Greg Autry

Fighting for space, not over it.

Testimony To Foreign Affairs – 3/21/13

The following testimony was presented to the Foreign Affairs Subcommittee on Europe, Eurasia, and Emerging Threats on March 21, 2013. Video of the hearing is at: http://foreignaffairs.house.gov/hearing/subcommittee-hearing-cyber-attacks-unprecedented-threat-us-national-security 

testiomony

 

 Testimony of Greg Autry

Senior Economist, Coalition for a Prosperous America, American Jobs Alliance

On

Cyber Attacks: An Unprecedented Threat to U.S. National Security

Before the

Subcommittee on Europe, Eurasia, and Emerging Threats

Committee on Foreign Affairs

U.S. House of Representatives

March 21, 2013

 

Good afternoon Mr. Chairman and members of the Subcommittee. My name is Greg Autry. I am the co-author, with Peter Navarro, of the book Death by China. I also serve as Senior Economist for the Coalition for a Prosperous America and the American Jobs Alliance. I teach macroeconomics at Argyros School of Business at Chapman University in Orange, California. I have previously worked as a software and network engineer and have earned certifications from Novell (CNE), Cisco (CCNA) and Microsoft (MCSE).

I am testifying on my own behalf and the views expressed here are not necessarily the views of any organization.

My testimony will focus on the economic consequences of China’s persistent cyber assault against America’s citizens, firms, government and critical infrastructure.

The recent report from Mandiant Corporation has made perfectly clear what everyone in the cyber security community already knows – there is a giant sucking sound in the world economy and it is coming from China. The government of that nation has long been engaged in a massive hacking campaign aimed at Western firms, governments and infrastructure. The military origin of these attacks, the obvious economic cost, and the threat implied by intrusions into our critical infrastructure, mark this as a 21st century act of war.

These attacks are not an isolated case of industrial espionage but rather part of an integrated military-economic-cultural assault on America, a nation that China views not as a benefactor and valued trading partner, but rather as an ideological adversary who must be subdued by any means necessary. Chinese senior military strategists have discussed such multidimensional warfare for years[1]. While the Chinese economic assault on the U.S. manufacturing base is painfully visible to our unemployed, the Mandiant report shows that China views this as a military operation. In the process China has debased the Internet, a gift to the world developed at U.S. taxpayer expense.

As a former software and network engineer, I am undeniably impressed by the skill, thoroughness and audacity of several private sector organizations whose counterintelligence work has brought the Chinese hacking threat into the light. Canada’s Information Warfare Monitor report on the Gh0st RAT threat, McAfee’s work on Aurora, Dell Secure works investigations into Chinese military connections and now Mandiant’s brilliant demonstration that Unit 61398 of the People’s Liberation Army is APT1 have done our nation and the world a great service.

However, it is reasonable to assume that our national security, military, and government officials have aware of this for sometime. Why is the Chinese regime never held accountable for of any manner of bad behavior? If 61398 were an Iranian Republican Guard unit located in Tehran the U.S. military would have reduced their HQ to a smoldering pile of rubble long before I presented this testimony.

How does an economist estimate the cost of Chinese cyber warfare? The evidence suggests these revelations are merely the tip of the iceberg. The FBI admits, “As a result of the inability to define and calculate losses, the best that the government and private sector can offer are estimates.”[2]  A full accounting of the damage done to the U.S. is impossible to compile, because most of the victims will never detect the Chinese intrusions or will decline to admit to their losses.

The discrepancy between expert estimates and the value of crimes actually reported makes this under reporting obvious. For instance, Symantec estimated 2011 individual and small business cybercrime losses at $388Billion[3], while the FBI’s IC3 summary of actual reports that totaled a mere $485million[4]. McAfee even tossed out a $1Trillion estimate a few years ago. Using the more conservative number only a little more than a tenth of one percent (0.0125%) of these crimes by cost were reported. Even if Symantec overstated the problem by an order of magnitude we still have more than 98% of cybercrimes going unreported.

In any case, how do we place a value on something like Google’s source code? The firm trades at 25 times its annual earnings, suggesting most of its value is in future revenues. Conservatively assuming that half of Google’s market capitalization of $248 billion reflects the value of its technology (other factors might be labor force, brand equity and assets) this implies a property worth $124 billion has been compromised. While assessing the total cost over time has too many unknowns to model, Google has clearly suffered at the hands of its Chinese competitor Baidu. Google has lost $ billions in the Chinese market alone prompting Google’s co-founder Eric Schmidt to brand the Chinese government a “menace.” He has wisely noted that “The disparity between American and Chinese firms and their tactics will put both the government and the companies of the United States at a distinct disadvantage.” In other words we don’t cheat and steal well.

Assuming that most American firms are less savvy than Google when it comes to cyber security, it is easy to justify some very large losses. If Mandiant was able to identify 141 victims, there are thousands of compromised firms. If we set Google’s losses at just $10 billion and assume that to be fifty times larger than the average of two thousand major victims we end up with a $400 billion figure. In any case, the losses are clearly in the hundreds of billions of dollars.  Putting an exact number on the damages should be no more important to our reaction than calculating the precise losses from Al Qaeda attacks. The point is that the Chinese government is currently using its military to intentionally inflict enormous damage on the American economy.

Consider that the economic costs of the September 11 attacks (excluding the military reaction) have been estimated at around $175Billion[5]. The annual cost of Chinese military hacking to the US economy is therefore in the same range as 9/11. Every $100 billion implies a loss of about one million American jobs[6]. Chinese military hacking has left millions of American workers unemployed. And although we’ve been spared the specter of horrible televised deaths, the suicide and death rates for the unemployed are substantially higher than the national average[7]. The statistics would suggest that over the years, Chinese military hacking has killed thousands of Americans.

The membrane between the black-hat hacker community and the professional security services of China is very permeable.  Internet trolls with handles like “UglyGorilla” have access to millions of American emails and passwords via their PLA connection. American workers often use their business computers and email for personal financial transactions. Many of them use the same password at work as they do on their bank. The American public should be in an uproar.

Technical protections against cyber intrusion have consistently proven to be insufficient because most initial system compromises are achieved via exploitation of human beings with “social engineering” tricks like spear phishing. The criminal consequences of getting caught are minimal. A report from Cambridge recently suggested, “we should spend less on anticipation of cybercrime (antivirus, firewall, etc.) and more in response . . . hunting down cyber-criminals and throwing them in jail.”[8] Internet crimes must have punishments, even when the criminal is the Chinese government, or there is no rule of law online. As an analogy consider that if the police don’t respond and the courts don’t enforce the law, all the alarm systems and locks on Earth could not keep your home safe.

When businesses in lawless regions are left at the mercy of criminal elements they must: fail, relocate or reach an accommodation with the criminals. Consequently, victims of Chinese cyber attacks are actually helping to conceal the extent of this problem. They wish to avoid public humiliation, negative stock market reaction and the liability associated with the loss of customer data. What makes the silence more worrisome is that most large American corporations have been, for all practical purposes, coopted by the Chinese government. They are so dependent on low-cost production in China and strategically committed to the promise of the “world’s largest market” that exposing the criminal behavior of their notoriously vindictive host is unthinkable. With the noble exceptions of Google and the New York Times, an American Corporation is no more likely to “call the cops” on China than are the victims of abusive relationships likely to testify against their spouses.

Remedies proposed by the administration suggest that nothing will happen until a victim proves exactly what China took it and how they used it. What CEO wants to take another beating from China’s state manipulated economy and the stock market while trying to convince the U.S. government and the WTO of their victimhood?

Worse, many officials in the departments of State, Treasury and Commerce upon whom we depend to make China play fair come straight from doing business with China or proceed to do so as soon as they leave government.

What is most important is recognizing the systemic nature of the China problem. None of China’s offenses, including cyber attacks, occur in isolation. They are part of an integrated, asymmetric war by other means policy. Yet, America deals with trade cheating, space debris, and espionage as though each were a completely disconnected phenomena.

We are executing an “Asian Pivot” strategy to confront China’s increasingly belligerent military posture in the Western Pacific, while our consumption of Chinese goods finances a massive PLA arms build up. The administration promises to tackle PLA cyber assaults in a similarly schizophrenic manner. Nothing could possibly make China’s master strategists happier.

The fundamental problem is that the Chinese government is not a normal government but an immoral regime conducting an active and planned assault against our political and economic institutions. These cyber attack revelations are simply the latest manifestation of that war in progress.

Do we believe that China’s corrupt, state dominated economy is actually beating American private enterprise in a fair contest? While Shanghai booms and Chinese billionaires sprout up like rice in the spring, 25% of Americans are unemployed or underemployed. This is the root of our intractable fiscal dilemma. While we cut and tax, the Chinese government can hardly think of enough new things to do with the vast wealth our consumers and corporations transfer to them – from maglev trains and moon missions to a frightening military buildup. This is what losing a 21st century war looks like.

 

 

I propose the following remedies.

Get Real about China: It is time to publicly admit that our engagement policy has completely failed to produce a democratic, peaceful China and is empowering an aggressive dictatorship. We must engage our allies in this new approach.

Systemic Penalties for a Systemic Problem: Take the burden off demonstrating damages off the victims and put the pressure on the perpetrator to stop. The PLA has been proven guilty of intending to undermine American firms and it does not enjoy constitutional rights in the US. A significant tariff should be placed on Chinese manufactured technological goods until there is no further evidence of these activities.

Technology Sanctions: The import of any Chinese computer and telecom networking hardware or software into the U.S. should be restricted. Specifically: Huawei, a technology firm founded by a Chinese military officer and routinely implicated in intelligence work.

Recover Costs of Defense from China: An import tariff equal to America’s cyber defense costs should be attached to Chinese imports. (A similar tariff should be assessed for our expense of missile defense and the “Asian Pivot” costs.)

Return Costs to Multinational Corps: It is time to stop rewarding American corporations for transferring capital, technology and jobs to an enemy state by modifying our corporate tax system to favor American based manufacturing.

Stop Conflicts of Interest: Halt the flow of US officials to and from engagement in business with China. Encourage the Senate to make the investigation of Chinese business dealings a priority in confirmation hearings for officials at State, Treasury, and Commerce.

Stop Educating Our Adversaries in Military Technology: Ban the admission of computer science student to the U.S. from nations whose militaries engage in cyber attacks against America and her allies. We are educating a massive pool of Chinese talent in our computer science and engineering schools, where they displace tens of thousand of American citizens and allies.

Encourage U.S. Education in Computer Science: Direct the majority of student aid to STEM majors and specifically graduate degrees in computer science and engineering.

Protect and Reclaim The Internet: The Internet is an invention of the American government funded by U.S. taxpayers. The U.S. government and the U.S. armed forces are reasonably entitled to demand special privileges in its use. Any attempt to transfer further administrative oversight of the Internet to international regulatory bodies must be most strongly opposed. Any opportunity to regain U.S. control of the Internet would be in the interest of all people, most notably the citizens of China. Specifically ICANN and control of the DNS root must remain in the U.S. Root servers currently in the U.S. must remain there. The location of anycast servers should be restricted to friendly nations.

 

Closing Note: I want to be clear that my remarks are in no way meant to disparage the admirable nation of China nor its hardworking people. My criticisms are aimed entirely at the corrupt, nominally communist plutocracy that is repressing them and at the failed American policy of engagement, which has enriched and empowered that loathsome regime a thousand fold.

————

Greg Autry serves as Senior Economist with the American Jobs Alliance, Economist with theCoalition for a Prosperous America and is co-author (with Peter Navarro) of Death by China: Confronting the Dragon – a Global Call to Action. He blogs regularly at: http://www.gregautry.us/blog  and on the Huffington Post.

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[1] i.g. Liang and Xiangsui, Unrestricted Warfare, 1999.

[2] http://www.fbi.gov/news/testimony/cybersecurity-responding-to-the-threat-of-cyber-crime-and-terrorism

[3] http://us.norton.com/content/en/us/home_homeoffice/html/cybercrimereport/

[4] http://www.ic3.gov/media/annualreport/2011_IC3Report.pdf

[5] The New York times suggest $55billion in physical damage and $123billion in attenuated economic impact. The cost of invading Afgahnistan and Iraq in reaction are separate and larger; though they are surely much less than the cost of using a traditional military response to China – something that is probably not a wise option.  http://www.nytimes.com/interactive/2011/09/08/us/sept-11-reckoning/cost-graphic.html?_r=0

[6] Estimating revenue of $100,000 per job

[7] http://www.nytimes.com/2012/11/05/health/us-suicide-rate-rose-during-recession-study-finds.html, http://news.yale.edu/2002/05/23/rising-unemployment-causes-higher-death-rates-new-study-yale-researcher-shows

[8] Measuring the Cost of Cybercrime: http://weis2012.econinfosec.org/papers/Anderson_WEIS2012.pdf

Testimony to House Foreign Affairs 3-28-12

How the Chinese Communist Propaganda Machine Runs Wild and Free in America

 

The follow was submitted with my testimony on Chinese Perception Management in a hearing entitled:

The Price of Public Diplomacy with China

 

Testimony of Greg Autry
Merage School of Business, University of California, Irvine
Senior Economist, American Jobs Alliance

On

The Price of Public Diplomacy with China

before the

Subcommittee on Oversight and Investigations

Committee on Foreign Affairs

U.S. House of Representatives

March 28, 2012

 

Good afternoon Mr. Chairman and members of the Subcommittee. My name is Greg Autry. I am the co-author, with Peter Navarro, of the book Death by China. I have served as a lecturer in Business Strategy and Macroeconomics at the Merage School of Business at the University of California, Irvine where I am currently completing a PhD in the area of Public Policy and Economics. I also serve as Senior Economist for the American Jobs Alliance. I am testifying on my own behalf at my own expense and my views are not necessarily the views of those organizations.

My testimony will focus on the co-option of the U.S. media, academic, business and political elite by the Chinese under the influence of the Communist Party’s Central Propaganda Department.

 

In the two decades since Henry Kissinger convinced America to overlook the massacre in Tiananmen Square, we’ve been mired in a relentless, one-sided trade war camouflaged under Chinese propaganda with the aid of an American fifth column of media pundits, CEOs and academics.  Eager to cheer the rise of state capitalism and to blame Americans for all our economic ills these apologists tell us Chinese currency manipulation, illegal export subsidies, and labor repression are not real problems. The real problems are our unions, our military adventurism, our legal system, our environmental regulations, our polarized media, and our “do nothing” Congress. Yet, by any objective evaluation we are still Ronald Reagan’s “Shining City Upon a Hill” in every one of these categories when compared to Beijing.

So, why do so many of our leaders listen when Thomas Friedman, Fareed Zakaria and the rest of the Flat World Society sing their siren song of global prosperity just over the horizon? Why do we continue to open our markets and media to a non-reciprocating China when our eyes tell us that the only thing being flattened is America’s productive capacity? Why do many in America believe that China is progressing toward democracy or improving human rights, when the empirical evidence says just the opposite? Why does our President publicly repeat Chinese propaganda phrases like “peaceful rise”[1] while simultaneously allocating billions of taxpayer dollars to counter China’s increasingly aggressive military posture?

The answer to this conundrum lies in the concept of the “Reality Distortion Field.” This is a phrase that was coined by associates of the late Steve Jobs to describe his uncanny ability to induce compliance and agreement in those around him even when they knew Mr. Job’s statements were untrue and even when they were fully aware that they were being manipulated and even exploited. In the last decade, the Chinese Communist Party (CCP) has expanded its domestic Big Lie propaganda system into a global reality distortion field.

Americans are aware of China’s overt, internal information control system, which includes media and Internet censorship along with the brutal suppression of public dissent. What many don’t see, even while in-country, is the pervasiveness of the Chinese propaganda system. Professor Anne-Marie Brady of the University of Canterbury, New Zealand has noted that “propaganda and thought work (Xuānchuán yǔ sīxiǎng gōngzuò, 宣传与思想工作) have become the very life blood (Shēngmìngxià, 生命线) of the Party-State.”[2]

The new head of Central China Television (CCTV), Hu Zhanfan, made this clear last year, when he chastised CCTV news workers who fancied themselves “journalists” rather than accepting their proper role as “mouthpieces” and “the Party’s propaganda workers.” Mr. Hu went on to call “Strengthening education in the Marxist view of journalism . . .” a matter of “extreme urgency.”[3]

This ideological thinking does not stop at China’s border as their state controlled news outlets expand across the globe. China’s overseas distortion field goes by many innocuous names including “foreign affairs” (Wàishì or外事), “foreign policy” (Dùwài zhèngcè , 渡外政策), and the pleasant sounding “foreign friendship” (Duìwài guānxì对外关系).

While all nations conduct official and unofficial efforts to manage their reputations abroad and project their values, an aggressive dictatorship in sheep’s clothing presents a very special challenge.

America’s ever-hopeful policy of engagement, careful not to offend China’s hypersensitive rulers, has driven a very soft official U.S. stance on issues of Chinese domestic behavior, as well as on its increasingly aggressive geopolitical and military posture, even among those who should know better. Those who don’t know better – are less informed about what is actually happening in Beijing, in Africa, and in the South China Sea – in the media, academia and business take their queues from a timid Administration and a diffident State Department. Our government’s public behavior clearly implies that Communist China is a normal nation, to be treated the same as Canada or India. This tacit endorsement has established an environment that allows the Chinese state-propaganda-machine to run wild and free in America and use our most powerful institutions to project the Communist Party’s world-view.

China’s rulers are the world’s experts at lying and at getting others to lie for them. In Communist China, truth is defined by the power of the authority doing the speaking rather than an objective evaluation of what is said. Domestically, the Party utilizes brute force to intimidate dissidents. Externally, they must co-opt foreign apologists. Sometimes this is a straightforward monetary transaction, but the most valuable targets are those whose honesty gives them credibility.

The first step is the subtle tactic of getting an honest target to knowingly accept and publicly repeat an innocuously small part of the Big Lie for the sake of politeness or convenience. The victim is now a partner in fraud, however minor, and will be compelled to defend that point or lose face. They find themselves annoyed with those who insist on all the little truths and more at ease within the comfortable newspeak inside the distortion field.

The prime example of the Small Lie is, “People’s Republic of China” or simply the “PRC.” While we all know that this authoritarian dictatorship does not belong to its people and that it is by no definition a republic, we acquiesce rather than argue in hopes of moving on to more constructive talk. However, once we’ve accepted “People’s Republic”, phrases like “Harmonious Society” and “Peaceful Rise” lose the Orwellian flavor that should put us all on high alert. We tell ourselves, “It’s just the way the Chinese are,” (i.e. chronic benders of the truth) and move on in the vain hope of reaching constructive agreements. Western CEOs and politicians regularly find themselves surprised at the audacious way Communist Chinese routinely ignore signed business contracts and international agreements. When we consider this in the context of the name of an entire country being an obscene falsehood, nothing should surprise us.

Academia

 

American schools and universities are increasing full of CCP apologists who expertly convey China’s thought work. NYU Adjunct, Ann Lee, wonderfully praises China’s leaders, downplays the CCP’s propaganda campaign, and scorns a major human rights figure in a single astounding sentence form her book What the U.S. Can Learn from China:

The fact that the Nobel Committee awarded the 2010 Peace Prize to a locked-up dissident, Liu Xiaobo, instead of Hu Jintao for leading a billion people to prosperity in a peaceful way is a testament to the huge failure of public relations on the part of the Chinese to communicate their position and present their image to the world.[4]

Sadly, this is becoming the dominant paradigm in America’s Universities and Lee, whose biography notes that she has advised Chinese officials[5], continues without irony:

China is still being perceived as undemocratic and antiliberal by the West, but the problem can be easily corrected with more astute public relations training.[6]

Professor Lee also presents China’s vision of reeducating America’s youth with their Confucius Institutes (CI):

This strategy of bringing students from other parts of the world to China is similar to the strategy Julius Caesar used when he conquered Gaul. Since Caesar didn’t have enough Romans to run the region, Caesar took the sons of the conquered elites and raised them as his own instead of throwing them into jail. By caring for them in such a way, he turned Gauls into Romans who could be trusted to run Gaul for the Roman empire.[7] [Emphasis added]

Clearly, the Central Propaganda Department did their homework when they chose Confucius as a mascot. Sneaking a “Mao Institute” into your child’s elementary school would not go over so well with the PTA. However, the CI curriculum was not developed in some temple on a misty mountain, but in a Communist Party office in Beijing. Interestingly, curriculum from real Confucian scholars wouldn’t be allowed in China anyway.  Mao suppressed Confucianism and the Party views it as a competing authoritarian philosophy incompatible with Marxism. Just last year, the master’s statue was unceremoniously booted from a display adjacent to Tiananmen Square.[8]

While the Chinese claim that the CI are a function of their Education Ministry, it was politburo member Li Changchun who toured Europe and dispersed funding to cooperative European educational institutions.[9] As Brett Decker and William C. Triplett II report in their book, Bowing to Beijing, “Li is a nasty piece of work”[10], heading up the CCP’s propaganda and censorship units and personally initiating China’s 2009 attacks on U.S. based Google.[11] Europe is not alone, according to Decker and Triplett, the University of Nebraska took $270,000 for setting up a CI and Stanford University is rumored to have accepted $4million.[12]

While ignoring God, Confucianism does include spiritualism and the ceremonial worship of ancestors, with temples dedicated to venerating its sages. The obvious separation of Church and State issue that should be raised here remains hidden by the reality distortion field. Further, the Confucian support of the Divine Right of Kings (Mandate of Heaven) and of accepting one’s place in society (filial piety to rulers and elders) is hardly in keeping with the American principal of “All men are created equal.”

The Confucius Institutes also reveal how the reality distortion field drives American duplicity in dealing with China. Consider that America’s relationship with Saudi Arabia is very similar. We run a chronic trade deficit with that authoritarian kingdom and we routinely overlook its human rights abuses and its support of those who wish to undermine liberty, democracy, and tolerance. To their credit, at least the Saudi’s aren’t selling organs or building a massive anti-U.S. military machine. What would the reaction be to the Saudi’s establishing hundreds of Mohammed Institutes in our schools, designed to teach Arabic and introduce Arab culture to young Americans? If that doesn’t seem acceptable, then why are we allowing a communist state that has a growing nuclear arsenal aimed at America to infest our schools with their ideology?

In my own experience as a student and a former faculty member at the University of California, the growing concentration of Chinese students, studies, and special relationships is damaging the formerly international diverse flavor of our the academic experience. There was a time when we’d have a very broad mix of international students from Asia, Latin America, and Europe in an MBA classroom. Now, there is often the Mainland Chinese cohort and “everyone else.” Let me be clear, individually most of these students are fine scholars, do good work and contribute to the school. The issue I have is with their overwhelming predominance and the presumption that there is some special bond between America and Communist China. Further, there is a sense of fatality within academia, which seems to accept the notion that China must inevitably eclipse the U.S. in business, research and education; so, we’d all better get on board with the Chinese now to protect our future careers.

There are more than 125,000 Chinese students in U.S. Universities, far more than any other nationality.[13] They are particularly dominant at the graduate level and in the economically critical hard sciences, engineering and business departments. A big part of the reason for this is the money they bring in with out-of-state tuition fees and in the funding of special chairs, institutes and grants. The China Daily blatantly advises:

Applicants from China should look at state universities in the US and lesser-known small colleges which need their dollars. One good bet is California. . . . California cut funding for the University of California this year by $650 million . . . A University of California commission recently recommended that the university system increase enrollment of nonresident students to as much as 10 percent of all undergraduates.[14]

My University has a growing number of relationships with Chinese universities and a newly endowed, “U.S. China Institute for Business and Law.” The purpose of which is described by the Dean of the Law school:

We are at a unique moment in the history of our two countries in which it is especially important to build bridges between them in business and law. And in each country, the legal system provides a unique framework within which business can flourish.”[15] [emphasis added]

This last sentence represents an astounding level of naivety when one honestly considers what the Chinese legal framework is. The Chinese constitution guarantees freedom of the press, speech, assembly and religion, but the Chinese state detains thousands without trial for religious and political purposes. Many prisoners have been beaten, tortured and used as involuntary organ donors.[16] Many business people have told me that extortion; property seizure, kidnapping, and assault are routine occurrences, conducted by Chinese gangs with the tacit approval or open cooperation of Chinese police and courts.

When Xi Jinping, the anointed next dictator of China, came to California last month, the Dean of Pepperdine’s Graziadio Business school wrote, “We are honored to host Vice President Xi Jinping’s delegation at the Graziadio School in the hope that our discussion and interaction will increase business opportunities and cooperation between our two countries.”[17] [emphasis added]

Media

 

The ubiquitous China Daily newspaper is the strongest outward manifestation of Communist Chinese influence in the U.S. I find it all over campus and on nearly every corner here in DC. It is clear that the vast majority of Americans have no idea that this is a publication entirely owned and operated by a foreign government, which routinely engages in combative behavior with America and our allies.

A China Daily editorial on August 8, 2011 entitled “China must punish U.S. for Taiwan arm sales with ‘financial weapon’” suggests “China should consider how to build a direct link between the U.S. Treasury bond purchase and US domestic politics . . .”[18] The intention to directly interfere in American affairs is totally clear.

Outrageously, The China Daily inserts a monthly print and daily online supplement into The Washington Post entitled “China Watch.”[19] The site features the large, bold, black masthead of the Washington Post in the upper left corner. Hidden, below the title “China Watch” on the right is the tiny disclaimer “A paid supplement to The Washington Post.”  When I showed about a dozen associates the China Watch site and asked, “What organization is doing the reporting here?” the unanimous response was, “The Washington Post.”

Zhao Qizheng, who as director-general of China’s State Council Information Office,[20] and the Communist Party’s Office of Foreign Propaganda[21] promised to expand the projection of the values of China’s communist government and to “exert influence on the foreign public. . . ”[22] In an interview Zhao describes his efforts to sanitize China’s human rights record abroad as “fairly systematic and penetrating.”[23] Repeating the big lie – in this case that China is a society ruled by law – is critical to maintaining the reality distortion field. Even the public repetition of familiar charges against China, in a sterile atmosphere filled with calm and smiling Chinese diplomats in business suits desensitizes the Western mind.

In the U.S. the Party controlled state television China Central Television (CCTV) has essentially unrestricted access to American cable viewers, while in China American networks have very limited access to “select” viewers under the watchful eye of the State Administration of Radio, Film, and Television (SARFT) which censors the political content of broadcasts.

The Mandarin language CCTV channel 4 is directed at the Overseas Chinese community and Americans of Chinese decent in particular. Nurturing a stronger sense of Chinese nationalism in America is a critical function of CCTV 4. Chinese dissidents in the U.S. tell me that the deep pockets of CCP backed Chinese language TV and newspapers in the U.S. have driven formerly anti-communist media to the margins in the rapidly growing Chinese-American community.  Anne-Marie Brady writes that a Chinese training manual on foreign propaganda explicitly suggests acquiring influence in Overseas Chinese groups in order to, “turn them into propaganda bases for China.”[24]

CCTV channel 9 is designed to put a friendly face on China’s brutal regime for English speakers in America, Canada, and Great Britain. Brady has written that CCTV 9 executive refer to their channel as “soft propaganda” and that its “senior editorial staff and journalists were all forced to write self-criticisms” for reporting honestly on Chinese coal mine disasters.[25]

Chinese state news organizations such Xinhua, People’s Daily, and China Daily generate a vast amount of English language web content directed at insinuating Party approved messages into the mainstream U.S. Internet media and blogosphere. The sheer volume of this material and the laziness of some U.S. reporters insures that excerpts from and links to these Communist press releases routinely turn up in American branded reporting.

Many U.S. websites like cnn.com are routinely censored or blocked at various times and places. The less censored, “privileged” Internet is offered in “Western Hotels” both as an accommodation for American guests as well as to hide from Westerners the level of thought control that the average Chinese citizen endures.

Business

 

While American multinational corporations are increasingly dependent on China’s, subsidies and currency manipulation, American consumers are not fond of the “Made in China” label. More than half of them report that they actively avoid Chinese made products[26] and a quarter of them identify China as an “Enemy of the United States.”[27] This compels firms to defend China and ironically to cover up their association with China even when their Chinese hosts have repeatedly cheated them.

No case of cooption has been more blatant than that of General Electric CEO, Jeff Immelt. In July of 2010, Immelt told a group of Italian executives in Rome that he was “really worried about China.” He warned of the ongoing Chinese “colonization” of resource rich countries, and complained of increasing Chinese market protectionism saying, “I am not sure that in the end they want any of us to win, or any of us to be successful.”[28]

Just three months later Immelt announced plans to transfer nearly $2billion of American capital into joint ventures with Chinese state owned firms.[29] In January of 2011 he met with Chinese dictator Hu Jintao and President Obama[30] and with a straight face said, “There is a multitude of ways to succeed in China.” Two days after that, the President appointed Immelt Chair of the White House’s new Council on Jobs and Competitiveness, aka “Jobs Czar.” Since then GE has towed the Chinese line, accelerated investment in China[31] and moved an entire business division to Beijing.[32] Immelt has also agreed to offer GE’s sensitive advanced avionics technology to Communist[33] state owned firms that compete with U.S. aircraft firms.

To hide the Chinese nature of their products many nominally American firms skirt the FTC’s country of origin regulations. “Made in China” labels are carefully concealed or designed to fade or fall off in transit. The attached photos of a Nike Baseball bat[34] are representative of this practice. Permanently emblazoned on the highly visible barrel end of the bat is the wording “Crafted by Nike – Beaverton Oregon,” while a small, insecure “Made in China” sticker is hidden under the handle.[35]

The case of Los Angeles based CODA Automotive is both an egregious attempt to disguise a Chinese product and a disturbing demonstration of how American political appointees benefit from support of China’s reality distortion field. At the most recent LA Auto show, CODA’s staff and executive spokesperson openly described their firm and car as “All American.” However, when confronted, they reluctantly admitted that 65% of the vehicle is imported from “overseas”, doing everything possible to avoid saying “China.” [36]  In fact, the car is the Saibao III chassis from Hafei motors with batteries from another Chinese state owned firm.[37] Yet, there was no reference to the vehicle’s Chinese origin in the sales literature nor on the major pages of the website.[38] It is certainly reasonable to believe that consumers could purchase this car without knowing it comes from China. CODA has good reasons to hide their China connection as their partner, Hafei motors is wholly owned by a Chinese state weapons conglomerate, China South Industries Group. [39]

Shockingly, Hank Paulson, who as U.S. Treasury Secretary supported China’s economic reality distortion field for years by denying China’s obvious currency manipulation, is an investor and advisor to CODA. Clinton Chief of Staff Mack McLarty is also an advisor and our current Commerce Secretary, John Bryson, served on the CODA board.[40]

Conclusion

Overall my findings are:

The Chinese Communist Party views Americans and their leaders as naïve, short sighted and easily coopted.

China is very actively involved in manipulating the American media to promote the Communist Party agenda, while actively constraining reciprocal American access to their media.

China has carefully targeted our schools, universities and multinational corporations as agents for Chinese propaganda.

Former and current US government officials have been uncomfortably financially intertwined with Chinese state owned business leading to a real question of their ability to speak or act objectively in regards to China.

American political leaders, business leaders, and pundits are increasingly out of touch with the reality of Chinese propaganda and with mainstream American views on Communist China.

 

 

 

I would like to thank Brian McAdam, formerly of the Canadian foreign service, for his knowledgeable input

 

 

Appendix A – Photos

 

Endnotes



[2] Anne-Marie Brady, Marketing Dictatorship: Propaganda and Thought Work in Contemporary China, Rowman and Littlefield, 2008. p. 1.

[4] Ann Lee, What the US Can Learn from China: An Open Minded Guide to An Open-Minded Guide to Treating Our Greatest Competitor as Our Greatest Teacher, Kindle Edition, 2011 p. 5

[6] ibid

[7] Lee, p. 194

[10] Brett Decker and William C. Triplett II, Bowing to Beijing, 2011. Pg. 164

[12] Brett Decker and William C. Triplett II, Bowing to Beijing, 2011. Pg. 165

[16] For a detailed investigation of the organ harvesting crimes against humanity please see Bloody Harvest: Organ Harvesting of Falun Gong Practitioners in China by David Matas and David Kilgour.

[17] http://www.marketwatch.com/story/pepperdine-universitys-graziadio-school-of-business-and-management-to-host-chinas-vice-president-xi-jinping-business-delegation-2012-02-06

[22] http://www.thehindu.com/news/international/article1487217.ece

[24] Wang Zhongshen, Duiwai xuanchuan chulun (Introduction to Foreign Propaganda), 2000 via Anne-Marie Brady, Marketing Dictatorship, 2010 edition, p. 163.

[25] Anne-Marie Brady, Marketing Dictatorship, 2010 edition, p. 167.

[34] taken by the witness at Dick’s Sporting Goods in Yorba Linda, CA in March of 2012.

[35] The author observed about half the bats missing this label.

[38] You have to dig into the FAQs where formerly it was in a hidden section of text. Since our LA Times article CODA has expanded the FAQ coverage on China.

[40] http://articles.latimes.com/2011/dec/11/opinion/la-oe-autry-coda-20111211

 

The official posting of this testimony on the house site is at:

http://foreignaffairs.house.gov/112/HHRG-112-FA17-WState-AutryG-20120328.pdf