Sticking to the Script in Alaska; Possible Chinese Company Bans in U.S. & India; GDPR Gets Personal
U.S. and Chinese Officials Stick to Their Standard Scripts in Alaska
Top foreign affairs officials from the United States and China met face-to-face in Alaska on March 18. The first such meeting of the Biden administration was… “frank” and “direct,” as many have noted. Too many topics to mention were discussed, so here are three statements that stand out:
- Secretary of State Anthony Blinken admonished Chinese “cyber attacks on the United States, and economic coercion toward our allies.” Alongside other actions, these “threaten the rules-based order that maintains global stability.”
- Yang Jiechi, Director of the Central Foreign Affairs Commission Office, responded: “On cyber attacks, let me say that whether it’s the ability to launch cyber attacks or the technologies that could be deployed, the United States is the champion in this regard. You can’t blame this problem on somebody else.”
- Jiechi later said that “if there is competition between our two countries, I think the competition focuses on the economic aspect.” Variations of this line are often used in the Chinese argument that U.S. actions against Chinese companies are disguised as national security issues but are really about economic supression.
Source: State Department
Three Chinese Telcos Closer to Expulsion from United States over “National Security” Concerns
Speaking of national security (or economic suppression) threats, the U.S. Federal Communication Commission (FCC) on March 17 moved closer to potentially revoking permission for China Unicom, Pacifics Networks, and ComNet to continue operating in the United States. The FCC said the companies were “indirectly and ultimately owned and controlled by the government of the People’s Republic of China,” adding they had so far failed to “dispel serious concerns” about the legality of their operations under Section 214 of the Communications Act of 1934. (The FCC describes the section as ensuring “that the U.S. market is protected against potential anti-competitive behavior by a carrier with market power in a foreign country.”) With this finding in hand, the FCC is initiating a process to decide whether to expel the companies.
Chinese officials in Beijing responded by accusing the United States of “abusing the national security concept and politicizing economic issues” while attempting to “suppress Chinese companies.”
India Implements Legal Framework for Potentially Banning Chinese Telecom Vendors
The Indian government is also moving forward with potential plans to blacklist some Chinese companies, specifically telecom equipment makers. From June 15 onwards, a variety of Indian telecoms and Internet Service Providers (ISPs) will only be allowed to purchase equipment from “trusted sources” approved by the Indian government, according to a series of Department of Telecoms (DoT) notifications posted in the last week. Though the specific companies which the Indian government considers trusted have not yet been announced, media reports indicate that Chinese companies Huawei and ZTE will likely be considered “untrusted” and therefore blacklisted. Expect at least mild gloating from the United States should a ban be implemented.
In practical terms, the main implication for network operators will be higher equipment costs. Gear from Nokia, Ericsson, and other non-Chinese companies has traditionally been more expensive, and in a country as large as India, even small price differences quickly add up.
In a small concession related to existing infrastructure, however, the government also said that the rules “will not affect Annual Maintenance Contracts or updates to existing equipment” already in use. Telecom operators and ISPs will likely be pleased with this provision, as many have extensive amounts of Huawei and ZTE equipment throughout their systems. Ripping and replacing this gear, as required in the United States, would be an exceptionally costly and time consuming process.
India Also Reinforces “Make in India” Preference for Cyber Security Products
In addition to preparing for a possible ban on Chinese vendors, the Indian government also ordered government and other public entities to give preference to Indian-made cyber security products. The Ministry of Electronics and Information Technology (MeitY) said it was responding to “several complaints from cyber security product companies” that its 2019 rules were being violated with “restrictive and discriminatory” product requirements. No details are given on the conditions allegedly violating the government’s mandate, but it stands to reason they resulted in foreign firms winning contracts over their Indian competitors. With Prime Minister Narendra Modi’s “Make in India” and “Self-Reliant India” initiatives touted at every available opportunity, that’s simply not acceptable in the government’s view.
Source: Department of Telecoms
Indian Officials Want India-centric Mobile App Store Too
Indian officials are also seemingly interested in encouraging the development of an Indian mobile app store independent from Google and Apple. According to the Economic Times, Minister for Electronics and IT Ravi Shankar Prasad told parliament “there has to be a proper Indian App Store,” pointing to the government’s Mobile Seva App Store as an example. Though created for apps providing government or other public services, Prasad said, private app makers should be encouraged to join the store too.
Source: Economic Times
Nikkei Asia: Bidders for South Pacific Undersea Cable All Get Rejected
Back over in China-related news, Nikkei Asia says in an exclusive report that applications from Huawei Marine, Alcatel, and NEC to build an undersea cable in the South Pacific have all been rejected for not meeting “required conditions.” The planned cable would have connected Micronesia, Kiribati, and Nauru with Guam, a major connection point for cross-Pacific cables.
The United States and some of its Pacific allies had mounted a lobbying campaign aimed at the island nations, World Bank, and Asian Development Bank, claiming that the selection of Huawei Marine would be a security threat enabling the Chinese company to spy on cable data. As is often the case with Huawei, the company’s bid was the lowest and therefore seen by many as quite competitive.
This lobbying would make the rejection of Huawei Marine understandable, but the rejection of the non-Chinese bidders as well is interesting.
Source: Nikkei Asia
China’s Baidu and Megvii Seek Sanction Safe Haven in Hong Kong, Shanghai
Two major Chinese tech companies are seeking safe haven from potential or existing sanctions from Washington:
- Online search giant Baidu is set to raise $3.1 billion in a secondary listing in Hong Kong, according to Reuters. The offering would offer the company a measure of protection should it be placed on a U.S. sanctions or other blacklist, as the company is also listed on the American NASDAQ. No specific threat against the company was mentioned, but with an increasing number of Chinese companies targeted by officials in Washington, Hong Kong is becoming an attractive alternative to list shares should they be kicked off U.S. exchanges or otherwise be blocked from doing business. Singapore has also become an attractive location for Chinese companies such as ByteDance to set up or expand operations.
- Alibaba-backed artificial intelligence company Megvii is taking another shot at an IPO, this time on the Shanghai Stock Exchange’s technology-focused STAR Market. Nikkei reports the company filed an application with China’s securities regulator and could become the first Chinese AI company to go public. Megvii’s first attempt to go public was scuttled when the Trump administration added the company to the U.S. government’s “Entity List” in late 2019 for what it called contributions to “human rights violations and abuses in the implementation of China’s campaign of repression” in Xinjiang. The order imposed additional licensing requirements making it more difficult for U.S. companies to work with Megvii, and according to Caixin, led to the scuttling of a planned IPO in the United States. A later application for a Hong Kong-based IPO eventually timed out in February 2020. Megvii is part of the so-called Chinese “AI quartet,” which includes Sense Time, CloudWalk, and Yitu. All are included on the Entity List.
Internal EU Frictions on Display as European Data Regulators Target Ireland over GDPR Enforcement
Finally, EU member state data regulators are accusing their Irish counterparts of not doing enough to enforce the bloc’s General Data Protection Rules (GDPR), with the dispute becoming increasingly public and personal. In the latest escalation, the EU Parliament’s Civil Liberties Committee on March 17 approved a resolution expressing concern that “many supervisory authorities” across the EU lack the needed resources to fulfill their missions, specifically calling on Irish (and to a lesser extent Luxembourgish) regulators to “speed up their ongoing investigations into major cases.”
Hosting the European headquarters for a disproportionate number of international tech companies, Ireland is ultimately in charge of enforcing GDPR for these firms. Just this week, the Irish Times said that the sometimes controversial social media app TikTok is narrowing down locations for new offices in Dublin that could accommodate up to 5,000 employees.
Non-Irish EU regulators, however, say the Irish data authorities are either intentionally slow rolling investigations and enforcement or are otherwise just not adequately suited to handle them. The Financial Times reports that Germany’s Ulrich Kelber and Ireland’s Helen Dixon have traded a series of letters essentially calling the other misinformed. Kelber specifically pointed to “more than 50 complaints about WhatsApp” sent to Irish regulators that have still not been addressed and said German authorities were closing a higher number of overall cases.