US sanctions highlight China's civil-military overlap

2018/08/1534748072.jpg
Read: 520     13:59     20 August 2018    

A U.S. clampdown on dealings with Chinese companies has highlighted the increasingly blurred line between the military and civilian sectors in the world's No. 2 economy.


The U.S. Department of Commerce earlier this month added 44 entities, including some companies affiliated with the People's Liberation Army, to its export control list over national security concerns. Despite the focus on businesses with military ties, the move could impact a range of commercial products.

Beijing is actively promoting integrated military-civilian research and development to boost the country's technological capabilities. The Politburo Standing Committee -- the top decision-making body, led by President Xi Jinping -- has made this a policy.

This approach has raised eyebrows in the U.S. Washington worries it will lead to military communications and other technologies being transferred to civilian products, while artificial intelligence and other technologies developed for civilian use could flow into the military.

The escalating U.S.-China trade war has raised the risk of working with military-linked Chinese businesses, said an executive of an international company's Chinese arm. The company supplies communications equipment components to a Chinese client affiliated with the armed forces, and the executive said this may have to stop if Washington tightens its regulations further.

All told, there are 11 military-affiliated business groups in China. They are all part of major state-owned companies under direct control of the central government. Together, they employ around 2 million people. And they deal in a broad range of civilian products, too.

Changan Automobile, which has separate joint ventures with Ford Motor, Mazda Motor and Suzuki Motorin China, is a subsidiary of China South Industries Group, one of the 11 groups.

The entities newly subject to the export controls include the Second Academy of China Aerospace Science and Industry (CASIC) and its affiliates, four research institutes of China Electronics Technology Group (CETC) and their affiliates, China Tech Hi Industry Import and Export, China Volant Industry and Hebei Far East Communication System Engineering.

Of note are CASIC and CETC. While it focuses on air defense systems, CASIC also conducts civil satellite launches and develops drones. CETC is believed to deal in communications equipment for both civilian and military purposes.

After the U.S. announced the sanctions, the share prices of many listed CETC affiliates dropped. Hangzhou Hikvision Digital Technology, a CETC affiliate and the world's largest surveillance camera maker, is not among the newly added entities but could still feel the impact on its overseas operations.

China, for its part, is imposing similar restrictions aimed at the U.S. The Commerce Ministry in late July said it would screen foreign businesses investing in listed local companies for potential national security risks. Further tit-for-tat sanctions could become a significant impediment to transactions between a variety of businesses.



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News Line

US sanctions highlight China's civil-military overlap

2018/08/1534748072.jpg
Read: 521     13:59     20 August 2018    

A U.S. clampdown on dealings with Chinese companies has highlighted the increasingly blurred line between the military and civilian sectors in the world's No. 2 economy.


The U.S. Department of Commerce earlier this month added 44 entities, including some companies affiliated with the People's Liberation Army, to its export control list over national security concerns. Despite the focus on businesses with military ties, the move could impact a range of commercial products.

Beijing is actively promoting integrated military-civilian research and development to boost the country's technological capabilities. The Politburo Standing Committee -- the top decision-making body, led by President Xi Jinping -- has made this a policy.

This approach has raised eyebrows in the U.S. Washington worries it will lead to military communications and other technologies being transferred to civilian products, while artificial intelligence and other technologies developed for civilian use could flow into the military.

The escalating U.S.-China trade war has raised the risk of working with military-linked Chinese businesses, said an executive of an international company's Chinese arm. The company supplies communications equipment components to a Chinese client affiliated with the armed forces, and the executive said this may have to stop if Washington tightens its regulations further.

All told, there are 11 military-affiliated business groups in China. They are all part of major state-owned companies under direct control of the central government. Together, they employ around 2 million people. And they deal in a broad range of civilian products, too.

Changan Automobile, which has separate joint ventures with Ford Motor, Mazda Motor and Suzuki Motorin China, is a subsidiary of China South Industries Group, one of the 11 groups.

The entities newly subject to the export controls include the Second Academy of China Aerospace Science and Industry (CASIC) and its affiliates, four research institutes of China Electronics Technology Group (CETC) and their affiliates, China Tech Hi Industry Import and Export, China Volant Industry and Hebei Far East Communication System Engineering.

Of note are CASIC and CETC. While it focuses on air defense systems, CASIC also conducts civil satellite launches and develops drones. CETC is believed to deal in communications equipment for both civilian and military purposes.

After the U.S. announced the sanctions, the share prices of many listed CETC affiliates dropped. Hangzhou Hikvision Digital Technology, a CETC affiliate and the world's largest surveillance camera maker, is not among the newly added entities but could still feel the impact on its overseas operations.

China, for its part, is imposing similar restrictions aimed at the U.S. The Commerce Ministry in late July said it would screen foreign businesses investing in listed local companies for potential national security risks. Further tit-for-tat sanctions could become a significant impediment to transactions between a variety of businesses.



Tags: