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Analysis: Chinese investments, cybersecurity and economic espionage

Sharon Magen examines the growing cyber espionage threat from China as perceived by Washington, which has labeled it a dire national security hazard, and other nations around the world such as Turkey.
US President Donald Trump and Chinese President Xi Jinping Photo Credit: EPA

The recent usage of emerging technologies for purposes of cyber-attacks or acts of cyber-espionage and the subsequent threat posed to the national security interests of governments in the economic sphere specifically has lately become an increasingly important issue in the international arena. Encompassing economic globalization made the international economic scene vastly interconnected, thus increasing the world economy’s vulnerability to possible cyber security breaches and intensifying the repercussions of a possible breach on national security interests on a wide scale.

As a country seeking to become a game-changer in the global arena, it is plausible that China, significantly more than other countries, is making use of economic espionage through cyber means to the fullest extent, so as to achieve its goals in other spheres such as the security and political spheres.

During the past few decades, cyber interconnectedness and vast economic integration have transformed the global marketplace into an arena in which state actors and others may utilize cyber means to conduct economic espionage and advance other strategic goals. The current global reality of international cyber and economic interconnectedness presents a new type of threat to national security, as these cyber means may be utilized by foreign actors as vessels for conducting harmful economic espionage.

In this case, foreign governments through private or state-owned companies may choose to target certain economies or foreign companies in order to make an investment which will inter alia allow that government to conduct cyber espionage in the economic sphere, such as obtaining new technologies, an act that may tip the scale in favor of the investing country that otherwise would not have been able to receive these technologies.

This phenomenon cements cyber espionage in the economic arena as an undeniable threat to national security nowadays. This accusation is mostly directed today towards China by the United States, as Chinese companies, which are mostly state-owned, are suspected of utilizing global cyber and economic integration as a vessel for conducting economic espionage. Cyberspace is a pivotal element in China's strategy to ascend in the international system and one of the key reasons for this is conducting economic espionage to gain strategic advantage.

Washington especially perceives Beijing’s intention to commit economic espionage through cyberspace as a dire national security hazard, as China’s success in conducting effective economic espionage may translate into a sharp increase in China’s power potential relative to the United States. China’s current investment policy in economies such as the United States consists of mergers and acquisitions, which enable opportunities for undesirable proliferation through means of cyber of intellectual property and trade secrets to Chinese firms. This type of activity is particularly problematic when Chinese multinational corporations, which are mostly government owned, attempt to purchase American companies with strategic significance or deal with critical infrastructure and assets.

According to recent assessments by the United States intelligence community, there is a heightened assertiveness within China's international policies and as part of this, it has resorted to massive cyber economic espionage. Moreover, according to Pentagon reports, China will continue to aggressively collect sensitive American technological information through cyberspace espionage.

This type of behavior presented by Chinese firms has also been prevalent in the Middle-East, where China's relationship with Turkey is especially intriguing; although more than half of China’s oil and natural gas imports are sourced from the countries of the Middle East region, thus deepening Beijing’s dependence on the region, hydrocarbons do not play a pivotal role in Turkey’s relations with China. Nonetheless, Turkey is a rising power in the region and has not directly experienced the upheavals felt in the Arab world in the past few years, a fact which still places Ankara as a pivotal partner of Beijing in the region in the economic and political spheres alike. Regarding the Turkish government’s stance on possible Chinese cyber economic espionage activities, it is important to note that in November 2015, Ankara canceled a 3.4 billion dollars long-range missile defense system tender provisionally awarded to a Chinese state-owned firm in 2013.

Turkey had originally entered negotiations in 2013 with the China Precision Machinery Import-Export Corporation (CPMIEC) to finalize the billion dollar contract. Even though French-Italian consortium Eurosam and US-listed Raytheon had also submitted offers, the Turkish government had preferred talks with the Chinese company, a fact which raised serious concerns over the compatibility of CPMIEC's systems with NATO missile defenses, as Turkey is a member.

In its official statement given by a representative from Prime Minister Ahmet Davutoglu's office, the Turkish government declared that it had canceled the deal with China mainly because Turkey had decided to launch its own missile project. Though the Turkish government officially maintained that the core reason for its cancellation of the multi-billion dollar deal with the Chinse firm had been its decision to self-develop the long-range missile defense system, it can be contended that this was actually done because of concrete concern within the Turkish government regarding Chinese cyber economic espionage. As previously asserted, Turkey had led a comprehensive process in order to decide on a foreign company to lead this project. If Turkey had indeed wished to self-develop this defense system, it would have done so from the beginning and would not have conducted a complete procedure so as to choose a foreign firm to conduct this project.

It is therefore feasibly understood that Chinese investments, in particular, are conceived as a national security threat, a notion shared by other countries in addition the United States.

JOL Blogger | Sharon Magen

Sharon is a young American-Israeli currently based in Paris, France, as a Master's exchange student at the Paris Institute of Political Studies (Sciences Po). She is currently interning at the Permanent Mission of Israel to the OECD and involved in various student initiatives, such as the SciencesPo Refugee Help Think Tank and the Paris – Tel Aviv association, which promotes Franco-Israeli cultural ties.

Her undergrad was completed at the Hebrew University of Jerusalem in the fields of International Relations and South East Asian Studies. She has vast research experience from my time in the military as an officer in the strategic division and has also interned at the INSS (Institute for National Security Studies) in the fields of Sino-Israeli Relations and the GCC (the Gulf Cooperation Council).

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