Chinese technology and operational experience are shaping security markets
The security market is influenced by many interconnected forces but one of the most significant shapers of what customers will buy, and who they will buy from, is China. In an earlier WA briefing we highlighted how Western export sales performance in Asia was far from stellar. This is not due to the lack of expenditure. On the contrary, investment has been significant and is forecast to continue to grow over the next decade. The explanation lies partly in the strength of Chinese security technology and the operational experience that systems integrators and operators have gained through deploying large scale, networked solutions. This capability is exportable and the success of HikVision and Huawei overseas is notable.
The internal drivers for China’s ongoing security infrastructure development are multifarious but can be categorised as internal terrorism, management of social stability and national security. Internal terrorism is the result of China’s past foreign policies and relates to the Tibet Autonomous Region and the neighbouring Xinjiang Autonomous Region. China’s response to the strong Uyghur separatist movement in Xinjiang has resulted in a significant increase in expenditure on public safety and development of systems to prevent, monitor and identify anybody involved in terrorist activities. This includes widespread video surveillance, facial recognition and mobile monitoring software. To enable biometric systems the Uyghur population has been required to have their photos and DNA uploaded into a central government database.
The survival of the Party is paramount to the Communist Party of China (CPC). Following years of focus on economic development President Xi Jinping has latterly pivoted towards investment in governance structures and security operations to ensure the longevity of the CPC. This led to the formation of the Central National Security Commission (CNSC), formed in 2013, and resulted in Chinese National Security Strategy and the subsequent National Security Law (NSL) in 2015. Security is described in its broadest term, to include not only internal social challenges and terrorist threats, but also the security of financial markets and resources. Ensuring social stability is a key thread running through many initiatives as the State contemplates Western challenges such as widening social inequality, increasing urbanisation, an ageing population and the role of social media. State wide surveillance, restrictions to the use of the internet and state powers to access people’s personal data are part of a nationwide security system to monitor and manage criminality and the possibility of social unrest. Vast surveillance camera networks, originally implemented in key cities like Chongqing, will be integrated and networked as part of a national surveillance system called the Xue Liang or “Sharp Eyes” project. A police Cloud will integrate other data, including personal information and traffic data to provide a live national intelligence network.
Cyber security is also covered in the NSL in articles 24 and 25 and covers the threat posed by foreign governments, separatists, reformists or organised crime. The Cyberspace Administration of China (CAC) was established in 2014 to provide regulatory guidelines for, amongst other things, monitoring of “Illegal and Unhealthy Information”. The use of mobile technology is widespread, providing users with access to social media tools which continue to be monitored by the state. The localisation of data in China – it is not to be held outside of China in the Cloud – coupled with China’s National Intelligence Laws means that the Chinese state is able to access personal, business and inter-governmental data for the purposes of National Security.
The Party focus on surveillance, industrialisation and self-sufficiency has resulted in a broad ecosystem of large technology and security organisations, some of them partly state owned, and innovative and privately held Chinese organisations. Huawei and ZTE are the two most recognised providers of communication and public safety networks. HikVision and Dahua Technology are the two leading video surveillance organisations but there are many others providing technology to both Chinese customers and export markets, including Tiandy, Infinova and Kedacom. NucTech is already a leading screening and detection organisation outside of China whilst the number of access control organisations is difficult to keep up to date with.
However, it is the application of data science and machine intelligence where Chinese organisations are making real progress. Biometrics and facial recognition technology have long been a Japanese strength, but this is changing as the operational experience gained by organisations such as Face++ and Sensetime as part of “Sharp Eyes” project helps to fine tune algorithms. Chinese organisations now regularly compete with the World’s best in technology demonstrations.
The willingness of public safety organisations to use technology has benefited organisations at the forefront of technology. Whilst Google Glass was widely celebrated but ultimately flopped, in China some forces use glasses with facial recognition built-in. Police robots are being used in small numbers in large public spaces whilst the use of unmanned aerial systems is evolving quickly. China is no longer a country of contract manufacturers but encouraged by government investment in research and the willingness to use new technology, has advanced to become a technology leader.
Beyond domestic policy, technology development and investment in public safety, WA believes that current geopolitics will determine China’s position as a security exporter. Although the G20 conference in November 2018 provided some respite from tit for tat tariffs, disagreements are unlikely to end during the current administration (the next US election is November 2020). Other factors such as the US accusation of Chinese state-run industrial espionage and sanctions against organisations such as ZTE and Huawei, and China’s industrial strategy designed to ween itself off Western developed technology further complicates relationships. The DeIOE campaign provides an example of China’s move towards using homegrown technology to reduce the potential threat of overseas monitoring of Chinese networks. This has involved gradually replacing US players such as IBM and Oracle.
Chinese organisations selling into Western market may be facing a challenging time but there are plenty of opportunities for expansion. The Shanghai Cooperation Organisation (SCO), which recently expanded to include India and Pakistan (2017), provides the framework for closer collaboration with Russia and former CIS whilst the ASEAN China Free Trade Area (ACFTA) encompasses South East Asia. Chinese influence and security contracts in Africa are well established whilst South America is a growing market. The Middle East has been a strong market for European and US organisations but may be more competitive in the future. Whilst North American and European governments remain wary of Chinese technologies, there are many other fast developing countries that will welcome field tested solutions and may ultimately lead towards clearly defined security trading blocks based on geopolitical alignment.