Risks and returns in China’s digital designs for SE Asia
Beijing aims to build a 'digital silk road' to neighboring region but trade wars, censorship and cyber-espionage point to a perilous path
For the first time, China could be trying to hack a foreign election. On July 11, US-based security research firm FireEye alleged that a Chinese hacking group which is said to have close links to Beijing broke into the computer systems belonging to Cambodia’s electoral commission, government ministries, domestic media and opposition figures.
The actual intent of these hacks is unknown. Cyber-attacks on political opposition figures and media could be designed to help the ruling Cambodian People’s Party (CPP), which is already poised to win the July 29 election given that its main rival, the Cambodia National Rescue Party (CNRP), was formally dissolved last November and thus won’t be on the ballot.
Another possibility is that Beijing wants to know the private thoughts of officials in a country where it has poured in massive amounts of aid and its state-owned and private companies have made considerable economic investments. That, some suggest, could explain why several CPP-controlled ministries were also hacked in the attack.
Cambodia’s National Election Commission, another victim of the China hacks, received a US$20 million donation from China after the United States and the European Union withdrew their funding for staging the upcoming election in protest of the government’s clampdown on the opposition.
The incident has raised questions about whether it is just the beginning of a wave of Chinese cyber-espionage in Southeast Asia’s politics, especially with next year’s important election in Indonesia and possibly another in Thailand while it serves as chairman of the Association of Southeast Asian Nations (Asean).
But the exposed hacking also possibly highlights China’s desire to boost its own geopolitical standing through technological means.
Many Southeast Asian nations have fallen closer in line with China as the result of its Belt and Road Initiative (BRI), a trillion-dollar global investment project. Eager for investment, many regional countries now yield to Beijing’s wider geopolitical ambitions, which includes turning a blind eye to its military expansion in the contested South China Sea.
Seldom, however, is much attention given to the BRI component Beijing policymakers refer to as the “digital silk road.”
Chinese president Xi Jinping said in April that this digital pathway will help others nations to build digital infrastructure and boost online security. Chen Zhaoxiong, a vice-minister of information technology, has defined it as “a community of common destiny in cyberspace,” the Economist reported in May.
Critics, however, suspect China intends to push its own surveillance and censorship capabilities onto other countries, especially those that already lean authoritarian. For the last three years, China has been ranked as the world’s worst abuser of online free speech in “Freedom on the Net” reports, published annually by Freedom House, a US-based think tank.
“Under the guise of BRI, China is seeking to export its policy of authoritarian cyber controls, giving countries the right to regulate and censor their own internet,” reads a recent report by the Council on Foreign Relations (CFR), another US-based think tank.
“China has already tightened control over its domestic internet, including through the Great Firewall and its Cybersecurity Law. It is now seeking to globalize that approach, while also inserting backdoor mechanisms that could increase its intelligence and propaganda operations in BRI partner countries,” the same report says.
Vietnam is now arguably the most restrictive country in Southeast Asia for online free-speech. This will only become worse when its new cybersecurity law, passed last month by the ruling Communist Party, comes into effect at the beginning of next year. Some analysts say it is almost identical to the one China introduced in June 2017.
One condition of Vietnam’s new law requires international tech firms like Facebook and Google to open domestic offices and store data on Vietnamese users locally. This, critics say, will allow Hanoi to access private conversation records of users, especially those within the growing activist movement.
At present, Vietnam struggles to effectively enforce online censorship. It remains responsive rather than proactive, jailing citizens for what they have already written rather than preventing what they can or cannot say or access online. Encrypted messaging-apps like Signal or WhatsApp, meanwhile, allow users to communicate freely. Virtual private networks, or VPNs, easily circumvent banned websites.
In China, however, regulators have already introduced “backdoors” that allow them to infiltrate encryption technology. Nowhere in Southeast Asia is there comparable censorship technology like China’s Great Firewall.
But Southeast Asian nations might be able to replicate these capabilities if China begins to export its censorship technology as part of the “digital silk road,” analysts warn. There is widespread speculation among activists that China’s censors are already advising their regional partners.
Advice aside, critics also point to the physical nature of China’s “information silk road”, the other name given to the plan which entails building technological infrastructure in parts of Southeast Asia.
China Mobile, a state-run firm and world’s largest telecoms network for subscribers, is reportedly developing an optical fiber cable project in Myanmar which will be linked to Beijing.
“There are multiple ways to tap a fiber optic cable, but physical access and breaking encryption codes are the two easiest methods. Once an intruder has gained physical access to the cable, tapping information is relatively easy,” states the recent CFR report.
“Moreover, those who lay the physical fiber cable can also bend or clamp the fibers so as to create micro-bends or ripples, which allows data to leak out and be transferred, if a receiver is installed,” it adds.
A major part of China’s “digital silk road” will be played out in the economic sphere. As such, Southeast Asia could become a proxy in the escalating China-US trade war. No other country has the capability of competing with America or China when it comes to technological innovation, analysts say.
But some reckon America is already losing out in this digital arms race. China Mobile is larger than Verizon and AT&T, America’s two telecoms giants, combined. America’s five largest tech firms – Facebook, Apple, Amazon, Netflix and Google, known by the acronym FAANGS – face considerable competition from China’s giants.
Tencent, often referred to as China’s Facebook, is the country’s highest-valued tech firm. Some estimates contend its net profit in the first quarter of this year hit US$11.7 billion, compared to Facebook’s US$12 billion.
Moreover, the spiraling US-China trade war, started by President Donald Trump earlier this year, could really be about America trying to claw back ground in the battle to develop 5G technology, which China is also apparently winning. Some think it will make a breakthrough by next year.
“The Chinese are about to win. They’ve got 5G. They’ve found out a way,” said former British Foreign Secretary Boris Johnson in a leaked speech, reported the Guardian.
5G’s introduction would be essential for new industries, from driverless cars to smart cities. It has been estimated that rolling out 5G technology will be worth US$12.3 trillion in economic output by 2035, according to report by IHS Markit, a leading tech research company.
Technology firms have played an outsized role in the mounting trade war.
ZTE, China’s second-largest telecoms company, was handed a seven-year trade ban by the American government in April for allegedly selling US technology to North Korea and Iran, but the Trump administration personally intervened to lift the ban last week, much to the chagrin of some lawmakers who say it threatens national security.
ZTE was close to collapsing when the US briefly imposed sanctions on the firm as it was prohibited from purchasing American-made chips and software, which reportedly resulted in almost US$3 billion worth of losses.
China’s Huawei, the world’s third largest smartphone maker, saw a deal collapse in January that would have seen AT&T sell Huawei’s smartphones in the US due to security fears. Intelligence officials claimed its phones could be used to spy on American citizens, according to media reports.
Alphabet Inc, the parent company of Google, is also reportedly under pressure from lawmakers to cease dealing with Huawei, which is accused of working on behalf of the Chinese Communist Party.
The US-China trade war could thus severely affect the development and future reach of China’s tech giants, including into Southeast Asia, some analysts suggest.
Others, however, say the trade war will actually be a boon for the “digital silk road”, as Chinese firms will reduce investments in America and turn instead to other regions like Southeast Asia. Last year the region spent US$6.3 billion to develop its technology sector, a measure based on 422 deals assessed by research firm CB Insights.
Lazada Group, a Southeast Asian e-commerce company, is now majority-owned by the Chinese tech giant Alibaba Group. In March, it invested another US$2 billion in the firm and installed Lucy Peng, one of its top executives, as Lazada’s new chief executive officers.
In February, a Malaysian law enforcement agency started using the surveillance equipment of Yitu Technology, a Chinese firm whose technology can identify a face from a database within three seconds. Megvii, another Chinese company that sells facial recognition software, is also reportedly expanding its operations in Southeast Asia.
In June, Huawei announced that it would invest an additional US$81 million across Southeast Asia over the next three years. Tencent, which owns WeChat, China’s largest social media platform, has also spent billions of dollars in Southeast Asia, including a minority stake in the Singapore-based gaming app SEA.
Southeast Asia “is becoming a proxy war for large Chinese internet companies like Tencent [and] Alibaba, and we think going forward this will increase,” Hian Goh, a Singapore-based venture capitalist, was recently quoted by the South China Morning Post.
But there’s an inherent risk for Southeast Asian citizens. WeChat is reportedly required by Chinese law to keep a record of all conversations on the platform, which could extend internationally.
The platform’s popularity is now growing in the region, thanks in part to its e-commerce function, WeChat Pay. Singapore’s Changi Airport launched a three-year partnership with WeChat Pay last week.
Critics contend that the commercial objectives of these Chinese tech firms closely align with the political interests of the country’s ruling Communist Party. Tencent, for instance, reportedly shares user data with Party departments.
Zhang Yiming, chief executive officer of Toutiao, a large information-sharing platform, was forced to apologize in April for going against “core socialist values” when his firm launched a joke-sharing app which was swiftly taken down.
The Communist Party is reportedly considering whether to buy stakes through state-owned enterprises in these major privately-owned tech companies, moves that would possibly give the Party veto powers over use and content in the process.
If, as Chinese officials say, the digital silk road is about building “a community of common destiny in cyberspace,” it could be a dystopian fate for Southeast Asia in a community fenced by binary barbwire and patrolled by well-spurred censors.