This year marks the 10th anniversary of
China Electronics Technology Group Corporation
(zhongguo dianzi keji jituan gongsi) -
known better by its acronym CETC - one of China's
10 official defense industry
conglomerate-bureaucracies [1].
CETC's
operations are central to China's push toward
dual-use electronics and civil-military
integration for information technology. CETC is an
entirely state-owned, research and development
behemoth with the professed goals of producing advanced
electronics for China's
military and leveraging civilian technology in
order to do so [2].
The organization
combines the advantages of state research funding
and government favoritism with a market-oriented
business model. Far from being a dinosaur in the
modern electronics business, it has managed to
grow and profit in diverse economic sectors and
has forged partnerships with some of the biggest
names in electronics.
The broad reach of
CETC's business relationships combined with its
self-described "sacred mission" of "rich country,
strong army" make CETC worthy of closer inspection
from anyone concerned with the national defense
implications of the Chinese electronics and IT
industries.
Origin and
function Under CETC's organizational
umbrella are 80,000 employees and myriad
subsidiaries. CETC oversees 55 semi-autonomous
research institutes (often referred to as RIs) -
many of which predate CETC itself and have existed
since Mao Zedong's defense modernization push in
the late 1950s and 1960s. CETC also includes 184
commercial subsidiary companies - most of which
were created by the individual research institutes
in the past 20 years.
While CETC itself is
a young organization, the research institutes that
conduct most of its research and production are
the oldest electronics research facilities in
China. They are responsible for many of China's
major advances in defense electronics, including
the electronics for the "Two Bombs and One
Satellite" initiative that gave China its first
nuclear bomb, guided missile, and geo-orbital
satellite. Today, CETC produces a wide range of
products for military and civilian markets - from
lasers and radar arrays to washing machines and
power plants.
Despite its size and its
explicit role in developing tactical electronics
for the People's Liberation Army (PLA), CETC is
not well known outside a small community of China
defense analysts. Large private companies like
Huawei and ZTE have drawn much more attention and
suspicion, most recently becoming the focus of
respective US Commerce Department and House
intelligence committee investigations.
While it is possible and even likely that
private corporations like Huawei and ZTE engage in
business dealings with the PLA, they nonetheless
primarily are interested in the civilian market,
and any contracts with the PLA would comprise only
a tiny fraction of their total business. At
minimum, Huawei and ZTE deny any direct allegiance
to the PLA.
CETC, on the other hand, is
very open with its stated purpose of leveraging
civilian electronics for the gain of the PLA, and
a majority of its products and services are
destined for state and military customers. If
there is any doubt of CETC's relationship with the
military, see the "About Us" (jituan
gaikuang) page on its website, especially
cached pages from 2006 or earlier, since the most
jingoistic language has been toned down since that
time.
Diverse business
areas CETC's decentralized structure makes
its behavior difficult to track, since its
research institutes have widely varying technical
specialties, appear to operate more or less
autonomously and often operate under pseudonyms
[3]. This is largely because all of CETC's
research institutes are older than CETC itself and
most of them continue the same lines of research
they pursued before they were amalgamated into
CETC and given a common purpose in 2002.
Some of these, like the 45th RI, appear to
almost exclusively develop consumer electronics;
others, like the 54th RI, focus heavily on
military and aerospace sensors as well as
communications systems. With the majority of the
RI's, however, the distinction is much less clear.
Many of these research foundational technology and
manufacture industrial components necessary for
the advancement of both the defense and commercial
electronics sectors. There are RI's specializing
in semiconductors, piezoelectronics,
nanotechnology, integrated circuits and industrial
control systems - to name but a few.
In
turn, almost all of the individual research
institutes have their own network of commercial
subsidiaries and joint ventures. CETC RIs use
their subsidiaries to bring their research to the
commercial market and turn a profit, but also to
arrange partnerships between the PLA, universities
and research organizations as well as Chinese and
foreign electronics firms.
Some of these
subsidiaries are among China's most notable
technology companies, especially in the field of
information security, including Venus Software
Corporation and Westone Information Industry
Company - subsidiaries of 32nd and 30th RIs,
respectively. Perhaps incidentally, many of these
same companies benefit from government subsidies
and tax breaks for their role as "key software
enterprises", including Venus and Westone.
Many of these subsidiaries also are not
acknowledged officially by their parent research
institutes. Venus Software and the 32nd RI do not
acknowledge their connections on their websites,
even though the institute is Venus's founder and,
at least previously, the majority shareholder.
This practice, as well as the practice of using
pseudonyms for the institutes, helps CETC evade
notice and any negative associations with the PLA
in its business dealings, especially outside of
China.
Supporting civilian and defense
economies CETC's distinguishing feature is
that it straddles the line between a military
technology research center, a commercial entity
and an academic institution. This mixed operations
strategy stems directly from a technological
development policy that could exist nowhere
besides China.
Under this policy, CETC can
access government research funding to develop
commercial and military electronics while training
graduate students and engineers and providing a
foundation for the advancement of the Chinese
technology industry.
Since at least 2002,
Beijing has emphasized civil-military
technological integration and the belief that a
strong military can only emerge from a vigorous
and technologically-advanced civilian economy - a
point reiterated in last year's authoritative PLA
Day editorials [4].
As the defense economy
was reorganized continually at the turn of the
millennium, CETC and the other defense industrial
organizations were encouraged to assist both
sectors to build off of one another while
encouraging a marketized defense economy. This
involved not just coordinating technology
exchanges between industry and the military, but
providing preliminary research for both sectors.
When in 2006 China's Defense Middle- and
Long-Term Science and Technology Development Plan
demanded all defense industrial organizations
invest at least 3% of revenue into research and
development, CETC was the only one that exceeded
this figure, pledging to spend at least 5% [5].
CETC benefits from both government funds
and corporate revenue to fund its research. The
organization is home to 15 state key laboratories
- the designated breeding grounds for technologies
the Chinese government deems central to national
economic and military strategy. Many of the
research institutes also host graduate student
technical training programs and recognized
national "senior scientists".
These
resources provide further funding and expert
personnel to CETC's research institutes and allow
them to leverage them for either military or
civilian projects. CETC's relationship with the
PLA is demonstrated further by awards it receives
from the General Armaments Department, which is
responsible for commissioning PLA weapons systems
[6].
The PLA's matchmaker Since
one of CETC's expressed objectives is
civil-military integration in the electronics
sector, it should be no surprise that CETC and its
research institutes pride themselves on their
partnerships with large Chinese and international
corporations. CETC and its subsidiaries have
entered into joint ventures and supplier
arrangements with some of the world's largest
electronics companies, including IBM, Sun, HP,
Cisco, Oracle and, unsurprisingly, Huawei. They
also supply their products to a growing list of
foreign governments.
CETC operates in many
ways like a civilian commercial entity and appears
eager to start profitable joint ventures that
offer access to the Chinese market, helped by
CETC's status as one of China's state-authorized
investment institutions. CETC's subsidiaries
conduct a diverse range of business with foreign
firms and governments, including manufacturing
parts for export electronics, providing software
outsourcing solutions, engineering radar arrays
for foreign governments and marketing advanced
foreign electronics in China [7].
In many
cases, CETC appears to be the middleman that
allows these private companies to do business with
the PLA. The CETC 15th RI advertises itself on
job-seeking websites, such as Zhaopin.com, as the
commercial representative of Huawei and Emerson
Electric Company to the PLA, and the 15th RI may
not be alone in this role. If this is true for
even a few of CETC's subsidiaries, then any
company doing business with CETC would suggest
tacit abetment of PLA modernization.
Through its subsidiaries, CETC has even
managed to establish partnerships with Western
military technology firms, bringing their products
to the Chinese market. Through its subsidiary
group Hebei Far East, the 54th RI has partnered
with the US defense contractor Harris Corporation,
which, according to its website, provides tactical
communications, intelligence and satellite
services to the US military, National Security
Agency and National Geospatial-Intelligence
Agency.
The joint venture, Hebei Far East
Harris Communications Company, manufactures a wide
range of communications products, including
military-grade communications field switches and
private mobile radio systems - which it markets in
China and the Russian Federation - according to
the joint venture's website.
CETC
International (CETCI), yet another subsidiary,
also is designated as an official Chinese arms
export company and markets its products abroad
through international branches in Venezuela, Peru,
Ecuador, Algeria, Egypt, Morocco, Angola, Sudan,
Saudi Arabia, Pakistan, Thailand, Myanmar and
Syria. The CETCI catalog appears to be more
limited than that of the collective research
institutes, but still openly markets products like
mobile signal jammers, microelectronics systems
and laser products.
Conclusion CETC is the crux of
China's effort to support the PLA with dual-use
electronics and information technology. As a
research organization, CETC has access to
favorable government policies, science grants, and
top technicians. As a business, it can actively
attract partners in the private sector and
leverage their technology. Finally, as a state-run
organization, it uses these resources to openly
support the PLA and its modernization program.
CETC's decentralized structure and use of
unacknowledged subsidies allow it to stay off of
the public radar to a large extent even when
private and/or profit-driven companies like Huawei
and ZTE cannot. Its partners comprise Chinese and
international technology giants, including at
least one US intelligence contractor.
Additionally, its supplier relationships with
major international electronics companies may mean
that CETC-designed software and electronics
components are more ubiquitous in our everyday
electronics than most observers realize.
Notes 1. Other notable
Chinese defense companies include the following:
China North Industries Corporation (NORINCO),
China Aerospace Science & Industry Corp
(CASIC), and China State Shipbuilding Corporation
(CSSC), government-run corporations that develop
the PLA's physical weapons systems. Inevitably
these receive more attention than CETC, just as
missiles tend to receive more attention than their
guidance systems. 2. "Basing the military among
the people" or "combining military efforts with
civilian support" (junmin jiehe, yu jun yu
min) has become a common slogan since 2006 and
the Report to the 17th Party Congress. This part
and others, unless otherwise noted, is drawn from
the CETC and subordinate organizations'
websites. 3. For example, the 15th Research
Institute refers to itself as the "North China
Research Institute of Computing Technology", the
44th Research Institute is the "Chongqing
Optoelectronics Research Institute", and the 29th
Research Institute is "Siwi Electronics
Corporation". 4. The majority of government
defense S&T documents published since 2002
have stressed the importance civil-military
integration. See for example the "National
Mid-long-range S&T Development Plan"
(guojia zhongchangqi kexue he jishu fazhan
guihua gangyao). 5. Tai Ming Cheung, "The
Chinese defense economy's long march from
imitation to innovation". Journal of Strategic
Studies, Vol. 34, No. 3, June 2011, p. 335. 6.
The 15th Research Institute, for example, recently
received a GAD research award: see www.nci.ac.cn/intro.htm,
January 18, 2012. 7. For example, the CETC 54th
Research Institute won the contract to supply
antennas for Australia's enormous ASKAP Radio
Telescope Array for astronomy research. See,
Australian Telescope National Facility News, No.
66, April 2009.
Matthew Luce is
a Mandarin linguist-analyst at SAIC. He has worked
and traveled extensively in China, and his
research focuses on Chinese technology development
and policy.
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