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Chinese Military Tied to Telecoms, Says Former Intelligence Agent

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The structure of modern Chinese society makes state control -- or at the least, involvement -- a near-certainty.

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"It has translated into a business culture that keeps the ideology very much alive, and institutions must remain loyal to the government or they will lose control." Juneau-Katsuya tells me. "You have generation after generation after generation of people indoctrinated into thinking a certain way. Not to fall into the overly simplistic position I hear coming from far-right Republicans, but we need to recognize that society will mold the way people think. And here's the thing: The first guy who warned us about this was called Marx."

Obfuscation? Evasion? Or Just a Simple Series of Misunderstandings?

During his testimony on Capitol Hill, ZTE's Zhu Jinyun was asked the following question:

Given all that ZTE is doing to promote cyber security, the Committee's inquiry whether ZTE may pose a threat to critical US telecom infrastructure is very disturbing for us, as you must expect. The Committee's central question has been: Would ZTE grant China's government access to ZTE telecom infrastructure equipment for a cyber attack?

The answer:

Mr. Chairman, let me answer emphatically: No! China's government has never made such a request. We expect the Chinese government never to make such a request of ZTE. If such a request were made, ZTE would be bound by US law.

How this would apply in practice is debatable. However, when the House Intelligence Committee requested various documents related to the current investigation, ZTE "flatly refused," claiming that supplying that information would violate China's state-secrets laws.

"It is very strange the internal corporate documents of purportedly private sector firms are considered classified secrets in China," retorted Rep. Rogers. "This alone gives us a reason to question their independence."

All of these doubts and fears have real-world implications for Chinese telecoms. In March, the Australian government blocked Huawei from bidding on a $38 billion broadband infrastructure initiative, citing security concerns. And in July, the FBI began an investigation into illegal exports of banned technology -- a surveillance system capable of monitoring the citizenry's communications -- to Iran, by ZTE.

Of course, the connection between Chinese telecoms like Huawei and ZTE and the central government could also all be one gigantic misunderstanding.

In Huawei's case, Huawei's American government-relations representative, William Plummer, told Fortune magazine last year that the mix-up goes back to 2001, when an article in the Wall Street Journal referenced "another Chinese company with a similar name which was in fact headed by a PLA officer and may have sold optical communications gear to Iraq under Saddam Hussein."

"There was some confusion there," Plummer said. "Huawei has never delivered any military technologies at any time."

Well, that settles it. Nevertheless, the House Intelligence Committee will issue its final report in early October.
No positions in stocks mentioned.
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