Surveillance fears cloud China's 'Digital Silk Road'

Key Points
  • Chinese tech companies are building cross-border communications networks and e-commerce links in countries involved in the Belt and Road infrastructure initiative.
  • But given the close links between these companies and China's government, those digital systems could be used for Beijing's intelligence operations, experts warn.
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A major element of China's continent-spanning Belt and Road Initiative has nothing to do with roads, ports or power plants. Rather, the "Digital Silk Road" aims to construct communications networks across the developing world.

Many fear Beijing could use those tools for electronic surveillance.

The world's second-largest economy wants to build fiber optic cables, international trunk passageways, mobile structures and e-commerce links in countries tied to its investment initiative. These technologies are designed to supplement the Belt and Road's physical infrastructure while introducing common technical standards in participating nations, most of which are emerging economies and lack rudimentary internet facilities.

Boosting connectivity can enable information exchanges, bringing about "mutual benefit and win-win cooperation" according to a 2015 white paper jointly released by various Chinese government bodies. But there are geopolitical implications if foreign governments allow Chinese technology companies — believed to carry close ties with the state — to install complex data communications systems.

A big fear is that Chinese players will insert "backdoor mechanisms that could increase [Beijing's] intelligence and propaganda operations in BRI partner countries," researchers at the Council on Foreign Relations said in a note last week.

State-owned China Mobile, the world's biggest telecom carrier by subscriber count, is currently building optical fiber cable projects linking Beijing to Myanmar, Nepal and Kyrgyzstan. Meanwhile, private player Huawei signed a deal last year to build a cable system linking Pakistan to Kenya via Djibouti. Talks are also underway for state-owned China Telecom to help build fiber-optic links in the Arctic Circle.

Cables, which transfer massive amounts of personal, government and financial data, are controlled by telecommunications firms. So, when it comes to enforcing security, regulatory grey areas emerge.

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That infrastructure can be used to help Beijing gain information, according to the Council on Foreign Relations. For example, technicians can bend or clamp the fibers to allow data to leak out or bypass encryption, the note explained: "Prior actions taken by the Chinese government, such as installing backdoors in encryption technology, suggest that it will take similar actions when laying down fiber optic cables in other countries."

China Mobile, Huawei and China Telecom didn't respond to CNBC's requests for comment.

While these projects may benefit developing economies, "they have raised concerns that Beijing could use these networks to exert pressure on other states or engage in electronic surveillance," The Economist Intelligence Unit said in a recent report. "BRI countries will need to enhance regulatory frameworks and oversight of projects to mitigate financial risks and political dependence," it added.

Heavyweights such as Huawei are also involved in deploying 5G mobile technology — a central component of China's digital economy — worldwide under the Digital Silk Road. But there are worries those firms could use their influence to promote Beijing's preferred standards.

"In 5G, China’s commercial and geopolitical objectives are closely aligned," said Elsa Kania, a Fulbright specialist at the Australian Strategic Policy Institute. Beijing "views the nascent and emerging technical standards in new technologies as a 'golden opportunity’ that Chinese national champions are poised to take advantage of," she said.

At the heart of the matter is deep-rooted suspicion about the data-sharing practices of Chinese firms.

Corporates could be legally required or co-opted to support and participate in Chinese intelligence, according to Kania. "That raises concerns about the implications for China’s future espionage capabilities, while also creating leverage that could be exercised for coercive purposes," she explained.

In 2012, U.S. intelligence chiefs deemed Huawei and ZTE products a risk to national security, claiming the companies collaborate with China's government to spy, steal trade secrets and cast cyberattacks.