China Research Notes - Part 3
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Note: Since beginning my IT career in 1973, I've guided over 1500 clients in making the best choices. The two most frequent users of my investigative research are IBM, who over an 8 year stretch from 1992 to 2000 had me speak at over 50 events spanning 5 contents. My other most active customer has been the The Government of Canada including their departments of Public Works, Defense, DOC, Health, and Treasury.
Why China Started the Covid19 Pandemic
Since President Trump took office in January of 2017 China has remained the world’s second largest economic power and is close to overtaking the U.S.
When President Trump took office, China’s leading telecom companies, state-owned Huawei and ZTE, were well on their way to dominating the world 5G network market. Telecom is at the heart of the Chinese strategy to achieve world-wide technological superiority by 2025. However, President Trump has put roadblocks in place that threaten China’s very existence, the most recent action being taken May 15, 2020 attempting to block global chip makers from shipping computer components to China.
China has experienced a number of similar setbacks during Trump’s first two years in office. For example, President Trump first persuaded allies Italy and the UK, that technology provided by Huawei and ZTE could not be trusted. Italy cancelled a signed contract with Huawei to build their entire 5G network. The UK also scaled back their plans to use Huawei. Trump is trying to make all countries aware of China’s imminent threat.
The May 2020 executive order was a renewal of one implemented the previous year. Since May of 2019 U.S. companies have been barred from using telecommunications equipment made by firms that could pose a national security risk. In all, there were 114 firms blacklisted, and many were Huawei and ZTE affiliates.
Dependency on the US supply chain has become China’s Achilles heel, and tensions between the US and China are at an all time high.
A second Trump term at a minimum would be devastating to China’s technology roadmap and cause its 5G plans to unravel, but if he can persuade enough countries to go against communist China it could threaten the very existence of the Chinese Communist Party (CCP).
Taking a Closer Look
China has created multiple state-owned companies that compete in markets world wide. Two of these, ZTE (created in 1985) and Huawei (1987), are telecom manufacturers of both infrastructure equipment and smartphones.
State-owned means the real owner is the CCP even though they claim they are employee-owned, but they aren't fooling anybody who knows the track record of the CCP.
The Huawei website states:
“Huawei is an independent, privately-held company. We are not owned or controlled by, nor affiliated with the government, or any other 3rd party corporation. In fact, Huawei is owned by our employees through an Employee Stock Ownership Program (ESOP) that has been in place since the beginning. No one can own a share without working at Huawei, and as of 2018 there were 96,768 shareholding employees. Our founder, Ren Zhengfei, owns a 1.14% stake in the company. Shares confer voting rights. Shareholding employees elect members to form a Representatives' Commission, getting one vote for each share held. Then the Commission elects the company’s Board of Directors and Supervisory Board. At the last election in January 2019, 86,514 shareholding employees voted to elect 115 representatives at 416 polling stations around the world. Employee-ownership is instrumental to our rapid growth. Over the years, it has offered an incentive to our loyal employees and helped us attract talented people. Unlike many publicly-owned companies, Huawei’s decisions are not based on the need for quarterly returns and annual dividends." see: https://www.huawei.com/us/about-huawei/corporate-governance/corporate-governance for more info
Please watch this 2 minute Huawei sales video for 5G networks that promotes putting communist built and managed technology into every home in the world: https://carrier.huawei.com/en/spotlight/5g
It appears if the price is right, buyers don’t mind that they are contracting with the Fox to guard the hen house. Being generously subsidized by the CCP, State-owned Chinese companies set product prices 20% to 40% below their international competitors. In a deal with Mexico, on top of the standard deep discounts, Huawei offered Mexico a 1% loan in return for being allowed to build out 80% of Mexico's 5G infrastructure.
As of May 2020 Huawei is still working with prominent telecom companies including British Telecom (BT), Vodafone, Orange, and T-Mobile. As mentioned previously, Huawei’s Achilles heel is its product manufacturing that is totally dependent on obtaining technology and parts from a number of U.S. companies. If access to it’s U.S supply chain goes away it would be catastrophic for China and could even threaten its existence, and that is what Trump is currently using for leverage in his dealings with China.
Here are a few more details regarding how Trump stopped China's telecom juggernaut:
(remember President Trump took the oath of office in Jan 2017)
March 2017 - ZTE pled guilty to illegally exporting U.S. technology to Iran and North Korea in violation of trade sanctions, and was fined by the US Dept of Commerce a total of US$1.19 billion... the largest fine ever imposed by the USA for export violations.
Jan 2019 - the USA filed an indictment against Huawei Technologies for the systematic theft of intellectual property and some other offenses.
Huawei was founded in 1987 and it took 22 years (2009) to land its breakout contract - building a 4G network in Norway. Since then Huawei has expanded operations to more than 170 countries and has signed more than 60 contracts for 5G with international carriers.
Security Flaws Discovered
Security companies and US intelligence agencies have examined Chinese products found backdoors in Huawei’s code along with other security flaws. That's why the US warned allies that the Chinese were positioning to conduct cyber-espionage worldwide. As a result, the US Congress banned the use of Huawei products in federal projects.
Feb 2019 - Italy, who had already closed the deal to have Huawei build their 5G infrastructure, backed out and canceled the contracts, citing strong pressure from the United States. Italy refused to pay China penalties for cancellation, and announced it would ban both Huawei and ZTE from playing a role in the 5G rollout. After Italy embarrassed China on the international stage, exactly one year later Italy became one of first and hardest hit countries by Covid-19.
Aug. 18, 2019: The UK is still on the fence about using Huawei, so President Trump applies more pressure on UK to not do business with Huawei, again raising the "national security threat".
Even though the US exposed Huawei as a threat to the national security of anyone using their products, the UK hesitated for financial reasons. The UK already had so much Huawei equipment in their 4G infrastructure that it would cost a fortune to replace it, so they ended up doing a partial ban, agreeing no Huawei equipment could be used in the core infrastructure, only in the towers.
Overall, the USA, Australia, New Zealand, and Japan also banned Huawei from their respective countries.
Jan 2020 – Huawei forecasted a difficult year ahead.
Since Trump has just survived impeachment and the democrats looking weak, anything that could destroy the US economy could also remove Trump from office.
April 2020 - Contrary to its grim business forecast regularly fed to analysts, Huawei still managed to show 1Q revenue growth of 1.4% year over year despite the Covid-19 pandemic.
Huawei (37%) and Ericsson are the current market leaders for 5G infrastructure called "the mobile core." In 2019 only 19 million 5G capable phones total were sold, of which Huawei sold almost 7 million...barely edging out Samsung as the top seller. Nokia and Ericsson are the other main competitors from Europe and Cisco, Qualcomm, and Juniper Networks are in the US.
Other Technology Fronts
In addition to 5G networks, China has a strong presence on a number of technology fronts. China is heavily invested into Artificial Intelligence (AI) and well positioned to dominate the software market for self-driving cars. They are leading the industry in facial recognition capabilities and already have millions of video cameras in place to track movements and activities of their citizens and rank them according to their compliance. Watch this 10 minute video from Bloomberg https://www.youtube.com/watch?v=ydPqKhgh9Mg which includes a segment interviewing foreign workers. One worker from Australia reported having jay walked and 20 seconds later a fine was withdrawn from his Wechat account. Here is a segment of the video transcript including timestamps:
[referring to finding QR codes on everything:} “America laughed these things off years ago, but here, they run the entire economy. Cash and credit cards are history. Instead you scan QR codes to pay for everything: restaurants, groceries, even buskers. On the surface this is all good. It's the easy, convenient mobile payment system of the future. But there's also a dark side. The Chinese government can peer into the two dominant payment systems, AliPay and WeChat, as it sees fit. It's already started tracking behavior as part of a plan to rank citizens and measure how good and obedient they are. The tech revolution may have brought prosperity to Shenzhen but it's also brought more and more insidious intrusions into people's lives. To dig deeper into life under the Chinese deep state, I've assembled a team of extraordinary foreigners who work at tech startups in Shenzhen.
Hopefully a few beers will encourage them to open up about their thought crimes.
[Host asks the group of several young men:] “Living in a very tightly regulated Communist country - does that bother you, or you don't care?
05:17 [Answers from the young men:] “The presumption at least that I got before I came from Australia was sort of like moving into a sort of like a militarized state, like things are going to be really intense. But like, you take a beer, just like walk down the road, hang out in the park, fine. Do that back in my hometown in Australia, like, straight to the cop-house.
05:30 [person 2] But then, play spikeball on the grass, and then all of a sudden the cops come and stop you.
05:36 Narrator: Well and you got, you jaywalked and you had facial recognition?
05:41 [person 3]... So I was jaywalking in Nanxian. And all of a sudden I got a fine to my WeChat.
05:48 Was it instant?
05:48 It was about 20 seconds after, I guess. I had money in my balance and it just went straight out.
05:54 This is just for the one thing - it just came straight out.
05:59 Didn't even authorize it. That's crazy.
06:02 It's true. Try to jaywalk in certain parts of Shenzhen, and the government's facial recognition will spot you. There's even a board of shame, showing the faces of recent offenders.
I'm surprised and very very worried that they have your face in the facial recognition - like, the facial recognition system. But they have everyone's though. When you go across the border they take that picture, exactly, yeah. So it's all in the system, they know where you are.That's scary.
06:28 [Narrator] It gets even scarier. Because big brother is watching what you do online too.
06:36 Most of the websites we know and love are blocked in China, replaced with Chinese equivalents that the government can monitor: a sort of mirror universe internet.
.(end of video transcript excerpt)
Please feel free to share this info, and contact me to request a copy of the full research report, which is free.
Part 4 is about the Power of Propaganda and China’s secret plan to replace America
Part 5 is about my findings from examining some of the more plausible claims of corruption in diagnosing and inaccuracies reporting Covid-19
Part 6 is my report on accumulating reliable info on Covid-19 from people who have contracted it and/or who can provide trustworthy information about someone they know who has had it..
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