Pushback: Why the Five Eyes Intelligence Alliance Should Keep Chinese Investors at Bay

A man walks past a billboard at 2017 China International Robot Show in Shanghai, China July 5, 2017. REUTERS/Aly Song

It is imperative that the Five Eyes begin a systemic overhaul of what sectors are open to foreign investment.

China has announced its intention to become the global leader in artificial intelligence, the primary technology upon which future militaries will depend. The outlines of Beijing’s strategy is backed by strong empirical evidence, ranging from China’s own stated economic strategy, Made in China: 2025, announced in 2014, to its latest cyber laws, which were announced in early July. The first sees a three-part strategy, with strong subsidies for Chinese firms entering foreign markets in artificial intelligence, high-tech developments and telecommunication companies. Although China is encouraging companies to make investments in these foreign-market areas, it is firmly shutting the door to prevent foreign firms from operating inside China—ultimately to gain hegemony over supply chains in the world’s most advanced technologies. The second shuts the door firmly on foreign investment in China’s digital infrastructure. A recent DOD report indicates a surge of Chinese state investment into American start-ups with cutting-edge military applications.

Germany’s decision in early July to restrict China from investing in sensitive parts of its digital economy and infrastructure should be a wake-up call for the Five Eyes nations. As one of the most open economies to foreign investment (according to the Organization for Security and Co-operation in Europe regulatory index), Germany is the last state to close the door to investment. The UK is mulling over the idea of establishing something like the Committee on Foreign Investment to the United States to supplement its current system. However, as it moves in that direction, it is imperative that the Five Eyes begin a systemic overhaul of what sectors are open to foreign investment. Certainly, those sectors are overly vulnerable now and should be protected from aggressive acquisitions by Chinese firms with People’s Liberation Army connections. The Five Eyes should:

• Institute a regular Five Eyes meeting between the heads of investment review boards

• Use that process to build a “common operating picture” of Chinese investment practises and targets

• Share more information on Chinese firms active in their own economies, more information on their owners and past instances of serving Chinese national-security objectives

• Consider an overhaul of the Five Eye working groups in telecommunications and artificial intelligence, give them greater prominence than they now have, and create stronger links between private sector actors and security agencies.

• Develop a better monitoring process for the Ministries of Economy; presently, governments capture statistics without giving much background information. They can and should provide more details to regulatory bodies.

John Hemmings is director of the Asia Studies Centre at the Henry Jackson Society.

Image: A man walks past a billboard at 2017 China International Robot Show in Shanghai, China July 5, 2017. REUTERS/Aly Song

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