Mapping China’s Tech Giants: Supply chains & the global data collection ecosystem

his report accompanies the re-launch of our Mapping China’s Technology Giants project.

This report is available for download in English and Arabic.

Other Reports that are part of this project include:

What’s the problem?

Most of the 27 companies tracked by our Mapping China’s Technology Giants project are heavily involved in the collection and processing of vast quantities of personal and organisational data — everything from personal social media accounts, to smart cities data, to biomedical data.1 Their business operations—and associated international collaborations — depend on the flow of vast amounts of data, often governed by the data privacy laws of multiple jurisdictions. Currently, however, existing global policy debates and subsequent policy responses concerning security in the digital supply chain miss the bigger picture because they typically prioritise the potential for disruption or malicious alterations of the supply chain. Yet, as we have defined it in this report, digital supply-chain risk starts at the design level (Figure 1).

For the People’s Republic of China (PRC), the designer is the Chinese party-state, through expectations and agenda-setting in laws and policy documents and actions such as the mobilisation of state resources to achieve objectives such as the setting of technology standards. It’s through those standards, policies and laws that the party-state is refining its capacity to exert control over companies’ activities to ensure that it can derive strategic value and benefit from the companies’ global operations. That includes leveraging data collection taking place through those companies’ everyday global business activities, which ASPI’s International Cyber Policy Centre (ICPC) described in the Engineering global consent report.2 Technology isn’t agnostic—who sets the standards and therefore the direction of the technology matters just as much as who manufactures the product. This will have major implications for the effectiveness of data protection laws and notions of digital supply-chain security.

What’s the solution?

This report recommends that governments, businesses and other organisations take a more multidisciplinary approach to due diligence. That approach needs to take into account the core strategic thinking that underlies the ways the Chinese party-state uses technology. It must also take into account the breadth of what’s considered to be ‘state security’ in China and the ramifications of the PRC’s cyber- and data-focused laws and regulations.

All governments should improve their regulatory frameworks for data security and privacy protection.

Doing so will put them in better ethical and legal positions to take meaningful long-term policy actions on a whole suite of issues. However, those efforts in isolation won’t solve all of the unique challenges posed by the Chinese party-state or other geopolitical challenges described in this report.

A more holistic approach, which would help to ensure that data is better protected, also requires a better definition of digital supply-chain risk and a reframing of global policy debates on these issues. There needs to be a greater understanding of how supply-chain risks manifest, including the intentional introduction of access and more subtle monitoring and information collection by malicious actors. Specific actions for managing potential data insecurity and privacy breaches in supply chains should include improving risk-based approaches to the regulation of data transfers.

Figure 1: Compromise of the digital supply chain without a malicious intrusion or alteration

Source: ASPI authors’ illustration.

1. The PRC’s data ecosystem

The PRC’s global data collection ecosystem was outlined in the ASPI ICPC policy report Engineering global consent: the Chinese Communist Party’s data-driven power expansion.3 In that report, we described ways the Chinese party-state directly and indirectly leveraged PRC-headquartered commercial enterprises to access troves of data that those enterprises’ products help generate.

That report was based on how the Chinese party-state articulated its objectives on data use and state security and a case study of the propaganda department–linked company Global Tone Communication Technology Co. Ltd (which we expand on in the ‘Downstream data access’ section of this report).

As part of the Mapping China’s Technology Giants project, we have identified the need to further define the PRC’s ‘global data ecosystem’ concept. In this section, we focus on the nature of interactions between political agenda-setting, active shaping of international technical standards, technical capabilities, and data as a strategic resource. This directly affects companies’ business activities, both domestic and global (Figure 2).

Figure 2: The PRC’s data ecosystem

Source: ASPI authors’ illustration.

The PRC’s data ecosystem begins with technical capability. That includes China’s advanced cyber offensive skills, but also extends to its companies’ normal business operations anywhere in the world providing access, collection, data processing or any combination of the three to the party-state.

The party-state’s ability to obtain large amounts of personal information and intellectual property through its state-sponsored cyber operations has been widely reported in detail, including in indictments by the US Department of Justice.4 However, the PRC’s policies and legislation— purposefully shaped by the Chinese Communist Party (CCP)—mean that the party-state’s ability to access data is extended even further than the normal operations of PRC-based companies with a global presence. It’s also consequential that those globally influential PRC-based technology companies occupy every layer of the ‘technology stack’.

In Table 1, we illustrate the ‘technology stack’ by using the ISO standard Open Systems Interconnection model as a reference (because it’s used for networking and data exchange but can also be illustrative of the technology industry ecosystem).5 We then charted it against the relevant companies in the Mapping China’s Technology Giants project and their US counterparts, which for several decades have had a dominant presence in every layer.

Table 1: Technology business ecosystem, referencing a simplified Open Systems Interconnection model

Source: ASPI authors’ illustration.

Technology companies everywhere are primarily driven by commercial interests. The difference between the US and China is that in China the way the state conceives of the usefulness of data goes beyond traditional intelligence collection. For the Chinese party-state, data and the information derived from it contribute to everything. Domestically, that ranges from solving policy problems to information control and state coercion. Globally, it ranges from expanding the PRC’s role in the global economy to understanding how to shape and control its global operating environment. In the next two sections, we elaborate on how the Chinese party-state’s laws, policies and actions, which apply to PRC-based technology companies, create an ecosystem that provides it with access to the data that those companies can obtain.

1.1 Who sets the standards matters

Technology isn’t values-agnostic. It takes on the values of its creator. Therefore, who sets the standards, and consequently the direction of the technology, matters. We know, for instance, that artificial intelligence has a history of racial and socio-economic bias built in from the design stage, reflective of the inherent biases of the designers and the choice of data used to train the algorithms.6

Technologies must be designed to be ‘values-neutral’7 to avoid those problems, but that aspiration might not ever be realistic.8

Liberal democracies don’t agree on what ‘values’ mean in this context. The European Union, for example, is increasingly prioritising indigenous technology development not just because of strategic competitors such as the PRC but also because of the US. That requires navigating often complex relationships with US-based technology giants such as Google, Apple and Facebook.9

Part of protecting values in any liberal democracy is about preventing the creep of illiberalism from sources both domestic and foreign. It’s also about introducing regulations and standards that protect the norms and freedoms underpinning democratic values. When it comes to Europe and the digital economy, much of that effort is currently targeted towards holding US technology companies accountable.10

The Chinese party-state is creating mechanisms and power structures through which it can ensure its ultimate and maximum access to datasets both domestically and globally. This is apparent through its agenda-setting (articulated in party and policy documents), its expectation-setting (signalled through new laws) and communications from the CCP (such as speeches and state media reporting). Part of the CCP’s effort takes place through the PRC’s attempts to set standards that guide the design of technologies. For example, PRC facial recognition systems are required to be designed to recognise ‘Uyghur faces’.11 Another example is big data platforms and systems designed to categorise individuals based on a politicised version of whom the CCP deems suspicious or potentially threatening (such as petitioners, Tibetans, Uyghurs or Falun Gong practitioners).12 Within the PRC, technologies are already being researched and developed to meet the needs of the party-state (see section ‘Data regulations: setting the standards’). When those technologies are exported, such design features can’t be erased by the technology’s end-user, whether it’s a global company or a foreign government.

1.2 Harnessing the strategic value of data

The Chinese party-state has deliberately formulated a strategy to harness the strategic value of data and the power of information to grow the power of the CCP over society. In 2013, Xi Jinping was quoted as saying, ‘big data is the “free” resource of the industrial society. Whoever has a hold of the data has the initiative.’13

In 2016, China’s 13th Five-Year Plan pushed for the creation of a ‘big data security management system’ alongside efforts to improve cyberspace governance by building an international consensus around the PRC’s ideas on cyberspace security.14 The 14th Five-Year Plan, unveiled in 2021, continues the party-state’s multifaceted priorities for the development and use of big data for economic and social governance and calls for building new data infrastructure and improving the rules governing data collection, storage and use.15

In addition to economic development, the party-state often describes big data technologies as contributing to ‘social management’ (also called ‘social governance’).16 Social management covers a broad and overlapping list of agenda items, from creating capabilities to improve public service administration to strengthening ‘public security’. Ultimately, social management refers to the party-state’s management of itself as well as of society. This process relies on shaping, managing and controlling its operating environment through capabilities that enhance service provision and the capacity for risk management.17

New and emerging digital technologies are valued because they’re viewed as a resource that can improve everyday governance capacity and facilitate problem-solving. In simplifying government service provision, the implementation of those technologies can in future facilitate communication across the PRC’s sprawling government apparatus.18 Digital and data-driven technologies obviously have multiple uses. For example, they can help streamline urban and social welfare services. In other respects, those same services can feed into the party-state’s totalitarian model of governance and the way it identifies and responds to what it believes are emerging threats.

This use of data occurs in ways that provide both convenience and control. Routine services are intertwined with surveillance and coercive tools in ways that are often not legally possible in liberal democratic societies—or, when they do occur, can be genuinely challenged by the public, media and civil society. That distinction doesn’t simply apply to the ways different PRC Government departments use similar technologies (such as ways the public security bureaus use technologies versus the ways industrial work safety offices use them).

One example is Human Rights Watch’s findings on Xinjiang’s Integrated Joint Operations Platform, which is used to centrally collect data on individual behaviours and flag ‘those deemed potentially threatening’. One metric used to identify threats is energy usage from smart electricity meters: abnormally high energy use could indicate ‘illegal’ activity, but such meters in their normal use would also improve the accuracy of meter readings.19 Another example is building datasets for use in the PRC’s ‘national defence mobilisation system’ (a crisis response platform) using data sourced from a variety of government cloud networks, from smart cities to tourism-related cloud networks (Figure 3).20

Figure 3: The concept of defence mobilisation and smart cities data integration and processing

Source: ASPI authors’ illustration.

Despite the benefits it can derive, the CCP also sees sources of harm emerging from technology and its use, and it realises that technology isn’t an all-encompassing solution to its problems. Xi Jinping has described science and technology as a double-edged sword: ‘On one hand, it can benefit society and the people. On the other hand, it can also be used by some people to damage the public interest and the interests of the people.’21 Such risks could include companies or officials having the ability to exercise too much power with the aid of technology.22 They could also include the use of technology by the CCP’s political opponents to organise against the party-state, from either inside or outside the PRC.23

1.3 A global outlook

The PRC’s plans to harness the strategic value of data and the power of information to grow state power are also globally oriented. The party-state sees its reliance on technologies originating in the West (especially the US) as a threat to state security, for fear of how foreign powers might exploit that reliance, especially in a crisis.24 That fear helps drive the development of the PRC’s indigenous technology capabilities.25 Its capability effort includes planning on big data development to build an ‘industry ecosystem’ with ‘globally oriented key enterprises and innovative small- and medium-sized enterprises with distinctive features’.26 It also includes a plan to export PRC-originated technology standards, envisioned through the China Standards 2035 project.27 Economic benefits and objectives are included in each plan, but through them the CCP also sets specific political ambitions.

As part of its global vision (see Figure 4), the Chinese party-state ensures that it’s a part of the market-driven expansion and success of its global technology giants. Under Xi Jinping, the government has increasingly demonstrated the extraterritoriality inherent in PRC state security concepts and law. Moreover, the fact that companies have the right to do business in China at the party-state’s discretion has become abundantly clear. The ability to harness the benefits of data would help to achieve the CCP’s global vision because, through the processing and application of that data, the party can improve the sophistication of its efforts to shape, manage and control its global operating environment.

Figure 4: Explainer: The Chinese party-state’s vision for the PRC in the world

Sources: ASPI authors’ illustration. See endnote for detailed citations.28

2. The PRC’s developing data security framework

PRC legislation related to state security29 provides reasons for foreign governments to be concerned about the exposure of any PRC-based commercial enterprise to the political demands of the party-state.30 Recent state security laws, such as the 2017 Intelligence Law, haven’t changed the longstanding de facto practice of state power in the PRC, but have further codified expectations in China that every citizen is responsible for state security.31 Assessments of those risks have helped address what should be the obvious political and legal risks of doing business with PRC-based technology companies.

Some analysts have attempted to downplay the significance of such laws by claiming that the law is never black and white in the PRC and by describing compliance with PRC law as ‘a negotiation’.32 The latitude of officials to enforce the law and corporations’ efforts to maintain their freedom of action leave open grey areas, but that claim, in the context in which it’s being made, is false. Law may be a negotiation in the PRC, as it is elsewhere, but the party-state decides whether there’s a negotiation at all, and where that negotiation ends. 

Critically, the party-state itself isn’t bound by the law when it’s challenged or when its interests are threatened. A recent illustration of this is Alibaba and its founder, Jack Ma, who briefly ‘disappeared’ at the end of 2020 following his public criticism of PRC regulators’ attitude towards big business, accusing them of having a ‘pawnshop’ mentality that stifled innovation.33 In April 2021, it was announced that Alibaba would be fined US$2.8 billion after a probe determined that it had abused its market position for years.34 Nobody in the PRC is too big or too powerful to be subject to the party-state’s demands.35

PRC-based technology companies themselves have acknowledged their exposure to legal risks emanating from the PRC. It’s standard practice for global companies to acknowledge in their privacy policies that user data may be transferred and governed by laws outside of their own jurisdiction.

According to most privacy policies for websites and products of the 27 companies in our Mapping China’s Technology Giants project, users who live outside the PRC may have their data transferred to and processed and stored in a country that isn’t where they reside or have ordered services from, including the PRC, where all of the companies have business. When the data is transferred it will be governed by the law in that country’s jurisdiction, not only the law in the place where the data originated (Figure 5).36

Figure 5: New Mapping China’s Technology Giants product—‘Thematic snapshots’

Source: Mapping China’s Technology Giants project website, online.

Most of the 27 companies state that they’re committed to protecting personal information, but acknowledge that they may be required to disclose personal data to meet law enforcement or state security requirements. The definition of what meets the threshold of being a national security or criminal case can be highly politicised in the PRC, and the process of definition isn’t similar to those that occur in a liberal democracy.

The political system of the PRC creates this risk. Law in the PRC is first and foremost political and a governing tool that enforces political power. It’s meant to be wielded by the party-state and to uphold and expand the power of the state. Its implementation is reliant on the CCP’s leadership and is used to strengthen the party’s governing capacity, but the law isn’t above the party-state even if it’s used to manage its members.37 Nonetheless, the law is more than a blunt weapon of state power. It’s important to think through the implications of the fact that the law also functions as a tool to set and communicate the state’s expectations of its apparatuses, its entities and individuals. New developments related to data collection, storage and transfer make these issues more apparent.

The Chinese party-state is currently deliberating on a draft Data Security Law (DSL) and draft Personal Information Protection Law (PIPL).38 In April 2021, second draft versions were issued publicly (see the appendix to this report for translations of the articles of the draft laws that we focus on in this section). Both are expected to become law in 2021. The third and probably final version of the draft DSL is expected to be deliberated at a National People’s Congress Standing Committee meeting on 7–10 June 2021.39

These laws don’t exist in a vacuum. They should be read along with a suite of other relevant state security legislation, including, for example, the State Security Law (2015) and the Cybersecurity Law (2016).

2.1 Data regulations: limiting individuals and organisations while empowering the state

The draft DSL and draft PIPL should be read together. The main distinction is that the draft DSL lays out the responsibilities of the state in creating a data security system and in guaranteeing data security, whereas the draft PIPL defines the boundaries and personal information protection requirements for individuals and entities.40

What makes the framework unique, compared to any other country’s laws regulating data security, is that data security is unambiguously part of the party-state’s security strategy and is first about protecting the CCP’s monopoly hold on power (Figure 6). The draft DSL says that the effort to guarantee data security must adhere to the party-state’s ‘comprehensive state security outlook’.41

The draft establishes the state as the leader of the data security system, stating that the ‘central state security leading mechanism’ is ‘responsible for decision making and overall coordination on data security work, and researching, drafting and guiding the implementation of national data security strategies and relevant major guidelines and policies.’42

Figure 6: Explainer: The PRC’s state security concept

Figure 6 (continued): Explainer: The PRC’s state security concept

Sources: ASPI authors’ Illustration. See endnote for detailed citations.43

The law says not only that a party entity is in charge, but also that any significant policies will originate there. The term ‘central state security leading mechanism’ in legal documents is synonymous with the Central State Security Commission, which is a CCP body led by Xi Jinping.44 Therefore, the activity of other state regulatory departments and public and state security organs responsible for implementing data security efforts would flow from the decision-making and strategy that the Central State Security Commission is tasked with overseeing and implementing.45

The draft DSL also applies to data-handling activities taking place ‘outside the territory of the PRC’, if those activities are seen to ‘harm the state security, the public interest, or the lawful rights and interests of citizens’ and organisations of the PRC, they are to be pursued for legal responsibility ‘in accordance with law.’ Existing law and practice illustrate the global application of such concepts.

Hong Kong’s new National Security Law, passed in 2020, criminalises ‘separatism’, ‘subversion’, ‘terrorism’ and ‘collusion’ in addition to support for any of those activities by anyone, no matter where in the world they’re located.46

The draft PIPL, meanwhile, is intended to regulate the power of individuals and entities who handle the personal data of PRC citizens both inside and outside the country. It establishes a more robust system for protecting individuals’ data privacy from individuals and companies.47 It applies to activities outside the PRC involving the handling of personal information of natural persons within the territory of the PRC when those outside actors are providing products or services to persons within the PRC, analysing and assessing the conduct of natural persons within PRC or ‘other situations provided for by law or administrative regulations’. Just like the draft DSL, it leaves open the potential that the law can be used as intended: to protect the CCP’s power wherever necessary. Laws such as the Intelligence Law illustrate specific cases in which other legislation might be used to justify this reach, and a law such as the Hong Kong National Security Law illustrates the fact that political opponents of the party-state might also be targeted in vague ‘other situations’.48

The draft PIPL also superficially applies to the state. For example, it says that any retrieval of personal information requires following ‘legally prescribed duties’ and must be done ‘in accordance with the authority and procedures provided by laws’.49 Yet, Article 19 establishes that: [W]hen personal information handlers handle personal information, where there are circumstances that laws and administrative regulations provide shall be kept confidential or need not be announced, it is acceptable not to notify the individual.

On the basis of that logic, any case in which the 2017 Intelligence Law applies could be excluded from the PIPL’s protections. Article 7 of the Intelligence Law says that: [A]ny organisation and citizen shall in accordance with the law, support, provide assistance, and cooperate in national intelligence work, and guard the secrecy of any intelligence work they are aware of.50

The important takeaway is that digital technology can be applied in ways that expand the aforementioned capabilities of the party-state, but governance of its use can be managed in ways that restrict officials’ discretion in applying it. This doesn’t mean, however, that these regulations limit the party-state’s influence. In reality, the regulations enhance their ultimate influence over digital technologies and the flow of data.

2.2 Data regulations: setting the standards

Both draft laws contain directives on how the party-state expects data security and data privacy regimes to develop. They establish that, in the PRC, data shall be collected, stored and processed in a manner that’s consistent with the party-state’s paramount security concepts and objectives. Especially given the party-state security concept guiding data security, it’s notable that Xi Jinping has called for strengthening ‘the Party’s leadership over standardisation work’ and has described standardisation as the ‘commanding heights’ of international economic and technological competition.51

Beyond establishing which institutions are in charge and who is responsible for data security, the draft DSL also establishes expectations about how the PRC’s standardisation system is to function that are specific to data security. The draft DSL says that State Council administrative departments and other relevant State Council departments are responsible for organising ‘the formulation and appropriate revision of standards related to technology and products for the development and use of data and to data security.’52 The most relevant body under the State Council is the Standardisation Administration of China (SAC), which is an agency under the State Administration for Market Regulation. According to the revised 2017 Standardisation Law,53 the SAC is required to oversee standards initiation and implementation. At the practical level, technical committees develop standards, which are then accredited by the SAC.54

The technical committees working on the standards consist of stakeholders that are mostly government entities, government-linked research institutes and commercial enterprises. Many standards they develop are mandatory requirements, which companies must also meet to successfully bid for a project domestically. A March 2021 report by IPVM pointed to documents such as ‘GA/T1400.3—2017’ on ‘public security video image information application systems’ developed by the Science and Technology Information Technology Bureau of the Ministry of Public Security in coordination with several companies included in the Mapping China’s Technology Giants project, including Uniview, Hikvision and Dahua.55

As the standards develop domestically, they’ll also be projected globally, not just through market activity but also as the PRC seeks to participate and shape international technology standards. The SAC is also responsible for representing the PRC at international standards-setting bodies.56 Both the draft PIPL and the draft DSL have provisions stating that the state is required to participate in setting international rules and technology standards for data security and personal information protection.57

The expansiveness of that expectation-setting creates normalised pathways for the PRC to exploit data-sharing downstream in ways that can undermine the security of other countries, as we describe in the next section.

3. Rethinking digital supply-chain vulnerability

Not all methods used to acquire data need to be intrusive, subversive, covert or even illegal—they can be part of normal business data exchanges. Figure 1 illustrates how a digital supply chain can be compromised without a malicious intrusion or alteration. The data-sharing relationships that bring commercial advantages are also the same ones that could compromise an organisation.

Thinking about risk solely in terms of potential disruption ignores the ways in which supply-chain risk can emerge from normal processes, in which no disruption is required.

The vulnerability of supply chains was made apparent by the Covid-19 pandemic, which made supply-chain resilience even more important. As we become more digitally interconnected, the breadth of what’s considered a risk to the supply chain has grown to include risks to the digital supply chain—the electronic products we rely on and the data that flows through them.

Discussions about digital supply-chain security typically prioritise the potential for disruption or malicious alterations of the supply chain. Examples include cyberattacks, altered components inserted into the supply chain and limited access to critical supplies such as semiconductors. That kind of risk from well-resourced state and non-state actors is already well understood by governments thinking about supply-chain security.58 As we noted in the section on ‘The PRC’s data ecosystem’, the PRC’s sophisticated offensive cyber capability and its ability to obtain data through those methods are also well known. But a digital supply chain threat doesn’t necessarily require malicious alterations or cyber intrusions into a network.

The SolarWinds supply-chain attack of 2020 is one example of a supply-chain cyberattack perpetrated through the malicious insertion of software. In that case, threat actors, probably of Russian origin,59 compromised the software update service for the SolarWinds Orion platform to facilitate the distribution of malicious code to Orion customers.60

Another cybersecurity risk in the supply chain that’s hidden in plain sight comes from ‘white labelling’ of original equipment manufacturer (OEM) products.61 That was the case with US-headquartered Honeywell, which came under scrutiny in 2018 for selling Dahua cameras under its own brand, as Dahua was banned in the US under the National Defense Authorization Act.62 A simple example of risk for customers in this situation is that they may be monitoring cybersecurity vulnerabilities for Honeywell products, not knowing that in fact they should also be monitoring vulnerabilities for the underlying Dahua product.

Other areas of discussion include vendor trustworthiness. The 5G vendor debate within Australia a few years ago brought to light the importance of the ownership and control of network infrastructure.63 More broadly, it made organisations consider the risk of the vendors whose equipment their organisations’ data would be passing through and the obligations that those vendors have to their ‘home’ governments.64 Australia’s lead cybersecurity agency, the Australian Cyber Security Centre, in its guidance to organisations on identifying digital supply-chain risks, addresses this need to take into consideration foreign control, influence and interference.65

While these discussions are likely to lead to important policy responses that address some digital supply-chain vulnerabilities, they don’t capture the full scope of risk that currently exists. In the SolarWinds and Honeywell examples above, those charged with ensuring cybersecurity usually look for changes to normal activity as an indicator of a problem or threat. In cases where the risk lies within standard data exchange processes, therefore, it could be easily missed. 

3.1 Downstream data access: the GTCOM case study

The ASPI ICPC policy brief Engineering global consent focused on Global Tone Communication Technology Co. Ltd (GTCOM), which is a subsidiary of a state-owned enterprise directly controlled by the Central Propaganda Department of the CCP that collects bulk data globally in support of the party-state’s propaganda and state security objectives.66 The data ecosystem emerging from GTCOM’s commercial partnerships includes some of the PRC’s largest and most important technology companies. For GTCOM, strategic cooperation with globally recognisable PRC-based companies—notably Huawei and Alibaba Cloud—provides assistance in two key areas in the form of:

  • the opportunity to conduct bulk data collection by providing translation services to both companies, which have deeper market penetration
  • the development of or access to capabilities that support its bulk data collection.

As Figure 7 shows, GTCOM has commercial partnership agreements that provide it with access to bulk data from other PRC-based technology companies.

Data transfers can occur through processes built directly into the ecosystem. A technology company such as GTCOM provides an important case study in how the data ecosystem could reach far beyond the PRC’s data regulatory regime.

Figure 7: GTCOM and the global data collection ecosystem concept

Sources: ASPI authors’ illustration.

3.2 Processing power

The party-state prioritises data collection domestically and globally. As we’ve described above, it’s building an ecosystem that enables access to any bulk data collected through commercial enterprises.

It further recognises that technology will eventually catch up to its ideas for processing and generating specific outputs. Being able to collect data is useful, but it’s the ability to access and aggregate data for analysis and derive useful insights from it that’s powerful.

The business model of internet giants such as Facebook, Google, ByteDance and Tencent heavily relies on data and the use of artificial intelligence. They collect large volumes and many varieties of data from users of their service platforms. For example, they may collect such things as user platform preferences, platform behaviours (such as how long it took an individual user to click from one page to another), how long the user stayed on a page, what products they put into their shopping cart and who their friends are, as well as real-world information such as the running routes of the user and the user’s home location. The data is aggregated to generate profiles of individual users for marketing and advertising purposes, and also to improve the platform. That in turn leads to greater user engagement and provides additional opportunities to collect more data. Data brokers perform a similar aggregation and analysis task, but they usually use data that they’ve mined freely from the internet or purchased from other sources.

The concern isn’t necessarily that data is being collected, but rather the ability to infer sensitive details about individuals from the aggregation of seemingly innocuous bits of data from a variety of sources.

A single geolocation coordinate out of context isn’t meaningful, but, using location data from a single mobile device collected over time, it’s possible to identify an individual in a household and their pattern of life. All that’s needed is to identify their three primary locations—home, work and one other regularly used location.

That kind of data can be used to target individuals, such as by identifying and tracking the movements of the US President,67 and can identify sensitive military locations en masse,68 but it can also be used to create convenience. Google Search results provide popular times, wait times and visit durations for all users searching for a local business by using ‘aggregated and anonymised data from users who have opted in to Google Location History’.69

The use of big data analytics to monitor operations in smart cities can bring greater efficiency benefits to operations, facilitate data sharing and assist with decision-making and situational awareness overall. However, that same data, in the hands of adversaries, could give them macro-scale insights that would otherwise be difficult to obtain. If those systems are under the control of adversaries, the concern isn’t just about others having access to the data but also about adversaries’ ability to control or modify the data. As a consequence, the information used to create convenience, improve efficiency and enhance situational awareness is the same information that can be used by an adversary. The ability of some PRC-based technology companies to process big data is sufficiently large.

According to reporting in Foreign Policy, they’ve been used by the party-state to carry out intelligence tasks. According to ‘current and former officials’ cited in the report, this has included the acquisition of datasets from large data breaches, such as the 2014 cyber intrusion into the US Office of Personnel Management.70 It’s big data analysis like this that the US Central Intelligence Agency believes enabled the exposure of its undercover officers in Africa and Europe.71 The question that requires further research and analysis is why those PRC-based companies were chosen. For instance, were they chosen not just for their processing ability but also because, by ingesting the datasets and combining the data with their own holdings, they could enrich the information that could be derived from the data?

Commercial businesses aren’t the only entities carrying out large-scale data processing in the PRC.

The party-state is also doing it at the national level. The People’s Bank of China has included a ‘Big Data Analytics Centre’ as part of the design of the PRC’s ‘Digital Currency / Electronic Payments’ system. The bank’s officials have said that the data collected through the system will be used to improve macroeconomic policy. The bank will ‘analyse how money is being used, transacted, and stored; support tracking and surveillance using both static and real-time data; provide data and analysis inputs for monetary policy; and flag financial fraud’.72

Goals associated with harnessing the strategic power of data are a natural extension of long-enshrined goals in authoritative party-state documents and embedded in detailed economic policies and plans to ensure progress toward those goals.73 However, the party-state’s development of theory and policy is an iterative process and has always involved a degree of experimentation to ensure progress without too many unintended consequences.74 Control or the preservation of the CCP’s power isn’t a goal unto itself, but rather a prerequisite for achieving those ambitions. The collection, storage and processing of big data will play an increasingly key role in those efforts in future.

4. Recommendations

Adequately evaluating the risks associated with doing business with PRC-based technology companies, or companies that rely on their technologies in their supply chains, requires an understanding of the Chinese party-state’s articulation of its own intentions. It also requires an understanding of the implications of policy and legal documents that signal what steps will be taken to realise intended outcomes, as well as, of course, analysis of the party-state’s actual behaviour (domestic and global).

We recommend as follows.

1. Invest resources to better understand the PRC’s and the CCP’s articulation of their own intentions in order to set the tone for a more informed public debate that will generate targeted responses to the identified problems.

Incorrect assumptions are often made about the party-state’s intent. In addition, what’s being articulated and signalled through PRC policy and legal documents is too often ignored or not placed into the context in which it’s being articulated or signalled (such as being placed in an appropriate political context) or being described (for example, in the light of the CCP’s view that data security is a problem of state security, as the party-state defines ‘state security’).

2. Recalibrate data security policy and privacy frameworks to account for the Chinese state’s use of data to reinforce its political monopoly.

Companies and governments too often assume that other governments’ data and privacy regulations share the same goals as their own. That isn’t true when it comes to the Chinese party-state and PRC-based companies, even if common vocabularies are used or if some policy drivers are similar. In the PRC, unlike in liberal democracies, data security and privacy concepts (including draft legislation) reinforce the party-state’s monopoly power. Companies and governments need to recognise this risk and calibrate their policies to account for it.

3. Collaborate with like-minded countries to develop systems for improving risk-based approaches to improving the regulation of data transfers.

Organisations must assess the value of their data, as well as the value of that data to any potential party in their supply chain that may have access to it or that might be granted access. In an age in which information warfare and disinformation campaigns occur across social media platforms and are among the greatest threats to social cohesion, data that’s about public sentiment is as strategically valuable as data about more traditional military targets. Risk needs to be understood in a way that keeps up with the current threat landscape, in which otherwise innocuous data can be aggregated to carry meaning that can undermine a society or individuals.

4. Take a multidisciplinary approach to due diligence.

Governments, businesses and other organisations need to develop frameworks for conducting supply-chain reviews that take into account country-specific policy drivers. Developing such a framework shouldn’t be limited to just assessing a vendor’s risk of exposure to political risk. It should also include detailed analysis of the downstream actors who have access to the vendor’s data (and must include analysis of things such as the broader data ecosystem they’re a part of and the obligations those vendors have to their own governments). Taking this more holistic approach to due diligence will better ensure that data can be protected in an effective way.

Appendix: The draft Data Security Law and draft Personal Information Protection Law

Please download the PDF to access the appendix.


Acknowledgements

Thank you to Danielle Cave and Cheryl Yu for all of their work on this project. We would like to also thank our external peer reviewers Lindsay Gorman, Kara Frederick and Chris Crowley. We’re also grateful for the valuable comments and assistance provided by Peter Mattis, Tom Uren, Michael Shoebridge and Fergus Hanson.

This research report forms part of Mapping China’s Technology Giants, which is a multi-year project mapping and analysing the overseas expansion of key Chinese technology companies. The project seeks to:

  • analyse the global expansion of a key sample of China’s tech giants by mapping their major points of overseas presence
  • provide the public with analysis of the governance structures and party-state politics in which these companies have emerged, and are deeply entwined.

The Mapping China’s Technology Giants project is produced by researchers at ASPI’s International Cyber Policy Centre. The relaunch of this project, and associated research, was funded with a US$270,000 grant from the US State Department

What is ASPI?

The Australian Strategic Policy Institute was formed in 2001 as an independent, non‑partisan think tank. Its core aim is to provide the Australian Government with fresh ideas on Australia’s defence, security and strategic policy choices. ASPI is responsible for informing the public on a range of strategic issues, generating new thinking for government and harnessing strategic thinking internationally. ASPI’s sources of funding are identified in our annual report, online at www.aspi.org.au and in the acknowledgements section of individual publications. ASPI remains independent in the content of the research and in all editorial judgements.

ASPI International Cyber Policy Centre

ASPI’s International Cyber Policy Centre (ICPC) is a leading voice in global debates on cyber, emerging and critical technologies, issues related to information and foreign interference and focuses on the impact these issues have on broader strategic policy. The centre has a growing mixture of expertise and skills with teams of researchers who concentrate on policy, technical analysis, information operations and disinformation, critical and emerging technologies, cyber capacity building, satellite analysis, surveillance and China-related issues.

The ICPC informs public debate in the Indo-Pacific region and supports public policy development by producing original, empirical, data-driven research. The ICPC enriches regional debates by collaborating with research institutes from around the world and by bringing leading global experts to Australia, including through fellowships. To develop capability in Australia and across the Indo-Pacific region, the ICPC has a capacity building team that conducts workshops, training programs and large-scale exercises for the public and private sectors.

We would like to thank all of those who support and contribute to the ICPC with their time, intellect and passion for the topics we work on. 

If you would like to support the work of the centre please contact: icpc@aspi.org.au

Important disclaimer

This publication is designed to provide accurate and authoritative information in relation to the subject matter covered. It is provided with the understanding that the publisher is not engaged in rendering any form of professional or other advice or services. No person should rely on the contents of this publication without first obtaining advice from a qualified professional.

© The Australian Strategic Policy Institute Limited 2021

This publication is subject to copyright. Except as permitted under the Copyright Act 1968, no part of it may in any form or by any means (electronic, mechanical, microcopying, photocopying, recording or otherwise) be reproduced, stored in a retrieval system or transmitted without prior written permission. Enquiries should be addressed to the publishers. Notwithstanding the above, educational institutions (including schools, independent colleges, universities and TAFEs) are granted permission to make copies of copyrighted works strictly for educational purposes without explicit permission from ASPI and free of charge.

First published June 2021.
ISSN 2209-9689 (online),
ISSN 2209-9670 (print).

Cover image: ASPI ICPC, Nathan Attrill

Funding Statement: Funding for this report was provided by the US State Department.

  1. Mapping China’s Tech Giants, online. ↩︎
  2. Samantha Hoffman, Engineering global consent: the Chinese Communist Party’s data-driven power expansion, ASPI, Canberra, 14 October 2019, online. ↩︎
  3. Hoffman, Engineering global consent: the Chinese Communist Party’s data-driven power expansion. ↩︎

Mapping China’s Tech Giants: Reining in China’s technology giants

This report accompanies the re-launch of our Mapping China’s Technology Giants project.

This report is available for download in English and Arabic.

Other Reports that are part of this project include:

1. Introduction

Since the launch of ASPI ICPC’s Mapping China’s Technology Giants project in April 2019, the Chinese technology companies we canvassed have gone through a tumultuous period. While most were buoyed by the global Covid-19 pandemic, which stimulated demand for technology services around the world, many were buffeted by an unprecedented onslaught of sanctions from abroad, before being engulfed in a regulatory storm at home.

The environment in which the Chinese tech companies are operating has changed radically, as the pandemic sensitised multiple governments, multilateral groups and companies to their own critical supply-chain vulnerabilities. The lessons about national resilience learned from the pandemic are now being applied in many sectors, including the technology sector, where a trend towards decoupling China and the West was already well underway. As the geopolitical rivalry between the US and China has heightened, both sides increasingly see any reliance on the other for strategic commodities, such as rare-earth minerals and semiconductors, as dangerous vulnerabilities.

Supply-chain vulnerability has ignited work in Europe, North America and other regions to reduce dependence on China. Telecommunications companies such as Huawei and ZTE that are deemed ‘high risk’ by multiple countries are increasingly finding themselves locked out of developed markets. Amid the trade war between the US and China, which began in 2018, the Trump administration unleashed a relentless series of actions targeting Chinese companies in an effort to slow their advance. That onslaught has further convinced China’s leadership to redouble its efforts to dominate the commanding heights of technology as a source of strategic and economic power.

Among the measures meted out by the Trump administration were limits on investment by Chinese technology companies,1 blocks on the operations of Huawei and other Chinese telecom companies in the US,2 pressure on other countries to block Huawei’s operations,3 new export control regulations,4 tariffs on products benefiting from Beijing’s ‘Made in China 2025’ program5 and an attempt to ban ByteDance’s TikTok and Tencent’s WeChat apps.6 The effects of the actions have been uneven—dealing a major blow to Huawei, for example, while barely touching the major Chinese internet firms’ businesses.

For China’s leadership, the twin crises of the Covid-19 pandemic and the growing China–US strategic and technological competition highlighted the country’s need to achieve its long-held goal of ‘technological self-reliance’.7 The US’s ability to cut off China’s technology companies’ access to semiconductors, in particular, is seen by leaders from Xi Jinping down as an unacceptable ‘choke point’ holding back China’s progress.8 The 14th Five-Year Plan, unveiled in March 2021, reflected the Chinese Communist Party’s (CCP) sense of urgency. For the first time, it described technological innovation as a matter of national security, not just economic development.9

The now 27 Chinese technology firms that we cover on our Mapping China’s Technology Giants project (‘our map’) span sectors including biotechnologysurveillanceartificial intelligence (AI), e-commerce, finance, entertainment and telecommunications. All of them are set to play a key role in the coming years as Beijing ramps up major investments in strategic technologies such as 5G telecommunications, quantum computing and AI. Both state-owned and private businesses are being mobilised in a ‘whole country’ approach to reduce reliance on foreign technologies and seek breakthroughs in strategic science and technology projects.10 Beijing’s new goal is to increase R&D investment by 7% each year.11 Already, several of the companies featured on our map, including SenseTime, Huawei, ZTE, MegviiYITUCloudWalkBaiduAlibaba, Tencent and China’s three major telecommunications companies, have been recruited into a US$2 trillion ‘new infrastructure’ plan.12

Pushback on China’s technology giants didn’t just come from Washington, however; it also came from the CCP. Chinese regulators used the Covid-19 pandemic as an opportunity to tighten supervision over the companies, which had grown into behemoths with relatively light regulatory oversight in the past decade.13 The escalating geopolitical tensions with the US and the ensuing US–China trade war contributed to a government campaign to rein in Alibaba’s fintech affiliate Ant Group, as the Chinese state sought to head off risks in the banking system amid concerns that the stand-off with Washington could precipitate a financial crisis.14 Those concerns culminated in the abrupt cancellation of the company’s initial public offering (IPO), which was set to be the world’s largest ever, just two days before its launch in Shanghai and Hong Kong in late 2020.15

Since then, the CCP’s efforts to tighten state control over China’s internet companies have widened. In April 2021, Chinese e-commerce leader Alibaba Group was hit with a record US$2.81 billion antimonopoly fine, equivalent to around 4% of its 2019 domestic sales.16 A string of high-level resignations has followed as the government continues to seek to weaken the central authority of all the leaders of the major tech companies.17 China’s regulators, tasked with ‘tackling monopolies’ and ‘preventing disordered capital expansion’, have set their sights on a fundamental restructuring of the country’s biggest tech companies to ensure that they remain focused on technological innovation and align themselves even more closely with the strategic goals of the CCP.18

2. Covid-19

The Covid-19 pandemic has had a profound effect on the world economy. The International Monetary Fund estimates the global economy shrank by 4.4% in 2020, compared to a contraction of 0.1% in 2009 during the global financial crisis.19 China was no outlier in the first quarter of 2020, when its economy shrank by 6.8% in the first such contraction in at least 40 years.20 Yet, amid the turmoil, technology giants—particularly in the US and China—provided a rare bright spot as they seized the opportunity to expand aggressively.

As reliance on digital products grew during the pandemic, demand for US and Chinese technology giants’ products and services surged. The combined revenue of the largest US tech companies—Apple, Microsoft, Amazon, Google-parent Alphabet and Facebook—grew by a fifth to US$1.1 trillion, while their combined market capitalisation grew by half during 2020 to US$8 trillion.21 As of May 2021, the 27 companies we cover on our map had a combined market capitalisation of more than US$2.2 trillion, ranking them, in estimated nominal GDP terms, as equivalent to the world’s eighth largest economy, after France.22 Only three of the companies on our map—Huawei, Megvii23 and CloudWalk— experienced slowing year-on-year revenue growth.

Some of China’s internet companies, including Tencent, Alibaba, ByteDance, Huawei and biotechnology company BGI, attempted to turn the crisis into a public relations opportunity by providing financial or material assistance to countries struggling to control the Covid-19 pandemic (Figure 1). To take one example: Tencent’s Covid-19 donations from its US$100 million Covid-19 fund included medical equipment to sporting teams such as Football Club Barcelona24 and the New England Patriots25, cities such as Nashville (US)26, countries such as Ethiopia27, hospitals in Los Angeles (US)28 and Karachi (Pakistan)29, and the World Health Organization’s Covid-19 Solidarity Response Fund.30

Figure 1: China’s technology giants’ overseas donations

The Mapping China’s Technology Giants project currently counts a total of more than 130 donations by all tracked companies combined. Over eighty of those donations are Covid-19 monetary and medical donations from ByteDance, Tencent and Alibaba.

Tencent’s largesse was possible due to its oversized success. Supercharged by the pandemic, the company was able to exploit falling valuations to scoop up Norwegian game developer Funcom, take a stake in German developer Yager and make multiple investments in fintech start-ups, mainly in Europe and the US. The company currently sits on a portfolio worth roughly a quarter of a trillion dollars.31

As Chinese consumers ensconced themselves at home, Tencent’s music and video service subscriber numbers swelled to 43 million and 112 million, respectively, growing by 50% and 26% from June 2019 to 2020.32 WeChat, the company’s ubiquitous social media app, ballooned to over 1.2 billion users in the first quarter of 2020, up by more than 8% from 2019, as Tencent worked in collaboration with the Chinese Government’s National Development and Reform Commission to create the WeChat Health Code app used to verify people’s exposure to Covid-19.33 Tencent’s profit for the whole of 2020 stood at US$25.1 billion (Ұ159.8 billion), a year-on-year increase of 71%.34 At the time of writing, Tencent’s market capitalisation is around US$800 billion, making it China’s most valuable company.

Despite 13 companies on our map having been added to the US Government’s Entity List (see box below) and facing challenges while operating during the pandemic, many continued to report strong growth throughout 2020.

The Entity List

The US Department of Commerce’s Entity List was created in 1997 to address risks related to the proliferation of weapons of mass destruction. The US Government has since expanded its basis for adding entities to the list to include countering Chinese military activity, countering spying and addressing human rights concerns.35 Companies placed on the Entity List are banned from buying parts and components from US companies without government approval.

BGI, for example, saw its profits surge as Covid-19 spread around the world, despite the addition of two of its subsidiaries to the Entity List in July 2020. As of August 2020, BGI had already sold 35 million Covid-19 rapid-testing kits to 180 countries and built 58 labs in 18 countries (Figure 2).36 Due to its rapidly expanding global presence, the company experienced a net profit surge of 653% during 2020, and the value of its shares climbed by 87%.37 BGI’s operating income in the North American market even increased by 556.23%, making up 9.91% of the company’s total operating income in 2020.38 By March 2021, BGI’s market capitalisation on the Shanghai stock exchange had jumped to US$7.9 billion (Ұ50.83 billion), up from its March 2020 market capitalisation of US$5.26 billion (Ұ33.86 billion).39

Figure 2: BGI’s overseas presence

The Mapping China’s Technology Giants project currently counts more than 100 points of presence for BGI overseas, including commercial partnerships, Covid-19-related donations, investments, joint ventures, memorandums of understanding, overseas offices, research partnerships and subsidiaries.

WuXi AppTech Group is another biotech company that experienced growth during Covid-19, increasing its market capitalisation by 130%.40 Since the beginning of the pandemic, WuXi has been involved in the research and production of antibody treatments for Covid-19, and in January 2021 announced its plans to begin producing vaccine components for British–Swedish pharmaceutical company AstraZeneca at WuXi’s manufacturing facility in Germany.41

Three of our mapped internet companies were responsible for donating notable sums of money globally in the fight to combat Covid-19. ByteDance, Tencent and Alibaba ranked in the world’s top Covid-19 corporate financial donors, donating close to US$436 million, US$173 million and US$144 million, respectively.42 Those sums fall behind donations from only two leading US technology companies: Google and Cisco donated US$1.3 billion and US$226 million, respectively.43

The three Chinese companies also experienced significant growth in 2020:

  • ByteDance’s revenue more than doubled despite the challenges that its subsidiary TikTok faced, including a ban from the Indian market and attempts by the Trump administration to force TikTok’s sale to an American owner.44
  • Similarly, Alibaba has been referred to as ‘one of China’s biggest corporate winners of the coronavirus crisis’, as the company’s online traffic skyrocketed in 2020 and the Chinese Government increased its reliance on Alibaba’s cloud services in response to the pandemic.45
  • Ant Group, which is an affiliate of Alibaba, was essential in China’s initial Covid-19 response. Early in the pandemic, the company assisted the Chinese Government in developing and implementing the Alipay Health Code to facilitate contact tracing.46 Ant’s small-business lending platforms accumulated a US$300 billion credit balance, and its wealth management platform facilitated US$590 billion worth of investments.47

Similarly, HikvisionUniviewSenseTime,48 iFlytek (Figure 3),49DJIMeiya Pico50 and Ping An Technology51—a collection of surveillance, AI and technology companies—grew by developing technology used in response to Covid-19. Many of those technologies include temperature-screening products and contact-tracing systems. SenseTime claimed it has improved its facial-recognition algorithm to identify individuals wearing masks using just the person’s visible facial features.52

Figure 3: iFlytek’s Covid-19 impact

Source: This is an extract from one of our ‘Thematic snapshots’ on the Mapping China’s Technology Giants project website (under ‘Analysis’), online.

Surveillance company Hikvision’s revenue initially fell in the first quarter of 2020, but rebounded in the second quarter due to the company’s overseas revenue growth from its ‘fever cameras’.53 Uniview followed a similar pattern, first experiencing a sales and profit slowdown in the first half of 2020 and then recovering by the end of the year due to strong overseas growth in temperature-screening products, according to our map (Figure 4).54

Figure 4: Overseas expansion by Hikvision, Dahua and Uniview during the Covid-19 pandemic

The Mapping China’s Technology Giants project depicts the overseas expansion of Hikvision, Dahua and Uniview as overseas demand for their temperature-screening products increased during the Covid-19 pandemic. The map contains 65 data points of overseas presence relating to Covid-19 for the three companies, including donations, commercial partnerships and surveillance equipment.

Drones manufactured by technology company DJI proved useful in helping counter the spread of Covid-19. The company sold drones to countries, including France, Norway, Italy, the Philippines, Spain and Indonesia, and 22 states in the US to disinfect public areas and to patrol streets.55

Although China’s economic growth slowed to 2.3% by the end of 2020, its economy emerged as the only major economy expected to have grown in 2020 as a result of the pandemic.56 China’s digital economy, in particular, was positively affected by Covid-19, expanding by 9.7% from 2019.57 While China’s economic recovery had a head start, the International Monetary Fund expects the global economy to recover and grow by 6.1% in 2021, estimating 5.1% growth for advanced economies and 6.7% growth for developing economies.58

Despite external pressures amid tense US–China relations, Covid-19 provided the technology giants on our map with an opportunity to expand both domestically and overseas. High-profile donations of personal protective equipment from the tech giants helped to burnish their brands as well as deflect criticism of the Chinese state’s cover-up of the Covid-19 outbreak in its early days. China’s tech giants may have received a short-term boost from the pandemic, but over the longer term their prospects are less certain as many countries begin to address their dependence on China in critical sectors.59 As those countries make changes to reduce their reliance on China, the overseas growth that Chinese tech companies have experienced may slow.

3. US-China tech tensions

As factories in China were shut down and exports from the country ceased in China’s early response to the Covid-19 outbreak, the pandemic triggered countries and companies to move away from their supply-chain reliance on China. Before the pandemic, the US Entity List played a role in the Trump administration’s push to decouple the US economy from China. Cooperating with blacklisted companies on the Entity List raised fears among Western businesses about the data security and privacy risks associated with continued collaboration.60 As those concerns and Entity List designations began affecting business between US and Chinese companies, the ramifications of the listings spread globally, influencing the actions of other countries against some of the technology giants on our map.

The impacts of the US Entity List and ensuing global actions against the Chinese technology companies that we observed have varied drastically, significantly slowing Huawei’s overseas growth and overall expansion, while sparing major internet companies, including ByteDance, Tencent and Alibaba.61 The Entity List designation of telecommunications companies Huawei and ZTE prompted other countries, such as the members of the Five Eyes group and the EU, to implement policies aimed at limiting and in some cases excluding those companies from their 5G infrastructure. Although Covid-19 provided several surveillance and AI companies with an opportunity to neutralise such effects, many countries are still responding to security concerns associated with China’s tech giants, and the impacts of further global actions can be expected to shift in severity in coming years.

In the five years since the US first blacklisted ZTE in 2016—in a move that threatened the corporate viability of the Chinese telecommunications company62—Washington has widened its net to include a range of other Chinese companies, including 16 of the 27 featured on our map. As of April 2021, more than 400 Chinese companies, organisations and affiliates had been placed on the Entity List.63

In addition to placing various Chinese companies on the Entity List, the Trump administration also prohibited US companies and citizens from investing in the securities of dozens of companies included in the Pentagon’s list of ‘communist Chinese military companies’ operating in the US (the CCMC List),64 including seven of the technology companies featured on our map: China Electronics Technology Group (CETC)China MobileChina TelecomChina Unicom, Hikvision, Huawei and Inspur.65 The Trump administration also proposed new rules that sought to eject Chinese firms from US stock exchanges for failure to comply with US auditing standards (Figure 5).

Figure 5: Timeline of US listings and other measures affecting Chinese tech companies

Note: For more information and sources, refer to Appendix 1.

3.1 The ZTE case

In March 2016, the US Department of Commerce added ZTE to the Entity List after it found that the company had schemed to hide its re-exports of US-origin items to Iran and North Korea, both of which were under US sanctions.66 The restrictions prevented suppliers from providing ZTE with US equipment, threatening the company’s supply chain.

While the ban brought the company to the brink of collapse, Washington extended a series of lifelines to ZTE, allowing it to maintain ties to its US suppliers before it agreed to pay US$892 million in a plea deal in March 2017.67 In April 2018, the US announced a seven-year ban on American firms selling parts and software to the company after it was found to be shipping US goods to Iran in violation of its agreement.68

The ban had an immediate effect on ZTE, bringing the company’s production to a grinding halt. It announced in April 2018 that it was ceasing ‘major operating activities’.69 The following month, US President Donald Trump threw an unexpected lifeline to the company, tweeting that there would be ‘too many jobs in China lost’ due to the US Government’s actions against ZTE.70

ZTE went on to report revenue growth hitting a five-year high during 2020. The company’s operating revenue reached almost US$16 billion (Ұ101.45 billion), indicating a year-on-year increase of 11.8%.71 Its net profit experienced a year-on-year increase of 17.3%, totalling US$672 million (Ұ4.26 billion).72 While sales had declined in the US and Europe, the company was able to achieve sufficient growth in Asian markets and domestically, where it made over two-thirds of its revenue.

In August 2018, Washington reached for another tool. The annual Defense Authorization Bill barred government agencies from procuring equipment from five Chinese companies, including ZTE.73 The Bill covered any substantial or essential technology component of any system used by US Government agencies, and especially mentioned technology used to track or view user data. As a result of the Bill, all agencies that were already using equipment provided by the Chinese companies were directed to allocate specific funding to replacing it.74 When the Bill was enacted, it also targeted other Chinese companies, including Huawei and Hikvision.75

3.2 Huawei’s global struggles

Similarly to its competitor, ZTE, Huawei continues to experience turbulence due to its addition to the US’s Entity List. The company was first blacklisted on 16 May 2019 by the US Commerce Department’s Bureau of Industry and Security, together with 66 of its non-US affiliates.76 The bureau later added several other affiliated entities in August 201977 and August 2020.78

In addition to using the Entity List, the Trump administration blocked global chip supplies to Huawei in May 2020, further impeding the global expansion of the company’s business.79 As the crackdown on the company continued, Huawei was designated as a national security threat, together with ZTE, by the US Federal Communications Commission on 30 June 2020, which effectively barred them from receiving federal broadband subsidies to expand broadband access across the US.80 Finally, in November 2020, Huawei and 30 other Chinese companies were included in an executive order that designated them as being backed by China’s People’s Liberation Army.81

As the US has taken action against Huawei, it has also actively encouraged and publicly pressured other countries to adopt similar policies.82 But many countries have taken their own, and often different pathways, to arrive at their decisions on 5G over the last few years. And some, like Australia, made their decisions long before the United States.

The Five Eyes countries have responded with some of the toughest policies against Huawei. In 2018, Australia became the first country to exclude ‘high-risk vendors’ from its 5G networks.83 New Zealand similarly rejected Huawei’s first bid in the country in 2018 due to national security concerns.84 The UK most recently banned mobile providers from purchasing new Huawei 5G equipment and announced that providers must remove all Huawei 5G equipment from their networks by 2027.85 Although Canada hasn’t formally blocked Huawei, the country has delayed its decision long enough to effectively force its telecom companies to exclude Huawei equipment from their 5G networks.86

According to the Dell’Oro Group, countries representing more than 60% of the world’s cellular-equipment market are now considering or have already acted to restrict Huawei.87 The EU and several of its members have taken similar actions to block or limit Huawei’s presence in their 5G network deployments . In January 2020, the EU recommended that its members limit ‘high-risk 5G vendors’, including Huawei, stopping just short of recommending an outright ban of the company.88 Swedish regulators banned wireless carriers from using Huawei’s 5G equipment, citing national security concerns. In response, however, Huawei challenged the decision in Swedish courts and has since threatened to exclude Ericsson from participating in China’s 5G growth.89

Romania and Poland both enacted policies aimed at blocking Huawei from their 5G networks, although the policies didn’t explicitly ban Huawei.90 Huawei sent a letter to the EU competition chief, in which the company argued that Poland’s and Romania’s proposed 5G security rules were ‘predicated on several violations of EU law’.91 In its letter, Huawei also cited the involvement of the US in those actions against the company, referencing ‘joint declarations’ and ‘memoranda of understanding’— aimed at pushing out 5G suppliers subject to foreign interference—that the US signed with several European countries, including Romania, Poland, Estonia, Latvia, the Czech Republic, Slovenia, Slovakia, Cyprus, Bulgaria, North Macedonia and Kosovo.92

In 2020, as a result of global actions against it, Huawei reported its slowest annual revenue increase in a decade.93 Specifically, Huawei’s revenue increased year-on-year by 3.8%, totalling US$136.7 billion,94 which was a drastic decline from its 19% revenue growth during 2019 (Table 1).95 Although the company still managed to grow overall, China was the only region where it experienced positive revenue growth.96 The company’s carrier business, which is responsible for building its telecom networks, grew by only 0.2%.97 That stall was largely due to the decision of several Western countries to exclude Huawei’s 5G equipment from their networks.98

Table 1: Huawei’s 2020 business revenue, by region

Source: Huawei Investment & Holding Co. Ltd, 2020 annual report, 2021, online.

While Huawei’s decline in growth was most pronounced in North and South America in 2020, Europe, the Middle East and Africa collectively showed the next greatest decline, followed by the Asia–Pacific. This resulted in the company’s decision to pivot its priority industries to focus on developing software. In an internal memo made public in May 2021, Huawei founder Ren Zhengfei wrote that Huawei should strive to ‘lead the world’ in software as the company seeks growth beyond its hardware operations.99

Although Huawei’s deputy chairman, Eric Xu Zhijun, said in an interview that the company’s goal for 2021 is ‘to survive’, experts such as Dan Wang, an analyst with Gavekal, have speculated that Huawei may pivot to new businesses, such as self-driving and electric-vehicle technologies.100 Already, Huawei reportedly has plans to invest US$1 billion into researching self-driving and electric vehicles and is reportedly in talks to acquire a domestic automaker’s electric vehicle unit.101 Through investing in businesses that are less reliant on advanced chips and through strengthening its software business, Huawei is searching for new revenue sources.102

US sanctions have particularly affected Huawei’s access to international technologies, such as advanced chips, that are essential for the company’s products. When the US Government barred Huawei from purchasing semiconductors produced using US software or technology without a special licence, the move crippled Huawei’s smartphone business and resulted in the sale of its Honor budget smartphone brand.103 US sanctions also required Google to revoke Huawei’s Android licence, leaving the company without access to Google apps and services that have been critical for the functioning of Huawei’s smartphones.104

In response to losing its Android licence, Huawei created a ‘forked’ version of Android to serve as its own operating system, Harmony OS, which is likely to face challenges as it seeks to attract developers and create apps.105 If it’s successful, however, Harmony OS would provide Huawei with complete control over an operating system with potential implementation in smartphones internationally, enabling Huawei to control the information environment—including which apps are banned—outside of China’s borders.106

Despite losing access to several markets globally, Huawei has signed new 5G and cloud-computing agreements with countries in Africa, the Middle East and Southeast Asia (Figure 6). Access to those markets will be critical for Huawei’s future as the US and the EU move to confront their supply-chain dependence on China.107

Figure 6: Huawei’s 5G and cloud-related overseas presence

Note: The Mapping China’s Technology Giants project website contains 200 data points of overseas presence relating to 5G and cloud technologies for Huawei.

3.3 Sanctions for all

Similarly to Huawei, state-controlled surveillance technology company Hikvision was added to the US’s Entity List in October 2019.108 Along with Hikvision, six other technology giants on our map were added at that time, including surveillance company Dahua, AI companies iFlytek, Megvii, SenseTime, and YITU, and digital forensics and security company Meiya Pico.109

Although Hikvision’s growth was boosted by Covid-19, a March 2020 disclosure detailed the negative impacts of sanctions on the company’s overseas market and income. The disclosure stated that, as a result of its Entity List designation, Hikvision had increased its R&D costs significantly to allow for expanding upstream technology, changing materials and adjusting product designs.110 Additionally, Hikvision has been restricted in other countries, such as India, where the company is prohibited from bidding on government projects.111 The company also faces scrutiny in Australia, where, as recently as January 2021, the South Australian health department removed all cameras made by Hikvision from public hospitals and nursing homes.112

Predicting its addition to the Entity List in 2019, Hikvision stockpiled essential components in preparation, which proved helpful in mitigating the immediate impacts.113 As the global chip shortage continues to affect the technology industry, however, Hikvision’s president has indicated future uncertainties for the company if the situation persists.114

Among the companies we tracked, BGI Group—a key supplier of Covid-19 testing technology—experienced the greatest growth despite being blacklisted by the US. In July 2020, the US Department of Commerce placed two of BGI’s subsidiaries (Xinjiang Silk Road BGI and Beijing Liuhe BGI) on the Entity List.115 However, due to the company’s key role in providing Covid-19 testing equipment, BGI reported a surge in its net profit and share price during 2020.

Other Chinese tech companies on our map that were affected by US sanctions include DJI and Nuctech. The US Department of Defense first issued a ban on the purchase and use of DJI’s commercial drones on 23 May 2018 and later added the company to the export blacklist in December 2020.116 Although DJI continued to expand during 2020, it faced challenges in maintaining its large presence overseas, reportedly having to make sweeping cuts to its global sales and marketing teams.117 Despite its Entity List designation, DJI maintains control of more than 70% of the global drone market, and North America remains its largest market.118

China’s major telecommunications companies—China Telecom, China Unicom and China Mobile—have been targeted by Washington in several capacities (Figure 7). Most recently, in January 2021, the three companies were added to the Pentagon’s CCMC List, which triggered a series of delistings and relistings of the companies by the New York Stock Exchange, eventually resulting in the final delisting of all three.119 The companies were also among 31 Chinese companies included in a November 2020 executive order that designated them as being backed by the People’s Liberation Army.120 Before those designations, the US Federal Communications Commission had already begun taking action against China Telecom and China Unicom in April 2020.121 Despite being added to the lists, all three telecom companies experienced growth during 2020 as they expanded their 5G operations—especially in China.

Figure 7: Chinese telcos’ overseas presence

Note: The Mapping China’s Technology Giants project counts more than 480 points of overseas presence for China’s three major telecommunications operators (China Mobile, China Telecom and China Unicom) combined.

Apart from those tech giants, several major Chinese technology companies on our map have been largely spared US economic countermeasures, specifically Alibaba, Ant Group, Baidu, ByteDance and Tencent. There were, however, disparate attempts by the Trump administration to take action against those companies, which all eventually failed during Trump’s term of office.

In January 2021, for instance, the US Department of State and Department of Defense pushed to add Alibaba, Tencent and Baidu to the CCMC List, which would have banned US investors from holding stock in the three companies.122 Previously, in August 2020, Trump issued two executive orders prohibiting any American company or person from conducting transactions with ByteDance, which is TikTok’s parent company, and Tencent’s WeChat.123 The bans were halted a month later by a US federal judge, citing First Amendment rights.124 In October 2020, the US State Department proposed adding Ant Group to the Entity List, which was seen as a move to discourage US investors from taking part in Ant’s upcoming IPO in Shanghai and Hong Kong. The bid was later put on hold by the Trump administration.125 Any impacts of attempted bans on those companies were neutralised as demand for digital products skyrocketed during the Covid-19 pandemic.

Although the attempts to take action against Alibaba, Ant Group, Baidu, ByteDance and Tencent were unsuccessful, they attracted global attention to the data privacy and security risks associated with using products and applications developed by the Chinese technology giants. Following US attempts, India permanently banned 59 Chinese apps from its domestic market in January 2021, while Germany’s intelligence agencies warned consumers that personal data provided to Chinese technology companies could end up in the possession of the Chinese Government.126 As the US and other countries continue targeting China’s tech giants through various regulatory measures, they’re being pushed to address their reliance on China just as China is seeking to reduce its dependence on the US for critical technologies, particularly semiconductors.

4. Localising supply chains: from a ‘choke point’ to ‘dual circulation’

From the perspective of Beijing’s policymakers, 2020 was a year in which, as Vice Foreign Minister Le Yucheng put it, China experienced a ‘plot reversal’ and ‘turned a crisis into an opportunity’.127 ‘Rather than being a “Chernobyl moment”’ for China, the pandemic became a ‘highlight moment for socialism with Chinese characteristics’, Le told a think-tank forum in December 2020. The triumphalist note came as China’s ability to contain the spread of Covid-19 before other major economies allowed it to rebound faster and end 2020 on a high note as the only major economy to report positive growth, achieving an economic expansion of 2.3%.128

Despite their upbeat tone, China’s leaders also recognised that the combination of the Covid-19 pandemic and the US–China trade war had exposed the country’s fragility in technological innovation. In a speech to scientists in September 2020, Xi Jinping stressed the need for China to ensure secure and stable supply chains and to pursue indigenous innovation: ‘We must give full play to the significant advantages of our country’s socialist system that concentrate power on large undertakings, and successfully fight tough battles for the key core technologies,’ he instructed.129

While the Chinese state’s goal of achieving self-reliance in technology has been a longstanding policy, the combination of the Covid-19 pandemic and the ever-tightening technology blockade imposed by the White House put the issue front and centre for the Chinese leadership. In December 2020, China’s Central Economic Working Conference announced that science and technology work would be the top priority in 2021. The 14th Five-Year Plan, unveiled in March 2021, described technological innovation as a matter of national security, not just economic development, for the first time.130

4.1 Mobilising the tech industry

China’s technology companies are set to play a key role in addressing that fragility as they’re mobilised in what Beijing’s top policy official, Jiang Jinquan, calls a ‘whole country approach’ to reduce reliance on foreign technologies.131 That effort would seek breakthroughs in ‘strategic and fundamental key science and technology projects’ so that the country can overcome ‘choke points’ in its technological progression, Jiang said in his interpretation of an as yet unpublished keynote speech made by Xi to China’s provincial-level leaders in early January 2021. As part of the plan, the country will establish ‘national teams’ to strengthen scientific research and innovation, according to Jiang. The private sector will be encouraged to invest in R&D, and the state will reward companies through ‘state purchase of research results’.

Several of the companies featured on our map, including SenseTime, Huawei, ZTE, Megvii, YITU, CloudWalk, Baidu, Alibaba, Tencent and China’s three major telcos, have already been recruited in a US$2 trillion new infrastructure campaign that the Chinese state introduced in the early days of the pandemic to boost the economy and cushion the impact of the global slowdown. The campaign targets high-tech sectors such as 5G infrastructure, AI, big data centres, the industrial internet, ultra-high-voltage high-speed intercity rail and electric vehicle charging infrastructure.132 The plan is largely a continuation of the Made in China 2025 campaign that was launched in 2015, with some minor cosmetic changes.

Made in China 2025 targeted investments in 10 strategic industries now largely dominated by the US, including aerospace, semiconductors, information technology, robotics, green energy, electric vehicles, agricultural machinery, pharmaceuticals and advanced materials. The campaign attracted sustained criticism from the Trump administration for its attempt to capture market share from China’s foreign technology rivals. The new infrastructure campaign dropped any reference to that plan as well as any explicit requirements that core technology must be sourced domestically. The campaign is funded mainly by the private sector and local governments instead of the national government.133

China’s three national telecom carriers (China Unicom, China Telecom and China Mobile) collectively promised in March 2020 to invest around US$34 billion (Ұ220 billion) to build 5G base stations in China. Tencent said that it would invest US$77 billion (Ұ500 billion) over the following five years in new infrastructure technologies, such as cloud computing, and cybersecurity. Alibaba also pledged US$30 billion (Ұ200 billion) in new infrastructure investments over three years.

4.2 All about the chips

Over the long term, the success of the new infrastructure campaign hinges on China’s access to the world’s most advanced semiconductor chips, which are the basic building blocks for emerging technologies such as 5G, AI and autonomous vehicles, in which Beijing hopes to lead the world. China’s reliance on a globalised value chain to source semiconductor chips is seen by Chinese leaders from Xi Jinping down as a key obstacle to the country’s technological ambitions.

The Trump administration’s assault on China’s ability to source semiconductor chips resulted in a flurry of panic buying. Imports of semiconductors jumped by 33.6% to US$155.6 billion in the first three months of 2021—an increase of 77.6% from 2019.134 Beijing’s attempts at achieving self-sufficiency in semiconductors have been beset by setbacks, and large subsidies for semiconductor projects have failed to produce successes. China’s self-sufficiency ratio for semiconductors is expected to be only 19.4% in 2025.135

In an effort to achieve self-sufficiency, public and private entities in China have facilitated the organisation of several technology-focused alliances. In 2016, Huawei, ZTE, Inspur and the Ministry of Industry and Information Technology were among 27 entities that established China’s High End Chip Alliance, which aims to promote the production of, research into and collaborative innovation on chip technology.136 The National Integrated Circuit Standardisation Technical Committee was later proposed by the China Electronics Standardisation Institute in 2021. Huawei, Tencent and Alibaba are among 90 Chinese tech companies that joined the committee in an effort to strengthen the domestic semiconductor supply chain.137

Huawei’s addition to the US’s Entity List further spurred its efforts to create a domestic supply chain but it also served as a warning to other Chinese tech companies featured on our map, such as ByteDance, Baidu, Alibaba and SenseTime, that now view reliance on US technology as a vulnerability that must be eliminated. ByteDance is exploring the feasibility of developing its own AI chips.138 Baidu has completed one round of financing for its Kunlun AI chip unit and is considering commercialising its chip design capabilities.139 Alibaba has also unveiled an AI chip for its cloud-computing products.140 After being added to the Entity List in 2019, SenseTime began developing its own AI chips.141 Meanwhile, Huawei is reportedly constructing a dedicated chip plant in Shanghai that won’t use American technology.142

4.3 Dual circulation

The Covid-19 pandemic and the growing China–US strategic and technological competition also prompted a major rethink in economic policy for the CCP. A new strategy began to take shape in a series of key speeches and party documents as China emerged from its Covid-19 economic slump in early 2020. In April 2020, in a seminal speech on China’s economic development that was kept under wraps for six months, Xi Jinping said that the impact of the pandemic had exposed hidden risks in China’s industrial and supply chains and that the country ‘must strive to have at least one alternative source for key products and supply channels, to create a necessary industrial backup system’.143

Referred to as a need to speed up China’s ‘dual circulation’ growth model, the new economic strategybecame the focus of the 14th Five-Year Plan adopted on 11 March 2021, which charts a course for China’s economy from 2021 to 2025.144 It envisages a future in which Beijing steadily weans itself off high-end imports from industrialised nations while using the ‘powerful gravitational field’ of its economy to make other nations heavily reliant on China for high-tech supplies and as a market for raw materials. As Xi said in his April 2020 speech:

We must sustain and enhance our superiority across the entire production chain … and we must tighten international production chains’ dependence on China, forming a powerful countermeasure and deterrent capability against foreigners who would artificially cut off supply [to China].

By pursuing a strategy of ‘dual circulation’, Beijing hopes to build fully domestic supply chains while binding foreign companies to the Chinese market even more strongly. Over the long term, the aim is for a stronger China able to withstand economic coercion, but also for China to be in a stronger position to inflict coercion on other countries. The CCP’s use of economic coercion against countries such as Australia and companies such as Swedish retailer H&M foreshadow how the Chinese state is likely to use its enhanced power if its ‘dual circulation’ strategy is successful.

5. Reining in the tech giants: tougher regulation at home

China’s regulatory agencies have treated the country’s tech giants with a light touch for most of the companies’ history, favouring their pursuit of technological dominance and economic prosperity over the need for regulating their growing monopoly power.

In October 2020, the scales tipped in the opposite direction after Jack Ma, the co-founder of Alibaba and its fintech affiliate, Ant Group, made a public speech in Shanghai in which he levelled a scathing critique of financial regulators and implicitly rejected Xi Jinping’s signature campaign to combat financial risks.145 The speech reportedly infuriated the leadership in Beijing and prompted Xi to personally call off Ant Group’s impending US$34 billion IPO and order regulators to investigate risks posed by Ma’s business.146

Regulators cited the systemic financial risks posed by Ant Group as the reason for the company to reorganise itself as a financial institution, subject to oversight by the country’s central bank, the People’s Bank of China. Escalating geopolitical tensions with the US and the ensuing US–China trade war contributed to the regulator’s efforts to rein in Ant Group, as Beijing sought to head off risks in the banking system amid concerns that the stand-off with Washington could precipitate a financial crisis.

Ma’s speech served as a tipping point for agencies, such as China’s antitrust authority, the State Administration for Market Regulation (SAMR), that have now become much more assertive with their agenda to draw clear lines between tech companies and financial services companies—lines that Jack Ma was intending to further blur. As Ma removed himself from public view, the campaign widened out to other companies in late April 2020, when the People’s Bank of China and four other regulatory agencies told 13 firms, including Tencent and ByteDance, that their apps should no longer provide financial services beyond payments.147

Ma’s speech may have been a catalyst for some regulatory agencies, but the groundwork for action had been put in place much earlier. In January 2020, the SAMR proposed the first major revisions to the country’s 2008 antimonopoly law in over a decade, including provisions for large internet platforms.148 The regulatory push has been spearheaded by Vice Premier Liu He, who is Xi Jinping’s top economic adviser.149 The principles underlying the campaign—‘tackling monopolies’ and ‘preventing disordered capital expansion’—emerged during several high-level government meetings, including the Fifth Plenary Session of the 19th CCP Central Committee in October 2020 and the Central Economic Working Conference at the end of the year.150

Beijing’s effort to tame the outsized power of China’s internet companies has continued to widen. A week after Ant Group’s IPO was scuttled, the SAMR published draft rules to curb monopolistic behaviour in the country’s tech sector, immediately wiping US$280 billion from the market capitalisation of the internet giants Tencent, Xiaomi, Meituan and JD.com.151 In April 2021, Alibaba Group was hit with a record US$2.81 billion antimonopoly fine, which was equivalent to around 4% of the group’s 2019 revenue. An investigation into Tencent is currently underway, and some reports suggest that it, too, may be hit with a fine of at least US$1.54 billion (Ұ10 billion).152

The SAMR went on to summon 34 technology companies and warn them to ‘heed the warning’ provided by Alibaba’s case. The companies, which included Baidu, Tencent and ByteDance, were given one month to undergo ‘complete rectification’ to ensure that they weren’t in breach of anti-monopoly laws. In a statement, the monopolies regulator stressed that the companies must ensure that they’re not doing anything that ‘harms the interests of operators and consumers’ and that they should give ‘priority to national interests’.153 Between December 2020 and April 2021, the regulator fined 11 companies, including Tencent, Baidu, Alibaba and ByteDance, for failing to disclose past acquisitions and investments.154 As the government continues to clamp down on this sector, investors have grown nervous, leading to a plunge in the combined market capitalisation of 10 leading technology companies by over US$800 billion from its peak in February 2021.155

Beijing’s campaign, which is set to continue throughout 2021, comes at the same time as efforts in the West to rein in companies such as Facebook and Google have gained momentum. The efforts share some similar worries: regulators in the US, Europe and China all cite concerns that the technology giants have built market power that stifles competition, misuses consumer data and violates consumer rights. But, for China’s regulators, the need to discipline their country’s tech companies goes beyond those concerns to a broader sense that the companies’ interests aren’t sufficiently lined up with the CCP’s industrial policy or its goal of achieving technological self-sufficiency.

An editorial in the People’s Daily in December 2020 urged the country’s internet giants to focus on innovation instead of the ‘community group-buying’ market.156 ‘Internet giants with access to big data and advanced computing should have a greater responsibility, greater pursuits, and a greater role in scientific and technological innovation,’ the CCP mouthpiece wrote. The CCP has now moved on from merely chiding the tech companies to enforcing their adherence to its strategic goals. In January 2021, the head of the SAMR emphasised that one of his priorities for 2021 was to ‘promote the coordination of industrial policy and competition policy’.157

6. Conclusion

The Covid-19 pandemic may have been a short-term boon to many of China’s technology giants, but, for the CCP, the pandemic and the US–China trade war were a stark reminder of the country’s fragility in technological innovation. While the Chinese state’s goal of achieving self-reliance in technology has been a longstanding policy, the combination of the Covid-19 pandemic and the ever-tightening technology blockade imposed by the White House elevated the issue to a higher level of importance than ever before.

The onslaught of sanctions and other related measures from the US helped to further align the interests of China’s tech giants with the CCP’s goal of achieving technological self-sufficiency. A newly launched rectification campaign in the technology sector is designed to ensure that this alignment continues. The campaign, which looks set to continue throughout 2021 and beyond, is already bearing fruit as major internet companies warn investors that they’re preparing to funnel capital into areas that the Chinese state has identified as priorities, such as cloud computing, autonomous vehicles and AI.158

Already, a string of high-level resignations have taken place in various Chinese technology companies, including Ant Group, Pinduoduo and ByteDance, as the government seeks to weaken the central authority of all the leaders of the major technology companies.159 The Chinese state is embarking on a fundamental restructuring of the technology industry and the private sector more broadly so that, as CCP guidelines released in September 2020 put it, ‘ideological guidance’ is strengthened to ‘create a core group of private sector leaders who can be relied upon during critical times’.160

The Chinese state is more determined than ever to rein in China’s technology giants and push them, and the country, towards technological self-sufficiency.

Appendix 1: Timeline of US entity listings and other measures

For Appendix table, please download the full report.


Acknowledgements

Thank you to Danielle Cave and Cheryl Yu for all of their work on this project. We would like to also thank our external peer reviewers Lindsay Gorman, Kara Frederick and Chris Crowley. We’re also grateful for the valuable comments and assistance provided by Peter Mattis, Tom Uren, Michael Shoebridge and Fergus Hanson.

This research report forms part of Mapping China’s Technology Giants, which is a multi-year project mapping and analysing the overseas expansion of key Chinese technology companies. The project seeks to:

  • analyse the global expansion of a key sample of China’s tech giants by mapping their major points of overseas presence
  • provide the public with analysis of the governance structures and party-state politics in which these companies have emerged, and are deeply entwined.

The Mapping China’s Technology Giants project is produced by researchers at ASPI’s International Cyber Policy Centre. The relaunch of this project, and associated research, was funded with a US$270,000 grant from the US State Department

What is ASPI?

The Australian Strategic Policy Institute was formed in 2001 as an independent, non‑partisan think tank. Its core aim is to provide the Australian Government with fresh ideas on Australia’s defence, security and strategic policy choices. ASPI is responsible for informing the public on a range of strategic issues, generating new thinking for government and harnessing strategic thinking internationally. ASPI’s sources of funding are identified in our annual report, online at www.aspi.org.au and in the acknowledgements section of individual publications. ASPI remains independent in the content of the research and in all editorial judgements.

ASPI International Cyber Policy Centre

ASPI’s International Cyber Policy Centre (ICPC) is a leading voice in global debates on cyber, emerging and critical technologies, issues related to information and foreign interference and focuses on the impact these issues have on broader strategic policy. The centre has a growing mixture of expertise and skills with teams of researchers who concentrate on policy, technical analysis, information operations and disinformation, critical and emerging technologies, cyber capacity building, satellite analysis, surveillance and China-related issues.

The ICPC informs public debate in the Indo-Pacific region and supports public policy development by producing original, empirical, data-driven research. The ICPC enriches regional debates by collaborating with research institutes from around the world and by bringing leading global experts to Australia, including through fellowships. To develop capability in Australia and across the Indo-Pacific region, the ICPC has a capacity building team that conducts workshops, training programs and large-scale exercises for the public and private sectors.

We would like to thank all of those who support and contribute to the ICPC with their time, intellect and passion for the topics we work on. 

If you would like to support the work of the centre please contact: icpc@aspi.org.au

Important disclaimer

This publication is designed to provide accurate and authoritative information in relation to the subject matter covered. It is provided with the understanding that the publisher is not engaged in rendering any form of professional or other advice or services. No person should rely on the contents of this publication without first obtaining advice from a qualified professional.

© The Australian Strategic Policy Institute Limited 2021

This publication is subject to copyright. Except as permitted under the Copyright Act 1968, no part of it may in any form or by any means (electronic, mechanical, microcopying, photocopying, recording or otherwise) be reproduced, stored in a retrieval system or transmitted without prior written permission. Enquiries should be addressed to the publishers. Notwithstanding the above, educational institutions (including schools, independent colleges, universities and TAFEs) are granted permission to make copies of copyrighted works strictly for educational purposes without explicit permission from ASPI and free of charge.

First published June 2021.
ISSN 2209-9689 (online),
ISSN 2209-9670 (print).

Cover image: ASPI ICPC, Nathan Attrill

Funding Statement: Funding for this report was provided by the US State Department.

  1. Humeyra Pamuk, Alexandra Alper, Idrees Ali, ‘Trump bans US investments in companies linked to Chinese military’, Reuters, 12 November 2020, online. ↩︎
  2. ‘FCC designates Huawei and ZTE as national security threats’, news release, US Federal Communications Commission, 30 June 2020, online. ↩︎
  3. David E Sanger, Julian E Barnes, Raymond Zhong, Marc Santora, ‘In 5G race with China, US pushes allies to fight Huawei’, New York Times, 26 January 2019, online. ↩︎
  4. Jeanne Whalen, Ellen Nakashima, ‘US bans technology exports to Chinese semiconductor and drone companies, calling them security threats’, Washington Post, 18 December 2020, online. ↩︎
  5. James McBride, Andrew Chatzky, Is ‘Made in China 2025’ a threat to global trade?, Council on Foreign Relations, 13 May 2019, online. ↩︎
  6. Adam Segal, ‘Seizing core technologies: China responds to US technology competition’, China Leadership Monitor, 1 June 2019, online. ↩︎
  7. Nigel Inkster, Xi steers China towards economic and technological self-reliance, International Institute for Strategic Studies, 11 November 2020, online. ↩︎
  8. ‘习近平:在科学家座谈会上的讲话’ [Xi Jinping: Speech at the Symposium of Scientists], Xinhua, 11 September 2020, online.. ↩︎
  9. ‘中华人民共和国国民经济和社会发展第十四个五年规划和2035年远景目标纲要’ [The 14th Five-Year Plan for National Economic and Social Development of the People’s Republic of China and the outline of the long-term goals for 2035], Xinhua, 12 March 2021, online. ↩︎
  10. ‘江金权:把握构建国内大循环的着力点 ——学习习近平总书记在省部级专题研讨班上重要讲话精神的体会’ [Grasp the focus of constructing the domestic circulation—Learning the spirit of General Secretary Xi Jinping’s important speech at provincial and ministerial seminars], Study Times, 25 January 2021, online. ↩︎
  11. ‘China ramps up tech commitment in 5-year plan, eyes 7% boost in R&D spend’, Reuters, 5 March 2021, online. ↩︎
  12. Liza Lin, ‘China’s trillion-dollar campaign fuels a tech race with the US’, Wall Street Journal, 11 June 2020, online. ↩︎
  13. Rui Ma, ‘Old Extra Buzz post from Dec. 2020: Internet platforms: antitrust regulations are here’, Tech Buzz China, 11 December 2020, online. ↩︎
  14. ‘Playing by the rules’, Week in China, 16 April 2021, online. ↩︎
  15. Jing Yang, Serena Ng, ‘Ant’s record IPO suspended in Shanghai and Hong Kong stock exchanges’, Wall Street Journal, 3 November 2020, online. ↩︎
  16. Raymond Zhong, ‘China fines Alibaba $2.8 billion in landmark antitrust case’, New York Times, 9 April 2021, online. ↩︎
  17. Yuan Yang, Ryan McMorrow, Miles Kruppa, ‘ByteDance staff and investors shocked as founder steps back’, Financial Times, 22 May 2021, online. ↩︎
  18. ‘Xi focus: Xi chairs leadership meeting on economic work for 2021’, Xinhua, 11 December 2020, online. ↩︎

Collaborative nation building: Port of Townsville case study

The theme for this report is nation building, not the kinds of one-off investment ‘announceables’ we’re familiar with that connect cities with roads. Instead, this is the kind of nation building that’s big picture and courageous, and reminiscent of the past—the kinds of initiatives that build the infrastructure from which economic, social and national security opportunities grow.

The Port of Townsville has embarked on a forward-leaning journey that started a decade ago with a vision, planning and initial environmental approvals, and that’s now being pursued through collaborative engagement of a type not common in the ports sector. While the sector does take a long-term view on management and expansion, it’s still very unusual for individual ports to actively engage with trading partners in a strategic way and beyond the boundaries of specific projects.

This special report looks at what’s happening today in the Townsville region, using the Port of Townsville as an example of what’s possible, and looks at what others at the regional, state and national levels can pursue beyond one-off investments to drive nation building that fosters economic, social and environmental prosperity.

A collaborative approach to nation building isn’t new. It’s more that we haven’t engaged in this way for several decades now and as a nation, and we’re out of practice.

Nation building in Australia must move beyond investment in major highways between large cities and investment in inner urban infrastructure. It must be underpinned by a framework that drives economic, social and environmental prosperity and that’s pursued collaboratively with persistence and courage. It must also move beyond a focus on short-term energetic infrastructure construction and economic ‘sugar hits’.

The Port of Townsville provides a case example of how that’s being done today.

Deterrence through denial: A strategy for an era of reduced warning time

Australia now needs to implement serious changes to how warning time is considered in defence planning. The need to plan for reduced warning time has implications for the Australian intelligence community, defence strategic policy, force structure priorities, readiness and sustainability. Important changes will also be needed with respect to personnel, stockpiles of missiles and munitions, and fuel supplies. We can no longer assume that Australia will have time gradually to adjust military capability and preparedness in response
to emerging threats. In other words, there must be a new approach in Defence to managing warning, capability and preparedness, and detailed planning for rapid expansion and sustainment.

This paper addresses those issues, recognising that they’re a revolutionary break with the past era of what were much more comfortable assumptions about threats to Australia. Considering the complexity of the issues involved, we have identified further areas for research, including at the classified level.

ASPI – Embassy of Japan 1.5 Track Dialogue on Responsible Behaviour in Space

Earlier this year, ASPI and the Embassy of Japan in Australia convened a hybrid workshop on responsible behaviours in space; a concept which has emerged as a key focus of the international space policy community. At the workshop, participants discussed the stable and sustainable use of space and management of security challenges in space, and ways to define responsible behaviour in space, including through UN General Assembly Resolution 75/36. Participants at this workshop included academics, practitioners, government representatives, military personnel and legal experts from Australia, Japan, Britain and Southeast Asia.

This workshop and report were sponsored by the Embassy of Japan in Australia.

North of 26 degrees south and the security of Australia: Views from The Strategist Volume 3

The Northern Australia Strategic Policy Centre’s latest report, North of 26° South and the Security of Australia Volume 3’, is an all-new series of articles by a range of authors exploring the continued importance of Northern Australia to national security and defence strategy.

This Volume’s contributions were written over a year in which increased strategic uncertainty and an unprecedented global pandemic have collectively generated an interest in revisiting old policy assumptions. Right from the start, it was clear that we need to think of the north as the middle of the region, rather than the edge of Australia, and reflect that critical role in Australia’s political, military and economic strategies moving forward.

The economic, social and geopolitical effects of Covid-19 have presented opportunities for a radical a rethinking of nation-building in the north, and collaboration between the public and private sectors to support it. The rise of Chinese influence in the region and globally has changed Australia’s role in the Indo-Pacific and the strategic significance of Australia’s defence capabilities and alliances to the broader international community.

The pandemic response and geopolitical tensions have highlighted supply-chain resilience as a key area of capability uplift for Australia, making the north significant both as the key trade hub with region and a source of natural resource exports.

The report builds on the previous Volumes of North of 26° South by broadening the breadth and depth of its contributions northern Australia strategic policy.

This report provides much needed contemporary analysis and the criticality of the North to Australia’s national security and defence.

An Australian strategy for the quantum revolution

What’s the problem?

The world is now at the precipice of another technological and social revolution—the quantum revolution. The countries that master quantum technology will dominate the information processing space for decades and perhaps centuries to come, giving them control and influence over sectors such as advanced manufacturing, pharmaceuticals, the digital economy, logistics, national security and intelligence.

The power of quantum computing, quantum communications and other quantum-enabled technologies will change the world, reshaping geopolitics, international cooperation and strategic competition. The new United States administration is well aware of this. In his first weeks in office, President Biden signalled a major new policy focus on science and technology,1 including quantum technologies.2 This will involve new public investment, working closer with allies, and decisions such as re-establishing the President’s Council of Advisors on Science and Technology.3 The Covid-19 crisis has also seen quantum emerge as an investment vector for post-pandemic recovery: large capital investments have been made over the past year by such nations as China, Japan, Germany, France, South Korea and India.

While Australia benefited from the digital revolution of the 20th century, we missed our opportunity to play a major role in the computing and communications technology sector. A similar fate doesn’t have to befall us in the upcoming quantum revolution. We have a long history of leadership in quantum technology and we’re highly influential relative to our size. As geopolitical competition over critical technologies escalates, we’re also well placed to leverage our quantum capabilities owing to our geostrategic location and alliances with other technologically, economically and militarily dominant powers (most notably the Five Eyes countries) and key partnerships in the Indo-Pacific, including with Japan and India. While Australia is well placed to take full advantage of the quantum revolution, the status quo isn’t enough. We must build and capitalise on the immense potential of quantum technologies.

What’s the solution?

Australia needs a clear quantum strategy, political leadership and an organised effort, including policy focus and public investment. Without those things, we’ll be left behind. This report focuses on analysis—and building policy recommendations—to help Australia better leverage the quantum revolution. It also recognises that quantum is just one critical technology and that what’s needed is a step change in our current policy settings related to critical and emerging technologies more generally. Hence, this report makes broader policy recommendations that serve the dual purpose of supporting that much-needed step change, while also enabling a more strategic focus on Australia’s quantum opportunities.

The Prime Minister should appoint a dedicated and ongoing minister for critical and emerging technologies (that position could also inherit ‘cyber’). This minister’s focus should be technology, rather than ‘technology’ being added to a longer list of portfolio topics. This should be a whole-of-government role with the minister working across the relevant economic, national security, industry, research, defence and science agencies in the public service. The Australian Government should also immediately lay the groundwork for a post-Covid-19 $15 billion technology stimulus that should include a $3-4 billion investment in quantum technologies.4 The stimulus would be a game-changer for Australia and help the country diversify and deepen its technological and R&D base.5 It would also exploit our disproportionate concentration of world-class quantum expertise, ensuring the long-term growth and maintenance of this vital technological sector.

The government should move quickly in 2021 to develop and articulate a national technology strategy, of which quantum should form a key part. The relatively new but small Critical Technologies Policy Coordination Office in the Department of the Prime Minister & Cabinet (PM&C) should be expanded and elevated to become the ‘National Coordinator for Technology’. This division within PM&C—which is already developing a list of key critical technology areas6—should lead this whole-of-government technology strategy process. They should work closely with other parts of government, including the Department of Industry, Science, Energy and Resources (DISER), Office of the Chief Scientist, Defence, Home Affairs, DFAT, CSIRO, the Office of National Intelligence, the Australian Signals Directorate, as well as the research and civil society community and the private sector. Within the division, offices should be created to focus on a small number of key critical technology areas deemed most important to Australia and our place in the world. The first such office should be developed for quantum technology, while other offices could focus on, biotechnology7 and artificial intelligence, for example. A useful model for such appointments is the position of Assistant Director for Quantum Information Science at the White House Office of Science and Technology Policy in the US.

At the same time, the federal government should lead a national quantum initiative, in consultation with the states and territories and the private sector. This national initiative should form the ‘Australian Distributed Quantum Zone’—a large collaboration of universities, corporations and Australian-based quantum start-ups tasked with laying the foundations of a dedicated industry in Australia for quantum technology prototyping, development and manufacturing. Significant government investment should be used to help stimulate an economy emerging from the most severe crisis in decades. Australia’s favourable handling of Covid-19 presents a unique opportunity to attract new talent as well as to lure back Australians currently running foreign quantum programs, and further expansions to the government’s talent visa options should be considered. Once this groundwork is laid domestically, Australia will be in a strong position to assume a quantum technology leadership role in the Indo-Pacific region.

Introduction

Quantum technology—technology that takes advantage of the rules and behaviour of light and matter at their most fundamental level—has existed for nearly a century. Lasers, MRI machines8 and transistors all rely on the quantum mechanical properties of nature to function. In fact, quantum technology can be directly attributed to the medical and digital revolutions that occurred in the 20th century. Without lasers there would be no fibre-optic communication, without MRIs the entire field of high-resolution, non-invasive medical imaging wouldn’t be possible and without transistors there would be no digital electronics.

However, there’s a difference between those types of quantum technology and the devices we’re trying to build today. While lasers, MRIs and transistors exploit the quantum mechanical nature of reality to function, they don’t manipulate the exact quantum mechanical properties of individual quantum objects such as atoms or particles of light. The second generation of quantum technologies, which includes quantum computers, quantum communication networks and quantum sensors, manipulate single atoms or particles of light with exquisite precision. This leads to computational and communications systems that offer an extraordinary level of new technological power.

Timelines for the delivery of these technologies range widely:

  • 0–5 years for sensors for health, geosurveying and security
  • 5–10 years for quantum-secured financial transactions, hand-held quantum navigation devices and cloud access to quantum processors of a few thousands of qubits9
  • 10–15 years+ for the establishment of wide-ranging quantum communications and the integration of quantum sensors into everyday consumer applications, such as mobile phones
  • 15 years+ for a quantum computer capable of cracking public-key cryptosystems.

Those time frames could change if and when faster breakthroughs occur, but are at least broadly indicative of the pace and likelihood of quantum development. The quantum technology that birthed the digital revolution of the 20th century was just the beginning. On the one hand, this new class of technology could aid in the creation of new materials and drugs, adapt and secure communication networks, increase economic output and improve quality of life. On the other, quantum technologies also represent a significant long-term threat to our digital security, and the promise of computing technology that can scale exponentially in power in the hands of geostrategic adversaries. These new devices will create a knowledge gap in every piece of technology, from security to manufacturing to medicine and bioscience.

Part 1: Australia and quantum technology

Background: A long history of Australian leadership in quantum technology

Australia has played a pivotal role in the advancement of second-generation quantum technology since the technology’s emergence in the 1990s. The country nurtured the intellectual and technological backbone for what’s now a global and highly competitive network of academic and corporate research, as well as a rich global start-up ecosystem. However, as world powers are now recognising the urgency of dominating the quantum technology industry, Australia is at risk of losing its competitive edge.

Australia often achieves great things with scarce resources, including in the technology sector, yet we’re still small compared to the scientific powerhouses of the US, the UK, Germany, Japan and, in the past 20 years, China. We have a population of just over 25 million and an economy strongly reliant on primary industries, so our scientific research tends to focus on `areas of critical mass’ such as mining, agriculture and medical research. Therefore, it may be surprising that a major strength in Australian physics research is still quantum technology.

Australia’s expertise in quantum physics and quantum technology emerged thanks to significant research before 1990, as well as government policy and the country’s strengths in inexpensive innovation. Since at least the 1980s, Australia and New Zealand have had exceptionally strong representation in the field of quantum optics, for example. It’s also an artefact of a time when the fields of particle physics and condensed matter were dominated by the US and USSR. Quantum optics, on the other hand, was a ‘cheap and cheerful’ science in which real progress could be made with the limited resources available south of the equator.

Here’s a brief overview of how Australia currently maintains quantum research:

The Australian Research Council (ARC) Centres of Excellence program is considered the premiere funding vehicle for fundamental and applied research. Many of the (current and past) centres of excellence (CoEs) have a quantum technology aspect. The CoE for Quantum Computation and Communication Technology (CQC2T) has been both the most visible and the best funded of the CoEs since 1999. The vast majority of that investment is focused on the singular goal of designing and building a silicon-based quantum computer. Given the collaborative nature of the CoE, this has resulted in an exceptionally high level of output in the area of quantum computing. In parallel, the CoE for Engineered Quantum Systems (EQUS), funded from 2011 to 2024, has achieved groundbreaking research outcomes in a variety of other quantum technologies falling broadly under the category of quantum machines.

Australia has also hosted other CoEs with significant quantum physics research focused on technology and applications, but they haven’t always specifically labelled themselves as quantum technology centres, and many have been discontinued:

  • The Centre for Quantum-Atom Optics (ACQAO) combined theoretical and experimental groups to advance the rapidly developing field of quantum atom optics (discontinued in 2010).
  • The Centre for Ultrahigh Bandwidth Devices for Optical Systems (CUDOS) focused on photonic engineering and optical devices for communication (discontinued in 2017).
  • The Centre for Nanoscale BioPhotonics (CNBP) researched biomedical imaging applications and the control of light at the single photon level (discontinued in 2020).
  • The Centre for Future Low-energy Electronics Technologies (FLEET) focuses on low-energy electronics using novel materials, including two-dimensional films and topological insulators (funded until 2024).
  • The Centre for Exciton Science (ACEx) is researching the generation, manipulation and control of excitons in molecular and nanoscale materials for solar energy harvesting, lighting and security (funded until 2024).

Beyond ARC-funded schemes, there are other examples of large-scale investment in research in the quantum computing space in Australia. Microsoft has established a strong presence in quantum information and computing via its StationQ (now Microsoft Quantum) research team led by Professor David Reilly at the University of Sydney (also a member of EQUS). Just down the road, the University of Technology Sydney formed the UTS Centre for Quantum Software and Information in 2016 using a combination of university and ARC funding. Although these efforts are still largely university based, they’re indicative of the worldwide pivot towards the commercialisation of quantum computing technology by universities, governments and the private sector.

Since around 2016, we’ve started to see a nascent corporate and start-up sector in quantum technology grow locally. Yet, compared to the rest of the world, Australia is moving very slowly.

In 2008, Quintessence Labs was the first quantum technology company to emerge from an Australian university—spun out from the Australian National University (ANU) —and focused on commercial technology related to quantum key distribution systems and digital security.

In late 2014, QxBranch was founded as a joint spin-off of Shoal Group and the Tauri Group to focus on data analytics and quantum software.

In 2016, h-bar: Quantum Technology Consultants was formed by researchers at RMIT and UTS to service the rapidly expanding corporate and start-up sector.

In 2017, Q-CTRL was founded out of Sydney University and quickly attracted funding from Main Sequence Ventures (the fund associated with the CSIRO). As of 2020, Q-CTRL has secured more than$30 million in venture capital funding, employs approximately 40 scientists and engineers and has recently formed a partnership with the Seven Sisters collaboration to search for water on the Moon.10

While the figures were modest, given international developments, there was a sizeable boost in Australian Government funding for quantum between 2016 and 2019 (Figure 1). This was dominated by the renewal of EQUS and CQC2T and the establishment of Exciton Science and FLEET, funded until 2024, along with the establishment of Silicon Quantum Computing, a spin-off company of the University of New South Wales-led effort to build a silicon quantum computer, headed by Professor Michelle Simmons.

Figure 1: Estimated cumulative investment in quantum technology within Australia, including ARC centres and the private sector, 2000 to 2020



Source: Australian Research Council funding reports (1999-2019), Silicon Quantum Computing and abl.com.au.

Finally, it’s important to note that not all industry activity in quantum technology originates from academia. For example the Melbourne-based cybersecurity company Senetas, founded in 1999, has announced that it will distribute post-quantum encryption to customers in Australia and New Zealand.

While Australia has been comparatively slow to seize on the most recent quantum ‘boom’, there have been recent efforts to begin a coordinated effort in the National Initiative for Quantum Technology Development. In May 2020, the CSIRO released a report titled Growing Australia’s quantum technology industry. In summarising the current state of quantum technology development in Australia, the report argued that the country could tap potential global revenue of at least $4 billion and create more than 16,000 jobs in the new quantum sector. This is a first step in a national conversation on Australia’s future in quantum tech.

Today: Australia is now behind, as the rest of the world started to race in 2014

The pace of global quantum technology investment accelerated rapidly between 2015 and 2020, and Australia is falling behind. Before 2015, we ranked sixth in sovereign investment among the nine largest economies actively investing in quantum technology.11 Today, we’re last. Investment in the sector by China, the US, France, Germany, the EU as a whole, India and Russia now exceeds Australian investment by a factor of 10–100, even while Australia maintains a strong position in quantum talent.

Multiple nations have announced billion-dollar programs to develop their quantum technology industries. China has flagged over A$13 billion to set up a four-hectare quantum technology centre in Hefei.12 In October 2020, China also announced that quantum technologies would be included in its 14th Five-Year Plan (2021–2025).13 Japan has stepped up its investment in quantum computing by placing a functional error-corrected computer as one of its six ‘moonshot’ targets in a newly funded A$1.3 billion program.14 Japan was one of the major early investors in quantum technology, but it lost significant ground in the late 2000s and early 2010s because of a lack of confidence within government. If Australia doesn’t move quickly, we could lose the edge that we’ve cultivated since the turn of the century and unlike Japan, might not have the resources or talent to recover.

The Covid-19 crisis has also seen quantum technology emerge as an investment vector for post-pandemic recovery (figures 2 and 3). As part of a major stimulus injection, the German Government announced a A$3.15 billion investment into quantum technologies.15 In January 2021, France announced a five-year A$2.85 billion investment in quantum technologies intended to place it in the top three in the world, together with the US and China.16 Its investment strategy is broad: it includes funding for a universal quantum computer, quantum simulators and sensors, quantum communications, post-quantum cryptography, and support technologies such as cryogenics. The Israeli Government also announced a A$78 million program to build domestic quantum capacity, including the construction of a 30–40 qubit quantum computer through a contract that will be put out to tender later in 2021.17 As recently as April 2021, the Netherlands announced a A$960 million investment from the National Growth Fund to train 2,000 researchers and engineers, fund up to 100 new quantum start-ups and host three corporate R&D labs18.

Figure 2: Sovereign funding increases, 2015 to 2020 (A$ million)



Source: These figures are the same as quoted in footnotes (11-18), 2015 data is from The Economist,online. Please note that for the Netherlands and Canada, data has been used from early 2021 announcements.

Figure 3: Percentage increase in sovereign funding, 2015 to 2020



Source: derived from Figure 2.

The private sector’s involvement in both corporate investment and private equity funding of quantum start-ups has also boomed (Figure 4). Several start-ups in quantum technology are now valued at well over A$1 billion, and shares in at least two quantum tech companies are now publicly traded.19 Australia has again moved comparatively slowly in the start-up space: only one quantum computing hardware start-up and one software start-up have raised significant levels of funding.20 National R&D programs have been used extensively overseas to help incentivise private-sector engagement in quantum technology development, but that hasn’t been mirrored in Australia.

Figure 4: Quantum computing companies before 2015 and in 2020

In each of the recent examples, governments around the world have recognised that quantum science is no longer an academic field of research, but rather a burgeoning new technological industry. The difficulty faced by the Australian quantum industry is the translation of what, until recently, has been a mostly academically focused endeavour into a nascent new commercial sector.

Building a quantum society

Quantum technologies will affect many aspects of our society and economy, including health care, financial services, defence, weather modelling and cybersecurity.

One type of quantum technology—the quantum computer—presents a potentially dazzling range of applications. They include quantum chemistry simulation that will accelerate drug development, improved supply-chain optimisation and supercharged artificial intelligence. These quantum computing applications promise exciting benefits. Yet the history of technology development suggests we can’t simply assume that new tools and systems will automatically be in the public interest.21 We must look ahead to what a quantum society might entail and how the quantum design decisions being made today might affect how we live in the future.

Consider the use of quantum computing to advance machine learning and artificial intelligence (ML/AI). ML/AI technologies are already the subject of ethical frameworks designed to prevent harm and ensure the design of ethical, fair and safe systems.22 Those frameworks are vital, as potential harms could include the reproduction and amplification of existing socio-economic marginalisation and discrimination, and the reduction of personal privacy.

At this time, no ethical framework for quantum technologies exists in Australia, although the CSIRO Quantum Technology Roadmap calls for quantum stakeholders to explore and address social risks.23 As quantum technologies progress, such discussions should build literacy in the societal impacts of quantum technologies. This should be a collaborative effort between quantum physics and social science researchers, industry experts, governments and other public stakeholders, and be led by the proposed office of the minister for critical technologies.

An example of this discussion began at the World Economic Forum in 2020 through the launch of a global quantum security coalition,24 which is working to promote safe and secure quantum technologies. Australia should draw on such initiatives during the creation of a national quantum initiative to ensure the quantum technologies we develop work for the public good. In addition, two new legal organisations launched in 2020—the Australian Society for Computers and Law and the Digital Law Association—have identified quantum as a technology that needs engagement from the legal community in order to draft well-designed standards and regulations.

Quantum researchers and other stakeholders in the emerging quantum tech industry should review the potential impacts of quantum technologies on society.25 Establishing links between Australian publics and quantum researchers may help them in that review. To begin public engagement with quantum technologies, the quantum sector should invest in accessible information on quantum technologies and establish dialogue with Australian publics on a range of applications related to the new technologies. That will clarify societal expectations for the scientific community and policymakers and prompt work to address any concerns raised. Outcomes from these exercises should also inform the national quantum initiative.

Australia’s quantum talent leak

Australia’s long history in quantum technology means that our quantum technologists are high on the priority list for recruitment. Australians are some of the most successful start-up founders and leaders in the quantum industry. However, many are now working outside of Australia. Notable examples include the following:

  • Jeremy O’Brien and Terry Rudolph (UNSW and the University of Queensland) are founders of the photonics-based quantum computing start-up PsiQuantum located in Silicon Valley. They have raised over A$400 million in venture capital to date.
  • Jay Gambetta (Griffith University) is an IBM Fellow and Vice President of Quantum Computing at IBM, where he has spearheaded the massive growth in IBM’s investment in quantum computing.
  • Christian Weedbrook (University of Queensland) is the CEO and founder of Xanadu, an optics-based quantum computing start-up. Now located in Toronto, Xanadu has raised over A$40 million in venture capital funding.
  • Runyao Duan (the founding director of the Centre for Quantum Software and Information at UTS) is now the director of the Quantum Computing Institute at Baidu in Beijing.
  • Min-Hsiu Hsieh (a founding member of the Centre for Quantum Software and Information at UTS) is now the director of the Hon Hai Research Institute for Quantum Information Science (a division of Foxconn) in Taiwan.

Australia must prioritise plugging the quantum industry’s talent leak over the next two years and attracting back the talent that has moved offshore and acquired new expertise. Without a strong quantum computing sector and without significant mechanisms to train and retain highly qualified personnel, the significant investment that Australia has made in such talent will be lost. The uncertainty about H-1B visas in the US—notwithstanding the recent partial lifting by the Biden administration of the 2020 suspension by the Trump administration26—offers an opportunity for Australia to pursue skilled recruitment (in quantum, for example), given our favourable handling of the Covid-19 crisis.

The need to build quantum talent, education and literacy in a post-Covid world

We’re all now familiar with the term ‘digital literacy’: the necessity for the workforce of the 21st century to work with classical computational infrastructure. As quantum technology develops, quantum literacy will become similarly instrumental.

The creation of a talent pipeline of students who can understand and speak the language of quantum technology is a necessity—especially given the explosion of quantum start-ups and corporate teams— and will be strategically critical in the near future as the technology begins to be integrated into global information processing and telecommunications infrastructure.

One promising initiative by the NSW Government, the Sydney Quantum Academy (SQA), brings together the four main research universities in Sydney with strong quantum technology programs. Founded to provide higher degree research training at the masters and PhD levels in a coordinated way between UNSW, Sydney University, UTS and Macquarie University, the SQA is expected to amalgamate a large amount of the teaching and training efforts in quantum technology in the state. With an initial five-year investment from the NSW Government of A$35 million, it’s expected to teach a student cohort of approximately 500 PhD students and is mandated to facilitate outreach and entrepreneurship in the Sydney area—a level of coordination for quantum training that’s never before existed in Australia.27

While the SQA is a promising first step, efforts in providing education and training programs to build quantum literacy should be expanded nationwide. The talent pipeline for a quantum technology industry requires integration with graduate, undergraduate and even high-school programs across disciplines such as physics, engineering, computer science, mathematics and business. Just as digital literacy begins in school and becomes more specialised as a student progresses through university, quantum literacy programs should be similarly designed. The US and the EU are already rapidly accelerating their development of quantum education programs at all levels of education, targeting both domestic and international markets.28

Education and training should be an immediate focus for Australian investment and leadership to market the country as a leading quantum educator. Establishing educational services internationally, especially in the Asia–Pacific region, should also be a high priority.

Notable targets include the Indian and Taiwanese markets. India has indicated an intention to invest A$1.4 billion into quantum technology, but doesn’t have the required domestic expertise to exploit that level of national investment.29 Australia has the potential to provide those services to burgeoning global quantum industries.30

Similarly, Taiwan has indicated that it may more aggressively expand its efforts in quantum technology. Foxconn has established the new Hon Hai Research Institute, which has a dedicated program in quantum computing and there have been rumours that a more concerted government-backed effort may be emerging in Taipei. While the current level of domestic talent in Taiwan is significantly larger than in India, it still represents a market opportunity for Australia to provide training, education and R&D collaboration.

The local quantum talent present in Australia and initial pilot programs31 should be expanded and developed into a federally coordinated effort in which state-level initiatives—such as the SQA—take a strong leading role. It’s expected that states such as Victoria and Queensland will attempt to mirror the SQA model, but a lack of a critical mass of academics outside Sydney will make other state efforts difficult unless more quantum talent is hired or efforts are coordinated across state borders.

Part 2: How quantum technology will shape the world

Quantum will reshape not only technology, but also geopolitical strategy

The race to build quantum technologies is not only one of science and commerce. It’s a race for geopolitical leadership. Attempts to predict the impact of future technology have been notoriously inaccurate. Famous underestimates include the prediction in 1943 by Thomas Watson, then-president of IBM, that ‘there is a world market for maybe five computers.’ Clearly, there was a view that computational power was nothing more than a minor scientific tool or curiosity, when it has instead dictated geopolitical power and economic growth over the past 80 years. With that in mind, we outline three scenarios in which quantum technologies could significantly affect geopolitics.

First, there are immediate consequences for relations between Western allies and China, particularly in quantum education and technology transfer. A US senator recently claimed the US had trained some Chinese nationals to ‘steal our property and design weapons and other devices’, and that ‘they don’t need to learn quantum computing and artificial intelligence from America.’32 The mention of quantum computing wasn’t incidental. The publicity over Chinese government-sponsored quantum technology, starting with the 2017 demonstration of satellite-based quantum communications, hasn’t gone unnoticed by policymakers in Washington.33

The US Department of Energy has requested a 2021 budget that includes A$56 million to accelerate the development of the quantum internet34 on the back of a 2021 budget request, initially by the Trump administration, of A$312 million for quantum technologies.35 That complements the A$1.6 billion quantum investment signed into law in 2018.36 Xi Jinping’s government is spending A$13 billion on China’s National Laboratory for Quantum Information Sciences.37 In recognition of the national security implications of this technology, Australia has already identified ‘quantum cryptography’ and ‘high performance quantum computers’ as controlled technologies in the Defence and Strategic Goods List.38

Second, there’s potential for quantum technology to tip the balance between regional powers. Some possible scenarios include the following:

  • In early 2020, India committed A$1.4 billion for quantum computing research over five years.39 Access to enhanced imaging provided through satellite-based quantum sensing and enhanced image processing could enable the identification of underground nuclear installations in neighbouring Pakistan.
  • Conflict-ridden areas of the Middle East have experienced periods in which even vastly outnumbered insurgents have been able to maintain strategic footholds using improvised explosive devices (IEDs). While IEDs are relatively cheap to produce, technology to respond to counter-IED tools evolves quickly. Quantum technology could benefit either side. For example, extremely precise quantum magnetometers can detect large mobile metal equipment as targets or detect IEDs themselves, and photonic chips could operate even in the presence of an electromagnetic pulse that would knock out conventional electronics.
  • China’s Belt and Road Initiative, launched in 2014, had signed up about 65 countries, including 20 from Africa, by 2019.40 Many of its key projects are being financed by mined minerals from sub-Saharan Africa. Quantum gravimeters could significantly improve the accuracy of drilling by sensing density fluctuations that indicate oil and mineral deposits with a precision not possible with classical devices. Increasing access and raw material yields in nations within China’s sphere of influence could reduce demand for Australian exports.

Finally, quantum tech will disrupt digital economies. Cryptocurrencies are being used increasingly by institutional and private investors and have a current market value of over A$2 trillion. One significant threat to cryptocurrencies is from quantum computer attacks on the digital signatures used to secure transactions between untrusted parties. That would allow a malicious agent to steal crypto tokens like bitcoin undetected. In fact, up to one-third of all bitcoin, worth hundreds of billions of dollars, is estimated to be vulnerable to such theft.41 This type of threat, whether realised or not, has the potential to undermine confidence in all contemporary blockchain-based systems. The solution is to use so-called post-quantum cryptography that’s thought to be immune to attack using quantum technology. That technology is already used by some cryptocurrencies, such as HyperCash and Quantum Resistant Ledger.42 It will be a matter of economic security to frequently test and verify that coming post quantum cryptographic standards are met.

Quantum’s role in national security, defence and intelligence

The defence and intelligence implications of quantum technology can be broken down into several categories, depending on the underlying technology: quantum computing, quantum communications and quantum sensing.

1. Quantum computation

The increased power of quantum computing affects a wide range of national security applications, from materials science to logistics, but the most direct application of interest to the defence and intelligence community is in cryptography. Quantum computers applying artificial intelligence to enormous datasets at speeds that create strategic and operational advantage have direct impact in the field for two key reasons:

  • The entire security backbone of the internet is built using encryption that’s vulnerable to quantum computing. That includes everything from internet banking to the domain name system security certificates that are used to verify whether ‘google.com’ is really Google.com, instead of a hacker. The development of a quantum computer without changing the current encryption standards that underpin the entire classical internet would be catastrophic to network security.
  • While a quantum computer able to break this type of encryption won’t be around for at least a decade or two, a large amount of encrypted information crossing networks, some of which is being intercepted by malicious actors, needs long-term security. Medical records, client data held by insurance companies and nuclear weapons stockpile information are just some examples. While hackers might not have the ability to break encryption today, saved copies of encrypted data could quickly be decrypted when quantum computers become available. To prepare for that scenario, policymakers, businesses and researchers need to consider three key questions:
    1. For how many years does the encryption need to be secure, if it’s assumed data is intercepted and stored?
    2. How many years will it take to make our IT infrastructure safe against quantum attacks?
    3. How many years will it be before a quantum computer of sufficient power to break encryption protocols is built?

As anticipated by many, the first realisation of quantum computing technology has occurred in the cloud, as users log onto dedicated hardware over the classical internet. These types of ‘quantum in the cloud’ systems began with the connection of a two-qubit photonic chip to the classical internet by the University of Bristol in 201343 and accelerated significantly in 2016 with IBM’s introduction of its Quantum Experience platform. We now see both free and paid services offered by IBM, Microsoft, Amazon, Xanadu and Rigetti using a variety of hardware modalities for small-scale quantum computing chipsets with capacities of up to 65 physical qubits. This has spurred the so-called noisy intermediate-scale quantum (NISQ) field of algorithm and hardware research.44 However, we’ve only just begun to understand how these machines will be constructed and used, and their technological development is continuing to accelerate.

For a detailed explanation of quantum computing threats to cryptographic systems, see Appendix 1 on page 24.

Quantum communications platforms

Quantum technology has progressed rapidly in recent years and will have a significant impact on communication technology. The largest investment in quantum communications technology is currently being made by the Chinese Government.45

China has two major quantum networking initiatives geared towards building a quantum key distribution (QKD) infrastructure46—a technology that solves some of the security problems, discussed above, that quantum computing creates for public-key cryptography.

The first program in the Quantum Experiments at Space Scale (QUESS) program culminated in the 2016 launch of China’s Micius platform, which was a proof-of-concept platform that allowed for the distribution of entangled pairs of photons to elevated telescopic ground stations separated by thousands of kilometres. The QUESS program is designed to use a potential constellation of quantum-enabled satellites. It will provide secure cryptographic keys between multiple ground stations to secure classical communications channels using strong symmetric encryption, with keys provided by a quantum backbone network. The exact amount of funding for the QUESS program is currently unclear; however, based on a 651 kilogram payload and estimates of prices for commercial launches into low Earth orbit at that time, the cost of this technology demonstrator could easily approach A$100 million.47

The QUESS program is part of a broader quantum communications effort in China. A second major component is the Beijing-to-Shanghai optical QKD link. This is a 32-node optic-fibre-based link that’s built along the high-speed train line between the two cities, in which each node is located in secure facilities at particular stations.

These two technology demonstrators have recently been amalgamated into a national QKD network, combining more than 700 optical fibres on the ground with two ground-to-satellite links to achieve QKD over a total distance of 4,600 kilometres for users across China.48 That level of investment and technology deployment is significantly more advanced than in any other nation that’s building quantum communications systems.

Other countries have instituted similar programs or are planning to do so. For instance, a government-funded quantum repeater network is to be built between four cities in the Netherlands. There’s also a A$410 million program authorised in the US for the initial development of technology for a future US quantum internet.49 There are even discussions within Australia about a space-based quantum communications centre of excellence in collaboration with the Australian Space Agency. However, Australia is significantly behind China in technological development and it isn’t clear, from a scientific and technical perspective, whether replicating what China has done is the most appropriate way to proceed.

For a more detailed explanation of the major quantum communications systems being deployed worldwide, see Appendix 2 on page 29.

3. Quantum sensing and its applications for the resources sector and defence

Quantum sensing is seen as one of the three main pillars of quantum technology development, along with quantum computing and quantum communication systems. Applications that provide positioning, navigation and timing could potentially benefit from quantum effects, especially when combined with a quantum communications network. Quantum sensing may be the first technological application to be widely adopted in markets.

Three types of quantum sensors have direct applications in multiple sectors, including mining and defence:

  • Quantum sensors to detect magnetic fields with high precision (magnetometry): In principle, this can be used for the undersea detection of magnetically discernible materials. The most promising candidates in this area are diamond-based quantum sensors, and significant effort at Melbourne University, Macquarie University and the ANU is focused on developing that technology.
  • Increased timing precision (atomic clocks): The GPS and inertial guidance positioning, navigation and timing are intricately linked to precise clocks. While atomic clocks have been commercialised for more than 30 years, the ability to miniaturise and package atomic clocks based on technology such as ion traps may be instrumental in even wider adoption.
  • Quantum sensors for ultra high precision measurement of gravitational fields (gravitrometry): By measuring small deviations in ‘little g’ (the acceleration due to the Earth’s gravitational field), we can possibly detect anomalous underground structures, which could be hidden subterranean bases or large oil and mineral reserves.

None of those platforms requires the hardware resources needed for quantum computing or communications systems, so they’re comparatively easier to build and test. However, their superiority over highly precise classical systems isn’t as well understood, so they’ll need to show a competitive advantage in both price and portability before they’re adopted at scale.

The UK, the EU, the US and Canada all have extensive research programs in the quantum sensing space as well as numerous start-ups. In Australia, sensing is most likely to find markets within the minerals sector.

Part 3: What we need to do

Drivers for action: Time for strategic investments

The world is racing to develop quantum technology for business as well as for security and defence. It’s now a crucial moment. Australia reacted exceptionally well in the late 1990s and early 2000s as quantum technology became a substantial area of research within academic physics, computer science and engineering departments. The investment in ARC fellowships, special research centres and centres of excellence tied to quantum computing and related technologies ensured that we were at the forefront of development during the 2000s and early 2010s. Yet, in the years since, there’s been no acceleration of national funding for quantum technology. Consequently, there’s been little movement from the private sector to get involved in the field.

Australia doesn’t have the capital needed to build a complete R&D infrastructure and manufacturing base to control a large share of the future quantum technology market. However, that shouldn’t stop us making strategic moves to become a major player in some of the more lucrative aspects of this new industry. We already possess the technical know-how to invent, develop and prototype some of the critical components needed for large-scale quantum technologies. We can also set up companies, research centres or even government-backed entities to build up large intellectual property portfolios across a variety of physical hardware platforms.

Australia has a significant level of expertise in software and hardware and could develop and manufacture critical components domestically. Of the major hardware systems for large-scale quantum computing, Australia has a near-monopoly on the most advanced technology for silicon (CQC2T and its spin-off company, Silicon Quantum Computing). We were also the pioneers and maintain a very high level of hardware expertise in optical quantum computing platforms, and we have significant capacity in diamond-based systems.

While Australia has the talent and ideas, there’s no mechanism to focus that capacity for the benefit of the Australian quantum technology sector. We can no longer rely solely on academia to lead our approach to quantum technology. Private-sector investment must be boosted. As we’ve seen in the US and the EU, investment comes when the private sector sees the establishment of strong, technology-focused initiatives. Arguably, large quantum efforts at companies such as Microsoft and IBM exist, in part, because those companies were corporate partners in US defence and intelligence funding set up by the Defense Advanced Research Projects Agency and the Intelligence Advanced Research Projects Activity in the 2000s and early 2010s.

In August 2020, for example, the US launched its national quantum research centres as part of its National Quantum Initiative. This should be a particular motivator for Australia, and particularly the Australia–US alliance, as it provides an opportunity for enhanced engagement and cooperation. Five new research centres focused on computing, communications, sensing and simulation have been established and funded to the tune of A$150 million. The centres build in major collaborations between US national labs, universities and, most importantly, quantum technology companies. The level of private–public engagement involved in the research centres is something that Australia needs to replicate.

While world-leading R&D is occurring in Australia, when it benefits private-sector interests, it benefits offshore quantum computing programs. That doesn’t happen in other nations. In the US, for example, Amazon has made a multimillion-dollar investment to set up Amazon Web Services’ quantum division in collaboration with Caltech in California. Likewise, partnerships with IBM link university research centres and other corporations interested in quantum technology, such as Goldman Sachs, and multi-institutional collaborations are taking advantage of funding incentives made available through the National Quantum Initiative. Such incentives don’t currently exist in Australia, and we’re being crowded out of the private–public collaborative space that’s taking shape.

Australia requires a strategic investment in dedicated research programs that are focused on technology development (unlike the centres of excellence, which mainly have a remit for basic research) to remain relevant on the global stage. This could take the form of a dedicated centre or program for the development of a small-to intermediate-scale quantum computer using optical systems or diamond technology that Australia has significant experience with, or it could be a major initiative to develop key quantum software components.50 If done correctly, that could reassert a level of Australian leadership in the quantum technology sector that has degraded over the past decade. An initial $3–4 billion national quantum strategy will be needed over the next five years to ensure that Australia can benefit from this new technological revolution.

Policy recommendations

1. A new minister

At the earliest opportunity, the Prime Minister should appoint a dedicated and ongoing minister for critical and emerging technologies (this position could also inherit ‘cyber’). This minister’s focus should be technology, rather than ‘technology’ being added to a longer list of portfolio topics. This should be a whole-of-government role with the Minister working across the economic, national security, industry, education, defence, research and science agencies in the public service. The minister would play a key role in the implementation of many of the policy recommendations made here.

2. A national technology strategy

The government should move quickly this year to initiate a whole-of-government technology strategy process led by PM&C, of which quantum should form a key part. By authorising PM&C to lead this initiative, this strategy necessarily recognises that there is no one lens through which to view technology and that its emergence and deployment will impact everything, including our society, the economy and industry, national security and human rights. This strategy should include consideration of appropriate ethical frameworks for critical and emerging technologies such as quantum. PM&C should work closely with other parts of government including the DISER, Office of the Chief Scientist, Defence, Home Affairs, DFAT, CSIRO, the Office of National Intelligence, the Australian Signals Directorate as well as the research and civil society community and the private sector. The new minister for critical and emerging technologies would be responsible for delivering the strategy to the Australian public by 2022.

3. Expand and elevate PM&C’s whole-of-government leadership role on technology policy

There is positive momentum in government and growing knowledge on critical and emerging technologies (like quantum) in departments such as Defence, DISER, CSIRO and PM&C. However, there’s currently no clear government lead on ‘technology’, and that lack of leadership and coordination is preventing policy progress. Critical and emerging technologies present a myriad of opportunities, challenges and threats, and PM&C is the only department with the whole-of-government perspective to balance them in our economy, society and national security. The relatively new but small Critical Technologies Policy Coordination Office in PM&C—the creation of which was a welcome move by the government—should be immediately expanded and elevated to become the National Coordinator for Technology.

The expanded division should work with Australia’s new minister for critical and emerging technologies to support the delivery of the recommended national technology strategy.

Within the new PM&C division in 2021, small offices focusing on key critical technology areas should be created. Quantum technology should be the first such office developed, and other small offices could be built to focus on biotechnology51 and artificial intelligence, for example. A useful model for such appointments is the Assistant Director for Quantum Information Science at the White House Office of Science and Technology Policy in the US.

The government should search for individuals to lead these offices who can serve as catalysts, working across government (including with the military and intelligence agencies), business, the research sector and internationally, to deliver a post-Covid-19 technology stimulus and build a pipeline of focus, policy and investment that should last decades. These leaders will need to engage globally and strengthen relationships with our key partners in the Indo-Pacific and work across key groupings such as the Quad (US, India, Japan, Australia). Investments in quantum technology, for example, require careful consideration of our interdependence with our strategic allies, which we’re currently well placed to cooperate with and piggyback on, and of our likely adversaries.

4. A$15 billion post-Covid-19 technology stimulus

The Australian Government should immediately lay the groundwork for a multi-year $15 billion post-Covid-19 technology stimulus that would also be informed by the delivery of a new national technology strategy. This stimulus should include a $3-4 billion investment in quantum technologies. The stimulus would be a game-changer for Australia and help the country diversify and deepen its technological and R&D base. It would also exploit our disproportionate concentration of world-class quantum technology expertise, ensuring the long-term growth and maintenance of this vital technological sector. The following recommendations describe what this stimulus could look like from a purely quantum perspective.

5. Establish an ‘Australian distributed quantum zone’

A national quantum R&D initiative should be a key part of the government’s post-Covid-19 technology stimulus. This could be established with a multibillion-dollar national funding initiative that would leverage the seed investments Australia has already made over the past 30 years. This initiative could be akin to a special economic zone—a place for quantum-related economic activity that wouldn’t sit with one city or state but instead be distributed nationally across universities and research institutes. The Melbourne Biomedical Precinct provides an attractive blueprint for the development of such a national initiative.52 Given the diversity of expertise and capabilities across the country, a distributed quantum zone not tied to a capital city or state is preferable.

The commercialisation of university-developed intellectual property is currently a major roadblock in building a quantum ecosystem in Australia beyond university research. Researchers are often actively disincentivised from spinning out academic research into new start-ups because of the administrative overhead in extracting relevant intellectual property. Universities should be encouraged to ensure that they foster collaboration, entrepreneurship and commercialisation in the quantum space. The newly announced A$5.8 million University Research Commercialisation Scheme scoping study should be encouraged to address the commercialisation of quantum technology.

6. Lure Australian talent back home and attract foreign talent

Australia’s favourable handling of Covid-19 presents a unique opportunity to attract new technology talent as well as to lure back Australians currently running quantum programs in other countries. This could involve increasing the accessibility, scope and clarity of R&D tax incentives, especially for small and medium-sized enterprises and further expansions and tweaks to the government’s ‘Global Talent Independent Program’, including for example, lowering the expected salary requirements below A$153,600/year.53

7. Build global cooperation and increase direct involvement in quantum development by the defence and intelligence communities

The Australian defence and intelligence communities, when compared to their counterparts in the Five Eyes alliance, are disengaged from the quantum technology community.

The Chief Scientist (Cathy Foley) and the Chief Defence Scientist (Tanya Monro) have strong backgrounds in quantum. Their expertise should be immediately tapped to create a quantum defence and intelligence working group, connecting stakeholders within government to the quantum technology community in order to identify key national security priorities that can benefit from quantum technology.

Australia should focus quantum technology work related to national security and defence through a formal partnership with the US, using the precedent of cooperation in other areas of science and technology. The national security and defence implications of quantum technology are clear enough to make this area of development a new core element of the Australia–US alliance. Formalising this partnership, in a similar manner to the US–Japan Tokyo statement on quantum cooperation,54 will also enable academic and industry contributions to contribute to and draw from the partnership. We support the similar policy recommendation in ASPI’s defence-focused report, The impact of quantum technologies on secure communications, which argues for the formalisation and prioritisation of Australia–US cooperation on quantum technology.55

Quantum experts should be encouraged and aided to gain the security clearances needed to be read into programs that may benefit from quantum technology. This should occur initially in an advisory context, but expand as projects are identified.

8. Eliminate uncertainty by developing a national framework outlining national security and defence policy covering quantum technology

The explosion of investment around the world and the unique expertise that Australia has open up tremendous opportunities for incoming investment from overseas. However, both the private sector and Australian research centres are in many cases timid or hostile to such partnerships due to the expected nature of a future national policy covering technology transfer in the quantum space. There are already examples of multimillion-dollar deals that have been rejected at the university level because of perceived future problems with export controls and their ability to work with certain nations, which isn’t yet enshrined in any articulated policy. This uncertainty needs to be rectified as soon as possible. This new national framework should involve the Department of Defence and other parts of government who work on export controls.

9. Expand the role of education and training within Australia

The coordinated national quantum initiative should include establishing major training hubs for quantum technology in Australia, which will assist the university sector in its post-Covid-19 recovery. This would also help build quantum literacy in Australia and throughout the Indo-Pacific region.

  • Establish a national quantum academy: The Sydney Quantum Academy is the first step in this direction, and it ought to be expanded to a tightly integrated national quantum academy, providing education and training at all levels to service future demand for quantum technology intellectual capital, both domestically and globally.
  • Build initial education and training partnerships abroad: With a particular focus on the Indian and Taiwanese markets, establish bilateral partnerships with their emerging quantum sectors and build domestic talent, research expertise and collaboration with the Australian quantum sector.
  • Enter the school sector, building quantum literacy: Initiate a pilot program that brings together stakeholders from state and federal departments of education, school teachers, students and members of the Australian quantum community to create entry-level educational material that introduces core concepts taught in high-school physics, chemistry, mathematics and computer science through the lens of quantum technology.

Appendix 1: Quantum computing threats to cryptographic systems

In broad terms, there are two types of classical cryptosystem that are commonly used throughout the world for a variety of applications: symmetric-key cryptosystems and public-key (or asymmetric) cryptosystems.

The most commonly known example is one-time pad symmetric encryption. One-time pads are provably secure against any attack (quantum or classical) if implemented perfectly: a caveat that’s arguably impossible to meet practically and economically. Symmetric-key cryptosystems use the same key to both encrypt and decrypt data. This offers the advantage of more secure message transmission but suffers from the downside of how to distribute keys to both the sender and receiver in a secure manner. For symmetric-key cryptosystems, there are secure protocols against quantum attacks.

Public-key cryptosystems use two separate keys that are mathematically related. One is used for encryption and one for decryption. One of the keys is publicly advertised (for example, a PGP or ‘pretty good privacy’ key, that some people attach to their email signature), while the other needs to remain completely secret and secure. Public-key cryptosystems are used for the vast majority of encrypted traffic traversing publicly accessible channels, such as the global internet, Wi-Fi, Bluetooth and microwave transmissions. While all public-key cryptosystems work on the same mathematical principles, the most well-known example is the RSA cryptosystem, in which security is based on the difficulty in factoring large composite numbers.

For factoring, the state of the art in classical algorithms remains the general number field sieve. Figure A1 (below) shows the year in which various bit-sizes (L) for the RSA cryptosystem were factored as part of the RSA challenge and an estimate of the computational time needed to factor a specific L-bit number using the scaling of the number field sieve for 100 PCs in 2003 and 2018. Once L becomes bigger than about 1,000, the time needed to complete the computation becomes prohibitively long. Currently, for online encryption, an L of 2,048 is commonplace.

Peter Shor, a professor in applied mathematics at Massachusetts Institute of Technology, completely changed the discussion by showing that a hypothetical (as it was in 1994) quantum computer allowed for a computationally efficient solution to factoring. Finding an efficient quantum algorithm to solve the foundational problems underpinning public-key cryptography opens up an irreconcilable security flaw in these protocols. Regardless of whether you think it will ever be practical to build a quantum computer, the fact that this fundamental mathematical result exists is a significant problem: any cryptosystem can’t have such a flaw even in theory, as this result underpins everything else.

The existence of an efficient algorithm for factoring adds a new curve to the scaling figures. Figure A1 illustrates the importance of the concept of computational complexity or algorithmic scaling. The new curve takes the scaling of Shor’s factoring algorithm and overlays the time to break the RSA. As Shor’s algorithm is a polynomial algorithm, computational times increase more slowly as the key length increases, compared to the classical number field sieve. Consequently, even key lengths of 10,000 bits or more are factorable in acceptable time frames using quantum computers of moderate to fast physical speed.

The existence of a quantum computer makes public-key protocols such as RSA insecure, as simply increasing key sizes can be easily overcome by a commensurate increase in quantum computing capability.

A potentially more immediate threat is posed by quantum attacks on digital signatures. A digital signature is like an electronic fingerprint appended to data, which proves to the receiver that a document was sent by the signer. It can be done in a completely public manner over the internet. Such signatures are routinely used for financial transactions and have a broad use case for blockchain-enabled technologies such as smart contracts for insurance and cryptocurrency trading. The signature is secured using trusted algorithms such as elliptic-curve cryptography, which make forging by stealing the sender’s private key exponentially hard for classical computers. However, due to another quantum algorithm discovered by Peter Shor for calculating discrete logs, quantum computers can quickly hack the message to learn the private key. Such an attack is in fact easier for quantum computers than breaking RSA cryptography, and could be possible within 15 years using around 1 million qubits.56

While the theoretical nature of Shor’s algorithm poses a security problem for public-key cryptography in a world where quantum computers exist, there’s still the practical question of when such machines of sufficient size to threaten current public-key cryptosystems can be built. Errors in quantum computing systems (due to both fabrication and control imperfections) require the use of extensive error correction, which requires more and more physical qubits within the chipset.

While there’s been remarkable progress both from the theoretical perspective (resource costs for Shor’s algorithm have dropped by a factor of nearly 1,000 since 2012) and from an experimental perspective (qubit chipsets of approximately 50 qubits with error rates of less than 1% are now possible), there’s still a long way to go before a machine of sufficient size to break public-key cryptosystems will be available on any hardware platform.

The current state of quantum computing systems

Blueprints for large-scale quantum computing systems were developed only in the late 2010s, and the current estimate of the resources needed for a fully error-corrected implementation of Shor’s factoring algorithm to break RSA-2048 is approximately 20 million superconducting qubits over a computational time of approximately eight hours. This assumes:

  • reliable gate error rates for each qubit of 0.1% (this should be achievable in experimental systems in the next 3–5 years)
  • significant ability to mass manufacture cheap qubits
  • the solution of several major engineering and infrastructure challenges to allow for chip sizes of the order of tens of millions of qubits.

The data that has been presented shows the current state-of-the-art knowledge in the theoretical and experimental space for implementing cryptographic-related protocols on quantum computing systems, but the future is open to speculation. We’ve focused specifically on Shor’s algorithm as it has been the most well-studied and optimised large-scale algorithm of interest to the non-scientific community. It should be noted that shorter timelines are certainly possible, particularly in the case of a quantum-assisted side channel attack. That is, one taking advantage of leaked information in cryptographic transactions, which would require fewer quantum resources than a full-blown Shor attack.

Certainly, quantum system developers are attempting to replicate a type of Moore’s law for quantum computing, doubling power every 18–24 months, but it’s unclear whether that will eventuate. Consequently, when classical cryptosystems will come under threat from quantum computers is subject to debate; that is, we don’t yet know when we’ll be able to close the gap between the requirements of breaking RSA-2048 and the size and quality of the chipsets than can be built in the laboratory.

The direct simulation of quantum mechanical systems for use in bioscience, material science and other fields has also been studied in depth. However, the size of a physical machine to provide unambiguous quantum advantage in these spaces is often larger than that of a useful factoring machine.57

At the smaller scale, corporations marketing new NISQ-based quantum cloud systems have been aggressive in soliciting the Australian quantum community and other markets in adopting access packages for those systems. This has included the establishment of the University of Melbourne’s IBMQ Hub in 2017 to coordinate access to IBM hardware in Australia.58 The accessibility of these services in Australia and access by Australian researchers will be a critical tool for quantum computing R&D into the future, but we should remain cautious to ensure that diversification in online providers is maintained and that we use these tools to augment Australian R&D efforts, rather than substituting the use of subscription services offered by international corporates for building sovereign capacity in the quantum space.

Figure A1: Estimated times required for RSA factoring on quantum and classical hardware



Source: R. Van Meter, PhD thesis, online, online.

Figure A2: Physical error rates required in quantum hardware to implement Shor’s algorithm without active quantum error correction. Insert: historical decreases in qubit error rates from 1996 to 2020.

Figure A3: Decrease in qubit resources for Shor’s algorithm between 2011 and 2020.



Source, online, online.

Figure A4: Historical demonstration of small qubit chip-sets in four major quantum hardware platforms.



Source, online.

Appendix 2: The status of quantum communications

Quantum communication systems, like their classical counterparts, use several types of hardware. The major ones being developed and deployed worldwide are as follows:

  • Quantum repeater systems: Unlike classical fibre optics, quantum states can’t be copied. Consequently, overcoming losses in fibre optics requires the use of what are effectively mini-quantum computers to relay quantum information at regular intervals across the link.
  • Quantum free space systems: Developed primarily by researchers in Austria, with prototype systems deployed in the Canary Islands, free space quantum systems work by beaming a particle stream of photons (light particles) from source to receiver using a direct line of sight. Developed as a precursor to quantum satellite systems, free space quantum transmission isn’t as aggressively pursued as it once was and might be useful only for ‘last mile’ type applications in quantum communications.
  • Quantum satellites: These systems are now the favourite for multiple nations and research groups. Spearheaded by the Chinese Micius platform, launched in 2014, quantum satellites beam either a single particle stream of photons (or a pair of entangled particle streams) to ground stations that can be separated by thousands of kilometres. This platform holds the record for longest distance quantum communications protocols.
  • Quantum memory units (sneakernet): A new model that’s still only theoretical, quantum memory units use the classical principle of sneakernet communications (physically transporting hard drives from point A to point B to achieve a communications link) but overcome the biggest downside of classical sneakernets: long latency times in information transport. Built using the same underlying technology as quantum computers.

The requirements of a quantum communication system are highly dependent on the desired application. The constraints that hardware must satisfy for quantum secured authentication tokens or the distribution of quantum secured keys for symmetric cryptosystems are different from those of a global quantum internet that connects quantum computing systems for distributed computation or blind server/client-based quantum computing. The tendency for people to conflate applications and speak of a quantum key distribution system in the same breath as a quantum internet doesn’t reflect the reality of what applications require and what current quantum communications hardware can do.


Acknowledgements

Thank you to Danielle Cave for all of her work on this project. Thank you also to all of those who peer reviewed this work and provided valuable feedback including Dr Lesley Seebeck, Lachlan Craigie, David Masters, Fergus Hanson, Ariel Bogle, Michael Shoebridge, Rebecca Coates, David Douglas and Justine Lacey. Finally, we are grateful for the valuable feedback we received from anonymous peer reviewers who work in the fields of quantum academia and policy. ASPI’s International Cyber Policy Centre receives funding from a variety of sources including sponsorship, research and project support from across governments, industry and civil society. No specific funding was received to fund the production of this report.

Important disclaimer: This publication is designed to provide accurate and authoritative information in relation to the subject matter covered. It is provided with the understanding that the publisher is not engaged in rendering any form of professional or other advice or services. No person should rely on the contents of this publication without first obtaining advice from a qualified professional.

© The Australian Strategic Policy Institute Limited 2021

This publication is subject to copyright. Except as permitted under the Copyright Act 1968, no part of it may in any form or by any means (electronic, mechanical, microcopying, photocopying, recording or otherwise) be reproduced, stored in a retrieval system or transmitted without prior written permission. Enquiries should be addressed to the publishers. Notwithstanding the above, educational institutions (including schools, independent colleges, universities and TAFEs) are granted permission to make copies of copyrighted works strictly for educational purposes without explicit permission from ASPI and free of charge.


First published May 2021. ISSN 2209-9689 (online), ISSN 2209-9670 (print).

Funding Statement: No specific sponsorship was received to fund production of this report.

  1. US$180 billion of Biden’s US$2 trillion infrastructure plan is earmarked for technologies of the future like quantum computing. See Martin Giles, Forbes, 1 April 2021, online. ↩︎
  2. ‘AI, quantum R&D funding to remain a priority under Biden’, Wall Street Journal, 9 November 2020, online. ↩︎
  3. ‘Fact sheet: President Biden takes executive actions to tackle the climate crisis at home and abroad, create jobs, and restore scientific integrity across federal government’, The White House, 27 January 2021, online. ↩︎
  4. This technology stimulus would of course be spread over multiple years. ↩︎
  5. See Germany’s June 2020 €50 billion ‘future-focused’ technology stimulus for an example of how other countries have managed and deployed such technology-focused investments: Eanna Kelly, ‘Germany unveils €50B stimulus for “future-focused” technologies’, Science Business, 4 June 2020, online. ↩︎
  6. Ben Packham, ‘PM’s department developing list of research, technology to shield from foreign interests’, The Australian, 12 March 2021, online. ↩︎
  7. See John S Mattick, Biodata and biotechnology: opportunity and challenges for Australia, ASPI, Canberra, 27 August 2020, online. ↩︎
  8. MRI = Magnetic resonance imaging. ↩︎
  9. Qubit = A Quantum Bit (Qubit) is the fundamental element of quantum information. Analogous to classical bits, a qubit is formed from two-level quantum mechanical systems such as the spin state of an electron or the polarisation state of a single particle of light—a photon. ↩︎

Stronger Together: US force posture in Australia’s north—a US perspective on Australia’s strategic geography

Stronger together: US force posture in Australia’s north—a US perspective on Australia’s strategic geography

This report argues why, and analyses how, Australia’s defence force capabilities and strategic geography can enable US force posture initiatives in the Indo-Pacific to promote greater regional cooperation in ways that advance US and Australian national interests.

Lieutenant Colonel Hanks writes that there are ‘practical and tangible areas for US-Australia cooperation and growth which include: 1) expanding the Australian defence industrial base while securing and hardening supply chains; 2) increasing US Army force posture in northern Australia; 3) increasing multinational training opportunities; and 4) in conjunction with Australia, expanding the defence partnership with Indonesia.’ ‘The US now relies on increased cooperation from partners and allies to regain the initiative from the PRC in the Indo-Pacific. Australia’s defence strategy and policies are better aligned with US defence strategy and policies today, than ever before.’

The report argues that military modernization alone will not effectively expand the competitive space and disrupt PRC grey-zone decision cycles. Thinking asymmetrically, Australia can use its strategic geography and defence capabilities to enable US force posture initiatives in the Indo-Pacific to promote greater regional cooperation and, through greater deterrent posture and capability, reduce the risk of conflict.

Family De-planning: The Coercive Campaign to Drive Down Indigenous Birth-rates in Xinjiang

In this report, we provide new evidence documenting the effectiveness of the Chinese government’s systematic efforts to reduce the size of the indigenous population of Xinjiang through a range of coercive birth-control policies.
 
Using the Chinese government’s own publicly available statistics, we have compiled a dataset of county-level birth-rates (natality) across 2011-2019. We then marshal this data to analyse trends across nationalities and spatial regions in Xinjiang, before and after the 2016 crackdown, and comparatively with other countries as recorded in the UN population dataset. Finally, we place these statistics in context through our analysis of county-level implementation documents and other official Chinese language sources which have been previously overlooked.
  
In 1979, Deng Xiaoping launched the “one child policy” and created a complex set of bureaucratic institutions and practices for controlling population growth. Party officials rather than women would decide what they did with their bodies.
 
The one-child policy has seen a dramatic drop in China’s fertility rate and unleashed new concerns about a looming demographic crisis. Yet the instinct to control remains. As Party officials are loosening family-planning rules on Han women, they are simultaneously cracking down on the reproductive rights of Uyghur and other indigenous nationalities in Xinjiang Uyghur Autonomous Region (XUAR) over perceived fears of instability and uneven growth.
 
In the name of stability and control, the CCP under President Xi Jinping is seeking to fundamentally transform the social and physical landscape of Xinjiang. This includes the construction of hundreds of prison-like detention centres and the mass internment of Uyghurs, Kazakh and other indigenous nationalities; a regime of highly intrusive and near constant surveillance; the erasure of indigenous culture, language and religious practices and sites; and mandatory job assignments that are indicative of forced labour; among other now well-documented human rights abuses.
 

Key Findings

Beginning in April 2017, Chinese Communist Party authorities in Xinjiang launched a series of “strike-hard” campaigns against “illegal births” with the explicit aim to “reduce and stabilise a moderate birth level” and decrease the birth-rate in southern Xinjiang by at least 4.00 per thousand from 2016 levels. This followed years of preferential exceptions from family-planning rules for indigenous nationalities.
 
The crackdown has led to an unprecedented and precipitous drop in official birth-rates in Xinjiang since 2017. The birth-rate across the region fell by nearly half (48.74 percent) in the two years between 2017 and 2019.
 
The largest declines have been in counties where Uyghurs and other indigenous communities are concentrated. Across counties that are majority-indigenous the birth-rate fell, on average, by 43.7 percent in a single year between 2017 and 2018. The birth-rate in counties with a 90 percent or greater indigenous population declined by 56.5 percent, on average, in that same year.
 
In 2017, the Chinese government’s approach to birth control among minority nationalities shifted from “reward and encourage” towards a more coercive and intrusive policing of reproduction processes. Hefty fines, disciplinary punishment, extrajudicial internment, or the threat of internment were introduced for any “illegal births.” Family-planning officials in Xinjiang were told to carry out “early detection and early disposal of pregnant women found in violation of policy.”
 
While the Chinese government argues it has adopted a uniform family-planning policy in Xinjiang, the county-level natality data suggests these policies are disproportionately affecting areas with a large indigenous population, meaning their application is discriminatory and applied with the intent of reducing the birth-rate of Uyghurs and other religious and ethnic minorities. This policy also stands in stark contrast to the loosening of birth control restrictions elsewhere in China.
 
Policy implementation documents from Xinjiang explicitly set birth-rate targets that are among the lowest in the world, and the birth-rate has declined from a rate similar to those in neighbouring countries such as Mongolia or Kazakhstan to only slightly higher than that of Japan, where the low birth-rate is seen as a “national crisis.” 
 
The sharp drop in birth-rates in Xinjiang (a region with a population of nearly 25 million) is proportionally the most extreme over a two-year period globally since 1950. Despite notable contextual differences, this decline in birth-rate is more than double the rate of decline in Cambodia at the height of the Khmer Rouge genocide (1975-79).
 
The 1948 Convention on the Prevention and Punishment of the Crime of Genocide, to which China is a signatory, prohibits states from “imposing measures intended to prevent births within the group,” as an aspect of the physical element to genocide. Our analysis builds on previous work and provides compelling evidence that Chinese government policies in Xinjiang may constitute an act of genocide; however further research is required to establish the intent and mental element of this crime. We call for the Chinese government to give researchers, journalists and human rights experts full and open access to Xinjiang.

Download full report

Readers are encouraged to download the report to access our full findings.


Acknowledgements

We would like to thank our external peer reviewers, Dr Timothy Grose, Dr Adrian Zenz, Dr Stanley Toops, and Peter Mattis, for their comments and helpful suggestions. Darren Byler, Timothy Grose and Vicky Xu also generously shared with us a range of primary source materials. We’re also grateful for the comments and assistance provided within ASPI by Michael Shoebridge, Fergus Hanson, Danielle Cave, Kelsey Munro and Samantha Hoffman and for crucial research assistance from Tilla Hoja and Daria Impiombato. This research report forms part of the Xinjiang Data Project, which brings together rigorous empirical research on the human rights situation of Uyghurs and other non-Han nationalities in the XUAR. It focuses on a core set of topics, including mass internment camps; surveillance and emerging technologies; forced labour and supply chains; the CCP’s “re-education” campaign and deliberate cultural destruction and other human rights issues.

The Xinjiang Data Project is produced by researchers at ASPI’s International Cyber Policy Centre (ICPC) in partnership with a range of global experts who conduct data-driven, policy-relevant research. The project is predominantly funded by a January 2020-October 2021 US State Department grant. The Xinjiang Data Project also hosts ASPI ICPC projects funded by the UK Foreign and Commonwealth Office (such as ‘Uyghurs for Sale’ in March 2020) and projects with no core funding (such as ‘Strange Bedfellows on Xinjiang’ in March 2021). The work of the ICPC would not be possible without the financial support of our partners and sponsors across governments, industry and civil society.

What is ASPI?

The Australian Strategic Policy Institute was formed in 2001 as an independent, non‑partisan think tank. Its core aim is to provide the Australian Government with fresh ideas on Australia’s defence, security and strategic policy choices. ASPI is responsible for informing the public on a range of strategic issues, generating new thinking for government and harnessing strategic thinking internationally. ASPI’s sources of funding are identified in our annual report, online at www.aspi.org.au and in the acknowledgements section of individual publications. ASPI remains independent in the content of the research and in all editorial judgements.

ASPI International Cyber Policy Centre

ASPI’s International Cyber Policy Centre (ICPC) is a leading voice in global debates on cyber, emerging and critical technologies, issues related to information and foreign interference and focuses on the impact these issues have on broader strategic policy. The centre has a growing mixture of expertise and skills with teams of researchers who concentrate on policy, technical analysis, information operations and disinformation, critical and emerging technologies, cyber capacity building, satellite analysis, surveillance and China-related issues. The ICPC informs public debate in the Indo-Pacific region and supports public policy development by producing original, empirical, data-driven research. The ICPC enriches regional debates by collaborating with research institutes from around the world and by bringing leading global experts to Australia, including through fellowships. To develop capability in Australia and across the Indo-Pacific region, the ICPC has a capacity building team that conducts workshops, training programs and large-scale exercises for the public and private sectors.

We would like to thank all of those who support and contribute to the ICPC with their time, intellect and passion for the topics we work on.

If you would like to support the work of the centre please contact: icpc@aspi.org.au

Important disclaimer

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© The Australian Strategic Policy Institute Limited 2021

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First published May 2021. ISSN 2209-9689 (online), ISSN 2209-9670 (print).

Funding statement: Funding for this report was provided by the US State Department.

Somebody might hear us: Emerging communications security technologies

Militaries have been trying to keep their communications safe from prying eyes for centuries. But they have also sought to be able to communicate as quickly as possible and as widely as possible with their own forces. Those requirements are in tension with one another.

Today, militaries can communicate globally over increasingly capacious data pipes. But the same technological evolution that allows them to do that has also given would-be eavesdroppers new and powerful tools to collect and exploit signals.

In this report, author Dr Andrew Davies explains the principles of secure communication and uses some examples of emerging technologies to illustrate what the next generation of secure communications might look like.