Last year’s war between Azerbaijan and Armenia was short, sharp and decisive. By effectively employing precision guided weapons, the former rapidly forced the latter to capitulate and accede to its political demands. The conflict confirmed the centrality of guided weapons to modern warfighting and showed how small states can now master the technologies and techniques needed to use them.

Last year also witnessed the onset of the Covid-19 pandemic and the supply-chain crisis it triggered. That provoked much soul-searching from governments and companies about how to manage the risks presented by modern just-in-time supply chains that span the globe.

When we take those two events together, it’s clear that the Australian Defence Force will not only need many kinds of guided weapons across the spectrum of conflict, but also need to guarantee their availability in times of crisis when supply chains will be under pressure and threat. That will be difficult, since Australia currently manufactures virtually no guided weapons.

The Australian government is also aware of both needs. Its 2020 defence strategic update plans on investing tens of billions of dollars in guided weapons over the next two decades. It also directs the Defence Department to explore the potential for new sovereign guided-weapons production capability to mitigate supply risks. It appears that exploration has determined that the potential can be turned into reality: on 31 March, the government announced that it was ‘accelerating’ the development of a sovereign guided-weapons manufacturing capability.

In a new ASPI report, launched today, I examine two fundamental questions. First, would the manufacture of guided weapons in Australia enhance ADF capability and provide greater self-reliance? Second, is it viable to manufacture guided weapons in Australia? The answer to both questions is ‘yes’. The report also presents some key considerations about how the industry should be established.

No single measure is a panacea for supply-chain risks, but domestic guided-weapons production, combined with greater stockpiling and cooperative development and production arrangements, would greatly reduce those risks.

Australia has the industrial capability to produce guided weapons here. In fact, we have a long and successful living history of doing just that. We can also draw upon ‘missile-adjacent’ sectors such as space and autonomous systems as well as leverage the power of the fourth industrial revolution to accelerate the design and manufacture of weapons. We can also leverage our alliance with the US to establish production lines for US weapons here, to the benefit of both partners.

A multibillion-dollar investment in the local manufacture of guided weapons is also consistent with broader government policy; for example, it supports the government’s modern manufacturing initiative, which is a key element in the effort to wean the Australian economy away from a dangerous over-reliance on the export of commodities and build on some other national strengths.

The government has announced that it’s establishing a guided-weapons ‘enterprise’, although it has released few details. What should that enterprise look like? To maximise the prospects for success, Defence needs to adopt a programmatic approach to its selection of guided weapons and actively manage the ‘missile matrix’. That is, rather than allowing the number of types of weapons that it uses multiply by letting individual projects choose different weapons for different platforms, it needs to make decisions that take all relevant factors into account and choose weapons or families of weapons that will be used across multiple platforms.

That approach will have many benefits. Acquiring more weapons of fewer types will increase the economies of scale of local production. It will also help to contain the overheads of ownership, such as sustainment costs, the logistics chain and integration costs.

A programmatic approach will necessarily involve ‘backing winners’ up front. While some may have concerns about the potential loss of commercial leverage, Defence is already using such an approach with success, for example in the navy’s combat management system, for which the government has decided that all classes of ships must use Saab’s combat system. This will involve seeing industry as long-term partners, rather than simply as suppliers—but that’s already a fundamental tenet of the government’s defence industry policy. Moreover, losing commercial leverage is a manageable issue, as Defence would be a more powerful, larger customer if it procured missiles using domestic co-production and the ‘family of weapons’ approach I outline in the report. And reduced commercial leverage is a different order of risk compared to losing a conflict owing to a lack of missile supplies.

A national guided-weapons enterprise could adopt many of the measures in Australia’s naval shipbuilding plan, including enhanced funding for research and development, support for the establishment of precincts for the design and production of guided weapons, and coordinated training and education programs to develop the workforce. Making guided weapons one of Defence’s ‘sovereign industrial capability priorities’, supported by an implementation plan, also makes sense as part of this broader plan.

But we can’t wait until the perfect plan is developed. The urgency of our strategic circumstances means we need to start now. There are many mature weapons that the ADF is already using or has decided to buy that we can start producing here now with minimal risk. But the government should also make some ‘big bets’, investing in the development of technologies such as hypersonic weapons that can be put into production here once mature, rather than waiting to see that maturity demonstrated elsewhere and then trying to retrofit Australia with a production capacity for these powerful new weapons.

The government has established a national enterprise to build ships, submarines and armoured vehicles in Australia, but, without guided weapons, those platforms will have limited utility. Put simply: a small number of military platforms without a large supply of advanced missiles is a force fitted for but not with combat power. The government’s decision to establish a guided-weapons enterprise, if implemented well, will be a key step in providing the ADF’s platforms with the advanced missiles in the types and quantities they need to deliver lethal and survivable capability.

President Joe Biden’s decision to withdraw US military forces from Afghanistan by 11 September 2021 is his first big blunder in office. This could cost America dearly in future years and should give America’s friends and allies pause to ask if Biden has the grit for the tough road ahead.

The president’s announcement, laughably titled ‘On the way forward in Afghanistan’, was nothing more than an unseemly bolt for the exit based, Biden tells us, on a ‘conviction’ he formed in 2008 that ‘American military force could not create or sustain a durable Afghan government’.

In fact, that is precisely what American, Australian and other forces delivered to Afghanistan: a flawed but functioning democracy, keeping the Taliban at bay, and preventing groups like al-Qaeda from using the country as a training base from which to attack the West.

Here Biden and his predecessor Donald Trump are on a unity ticket, locked onto a bizarre sabotage mission, negotiating, and now honouring, a ‘diplomatic agreement’ with the Taliban, while deserting the very Afghans who have fought with our forces over the past two decades.

Let’s be clear: this is an abandonment as complete as America’s failure to back South Vietnam after many promises of providing air support to Saigon in the face of North Vietnam’s advancing conventional forces in 1974 and 1975.

Biden’s statement gives the Taliban a green light to start massing forces against the capital. The president says: ‘the Taliban should know that if they attack us as we draw down, we will defend ourselves and our partners with all the tools at our disposal.’

‘Partners’ refers to NATO, Australia and other countries that seem to have been swept into a unilateral American decision to get the hell out of Dodge. Biden explicitly says that the US ‘will not stay involved in Afghanistan militarily’. He apparently decided—in that crystalline moment of ‘conviction’ in 2008—that Afghanistan cannot succeed.

Moreover, the withdrawal is happening without detailed thinking about what happens next. There is no plan for how the US will fight terrorism in the region, just a promise that ‘my team is refining our national strategy to monitor and disrupt significant terrorist threats.’

There is no plan for how the US will support the government in Kabul, just a vague assurance that ‘over the next few months, we will also determine what a continued US diplomatic presence in Afghanistan will look like.’

With no military forces to provide protection, I’ll tell you what that future diplomatic footprint will look like: nothing, nada, bupkis. Australia will be compelled to follow suit. Our mission in Kabul has a strong security detachment, but protecting an embassy compound is the last part of a system that must also stabilise the town, limit access to key government institutions and embassies and, at worst, enable evacuation to an airport. Without a larger military force, the Western diplomatic presence in Kabul will wither.

To whom should Kabul look for support? Biden has a suggestion: ‘we’ll ask other countries—other countries in the region—to do more to support Afghanistan, especially Pakistan, as well as Russia, China, India, and Turkey. They all have a significant stake in the stable future for Afghanistan.’

Yes, you read that correctly. The US is going to ask Russia to support Afghanistan. Presumably not like the Soviet Union did in its invasion of 1979. Russian President Vladimir Putin will not prop up Kabul, except to put his own proxies in power.

And China? Biden has no interest in promoting Beijing’s growing presence in Central Asia and the Middle East. China has prudently minimised its presence in Afghanistan but may indeed be interested to build a corridor of control through Afghanistan, linking up with its closest partner in the Middle East, Iran.

Beijing also has a close partnership with Pakistan. What could be attractive to China is the chance to build a condominium of influence, strengthening Beijing’s access to the ports of the Persian Gulf and the Arabian Sea.

In that outcome, apart from Afghanistan of course, the big strategic loser is India, which would then face a hostile China on its northeast as well as Chinese proxies in Myanmar under the generals and, to the northwest, in Pakistan.

Biden is right that these countries have significant stakes in Afghanistan, but their interests are not America’s interests, or ours. Beijing will, I suspect, be amazed at Biden’s invitation to supplant American interests in Afghanistan. Xi Jinping may judge that this confirms his assessment of American decline and withdrawal—a dangerous assessment, right or wrong.

This is the enduring reality of America’s strategic situation: Biden can withdraw the remaining 2,500 US troops from Afghanistan, but he can’t withdraw America from its global strategic interests, be they preventing the rise of terror groups, or limiting the malign behaviour of countries hostile to the US—China, Russia and Iran.

For a force deployment no larger than the annual ‘rotation’ of US Marines to Darwin, denying Kabul to America’s enemies was a valuable military investment. Leaving, with only the barest of notions about how to protect American interests in Afghanistan, will destabilise the region and more than likely create the basis for a new intervention half a decade or more in the future.

Biden told the press corps: ‘For the past 12 years, ever since I became vice president, I’ve carried with me a card that reminds me of the exact number of American troops killed in Iraq and Afghanistan.’

He stumbled on the numbers, simply couldn’t read them out, but the corrected transcript of his statement records that 2,448 US personnel died in the Afghanistan conflict. Biden’s announcement offers no solace to the families of those people, or indeed the families of Australia’s Afghanistan casualties, only the weary absence of strategic purpose and historical perspective.

The bigger threat from an aggressive, intolerant, authoritarian China is the strategic challenge of our age. Biden is right to focus on that, as we must, but the Middle East and Central Asia cannot be forgotten and will not be ignored.

I wonder how President Tsai Ing-wen of Taiwan reacted to Biden’s words that, ultimately, ‘only the Afghans have the right and responsibility to lead their country.’ Replace ‘Afghans’ in that sentence with ‘Taiwanese’, or ‘Australians’, for that matter.

As if the Afghanistan war wasn’t fought defending American and Australian interests and purposes. As if the next one won’t be. Lest we forget.

The pandemic has geopolitical and geoeconomics equivalents. Disruption all around, amid the end of the old global order.

The central truths that set the topography of Australian grand strategy in Asia—the four compass points—haven’t fallen, but their alignments are shifting. New navigation is needed.

The first compass bearing is a major trend that’s tough for any Oz politician to talk about in public: the long-term decline of Australia’s relative power. Call this our Going South star.

When a bunch of development, diplomacy and defence leaders got together for a foreign policy rethink in 2019 (ah, how long ago that seems), their statement pinged relative decline first up: ‘Australia’s weight in the world is declining. Primarily, this is driven by two factors: firstly, the fall of Australia’s relative economic weight to other nations and secondly, the fragmentation of the international order from which Australia has benefited.’

In Asia, our waning weight is striking because once we were heavy. Back in 1990, China’s GDP was US$360 billion, while Australia’s was US$310 billion. From that point, the World Bank graph has China’s economy soaring up a mountain while Australia’s gently streams.

Close to the end of the 20th century, the Australian economy was larger than the economies of all ASEAN members combined. No more. It’s a given that the shift of economic and strategic power means Australia faces a ‘disruptive Asia’—a truism heavy with significance.

In a book on Oz foreign policy, 21 years ago, my starting point was Australia’s relative economic and military decline: ‘This core reality has shaped Australian assessments. It is a key trend often hinted at but rarely stated in blunt terms. In the phrase “relative decline” the important word is relative. Decline does not equate with decadence or internal failure. Australia can keep getting richer and ever more affluent.’

The still-happy-and-getting-richer message of ‘relative’ suffers because of Edward Gibbon’s great title: any Oz leader who says ‘relative decline’ knows what the voters will hear is ‘decline and fall.’ To avoid nasty headlines, the polity deals tacitly and tangentially with Australia’s relative loss of power.

Much easier to talk about is a related compass point: Australia’s Great Asia Project. The compass metaphor means this is our East star.

Asia is ‘fundamental to Australia’s future,’ a Canberra consensus that former prime minister John Howard expresses in his 2010 memoir, starting his Asia chapter with this sentence: ‘For more than 40 years, every serious political leader in Australia has been committed to the belief that close engagement and collaboration with our Asian neighbours was critical to Australia’s future.’ On the next page, Howard makes clear that the leader at the head of this line is Gough Whitlam. While the term ‘Great Asia Project’ is mine, see 1972 as the start date, as tacitly embraced by Howard.

Howard often hammered the debating point that Australia didn’t have to choose between its history and geography. Yet in embracing (or recognising) geography, the Great Asia Project is a defining choice. Obvious, even unavoidable. But still a choice. The consensus is set and Australia’s political unity ticket on our Asian future approaches its 50th birthday.

Australia knew Asia existed before 1972, but didn’t want to have to translate geography into policy. The importance of the project is the acceptance that Australia must function as part of Asia, not apart from Asia. The Commonwealth of Australia spent its first seven decades seeking security from Asia; since then we’ve sought security in and with Asia.

The get-with-the-Asia-strength sentiment complements the North point on our compass (our axis of rotation): the reordering of the way Australia operates as a democracy with an open economy and open society.

The march to a multicultural identity started in 1966 when the Coalition government of Harold Holt quietly began to inter the White Australia policy; full burial with loud fanfare was delivered by the Whitlam Labor government after 1972. Both sides of Oz politics did the big deed.

Remaking the nation’s face with a new non-discriminatory immigration policy, we remade political traditions, junking the original ‘Australian settlement’ mindset (white Australia, industry protection, wage arbitration, state paternalism and imperial benevolence). The term ‘Australian settlement’ was coined by Paul Kelly in one of the great works of Oz journalism as history, a magisterial tome with a superb title that resonates anew, The end of certainty.

The only time Oz leaders have broadcast the relative-decline reality was during that era when Australia was tearing down tariffs and casting off the protection mentality (most memorably with Paul Keating’s 1986 warning about Australia becoming a ‘banana republic’).

An open society, in and of Asia, is why ‘our ethnic face has made a decisive shift from Anglo-European to Eurasian,’ as George Megalogenis writes, turning Sydney and Melbourne into Eurasian cities: ‘Australia’s identity is undergoing epic transformation. In seventy short years, we have shifted from the most insular rich nation on Earth to being a global role model for diversity. It took fifty years to get from white to Anglo-European, but only another twenty to cross the threshold to Eurasian.’

Looking north, east and south, Canberra ponders what a Eurasian grand strategy will mean. And how that relates to the fourth point on the compass, the leader of the West, the United States.

The US alliance came through Donald Trump’s presidency unscathed. Canberra worked the bilateral relationship with success while quietly horrified at Trump’s multilateral mayhem; Malcolm Turnbull called Trump a ‘natural isolationist’ and ‘thoroughly dystopian’.

The US has bounced back before, and Canberra offers President Joe Biden a fervent welcome. The Western point of our compass, though, has lost much ‘credibility and influence,’ as Biden acknowledges.

As the pandemic fog clears, we can take some compass sightings across tough topography. Our stars do not align.

The Chinese Communist Party’s first leader, Mao Zedong, once said that ‘political power grows out of the barrel of a gun’. Mao’s words echo a fundamental truth of China’s system of government—that the ruling party has its own military wing, the People’s Liberation Army. Soldiers in the PLA swear an oath to defend the CCP, not the Chinese nation, meaning that their primary task is to safeguard the interests of the party. The CCP’s ultimate goal is to ensure that its influence over the nation becomes so totalising that the interests of the two are indistinguishable. In this respect, the PLA ends up serving the dual role of safeguarding the CCP and defending the Chinese nation.

Just as the CCP has its own armed wing, it has its own commercial wings embedded in all of China’s powerful state-owned enterprises. These SOEs operate in a hybrid fashion, seeking out business ventures that generate profits while carrying out the interests of the Chinese state. China’s SOEs are legally required to have a party branch at the highest levels of the company hierarchy, and senior members of the board such as the managing director concurrently serve on the SOE’s party committee. This organisational structure makes sure that any business ventures undertaken by the SOE serve the interests of the company, the state and, most importantly, the CCP.

Xi Jinping has accelerated the party’s dominance over the state, military, nation and business. Chinese companies are expected to do the party’s work even if that means collaborating with its armed wing in the PLA or working with its political warfare agencies like the United Front Work Department. Under Xi Jinping’s leadership, the CCP is seeking to apply its internal disciplinary code to Chinese SOEs strictly and extra-territorially.

Our new ASPI report, Leaping across the ocean: The port operators behind China’s naval expansion, explores the links that two major Chinese maritime SOEs have with the CCP’s organs of political influence, its disciplinary apparatus and its militarised branch, the PLA.

COSCO and China Merchants, two companies that have taken a commanding position in overseas port operations and international maritime logistics, are subject to stringent control by the CCP and are increasingly willing to protect party interests overseas. A third of COSCO’s employees are members of the CCP, and a member of its party committee was a party disciplinarian in China’s Ministry of Public Security and the CCP’s United Front Work Department. China Merchants also has deep links with the CCP. One member of China Merchants’ party committee is a former deputy head of discipline inspection at the CCP General Office, and likely had a close working relationship with two current members of the Politburo Standing Committee.

Xi’s bid for total control over China’s SOEs has profound implications for countries that are open to foreign investment. Before Xi, the national security risks posed by the CCP’s integration into China’s SOEs could be ameliorated by requiring investigation, transparency and disclosure during a country’s foreign investment review process. These measures are no longer sufficient now that Xi has begun to strengthen his grip on the CCP and wield the coercive elements China’s national power.

Chinese companies are required by the country’s domestic law to assist with intelligence collection and national defence mobilisation. We should expect China’s SOEs to comply with any legitimate request by the CCP to assist with either mission in peace, war or the grey zone in between.

Indeed, there’s good evidence that such support is already being provided. For instance, COSCO operates its own militia, which is likely capable of conducting paramilitary activities such as maritime surveillance, counter-piracy missions and search-and-rescue operations. One of COSCO’s joint ventures has also been involved in taking Chinese tourists near illegally built PLA facilities in disputed areas of the South China Sea. The company’s involvement in the Greek port of Piraeus has also been supported by active-measures campaigns conducted by the United Front Work Department. COSCO appears to be developing the capability needed to comply with CCP requests to assist with intelligence operations, national defence mobilisation or grey-zone activities.

Australia and its like-minded partners, including the US and Japan, can no longer take a reactive approach to the expansion of China’s overseas port operations. Together, COSCO and China Merchants operate 36 ports around the world. If Chinese SOEs assume control of any more ports, Beijing will have secure access to some of the world’s most crucial shipping nodes and logistics hubs. In wartime, that could significantly undermine the freedom of action that Australia or its allies would need to defend their maritime interests and sea lines of communication.

More urgent, however, is the priority to build the resilience of countries that may be vulnerable to handing over critical infrastructure such as ports to Chinese SOEs. Coercion need not come from the PLA engaging in denial operations to secure access to a port shortly before a war breaks out or from an offensive cyberattack on a port’s digital infrastructure. Under Xi, the CCP has proven all too willing to rely on organs such as the United Front Work Department to orchestrate active-measures campaigns designed to compromise a country’s sovereign decision-making. Chinese SOEs may not be drivers behind such activities, but they offer the vehicles for them.

Australia, Japan and the US have some of the tools needed to help build countries’ resilience to coercion from the Chinese regime. They could begin by developing an international ports strategy through the ‘blue-dot network’, which was established in 2019 as a way of setting standards for high-quality infrastructure projects. Canberra, Tokyo and Washington should use the network to create a ‘Michelin guide’ for international port operations and investments. They could then post diplomatic personnel with expertise in critical infrastructure to agreed strategic locations around the world to promote blue-dot alternatives to investments backed by Chinese SOEs as well as advise on how to counter foreign interference.

Australia and its partners don’t have the power to change the nature of the CCP—and competing with Beijing dollar-for-dollar is a non-starter. But what we can do is create a world that is more resilient to the coercive measures Xi has developed a habit of using. A diplomatic strategy geared towards achieving that goal would make it much harder for the CCP to continue finding the logistical hubs needed to increase the PLA’s overseas presence and secure its success in wartime or grey-zone operations.

The subsidiary of a Chinese defence conglomerate nicknamed ‘the Huawei of airport security’ is increasingly dominant in border-control and security-screening technologies globally.

Last month, Canada’s foreign affairs department backflipped on its plan to buy security scanners for 170 overseas embassies and diplomatic missions from Nuctech, a Chinese company part-owned by the Chinese government and once run by former Chinese president Hu Jintao’s son, Hu Haifeng. The reversal followed media coverage that provoked a review of the department’s procurement practices for security equipment.

At a parliamentary committee hearing on 18 November, Canadian government officials were grilled by MPs over the decision to entrust such a delicate security function to a company with close links to the Chinese state.

‘I’m sitting here, and I’m dumbfounded that this could have possibly happened’, said Conservative MP Kelly McCauley. ‘I’m sorry for sounding so critical, but good lord.’

The Canadian parliamentarian is not alone. There’s unease around the world about Nuctech’s growing dominance of the market for security-screening and border-control technologies, including among European parliamentarians, the US Senate Committee on Foreign Relations and the US National Security Council.

The Canadian case brings into sharp relief the changing security calculus in using technology equipment from long-established Chinese suppliers. The integration of hardware with computer networks has added a new dimension of data risk.

Security scanners in Canadian embassies might be a relatively small matter. But the widespread use of products and services from a state-controlled Chinese company with strong links to the defence sector for operational security functions in major airports and border crossings all over the world is a much larger issue.

Nuctech is the global market leader in vehicle and cargo security screening and a major player in several other security and border-control markets. It has factories in Poland and Brazil. It claims to export equipment, systems and services to 170 countries. The company intends to ‘move towards the future vision of contactless security checkpoints’, and biometrics, data and artificial intelligence are central to its products.

Earlier this year, responding to the pandemic, Nuctech ramped up production of its FeverBlock infrared face-temperature screening system, touting ‘thousands of orders’ for use at international airports and border posts. Data about people, vehicles and cargo crossing international borders or transiting through airports would have significant value to a range of actors, from corporations to national intelligence services.

Australian state and federal government departments have spent tens of millions on Nuctech equipment and services since the Australian customs service gave the company its first overseas order in 2001.

And, as in the Canadian case, Australia’s current processes and rules for government procurement may not take into account emerging data risks.

Chinese defence sector links

Nuctech is nested in a web of corporate relationships in China’s state-owned defence sector. Nuctech’s parent company, Tsinghua Tongfang, is controlled by one of China’s largest defence entities, the China National Nuclear Corporation, a vast state-owned conglomerate that specialises in dual-use nuclear technologies. Two other CNNC subsidiaries, the China Nuclear Power Technology Research Institute and the Baotou Guanghua Chemical Industrial Corporation, are on the US banned entity list, which restricts US companies from doing business with them on national security grounds.

A Nuctech subsidiary, FoundMacro, with which Nuctech shares a Beijing office, makes ‘counterterrorism’ products, including a vehicle-mounted microwave denial system that ‘assists secret arrest’, and an AI-enabled predictive warning surveillance system using sentiment analysis technology jointly developed with Russia.

In Xinjiang, the autonomous region in northwestern China that has been the site of mass arbitrary detention of Turkic and Muslim minorities since 2016, Nuctech is a supplier of public security equipment to the regional government and subregional jurisdictions. It has donated security equipment for use at border checkpoints and has marketed a range of products at police trade fairs including as recently as 2019. It has also fitted out the region’s highways with at least 40 sets of X-ray inspection systems and installed passenger-screening equipment at transport terminals.

Nuctech overseas

Nuctech was banned from US airports in 2014 after a confidential government report that has never been released. But in Europe, Nuctech airport-screening and public-security equipment is in wide use. Nuctech supplied security equipment to the 2020 World Economic Forum in Davos and the 2016 Olympics in Rio de Janeiro. A corruption scandal in Namibia, a bribery scandal in Taiwan and an anti-dumping action in the EU have not halted Nuctech’s increasing capture of market share in the security technology sector over the past two decades.

Wang Weidong, Nuctech’s vice president, credits the company’s innovation and good after-sales service with its success.

There are other views, most prominent that voiced by Axel Voss, a member of the European Parliament, that subsidies from Beijing have enabled Nuctech to embark on a deliberate policy of undercutting overseas competitors to fuel its dramatic global growth.

Nuctech in Australia

In Australia, Nuctech systems are installed at major ports and some airports. Nuctech has a number of contracts with state governments for the provision and maintenance of body scanners at prisons and courts. Publicly available data on the AusTender website indicates that the Australian government has done tens of millions of dollars’ worth of business with Nuctech since 2001.

In April, Nuctech was one of nine suppliers that received a standing offer from the Department of Home Affairs to supply and maintain ‘X-ray, trace and substance detection technologies for the Australian Border Force’s existing fleet of equipment’. Australian government regulatory inspection reports suggest that Nuctech, rather than the Australian government, is the ‘sole responsible authority for maintenance’ of its screening equipment installed at Australian ports.

Nuctech reported selling 100 sets of its FeverBlock infrared screening system for use in Australia and New Zealand earlier this year. Nuctech says the system ‘is suitable for rapid body temperature screening in public places … based on AI algorithms to accurately locate the face position, automatically measure the distance of the person, and perform it in real time’.

The Australian government also gifted over $300,000 worth of Nuctech X-ray machines to the Papua New Guinea customs service in 2018.

A spokesman from the Department of Home Affairs told us that the department and Border Force ‘currently only use Nuctech equipment for X-ray scanning of shipping containers’. The department did not answer questions about data-security measures.

National security risk

Nuctech’s own publicity materials indicate that the types of data at least some of its systems collect would be of interest to a range of governments and private entities. For example, its ‘land border system’ for inspecting vehicles at Kazakhstan’s Port Kolzhat, installed in late 2018, ‘automatically collected’ through the integrated system ‘vehicle dimensions, container number, gross axle weight, X-ray image, CCTV video and other information’.

The extent to which Nuctech services interlink with national border-control and customs databases, including passenger identification systems, is not clear. Its products include cargo X-ray scanners (one developed using technology created by Australia’s peak science agency, CSIRO); devices for detecting explosives and narcotics; and body scanners that incorporate a range of collection modes, including facial recognition, fingerprint scans and human body scanning ‘micro measurement’. It also sells systems incorporating ‘AI, big data and video analysis technologies to realise automatic identification of high-risk passengers’.

Any use of Nuctech’s AI or facial-recognition systems is likely to be, as part of normal operation, sending collected data to Nuctech. US security agencies appear also to be concerned that any connected security-screening device—even an X-ray scanner—could access sensitive personal or commercial databases, such as passenger travel history or shipping manifests, and transmit that information to Chinese state actors.

A European spokesman for Nuctech, sensitive to this line of criticism, wrote in Politico in October that ‘data generated by Nuctech’s products during use belongs to our customers only—the company does not have any access to it whatsoever’.

A director-general of the Canadian Centre for Cyber Security, Michele Mullen, told the Canadian parliamentary committee that the risk was not imaginary—the technology has rapidly developed and with it the risk. She said Nuctech’s X-ray machines now typically come with hard drives and USB ports, so they could conceivably be used for data downloads ‘with malicious intent’.

‘Because technology is evolving, things we didn’t use to look at, we now should start looking at’, Mullen told the hearing. ‘Capabilities … with embedded operating systems and USB ports, that didn’t used to exist on X-ray machines, now do.’

Like all Chinese companies, Nuctech is subject to the suite of national intelligence laws that require it to provide any data to the Chinese security agencies if asked. The Chinese government has systematic access to private-sector data through an extensive range of overlapping state security laws that apply to any corporation with data servers inside China. Nuctech’s close linkages with the Chinese state-owned defence sector underscore these risks.

As Australia has recalibrated its understanding of the national security risks posed by a more assertive China in the past few years, and begun to grasp the extent of alignment of Chinese corporate interests with the party-state’s global interests, the Australian government has legislated against ‘corrupt or coercive’ foreign interference, reformed its foreign investment regime and provided the university sector with guidelines on problematic research collaborations. It has banned Chinese telecommunications giant Huawei and other companies ‘likely to be subject to extrajudicial directions from a foreign government that conflict with Australian law’ from involvement in building Australia’s 5G network.

In March this year, five of Australia’s most sensitive government departments, including Home Affairs, scrambled to remove servers made by the Sydney-based company Global Switch, after its parent company, the UK’s Reuben Brothers, was acquired by a Chinese state-owned consortium, Elegant Jubilee, that claimed to be privately owned.

Ironically, the same department is outsourcing elements of border screening, with its sensitive data risk, to a company linked to a state-owned Chinese defence conglomerate. It does not appear to be uniformly considering sensitive data risks with procurement from countries that may pose cybersecurity risks.

If government procurement processes and rules are not flagging risks from foreign state-owned entities and sensitive data risks, it’s time for a framework on government procurement and other collaboration with foreign companies in sensitive sectors. Customs and border control should clearly be one of those sectors. Such a framework would identify services and technologies that may put sensitive data at higher risk and apply a thorough and uniform security assessment to companies bidding for procurement tenders in those higher risk areas.

Update: On 18 December 2020, the United States added Nuctech to its banned entity list ‘for its involvement in activities that are contrary to the national security interests of the United States’. The determination cited Nuctech’s ‘lower performing equipment’ as the reason behind the designation.