unscrupulous business entities from India and other countries are involved.

Having said that, no Chinese entity can be allowed to get away with its covert efforts to sabotage the nerve centres of other countries and break international laws and regimes with the intention of gaining strategic advantage.

The immediate issue concerns the more than $ 6 billion GSM circuit expansion plan of India’s state-owned BSNL. Recent Chinese official media reports state that the Chinese companies bidding for this open tender have the right to be accepted under the lowest offer bidding norms. The Chinese bidders are Huawei Technologies and Ai Lin Xin (ALX), who have been short listed. But Indian security agencies and the Ministry of Defence have opposed awarding the contract to these companies on very cogent security grounds.

Two Chinese reports, one in the International Herald Leader (May 18) and the other in the Global Times (May 22) argue that Chinese companies are being unfairly targeted by the so-called “Security Gate” of the Indian government. The articles argue that Huawei and another Chinese telecommunication company, the ZTE have been facing obstacles in India, though by 2008 Huawei’s contract volume in India crossed the $ 2 billion mark and sales revenue reached $ 1.3 billion.

In a very persuasive comment, the International Herald Leader states that India’s private telecommunication multinationals continue to sign contracts with Huawei and ZTE and only a few people in India are trying to hinder the growth of Chinese companies such as these two.

This is no innocent comment. It is true that large Indian telecommunication entities are doing substantial business with Huawei, and Chinese telecommunication companies have invaded a substantial portion of the Indian telecommunication industry. Indian companies may be interested in business and profit, which is normal. Whether they examine thoroughly the implications for Indian security interests is not known. The Herald comment is an effort to win support in the Indian industry which in turn can put presence on the government to open the flood gates to Chinese entities in security areas.

One example would suffice to illustrate why Chinese companies such as Huawei remain short of credibility among Indian security agencies. In 2000, Huawei floated a sister off-shore company in Mauritius for its Asian operation. This off-shore company, “Now International”, opened a company called “Now India”, in India.

“Now India” was an International Service Provider (ISP), providing connectivity through its software in the form of a compact disk (CD). The company’s business was cleared by the Ministry of Telecommunications with the clause that the provider must disclose to the users the functionality of the software provided in the form of the CD.

What may have raised the suspicion of the Indian security agencies was the price of the CD. It was one rupee only or approximately two U.S. cent or less! This could hardly cover the manufacturing cost, let alone the cost of developing the software and profits. Obviously, Huawei’s aim was not profit, but maximum use of their software.

Subsequent tests of the software revealed an implanted Trojan which gave access to remote collectors of all information in a computer using the CD. The imbedded gate-way led to a server located in Hong Kong, accessed by the Chinese military and intelligence.

This was brought to the notice of Now India, which in turn closed down its India operations. The Huawei Technologies and the Chinese media articles claim that Huawei has no connection with the Chinese government and the army. But it is very well known that the company was formed in 1988 with funding from the People’s Liberation Army’s (PLA) General Staff Department’s Telecommunication arm. This department is deeply involved in the PLA’s cyber warfare programme which is now considered to be the most lethal and efficient in the world, followed by the USA at some distance, and then by Russia.

Huawei Technology is a very important arm of the Chinese government’s and Military’s security and intelligence department under the cover of a normal business entity. It provides communication security to top Chinese leaders travelling abroad, and Chinese missions abroad. This company was involved in Saddam Hussein’s military communications and signals network when Iraq was under UN sanctions. It was also active with the Taliban extremist government in Afghanistan along with ZTE, though Chinese did not officially recognise the Taliban government propped up by Pakistan, Saudi Arabia and the UAE. These are just examples.

Chinese government owned and controlled entities have unfortunately acquired a sordid reputation worldwide. From nuclear weapons and missile proliferation to Pakistan, Iran, Lybia and Syria, to being mentioned in Pakistan scientist Dr. A. Q. Khan’s nuclear black market. China is still reported to be assisting the Pakistani plutonium programmes at the Kushab facilities the Kushab-III and Kushab-IV plants under construction. But China, of course, denies all these as conspiracies against China.

Chinese computer hackers made a series of serious attacks on the computers of Australian Prime Minister Kevin Rudd’s delegation visiting China last year, forcing the Australian agencies to raise high firewalls against Chinese attacks. And Kevin Rudd is considered a key friend of China in Australia. China is beginning to lose credibility at least in the developed world where they poach the most. Last year, the US Congress blocked a bid by Chinese oil companies to take over their largest oil company, the UNOCAL. Australia recently blocked the Chinese giant CHINALCO to take over the cash- strapped Australian mineral giant Rio Tinto, much to China’s chagrin. Very interestingly, the Chinese iron ore federation has demanded they must have a say in all iron ore companies’ merger and take over decisions in Asia. This is the height of arrogance and impunity.

Chinese leaders and propaganda are no longer shy of claiming that they are politically, economically and militarily strong enough to play these “destined” role in Asia and beyond. A senior Chinese navy admiral suggested off the record to the US PACOM Commander Admiral Timothy Keating that China should control the Indian Ocean and the US control the Pacific. Though officially denied by China, these off the record probes and statements have importance.

China certainly has a prominent role to play in world politics and economy: But if it tries to muscle its way into others’ territories in a new avatar of Emperor Qin Shi Wang Di, it would be unfortunate for all concerned including China.

(The author, Mr.Bhaskar Roy, is an eminent China analyst with many years of experience of study on the developments in China. He can be reached at

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