On Wednesday, several news publications reported that the United States Department of Defense had released a list identifying 20 Chinese companies that have ties to the People’s Liberation Army of China, or the PLA.
The list includes some of China’s national champions, such as Huawei, which was added to the U.S. entity list in 2019, as well as state-owned giants that operate under China’s State Council, including China Mobile, China Telecom and China’s nuclear and shipbuilding giants. The Chinese government has not responded in detail to the recent list, but has said repeatedly that its companies are being unfairly targeted by the Trump administration.
Almost all of the companies on the new list, a copy of which was released by The Financial Times, are partially or completely state-owned enterprises, though some experts believe the definition of connections to the PLA employed in this case is notably broader than past interpretations. Adam Segal, an emerging technologies and national security analyst at the Council on Foreign Relations, says: “The way the original provision is written says ‘owned or controlled’ by the PLA. A lot of these companies are state-owned, but in the way we have traditionally understood the Chinese economy, being state-owned is not the same as being PLA owned or controlled.”
The companies do, however, publicly acknowledge roots or ties to the Chinese military, in their publications and announcements. The companies belong to a wide range of sectors, including nuclear energy, naval vessel construction, aerospace technology, and surveillance cameras. Some of them are already on the U.S. Entity List, which bars U.S. companies from doing business with them, or have been subject to other sanctions. The list includes all of China’s ten major state-owned defense contractors.
Many of the companies are closely tied to the government’s Made in China 2025 program, an industrial initiative aimed at upgrading the country’s technological capability, and its Belt and Road Initiative, which seeks to build projects and infrastructure throughout much of the world, particularly less developed regions.
Segal says that the new list of 20 firms tied to the Chinese military has its origin in Section 1237 of the National Defense Authorization Act of 1999. But “when it came out in 1999, the Clinton administration basically ignored it. The fact that this tool is being used [now] is a sign of worsening relations.”
Several experts said that the Pentagon’s decision to publish the list now could be aimed at alerting U.S. companies to consider and reevaluate their dealings with Chinese firms. But even with many of these companies already sanctioned or knowingly owned by the Chinese government, Peter A. Petri, an analyst at the Brookings Institution and the Peterson Institute for International Economics in Washington, said: “What it does add is this very wide-ranging and high-level power to apply sanctions like seizing of assets.”
He added, “One can’t really tell what this is about, whether it’s bluster for election purposes, or whether it’s really the prelude to a very serious confrontation with China.”
Senator Tom Cotton, Senate Minority Leader Chuck Schumer, and Representatives Mike Gallagher and Ruben Gallego called for Secretary of Defense Mark Esper to release the list in September 2019.
In another step Friday, the Bureau of Industry and Security, or BIS, a division of the U.S. Department of Commerce, published a notice that updates and details the definition of “military end user” with regard to China, Russia and Venezuela. The nine-page document answers “frequently asked questions,” and outlines how challenging it is for companies to trace the path of global supply chains and know whether they are selling to a firm that could be passing the goods along to a Chinese, Russian or Venezuelan end user in violation of export controls.
The release is effectively an aid for companies to “know your customer,” particularly when it comes to China.
Further legislative action may soon be taken to prevent the Chinese military and government from acquiring U.S. assets, ranging from intellectual property to other data and information. The National Defense Authorization Act for Fiscal Year 2021, which was introduced in the Senate on June 23, currently includes a call for the Secretary of Defense to protect “defense-sensitive” U.S. information from being acquired by the Chinese government.
Zack Cooper, an analyst at the American Enterprise Institute, a Washington based think tank, says analysts and officials have been pushing for years to release a list of companies that could be involved in intellectual property theft, working with the Chinese military or engaging in military-civil fusion.
“It begins with naming and shaming,” he said in an interview with The Wire. “And then the hope is absolutely that it transitions into real action, either by an administration or by Congress itself.”
Below are descriptions of the 20 Chinese companies on the Pentagon’s list, including some of their ties to American firms or investors.
AVIC is a state-owned aviation and avionics conglomerate and one of China’s largest defense contractors. The company does business in the civilian and defense sectors, and invests in ships, robots and unmanned aerial vehicles, or drones. It supplies military aircraft to the People’s Liberation Army, according to a U.S. government study. And over the past decade, it has acquired several U.S. aerospace or aviation companies, including Cirrus, Continental Motors and Align Aerospace. The company has 450,000 employees and owns a 38 percent stake in COMAC, China’s big state-run commercial airline manufacturer. And through its affiliates, AVIC works with Airbus and Boeing. In 2009, The Wall Street Journal reported that Chinese hackers got into the database of America’s Joint Strike Fighter program, and some technology was believed to be shared with affiliates of AVIC.
CASC, a large state-owned defense contractor, is the main company responsible for producing technology for China’s space program, including manned spaceflight and lunar, Mars, and asteroid exploration. The company, which was founded in 1999 and has about 150,000 employees — by comparison, NASA has about 17,000 employees — makes satellites, launch vehicles, missile systems, survey and mapping units and a range of other products for defense and civilian uses for customers around the world. It’s known for its Shenzhou and Long March rockets, which project Chinese spacecrafts; and for selling unmanned aerial combat vehicles to Egypt, Iran, the UAE and Saudi Arabia, according to a study conducted by the Australian Strategic Policy Institute. The company has at least three affiliates on the U.S. Entity list.
China Aerospace Science and Industry Corporation (CASIC) is the country’s largest manufacturer of missiles. The state-owned company also produces spacecraft and launch vehicles for China’s space program, and is one of the top ten defense contractors in the world, with over $12.1 billion in defense revenue. The company has 145,000 employees, partnerships with Siemens of Germany and other global firms, and makes hypersonic missiles and laser weapons. It also has helped China develop its BeiDou navigation satellite system, and founded and has a stake in ZTE, the mobile telecommunications giant. In 2009, a Sunnyvale, Calif.-based company called Trimble signed a joint venture with CASIC. At least six of its companies are listed on China’s stock exchanges, and several of its affiliates are on the U.S. Entity list, and therefore barred from receiving American exports. The intelligence analyst Elsa Kania has written that CASIC set up a new artificial intelligence unit in 2017.
China Electronics Technology Group Corporation (CETC) is a state-owned producer of military equipment, software, communications and research services, including advanced anti-stealth radar. It ranks among the world’s most lucrative defense manufacturers, with over $10.3 billion in defense revenue. The company was founded in 2002 and specializes in bringing civilian technologies to the military. It is believed to have 160,000 employees and about 55 research institutes, and has helped the PLA build relationships with universities. It develops drones, exports arms overseas, and has signed contracts to purchase supplies from some of America’s leading technology companies, including IBM, Sun, Cisco, and Oracle. Its subsidiary once formed a partnership with U.S. defense contractor the Harris Corporation. And the Australian Strategic Policy Institute says the company represents itself as a “commercial representative of Huawei to the PLA,” and that CETC produces technology that is used for coordinated surveillance that determines freedom of movement for individuals in Xinjiang, China, according to a Human Rights Watch 2019 report. At least nine of its affiliates are on the U.S. Entity list.
CSGC, one of China’s nine major state-owned defense companies, makes military and civilian vehicles, including motorcycles and automobiles, and has partnerships with multinational car companies such as Ford, Mazda, Honda, and PSA Group through its subsidiary Chang’an Automobile. Founded in 1999, and also known as the China Weaponry and Equipment Group Corporation, the company is in the small weapons and explosives business. It has 200,000 employees and about $34 billion in revenue, according to the Australian Strategic Policy Institute. Altogether, the company boasts more than 60 subsidiaries.
China Shipbuilding Industry Corporation, a state-owned corporation, designs and produces a wide range of ships, including tankers, ferries, and naval vessels. It also controls the Dalian shipyard that refurbished and built China’s first aircraft carrier. It is a major contractor with the PLA Navy. According to Nikkei Asian Review, it produces roughly 80 percent of the PLA Navy’s “main equipment.” The Australian Strategic Policy Institute says the company produces nuclear submarines, warships and torpedoes. The company’s shares are traded on the Shanghai Stock Exchange. CSIC initially formed by branching off of CSSC in 1999, and it re-merged with CSSC in 2019 to form China Shipbuilding Group Co., which will soon become the world’s largest shipbuilder. The company also produces wind turbines and has affiliates operating fisheries.
State-owned CSSC is a huge shipbuilding company, and with its announced merger laser year with CSIC, it will form the world’s largest shipbuilder, handling oil tankers, container ships, LNG carriers, and war ships for the PLA Navy. The new company, which will be headquartered in Beijing, will have $112 billion in assets and more than 300,000 employees. CSSC is now listed on the Shanghai Stock Exchange. Following its merger with the China Shipbuilding Industry Corporation, the new company will be bigger than the Korean shipbuilders Hyundai Heavy Industries Co. and Daewoo Shipbuilding & Marine Engineering Co, which agreed to merge in 2019.
State-owned Norinco Group is China’s second-largest defense contractor and main producer of weapons such as armored vehicles, missile defense, artillery, and small arms for the PLA. According to state-run media outlet China Daily, it is the “cornerstone of the PLA’s equipment development” and the “backbone of its strike ability.” Formed in 1980, the company has 220,000 employees and $50 billion in assets. It is building rail cars in Iran, wind farms in Croatia and mining copper and cobalt in South Africa. It has a joint venture to build refining facilities with Saudi Aramco, the powerhouse Saudi oil producer, and in 2015 was even seeking to contract to build a railcar facility in the state of Maine. Alibaba, China’s ecommerce giant, also formed a joint venture with Norinco to position satellites with the country’s Beidou navigation system. The US government sanctioned Norinco in 2002 for aiding Iran in building missiles capable of delivering weapons of mass destruction.
Hikvision, a state-controlled firm, is one of the world’s biggest makers of video surveillance equipment, both for consumer use as well as for the Chinese military. As part of its surveillance camera business, the company also sells AI software. It is perhaps most well known for selling surveillance cameras to China’s government, particularly to surveil its Uighur population in the Xinjiang province. It took in more than $8 billion in revenue in 2019 and has about 40,000 employees. Hikvision is a subsidiary of the China Electronics Technology Group Corporation, which along with Hikvision is already on the U.S. Entity List, and also on this list of 20 companies designated by the Pentagon as having ties to the Chinese military. The company’s shares trade on the Shenzhen Stock Exchange. Fidelity Investments is among the company’s shareholders.
Huawei is one of the world’s biggest mobile phone and telecommunication equipment makers. Co-founded in 1987 by Ren Zhengfei, a former military officer, Huawei is a global leader in 5G technology. The company, which insists it is privately-owned, has been involved in intellectual property disputes with Cisco and Motorola. Later, it became a major customer of American firms, including Qualcomm, Microsoft and Google. The U.S. has warned for years that the company may have ties to the Chinese military, though very little detail has been released to prove its case. It has funded research at major American universities, including Stanford University, though many now refuse to accept money from the company. Huawei has been placed on the U.S. Entity List, barred it from doing business in the U.S., and lobbied allies to stay away from the company’s 5G offerings.
Inspur Group is a state-backed cloud computing and big data company that is among the world’s top server vendors by revenue, according to market research firm IDC. The company makes servers for Chinese and multinational companies, and reportedly for the Chinese military. Increasingly, its servers are used for big data and AI applications, using chips and other tech from companies like Nvidia and Intel. Founded in the 1940s, Inspur also helped produce the electronics behind one of China’s first satellites. And in the 1980s it produced PCs. It now boasts having broken “the foreign monopoly” on servers in China. In 2005, Microsoft invested $20 million in the company. It has also signed joint venture agreements with VMware, the American software giant, and Diebold and Cisco. Its shares are listed on the Shenzhen Stock Exchange.
Aero Engine Corporation of China researches, develops, and manufactures aviation equipment, and is government owned. The state-run China Daily called it “the country’s leading state-owned aircraft engine manufacturer,” and the AECC is widely seen as emblematic of China’s push for independence in the realm of aerospace and aviation development. Established in 2016, the company spun out of the Aviation Industry Corporation of China, which was added to the U.S. Entity List in 2018. The government established the company as part of its Made in China 2025 program, with the aim of reducing the need for foreign produced engines as China seeks to produce commercial and military aircraft. According to the Australian Strategic Policy Institute, AECC is a leading manufacturer of aircraft parts for the military. In addition to working under the Chinese government, the corporation also has partnerships with the United Kingdom’s University of Manchester through a subsidiary.
CRCC is China’s massive railway and infrastructure construction service company. The government-owned company, which is listed in Hong Kong and Shanghai, brought in around $120 billion in revenue in 2019. The company is a major player in China’s Belt and Road Initiative, and it was debarred by the World Bank last June for nine months for misconduct in a project in the nation of Georgia. The company has about 250,000 employees and construction projects in dozens of countries, particularly in Africa. It was established by the Communist Party in 1948 and began as a division of the People’s Liberation Army.
CRRC is a state-owned enterprise that holds billion dollar contracts with transit systems across the U.S., including Boston, Chicago, and Los Angeles, primarily to make railcars for their subway and light rail systems. The partially government-controlled company is the world’s largest railway vehicle manufacturer, bigger than Alstom and Siemens, and has built a large assembly complex in Springfield, Mass. The company is also seeking to build a facility in North Carolina. According to The South China Morning Post, the U.S. has no domestic passenger car manufacturers, instead relying on CRRC or European companies. CRRC is listed in Hong Kong and Shanghai and has about 180,000 employees and in 2015 reported $37 billion in revenue. Its units have built China’s high speed trains.
Panda Electronics, a state-owned firm founded in 1992 and based in Nanjing, designs, manufactures, and supplies electronics in China, including mobile phones, data cards, TV sets, software and surveillance equipment. A subsidiary of the company was dual listed in 1996 on the Hong Kong and Shanghai Stock Exchanges. The low-profile company has been reported to have helped Huawei ship to Iran and Syria in violation of sanctions; it also has links to the PLA and a joint venture in North Korea. It is controlled by the China Electronics Infrastructure Industry Group, according to public filings. It has reported setting up joint ventures with Sweden’s Ericsson, the telecommunications giant, as well as Flextronics, Sharp, Hitachi and LG. It also formed a joint venture with a San Diego company called Axesstel.
Sugon is a state-owned manufacturer of supercomputers and known for producing some of the fastest computers in the world. It uses U.S. chips and other technology to build its supercomputers, which it acknowledges ties to the PLA. It has had joint ventures or partnerships with Intel. In 2015, it formed a strategic partnership with the American chip maker Nvidia. Its affiliate, Tianjin Haiguang Advanced Technology, set up a joint venture with AMD, the American chip giant. James Mulvenon, the military analyst, says the company has helped the Chinese military conduct nuclear weapons simulation testing. In 2016, the company, which is listed on the Shanghai Stock Exchange, set up a joint venture with Vmware, the American software company. In 2019, it was placed on the U.S. Entity list, and barred from getting U.S. technology.
State-owned China Mobile is one of the largest mobile network operators in the world. Listed on the New York Stock Exchange and Hong Kong Stock Exchange, the company has more than $100 billion in revenue and nearly 500,000 employees. It is one of the world’s most valuable companies because of its stock market listings. It is also the first Chinese telecommunications operator to provide mobile service under its own brand in the U.S., though in 2019 the U.S. Federal Communications Commission, or FCC, voted to bar the company from operating in the U.S. over national security concerns. U.S. authorities have recently been reviewing China’s telecommunications assets in the country out of fear that they may allow the Chinese government to have listening posts in the nation.
CGN Power is a state owned company that builds and operates nuclear power plants across China. It also works in renewables, including hydro, wind and solar energy. The company was formed in 1994, and was listed on the Hong Kong Stock Exchange in 2014. It has been the subject of U.S. sanctions. In 2016, the U.S. Justice Department accused the company of stealing American nuclear secrets, in a scheme that traces back decades. CGN Power was added to the Entity List in August 2019, which mandates that American firms cannot sell to the company, after it “engaged in or enabled efforts to acquire advanced U.S. nuclear technology and material for diversion to military uses in China,” as written in the Federal Register. The company has worked with Areva, the French firm, and Westinghouse.
China National Nuclear Corporation, a state-run company, generates nuclear power, manufactures nuclear-related products, and offers various services related to nuclear weapons. The CNNC was formerly the government’s Ministry of Nuclear Industry before being restructured in 1988. Its president is appointed by China’s prime minister. The company builds and operates nuclear power plants, and has ties to China’s military nuclear weapons program. It has 7 research institutes, 100,000 employees, and has for years gained advanced technology from the U.S., Japan and the European Union. The company has longstanding relationships with Westinghouse and Areva, and conducts joint research projects in Canada, France, Russia, the U.K., the U.S. and Argentina. Some years ago, hackers working for the PLA unit 61398 in China hacked into Westinghouse and other U.S. companies and apparently stole some technology related to Westinghouse. Two of its subsidiaries are on the U.S. Entity List, and barred from getting U.S. technology.
China Telecommunications Corporation is one of the world’s biggest internet and phone service providers. The state-owned company, which employs about 300,000 people, is listed in Hong Kong and on the New York Stock Exchange. In April, the Justice Department recommended that the FCC sever the relationship with China Telecom’s U.S. subsidiaries that offer telecommunications services in the U.S., as it is partially owned by the Chinese government. The FCC has not yet followed the DOJ’s recommendation. The Senate Permanent Subcommittee on Investigations discovered failures in U.S. efforts to monitor and patrol three Chinese telecommunications companies, including China Telecom, over national security risks. Many global investment funds, including BlackRock, are shareholders in the company.
Emma Bingham is a Boston-based editor for The Wire. Previously, she was editor in chief of The Tech at the Massachusetts Institute of Technology. @emmapbingham
Kara Greenberg is an editor at The Wire. @karagreenberg_
Hannah Reale is an intern with The Wire. Previously, she reported for the New England Center for Investigative Reporting, The West Side Rag, and her college newspaper, The Wesleyan Argus. @hannahereale
