There’s an emerging view that China’s belligerent approach and “torching” of diplomatic relationships with the wider world is a sign of “insecurity and weakness”; that its economic growth is “unsustainable”; and that “everyone in the top ranks of the Chinese Communist Party” knows the day is coming when “China’s entire economic structure and strategic position crumbles”.
These views are drawn from an essay by Peter Zeihan entitled A Failure of Leadership: The Beginning of the End of China.
He describes himself as a geopolitical strategist whose work history includes a stint working for the US State Department in Australia.
He is hardly the first person to say these sorts of things, and I suspect he won’t be the first to be wrong about them, at least for quite a while.
That’s not to say he doesn’t draw on facts. China has been extraordinarily profligate in its use of capital, and has become progressively more so over the last two decades.
Paul Krugman (1994) famously made the same point about the then rapidly-growing smaller East Asian economies a few years before the Asian financial crisis in The Myth of Asia’s Miracle.
Nor is there any denying that China has an enormous amount of debt relative to the size of its economy, especially for what is still in many ways a “developing” economy.
Debt as a percentage of GDP
But, and this is an important “but”, most of that debt is owed by state-owned enterprises to state-owned banks – which can be thought of as two entries on opposing sides of the same balance sheet, that of the People’s Republic of China.
If a lot of that were to turn “bad”, which is by no means impossible, then the ensuing “crisis” could be solved by writing it off, and then re-capitalising the state-owned banks by drawing down on the foreign exchange reserves of the People’s Bank of China.
China has actually done this twice before, in the late 1990s as part of the state-owned enterprise reforms pushed through by then-Premier Zhu Rongji, and again between 2003 and 2005, when the big four state-owned banks were “cleaned up” ahead of their very partial privatisation and listing on the Hong Kong Stock Exchange.
The “bad assets” were transferred into an entity called Central Huijin which subsequently became the nucleus of China’s sovereign wealth fund, the China Investment Corporation.
An unknown question is whether the People’s Bank of China’s foreign exchange reserves would be sufficient for what would now be a much larger task.
It lost one quarter of its reserves (almost US$1 trillion) defending its currency between June 2014 and December 2016, after which it imposed very strict controls on capital outflows, which have remained in force ever since and are easier to maintain in an authoritarian regime that knows how to deploy modern technology for surveillance purposes than in other countries that have resorted to capital controls such as Argentina.
Since that time, the ubiquitous “Chinese authorities”, as they are usually referred to by Western economists, have been acutely aware of the risks to financial stability posed by the growth of so-called shadow banks and the way Chinese banks have become more dependent on wholesale funding and less on deposits; as US and European banks did, to a much greater extent, in the years leading up to the global financial crisis.
That’s in part why China’s economic growth rate has been steadily slowing over the the past decade, from an average of 11.3% in the five years to 2009, to 8.5% in the five years to 2014, and to 6.6% in the five years to 2019.
Another important reason has been that China’s working-age population peaked in 2014 and has since shrunk by almost 1.5%.
It also helps explain why the People’s Bank of China hasn’t done nearly as much monetary stimulus as it did during and after the financial crisis or in 2015-16.
There hasn’t been a significant acceleration in credit growth in recent months nor has there been a surge in property development or prices, as there would have been if the People’s Bank of China had unleashed another wave of credit.
Average annual growth in China’s real GDP over five-year intervals
China’s authorities are doing more fiscal stimulus than they did 12 years ago, although it is in different forms to the construction-intensive programs it implemented then.
The potentially most worrying development – albeit not from the perspective of the next year or so – is the one depicted in this chart, which shows a marked divergence between the level of foreign exchange reserves and the rate of growth in domestic credit.
China’s domestic credit and foreign exchange reserves
For a fixed exchange rate system to be sustainable, the two ordinarily need to maintain a fairly close and stable relationship – which they do under a “currency board” like the one Hong Kong has had since 1984 (or that the Baltic states had before joining the euro, and which Bulgaria still has) where the monetary authority is explicitly precluded from issuing currency unless it is backed by foreign exchange reserves (or, in Hong Kong’s case, reserves plus the Land Fund).
China’s foreign exchange rate is of course no longer completely fixed, but rather is “carefully managed” around a peg to a trade-weighted index (as the Australian dollar used to be between 1976 and 1983).
But the People’s Bank of China’s capacity to maintain that peg is dependent on the credibility of its implicit promise to buy or sell its currency in whatever quantity is required to keep the exchange rate close to the peg.
Obviously China can sell its currency in whatever quantities it likes, since it are the ultimate source of its currency, and so can always prevent it from appreciating more than it wants (as can any country which is prepared to accept the potentially inflationary consequences of a sudden large increase in its domestic money supply).
But China doesn’t own or operate a US dollar factory, so it can only stave off a big depreciation for as long as it has sufficient foreign exchange reserves to satisfy everyone who wants to convert its currency into foreign dollars.
And that’s why the capital controls are so important at the moment: because they limit the demand for foreign currencies enough to ensure that the level of foreign exchange reserves is more than adequate, and widely regarded as such.
If something were to happen that resulted in a tsunami of capital outflows, and the Chinese authorities didn’t have any other ways of stopping it (such as confiscating the assets of or imprisoning or executing people who tried to get their money out of the country, something which I am sure they might not baulk at) there would be a “currency crisis”; the Chinese renminbi fall a lot, and the weakness in the domestic financial system (resulting from the accumulation of so much bad debt) would be fully exposed.
But you have to ask, how likely is that in the foreseeable future?
I can’t see any reason to answer that question with anything other than “not very”.
It’s worth remembering in this context that the lesson which the Chinese Communist Party drew from the collapse of the Soviet empire is that brutal authoritarian regimes can only survive, once they have clearly failed to deliver on the promise of delivering ongoing improvements in people’s well-being, for as long as they are willing to kill their own people in sufficient numbers to quieten resistance, or for as long as there is someone else who is willing and able to do it for them.
The Communist regimes of Eastern Europe, most of which had been demonstrably willing to shoot their own people (or allow the Soviets in to do it for them) at various times in the 1950s, 1960s and early 1980s, collapsed when they lost the will to shoot their own people, and the Soviets under Gorbachev lost the will to do it for them.
And the Soviet Union itself collapsed in 1991 when neither Gorbachev, nor the cabal of drunken fools who briefly tried to overthrow him in August of that year, were willing to shoot their own people.
It is worth noting in passing that Vladimir Putin has repeatedly demonstrated that he has no such scruples about killing his own people – whether they be ordinary Russians in high-rise apartments around Moscow, middle-class Muscovites attending the theatre, school children and their parents in Beslan, troublesome journalists, former KGB agents living in the UK, lawyers for aggrieved hedge fund managers, or prominent opposition figures.
By contrast with their contemporaries in Eastern Europe and the Soviet Union, Deng Xiaoping and Li Peng demonstrated that they were perfectly relaxed about the idea of shooting, or running over with tanks, large numbers of their own people in order to ensure that they remained in power – and even more competent than Josef Stalin in air-brushing those events out of the collective memory of the people who remained alive.
And I suspect nothing has changed, at least in that regard, since then.
Indeed Xi Jinping has repeatedly shown that he’s prepared to do whatever is required to entrench the Chinese Communist Party as the source of all power in China, to sideline potential rivals and to remain in office for as long as he is capable of drawing breath (not least because he is smart enough to know that he has made a lot of enemies, and that they would take their revenge on him and his family and supporters as soon as he was out of power – as Putin did to Boris Yeltsin’s wealthy supporters).
Far from feeling “weak and insecure”, I think China feels strong and emboldened – not only by its apparent success in stopping the spread of the virus (admittedly after a number of initial serious missteps) but also by the manifest incompetence of the US administration in dealing with COVID-19, and its almost complete abdication of its traditional global leadership role (something that, to be fair, didn’t start under Trump).
That’s why Xi has explicitly discarded Deng Xiaoping’s dictum that China should “hide your capacities and bide your time” – much as, Woodrow Wilson and, more forcefully, Roosevelt and his successors all the way to George W Bush – were prepared to discard George Washington’s advice, in his 1796 farewell address (which was actually written by Alexander Hamilton) to “avoid foreign entanglements”.
Xi (and, as far as one can tell, most of the Chinese population) think that “now” is China’s “time”. That’s what he means by phrases like “the great rejuvenation of the Chinese nation” and the “Chinese dream”.
And of course China’s economy, notwithstanding its burden of debt, is much stronger than the Soviet Union’s ever was.
Size of Soviet Union and China economies in relation to the United States
The closest the Soviet economy ever got to matching the United States’ was between 1974 and 1976 when it reached 44% of US gross domestic product. By the time Gorbachev took office in 1985 it was down to 38%, and in 1991, when the Soviet Union collapsed, its GDP was less than a third of the United States.
By contrast, measured in the same way, China’s economy surpassed the US economy in 2017, and this year is likely to be at least 10% bigger than the US (when compared using actual buying power – “purchasing power parity” – rather than the official exchange rate which shows the Chinese economy only about two-thirds of the US economy which is still a lot closer than the Soviet Union got).
It’s perhaps also worth noting that China isn’t really all that dependent on exports any more – in 2019 exports accounted for only 18.4% of China’s economy, down from a peak of 36% in 2006 and less than at any time since 1991.
Big economies, like China’s now is, tend to be relatively “closed”, which is why exports only represent 12% of the US GDP and 18.5% of Japan’s compared to 24% of Australia’s.
So, to summarise, I can’t agree with the proposition that China’s growth model is unsustainable and its leadership weak and insecure.
Of course, in the long run (when, as the economist John Maynard Keynes famously said, we’re all dead), it might turn out to be right. China’s government and its growth model might collapse.
But I’m not going to lie awake at night wondering whether it’s happened.
National security is like sausage-making. We might enjoy the tasty product, but want to look away from the manufacturing.
Recent news that Chinese company Zhenhua Data is profiling more than 35,000 Australians isn’t a surprise to people with an interest in privacy, security and social networks. We need to think critically about this, knowing we can do something to prevent it from happening again.
Reports indicate Zhenhua provides services to the Chinese government. It may also provide services to businesses in China and overseas.
The company operates under Chinese law and doesn’t appear to have a presence in Australia. That means we can’t shut it down or penalise it for a breach of our law. Also, Beijing is unlikely to respond to expressions of outrage from Australia or condemnation by our government – especially amid recent sabre-rattling.
Zhenhua is reported to have data on more than 35,000 Australians – a list saturated by political leaders and prominent figures. Names, birthdays, addresses, marital status, photographs, political associations, relatives and social media account details are among the information extracted.
It seems Zhenhua has data on a wide range of Australians, including public figures such as Victorian supreme court judge Anthony Cavanough, Australia’s former ambassador to China Geoff Raby, former NSW premier and federal foreign affairs minister Bob Carr, tech billionaire Mike Cannon-Brookes and singer Natalie Imbruglia.
It’s not clear how individuals are being targeted. The profiling might be systematic. It might instead be conducted on the basis of a specific industry, academic discipline, public prominence or perceived political influence.
It’s unlikely Zhenhua profiles random members of the public. That means there’s no reason for average citizens without a China connection to be worried.
Still, details around the intelligence gathering elude us, so best practise for the public is to maintain as much online privacy as possible, whenever possible.
Overall, we don’t know much about Zhenhua’s goals. And what we do know came from a leak to a US academic who sensibly fled China in 2018, fearing for his safety.
Pervasive surveillance is now a standard feature of all major governments, which often rely on surveillance-for-profit companies. Governments in the West buy services from big data analytic companies such as Palantir.
Revelations about Zhenhua have referred to the use of artificial intelligence and the “mosaic” method of intelligence gathering. But this is probably less exciting than it sounds.
Reports indicate much of the data was extracted from online open sources. Access to much of this would have simply involved using algorithms to aggregate targets’ names, dates, qualifications and work history data found on publicly available sites.
The algorithms then help put the individual pieces of the “mosaic” together and fill in the holes on the basis of each individual’s relationship with others, such as their as peers, colleagues or partners.
Some of the data for the mosaic may come from hacking or be gathered directly by the profiler. According to the ABC, some data that landed in Zhenhua’s lap was taken from the dark web.
One seller might have spent years copying data from university networks. For example, last year the Australian National University acknowledged major personal data breaches had taken place, potentially extending back 19 years.
While it may be confronting to know a foreign state is compiling information on Australian citizens, it should be comforting to learn sharing this information can be avoided – if you’re careful.
One big question is what Zhenhua’s customers in China’s political and business spheres might do with the data they’ve compiled on Australian citizens. Frankly, we don’t know. National security is often a black box and we are unlikely ever to get verifiable details.
Apart from distaste at being profiled, we might say being watched is no big deal, especially given many of those on the list are already public figures. Simply having an AI-assisted “Who’s Who” of prominent Australians isn’t necessarily frightening.
However, it is of concern if the information collected is being used for disinformation, such as through any means intended to erode trust in political processes, or subvert elections.
For instance, a report published in June by the Australian Strategic Policy Institute detailed how Chinese-speaking people in Australia were being targeted by a “persistent, large-scale influence campaign linked to Chinese state actors”.
Deep fake videos are another form of subversion of increasing concern to governments and academics, particularly in the US.
We can’t make Zhenhua and its competitors disappear. Governments think they are too useful.
Making everything visible to state surveillance is now the ambition of many law enforcement bodies and all intelligence agencies. It’s akin to Google and its competitors wanting to know (and sell) everything about us, without regard for privacy as a human right.
We can, however, build resilience.
One way is to require government agencies and businesses to safeguard their databases. That hasn’t been the case with the NSW government, Commonwealth governments, Facebook, dating services and major hospitals.
In Australia, we need to adopt recommendations by law reform inquiries and establish a national right to privacy. The associated privacy tort would incentivise data custodians and also encourage the public to avoid oversharing online.
In doing so, we might be better placed to condemn both China and other nations participating in unethical intelligence gathering, while properly acknowledging our own wrongdoings in Timor-Leste.
In the midst of all the stories about China’s oppression in Hong Kong and Xinjiang and its expulsion of foreign journalists, a recent clash on its border with India may pose the greater threat to Asian security.
For the first time in 45 years, shots were fired this week.
This in itself was not unusual. The two sides have been locked in several tense standoffs along the LAC since May.
What makes this confrontation stand out is it involved the first known use of firearms on the border in almost half a century.
China and India have accused each other of provoking this confrontation, which occurred in the Rezang-La heights area, just south of Pangong Lake.
According to Indian reports, there were between 30 and 40 Chinese troops involved. Photographs published in Indian media show Chinese soldiers armed with crude Guandao-style polearms, as well as standard issue rifles.
It is unclear how many Indian troops were involved or how they were equipped.
China claims Indian troops crossed the LAC and “blatantly fired shots” when Chinese border troops moved to deter them. India, has strenuously denied this, saying Chinese soldiers crossed the LAC and were blocked by an Indian forward position, who they then tried to intimidate by firing “a few rounds in the air”.
No troops have been reported injured or killed.
Regardless of which side actually fired the shots, the tactic did not work. Both Chinese and Indian soldiers remain in a stand-off, reportedly only 200 metres apart.
This recent exchange represents a troubling escalation between the two countries.
It directly contravenes the rules and norms painstakingly established by China and India to govern behaviour on the border.
Negotiations on the disputed border have always been tough for China and India. The two sides took nearly 12 years of tentative negotiations before signing their first treaty in 1993, in which they agreed to “maintain peace and tranquillity” along the LAC.
The prohibition against the use of weapons along the LAC was first laid out in the 1996 agreement.
Neither side shall open fire, cause bio-degradation, use hazardous chemicals, conduct blast operations or hunt with guns and explosives within two kilometres from the Line of Actual Control.
Until this week, China and India have upheld this agreement, even when previous border patrol confrontations became heated.
However, both sides have been pushing the limits of what the other will tolerate and have trying to exploit loopholes and technicalities for several years now.
This year has seen both sides up the ante, with the introduction of makeshift clubs in a lethal melee at the Galwan Valley in June and China now seemingly equipping some border patrols with polearms.
Earlier this month, Indian media reported India was using new rules of engagement. This change allows its border troops to use whatever means are available for “tactical signalling” against the Chinese.
As two of the world’s largest militaries – and two nuclear-armed countries – even a limited border war between China and India would be devastating for regional peace and stability. It would likely ruin what little cooperation there is left and potentially pull in third parties, such as Pakistan or the United States.
It is clear from the flurry of diplomatic activity between China and India over the past months that they feel the gravity of their situation.
But despite both sides proclaiming they seek a peaceful resolution to the ongoing standoffs, a culture of mistrust continues to poison discussions.
China and India’s foreign ministers are scheduled to meet in Moscow on Thursday to discuss the border standoff in person for the first time since the crisis began.
Both countries will now need to engage in some masterful and innovative diplomatic work to find a way to rejuvenate their diplomacy.
And find a mutually face-saving way to disengage before the standoff escalates out of control.
Australian Federal Police and ASIO raided two Chinese journalists in June as part of an investigation into foreign interference in Australia.
The previously unpublicised action has come to light via Chinese media reports, in the same week that two Australian reporters fled China amid fears for their security and in a blaze of publicity.
The Global Times, a mouthpiece of the Chinese authorities, said ASIO had questioned the Chinese journalists, seized computers and smartphones, and asked them not to report the incident.
The raids, undertaken under a warrant, were connected to the investigation into allegations of attempted Chinese infiltration of the NSW parliament through the office of NSW Labor state MP Shaoquett Moselmane, and in particular his part-time staffer John Zhang. Both Moselmane and Zhang have denied any wrong doing.
Moselmane is on leave from the parliament and suspended from the ALP.
Part of the investigation was into a group Zhang had on WeChat, a Chinese social media platform, that included the journalists as well as Chinese scholars. The ABC reported on Wednesday that two Chinese scholars on the chat group subsequently had their Australian visas cancelled.
The timing of the raids on the journalists coincided with raids on Moselmane and Zhang.
Asked about the Global Times claim, the Chinese embassy in Canberra said in a statement: “We have provided consular support to Chinese journalists in Australia and made representations with relevant Australian authorities to safeguard legitimate rights and interests of Chinese citizens.”
Citing a “source” the Global Times said: “Australia flagrantly infringed on the legitimate rights and interests of journalists from Chinese media and institutions in Australia in the name of a possible violation of Australia’s anti-foreign interference law”.
The Chinese have sat on the information about their journalists for more than two months.
This week the ABC’s Bill Birtles and the Australian Financial Review’s Michael Smith were rushed out of China after Australian government concern for their security.
Last week multiple Chinese security officials arrived after midnight at the homes of Birtles and Smith, in Beijing and Shanghai respectively. They were told they couldn’t leave the country without answering questions.
The men had been making arrangements to depart, on advice from the Australian foreign affairs department, after Australian journalist Cheng Lei, who worked for China’s English-language state broadcaster CGTN, was recently taken into custody.
The Chinese government says Cheng is suspected of activities endangering China’s national security.
Birtles and Smith contacted Australian officials following the late night visits, and were placed under diplomatic protection, with negotiations undertaken to enable them to return to Australia.
The Chinese made the journalists’ exit conditional on their being interviewed. Smith said the interview included some questions about Cheng whom he had only met once, in passing.
In a full-on attack, the Global Times wrote: “Freedom of the press has become political correctness for Australian authorities. When they spread fake information, smear and attack other countries, they call it ‘freedom of the press’, but when they see information they don’t want to see, they choose to crack down for political purposes, experts said.
“Chinese journalists in Australia strictly comply with Australian laws and have good professional conduct.”
The article said that in the past 20 years, “Australia has passed more than 60 rules restricting ‘press freedom’.
“Australia’s major media outlets launched a joint campaign on October 21, 2019 to protest government restrictions on press freedom, by blacking out copy on front pages.
“Australian authorities have not been satisfied with only extending their black hands to domestic media, and have blatantly raided the residences of Chinese journalists in Australia, regardless of the basic norms of international relations and China-Australia relations, analysts said.
“Analysts said what Australia did was not just driven by Australia’s traditional ideological bias, but also showed that it’s a follower of ‘Uncle Sam’”, the Global Times said.
It also accused Australia of having “hyped” the Cheng case.
The Australia-China relationship is unravelling at a pace that could not have been contemplated just six months ago.
In recent days, the ABC’s Bill Birtles and the Australian Financial Review’s Mike Smith were forced to flee China following intimidation by security agencies and the imposition of an exit ban, later lifted following negotiations led by Australian diplomats.
Chinese media outlets then alleged that Australia’s security agencies raided the properties of several Chinese journalists in June in connection with a foreign interference investigation involving NSW MP Shaoquett Moselmane.
With no sign of the political tensions between Australia and China easing, the big danger in all of this is the erosion of the economic and people-to-people ties that were once the glue holding the relationship together.
If this goes, the events of recent days might only be a starting point in a broader bilateral decoupling that offers little prospect for the protection — let alone advancement — of Australia’s national interest.
Political tensions between the two countries date back to at least 2017. Apart from a brief “reset” when then-Prime Minister Malcolm Turnbull gave an upbeat speech on China at the University of New South Wales in August 2018, the trajectory of ties at the government level has been downhill since then.
Yet, the economic relationship continued to flourish, with two-way trade growing from $183.5 billion in 2017 to $251.4 billion in 2019.
And people-to-people ties appeared to offer cause for optimism, too.
Vigorous cooperation was seen in other areas, such as Chinese researchers emerging as Australia’s leading partners in producing scientific and research publications.
In the background, however, there were signs of worrying developments.
Ten years ago, it wasn’t hard for foreign academics to find Chinese colleagues willing to talk openly about politically sensitive issues in a private setting, or even modestly depart from the Chinese government’s line in a public forum, such as an academic conference.
But in June, Frances Adamson, Australia’s former ambassador to China and now head of the Department of Foreign Affairs and Trade, reflected that while China has academics who have spent their lives working on and with Australia,
when I read now what they say publicly, that nuance that existed before is gone.
This unwillingness to depart from the official line stems from the heightened censorship and illiberal turn China has taken in recent years. This has been instigated by the Chinese Communist Party — and in particular, President Xi Jinping — as they have become increasingly paranoid their grip on power is under attack.
A prominent Chinese government narrative now alleges “black hands” connected to “foreign forces” are at work trying to undermine the country’s leadership.
This sensitivity has been sharpened by US government rhetoric. In July, US Secretary of State Mike Pompeo stopped not far short of declaring a policy of regime change in China, saying
We must also engage and empower the Chinese people – a dynamic, freedom-loving people who are completely distinct from the Chinese Communist Party.
But changing the CCP’s behaviour cannot be the mission of the Chinese people alone. Free nations have to work to defend freedom.
While the Australian government has deliberately put distance between itself and the Trump administration, Beijing remains wedded to the idea Australia is a US lackey, despite significant evidence to the contrary.
Australians appear to have already been caught up in the consequences.
Academic and blogger Yang Hengjun, a China-born Australian citizen, has been detained since January 2019, accused of “engaging in criminal activities endangering [China’s] national security”.
And last month, the Chinese-Australian journalist Cheng Lei was also detained under suspicion of carrying out “criminal activities” endangering China’s national security.
This came just weeks after the Australian government changed its travel risk advisory to warn Australians might be “arbitrarily detained” in China.
These moves have had a chilling effect on the people-to-people ties that once formed the ballast of China-Australia relations.
PwC’s Asia practice leader, Andrew Parker, said some in the business community are starting to ask the question, “are we actually safe here now”?
But importantly, not all the developments are one-way.
The ABC has reported that two leading Chinese academics in the field of Australian studies were also caught up in the investigation into the alleged Chinese plot to infiltrate the NSW parliament, resulting in their visas being revoked.
One of the academics, Chen Hong, the director of the Australian Studies Centre at East China Normal University, rejected the allegations.
There were signs before the dramatic developments of this week that some Chinese journalists and academics were becoming wary of engaging with foreigners due to rhetoric directed at China, as well as policy actions taken by Australia.
In one of his last stories for the AFR before leaving China, Smith reported that Chinese academics had told him they were cutting off communications out of
fear they will be accused of being Communist Party infiltrators.
Some Chinese observers believe national security concerns are not the only factor in what is unfolding in Australia.
Moselmane’s lawyers are seeking an investigation into whether the media were tipped off before the Australian Federal Police raid on his home in June.
This possibility raises questions about whether the source of the alleged leak saw an opportunity for domestic political gain or to push another barrow, such as adding to Australia-China tensions.
At the same time, academics at Australian universities, many of whom were born in China, have been put under the spotlight in News Corp outlets for allegedly having links to the Chinese government. The fact that none of these academics have to date been identified by Australian law enforcement agencies as having done anything wrong appears to count for little.
It’s becoming clear the fears of being caught up as “pawns in a diplomatic tussle” (as Birtles described it) are real now for journalists, academics and business people — those who used to believe they could continue to work in both countries, without significant concerns about political disputes.
The Thousand Talents Plan is a Chinese government program to attract scientists and engineers from overseas. Since the plan began in 2008, it has recruited thousands of researchers from countries including the United States, the United Kingdom, Germany, Singapore, Canada, Japan, France and Australia.
While many countries try to lure top international research talent, the US, Canada and others have raised concerns that the Thousand Talents Plan may facilitate espionage and theft of intellectual property.
China has long been suspected of engaging in hacking and intellectual property theft. In the early 2000s, Chinese hackers were involved in the downfall of the Canadian telecommunications corporation Nortel, which some have linked to the rise of Huawei.
These efforts have attracted greater scrutiny as Western powers grow concerned about China’s increasing global influence and foreign policy projects such as the Belt and Road Initiative.
Last year, a US Senate committee declared the plan a threat to American interests. Earlier this year, Harvard nanotechnology expert Charles Lieber was arrested for lying about his links to the program.
In Australia, foreign policy think tank the Australian Strategic Policy Institute recently published a detailed report on Australian involvement in the plan. After media coverage of the plan, the parliamentary joint committee on intelligence and security is set to launch an inquiry into foreign interference in universities.
The Chinese Communist Party (CCP) developed the Thousand Talents Plan to lure top scientific talent, with the goal of making China the world’s leader in science and technology by 2050. The CCP uses the plan to obtain technologies and expertise, and arguably, Intellectual Properties from overseas by illegal or non-transparent means to build their power by leveraging those technologies with minimal costs.
China’s technology development and intellectual property portfolio has skyrocketed since the launch of the plan in 2008. Last year China overtook the US for the first time in filing the most international patents.
The plan offers scientists funding and support to commercialise their research, and in return the Chinese government gains access to their technologies.
In 2019, a US Senate committee declared the plan a threat to American interests. It claimed one participating researcher stole information about US military jet engines, and more broadly that China uses American research and expertise for its own economic and military gain.
China’s quest for techno-military supremacy
Dozens of Australian and US employees of universities and government are believed to have participated in the plan without having declared their involvement. In May, ASIO issued all Australian universities a warning about Chinese government recruitment activities.
On top of intellectual property issues, there are serious human rights concerns. Technologies transferred to China under the program have been used in the oppression of Uyghurs in Xinjiang and in society-wide facial recognition and other forms of surveillance.
The Chinese government has established more than 600 recruitment stations globally. This includes 146 in the US, 57 each in Germany and Australia, and more than 40 each in the UK, Canada, Japan and France.
Recruitment agencies contracted by the CCP are paid A$30,000 annually plus incentives for each successful recruitment.
They deal with individual researchers rather than institutions as it is easier to monitor them. Participants do not have to leave their current jobs to be involved in the plan.
This can raise conflicts of interest. In the US alone, 54 scientists have lost their jobs for failing to disclose this external funding, and more than 20 have been charged on espionage and fraud allegations.
In Australia, our education sector relies significantly on the export of education to Chinese students. Chinese nationals may be employed in various sectors including research institutions.
These nationals are targets for Thousand Talents Plan recruitment agents. Our government may not know what’s going on unless participants disclose information about their external employment or grants funded by the plan.
Heng Tao Shen was recruited by the Thousand Talents Plan in 2014 while a professor at the University of Queensland. He became head of the School of Computer Science and Engineering at the University of Electronic Science and Technology of China and founded a company called Koala AI.
Members of Koala AI’s research team reportedly now include Thousand Talents Plan scholars at the University of NSW, University of Melbourne and the National University of Singapore. The plan allows participants to stay at their overseas base as long as they work in China for a few months of the year.
The company’s surveillance technology was used by authorities in Xinjiang, raising human rights issues. Shen, who relocated to China in 2017 but was as an honorary professor at the University of Queensland until September 2019, reportedly failed to disclose this information to his Australian university, going against university policy.
Most participants in the plan are not illegally engaged and have not breached the rules of their governments or institutions. With greater transparency and stricter adherence to the rules of foreign states and institutions, the plan could benefit both China and other nations.
Governments, universities and research institutions, and security agencies all have a role to play here.
The government can build partnership with other parties to monitor the CCP’s talent recruitment activities and increase transparency on funding in universities. Investigations of illegal behaviour related to the talent recruitment activity can be conducted by security agencies. Research institutes can tighten the integrity of grant recipients by disclosing any participation in the talent recruitment plans.
More resources should be invested towards compliance and enforcement in foreign funding processes, so that researchers understand involvement in the Thousand Talents Plan may carry national security risks.
Following US government scrutiny in 2018, Chinese government websites deleted online references to the plan and some Chinese universities stopped promoting it. The plan’s website also removed the names of participating scientists.
This shows a joint effort can influence the CCP and their recruitment stations to be more cautious in approaching candidates, and reduce the impact of this plan on local and domestic affairs.
Correction: This article has been updated to reflect the fact that Heng Tao Shen ceased to be an honorary professor at University of Queensland in September 2019.