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New Defense secretary: 'We need to be very concerned about Chinese technology getting into our systems'

Key Points
  • President Donald Trump's new Defense secretary said Wednesday that the U.S. trade war with China is as much about national security as it is about the economy.
  • "I think we need to be very concerned about Chinese technology getting into our systems or the systems of our allies," Secretary of Defense Mark Esper said Wednesday.
  • U.S. officials have long complained that Chinese intellectual property theft has cost the economy billions of dollars in revenue and thousands of jobs and that it threatens national security.
U.S. President Donald Trump listens as Mark Esper, U.S. Secretary of Defense, speaks during his swearing-in ceremony in the Oval Office of the White House in Washington, D.C., U.S., on Tuesday, July 23, 2019.
Bloomberg | Bloomberg | Getty Images

WASHINGTON — President Donald Trump's new Defense secretary on Wednesday said the U.S. trade war with China is as much about national security as it is about the economy.

"I've been studying China for quite some time now and I'm big on China as well," Secretary of Defense Mark Esper told a group of reporters at the Pentagon when he was asked about the escalating conflict between Washington and Beijing.

"And I think we need to be very concerned about Chinese technology getting into our systems or the systems of our allies. Huawei is the poster child right now for that," Esper said, adding that he supported the Trump administration's work to isolate the Chinese tech firm from expanding its foothold in U.S. partner countries.

"When I was in Brussels three weeks ago we talked about this among defense ministers on how do we preserve the integrity of our networks as an alliance and so that will continue to be important for me as we go forward," he said, referring to a NATO visit he made while acting Defense secretary.

U.S. officials have long complained that Chinese intellectual property theft has cost the economy billions of dollars in revenue and thousands of jobs and that it threatens national security. China maintains that it does not engage in intellectual property theft.

Last year, the Pentagon halted sales of Huawei and ZTE mobile phones and modems on military bases around the world due to potential security risks.

Esper's comments came a day after sources told CNBC that U.S. trade negotiators will head to China for face-to-face talks in order to settle the ongoing trade war.

Last month, Trump and Chinese President Xi Jinping agreed at the G-20 summit in Japan to restart negotiations and not impose new tariffs on each other's goods. Trade talks had collapsed in May, with intellectual property theft proving to be a major sticking point between the two sides. Since then, Trump has signaled that he'd be willing to relax restrictions on China's Huawei in exchange for purchases of U.S. agricultural products.

Esper's ascension to the top spot in the Pentagon comes not only as the world's two largest economies engage in a trade war, but also amid a massive Chinese buildup in the South China Sea.

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Earlier this month, CNBC and NBC learned that China was in the midst of conducting a series of anti-ship ballistic missile tests in the hotly contested waters of the South China Sea, according to two U.S. officials with knowledge of the matter.

The South China Sea, which is home to more than 200 specks of land, serves as a gateway to global sea routes where approximately $3.4 trillion of trade passes annually.

The numerous overlapping sovereign claims to islands, reefs and rocks — many of which disappear under high tide — have turned the waters into an armed camp. Beijing holds the lion's share of these features with approximately 27 outposts peppered throughout.

In May 2018, CNBC learned that China quietly installed anti-ship cruise missiles and surface-to-air missile systems on three of its fortified outposts west of the Philippines in the South China Sea, a move that allows Beijing to further project its power in the hotly disputed waters.

According to U.S. intelligence reports, the installations marked the first Chinese missile deployments to Fiery Cross Reef, Subi Reef and Mischief Reef in the Spratly Islands. The Spratlys, to which six countries lay claim, are located approximately two-thirds of the way east from southern Vietnam to the southern Philippines.

By all accounts, the coastal defense systems represent a significant addition to Beijing's military portfolio in one of the most contested regions in the world. The U.S. has remained neutral – but expressed concern – about the overlapping sovereignty claims to the Spratlys. Still, the U.S. and China have disagreed over several issues regarding the South China Sea.