Internet of Things: the China perspectiveby Henk H.F. Smid
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| China’s dominance in the IoT is likely to impose significant costs on non-Chinese businesses and consumers, harming both their economic and national security interests. |
China is at the forefront of all these issues and its drive to become a leader in the IoT poses a sobering challenge to non-Chinese economic and security interests. This study examines how China’s development of the IoT—supported by the Chinese government’s efforts to leverage national resources for its promotion—has positioned China to compete credibly with other leaders in the emerging IoT industry. Its robust participation in international standards committees has given Beijing greater ability to dictate traffic rules. The investigation of IoT security vulnerabilities and growing civil-military collaborations raise concerns about gaining unauthorized access to IoT devices and sensitive data. Authorized access to consumers’ IoT data will only grow as Chinese IoT companies use their manufacturing and cost advantages to gain market share abroad.
Chinese tech giants such as Huawei, Alibaba, and Tencent have invested heavily in IoT research and development, expanding their global footprint. For the time being, China’s large market size, production capacity, and government support provide some important advantages, but China still lags behind leading international levels in many IoT technologies. Therefore, other governments and companies still have time to maintain any technology lead and influence future IoT development, standards, and rollout.
For example, 5G, the latest generation of mobile communication technology, offers many advantages over previous generations, including higher data rates, lower latency, and greater reliability. Countries that can roll out dependable and extensive 5G networks are likely to have a head start in developing IoT technologies and applications. Countries that are at the forefront of developing these technologies are likely to be able to gain a competitive advantage in terms of economic growth, innovation, and technological advancement. China has laid a solid foundation for a comprehensive rollout, relying on a nationwide approach that has created a comprehensive system for domestically manufactured 5G technologies and promoted their adoption into international technical standards. With ten times more 5G sites per person than the United States, China seems likely to lead the early 5G rollout.
China’s dominance in the IoT is likely to impose significant costs on non-Chinese businesses and consumers, harming both their economic and national security interests. China views technological advancement as a critical strategic asset and considers the proficiency in essential technologies as a significant strategic advantage. The determination to be at the forefront of IoT development is based on these considerations, as is a high sensitivity to the costs of relinquishing dominance in next-generation technologies to other powers. As such, China’s IoT development strategy is designed to closely serve Chinese interests. It is unlikely that the Chinese government will pay much attention to protecting non-Chinese consumers, let alone companies competing in the IoT space.
As this study describes, China’s commitment to becoming a leader in IoT development is based on a belief that its security requires it to become a technology power, particularly in emerging technologies that the country sees as strategically vital. The potential impact of the IoT on the global economy led Chinese leaders to designate it as a priority area for development in 2009. China has subsequently taken steps to accelerate domestic IoT research and development and infrastructure development through robust planning initiatives and extensive financial support. After years of this financial support, the Chinese IoT market has grown rapidly, with the expectation that it will continue to do so. The global growth trends of the IoT industry are also robust. Chinese experts expect an “Internet of Everything” era to arrive once IoT is widely adopted in developed countries. It is estimated that China has already developed a relatively complete IoT supply chain, including chips, components, devices, software, systems integration, operators, and applied services.
China’s leaders have long viewed technological advancement as a trendsetter of national strength and security and want to avoid falling behind other international competitors in technological advancement. Driven by this sense of urgency, China’s policy to promote IoT development has seen the establishment of IoT industrial clusters and demonstration parks, extensive financial support for IoT R&D, restrictions on foreign investment, and selective enforcement of Chinese laws to hinder the operation of foreign IoT companies in China. This policy poses a serious challenge to all companies competing with Chinese companies in the IoT industry. They should be aware that the Chinese government views them as strategic rivals, if not outright threats. China is likely to engage in protectionist and unfair trade practices to favor its own IoT companies over foreign competitors, creating an austere and tacitly hostile market environment for foreign companies.
The Chinese government is actively trying to influence international technical standards for the IoT that would benefit Chinese companies at the expense of foreign counterparts. As information technology (IT) industry precedents have shown, competition over technical standards is edging into a larger competition over intellectual property, market advantage, international prestige, and approaches to data privacy, security, and control. Once a global standard has been established and accepted, it can put pressure on countries or companies developing other standards to conform to the existing standard.
| China is currently using a more coordinated and comprehensive strategy than, for example, the US to influence relevant standards for the IoT. |
This advantage is magnified from a security point of view because the creator of a standard technology has a close understanding of how it works inside and out. China’s increased efforts to influence and set international IoT standards is a critical part of China’s ambitious state-led plans to achieve IoT dominance. These efforts may block China’s preferences for standards in IoT and supporting infrastructure sooner rather than later, as nascent IoT and 5G standards exist in a fragmented and complex standards-setting environment filled with incompatible proprietary solutions and a mixed bag of standards settings.
China is currently using a more coordinated and comprehensive strategy than, for example, the US to influence relevant standards for the IoT. US entities are often absent from important international standardization processes. Consequently, some international standards have been developed with reduced US input. In contrast, China’s international standardization efforts are increasing according to a centralized plan to bring about changes at both high and low levels. At a prominent level, China has increased its participation in international standardization bodies, showing a preference for multilateral (one country, one vote) standardization bodies over other supported multi-stakeholder bodies. Chinese nominees leading these organizations collaborate with national Chinese standards development efforts.
At a lower level, China is leveraging the country’s sizable economy, state investment in innovative technologies, and state-sponsored foreign policy initiatives such as the Belt and Road Initiative (BRI) to encourage other countries to use its technology and thereby adopt its standards. China is explicit in its support for “standardization work” and will continue to emphasize this work and strategy for the IoT and other new and emerging technologies.
While authorized data access, collection and processing are indispensable components of the transformative potential of the IoT, the Chinese government has unique authority to access the IoT data of non-China consumers. Authorized access, or access agreed upon by the consumer in lengthy terms and conditions documents, allows companies and governments to collect massive amounts of data that can translate into significant economic and strategic benefits. While this practice is the norm around the world, China poses a serious threat to other nations’ privacy because its government and surveillance equipment have access to this data beyond accepted international standards. Chinese companies can access foreign IoT data in important ways:
Chinese access to foreign IoT data is problematic for other countries’ national security and economic competitiveness. In the short term, access by the Chinese government and industry to foreign data would represent a huge opportunity for Chinese intelligence operations. In the longer term, such access would provide a major head start to China’s artificial intelligence (AI) development efforts, eventually culminating in a significant Chinese economic advantage in another field that is expected to shape the economy of the future. Existing data protections outside of China seem insufficient to protect foreign data from malicious but authorized data access. The nature of other nations’ laws and authorities leaves loopholes that can facilitate Chinese access to foreign IoT data in bulk, a particularly risky proposition given China’s well-known motivations for accessing big data.
The IoT is inherently vulnerable to attack as billions of devices are added and connected to networks. These products, from industrial controls to smart watches, can become attack areas through their Internet connections. Even worse, market demand for lower costs coupled with low barriers to entry into the IoT market mean there is currently little incentive to build more secure IoT devices. Unauthorized access to IoT devices has already led to physical consequences, including attacks on industrial machinery and power grids around the world. Future unauthorized access is likely to open a Pandora’s box of negative consequences as IoT devices are deployed in greater numbers around the world.
| China is developing and building an integrated network of communications, Earth observation and navigation satellites, which is a critical part of China’s IoT development strategy. |
Because of its market size, China has the potential to have an outsized impact on the security of IoT devices against unauthorized access (i.e., technical compromise). IoT devices made in China have already become common targets for unauthorized access, in part due to insecure device configurations that have resulted in surreptitious data collection and commanding of devices for use in botnets. The widespread use of Chinese IoT devices and components suggests that the overall negative impact of unauthorized access to Chinese devices may be proportionally greater than for devices from other countries.
China is also actively researching IoT vulnerabilities, both for its own security purposes and certainly to gather intelligence, conduct network reconnaissance for cyberattacks, and increase its domestic surveillance powers. Chinese IoT security research shows a familiarity with exploitation methods that can lead to unauthorized access and is already using machine learning and algorithmic techniques to accelerate the pace of research and develop adaptable malicious code that can affect multiple types of IoT devices. China’s IoT security research entities are also part of a broader and increasingly fused civil-military research ecosystem that increases the likelihood that Chinese intelligence and military actors will have access to any IoT vulnerability research breakthroughs. The combination of widespread adoption of IoT products and Chinese exploration of the ability to exploit increases the threat of unauthorized access to non-China based IoT devices and the networks they connect to.
China’s Fourteenth Five-Year Plan, covering the years 2021 to 2025, was officially approved by the National People’s Congress of China on March 11, 2021. The plan covers all aspects of development for those five years and presents China’s vision for 2035. The plan is a comprehensive blueprint for the country’s development in various fields, including economy, technology, society, and environment.
One of the main goals of the plan is to accelerate China’s transition to a more innovative, sustainable, and high-tech economy. As part of this effort, China is investing heavily in the development of emerging technologies such as AI, 5G, and IoT. It is part of China’s broader strategic vision to become a world leader in science and technology. As part of this vision, the country is developing and building an integrated network of communications, Earth observation and navigation satellites, which is a critical part of China’s IoT development strategy.
The communications satellite network will provide better connectivity and low latency for IoT devices, especially in remote or hard-to-reach areas where traditional communications infrastructure is lacking. This will enable the deployment of IoT devices for various applications, such as smart agriculture, smart cities, and industrial automation.
Beyond these civilian applications, the improved connectivity of the communications satellite network can also be valuable for supporting military operations. IoT devices can be used for a wide variety of military applications, including monitoring and controlling unmanned vehicles, tracking and monitoring troops, and monitoring battlefield conditions. With better connectivity, these devices can be deployed more widely and more effectively, improving situational awareness and operational efficiency. However, the use of IoT devices in military operations raises concerns about cybersecurity and data privacy. As IoT devices become ubiquitous and interconnected, they become increasingly vulnerable to cyberattacks, which can compromise sensitive military data and systems.
The Earth observation satellite network will be able to provide detailed and timely data on environmental conditions, such as weather patterns, air quality, and water resources. This information can be used to support a variety of IoT applications, such as precision farming, environmental monitoring, and natural disaster response. In precision farming, the satellite data can be used to optimize crop yields by providing information on soil moisture levels, crop health, and weather patterns. For environmental monitoring, the data can be used to identify and track sources of pollution and to monitor the impact of climate change on the environment. In the case of natural disasters, the data can be used to assess the extent of damage caused by disasters such as floods or earthquakes, and to guide emergency relief efforts. The Earth observation satellite network also has military applications, as it can provide vital information about the state of the ground, potential military threats, and other strategic information. For example, satellite remote sensing can be used to track the movement of troops, detect missile launches, and monitor the development of military facilities.
| The communications satellite network will provide better connectivity and low latency for IoT devices, especially in remote or hard-to-reach areas where traditional communications infrastructure is lacking. |
The navigation satellite network provides accurate and reliable data, such as time reference and positioning, making it a critical infrastructure for enabling many IoT applications and providing key location data for a wide variety of civil and military operations. For example, in logistics, IoT devices equipped with GPS receivers can be used to track the location and movement of goods, which can improve supply chain efficiency and reduce the risk of loss or theft. In vehicle management, IoT devices with GPS can be used to monitor the location, speed, and behavior of vehicles, which can improve safety and reduce fuel consumption. In military operations, IoT devices with GPS can be used to track the movement of troops and equipment and to guide navigation and targeting systems.
Despite the massive launch plans of Hongyun (Xingyun constellation) and Hongyan satellites announced around 2018, no further launches followed some technology test satellites. Each of the constellations would consist of hundreds of communication satellites in low Earth orbit. Those projects were reportedly merged into a new megaconstellation project named Guowang (National Network) in 2020. This planned satellite constellation will provide a range of advanced communications services, including high-speed Internet access, video conferencing, and virtual reality, while supporting the development of IoT. The network is expected to consist of more than three hundred satellites and will operate in both low and geostationary orbits.
However, spectrum allocation applications submitted by China to the International Telecommunication Union in September 2020 revealed plans to build two eponymous “GW” constellations (national networks) in low Earth orbit with a total of 12,992 satellites. The applications point to plans for GW to consist of sub-constellations ranging from 500 to 1,145 kilometers in altitude with inclinations between 30 and 85 degrees. The satellites would operate over a range of frequency bands. It is still unclear whether the Guowang and GW projects are separate or related. Nevertheless, the plans for such a huge satellite constellation indicate China’s ambitions to become a leader in space-based communications and hence the development of IoT.
After the military systems, civilian and commercial Earth observation satellites have entered the era of high-resolution imagery. High resolution includes high spatial, spectral, and temporal resolutions. High spatial resolution satellites can display ground information and detail at resolutions better than one meter. High spectral resolution data can provide spectral information with hundreds of narrow spectral bands, from ultraviolet and visible to shortwave infrared, to describe the physical properties of the land cover qualitatively and quantitatively. The high temporal resolution indicates a short time interval or repetition cycle, to accurately track the subtle change of targets of interest. A high-resolution satellite system has enormous potential for investigating the Earth’s atmosphere, oceans, land, surface water, as well as their impact on climate, energy, agriculture, environment, ecology, disasters, public safety, and more.
The China High-resolution Earth Observation System (CHEOS) is an essential satellite system developed by the Chinese government to provide high-quality Earth observation data. The system consists of a constellation of satellites equipped with advanced sensors and imaging technology to capture detailed images of the Earth’s surface. The CHEOS satellite constellation includes a range of different satellites, including optical and synthetic aperture radar (SAR) satellites. The optical satellites can capture images in visible and infrared wavelengths, while the SAR satellites use radar technology to capture images in all weather conditions, including at night and through clouds.
The Gaofen satellites are optical and radar remote sensing satellites that form the CHEOS, meeting the main national strategic needs of China’s national defense, natural resources research, disaster relief and prevention, and IoT. CHEOS was approved in 2010 and the first Gaofen satellite was launched in 2013. By the end of 2022, some 30 Gaofen satellites had been launched. Information about the early (civilian) Gaofen satellites and their purposes has been published. However, details of later (presumed military) Gaofen satellite capabilities are classified. State media usually report that “the satellite will mainly be used for land survey, urban planning, land rights confirmation, road network design, crop yield estimation, and disaster prevention and mitigation.” The Gaofen 11 satellite series reportedly has estimated resolution capabilities of the order of 10 centimeters, comparable to the supposed optical capabilities of the modern US Keyhole-class spy satellites.
China’s satellite navigation system is known as the BeiDou Navigation Satellite System. The first BeiDou system consisted of three satellites that provided limited coverage and navigation services from 2000 and was decommissioned at the end of 2012. With a partial constellation of ten satellites, the second generation of China’s satellite navigation system, which is officially referred to as the BeiDou Navigation Satellite System (BDS) but also known as COMPASS or Bei-Dou-2, became operational in December 2011. In 2015, China launched the third-generation BeiDou system that provides full global coverage for timing and navigation and is an alternative to the Russian GLONASS, the European Glonass and the US GPS system. The BeiDou-3 constellation includes 35 satellites providing a full range of services since 2020. Five of the 35 satellites are in geostationary orbit, three are in inclined geostationary orbit, and the remaining 27 are in intermediate Earth orbit
The BDS system has a range of applications such as communications, hydrological monitoring, surveying, mapping, geological survey, forest fire prevention, time synchronization for communication systems, power supply, search and rescue, and disaster relief and relief operations. BeiDou-3 satellites are provided with intersatellite links, which aid in time synchronization, enhance search and rescue, and offer messaging services. The BDS can provide users with not only high-precision, all-weather, and real-time positioning and navigation information, but also can be widely used in many applications, such as the 5G communication system and IoT technologies. The system includes a network of ground stations that monitor the satellites and provide correction data to improve the accuracy of the positioning information provided to users. The system uses both the L1 and L5 frequencies for civilian use, as well as encrypted military signals for national security purposes.
Other nations can counter or mitigate China’s challenge in many areas through good policies. A comprehensive record of China’s participation in key international standards bodies would identify areas that may require more involvement by others. More exhaustive studies on the effectiveness of non-Chinese data privacy protections could help determine which model of data protection would be most effective in closing the front door. Some of these countermeasures only require non-Chinese action and do not rely on Chinese cooperation.
However, in other areas of IoT development, other nations’ ability to protect their own interests and those of its citizens will be limited. For example, China’s one-party regime is simply more empowered to demand all data collected by Chinese IoT companies, including data from foreign consumers. While other governments can theoretically prevent companies from transferring the data they own to Chinese entities, there is little that can be done to prevent the Chinese government from obtaining such information once it is in the hands of Chinese companies. This reality requires a clear understanding of these challenges and greater coordination between government resources, the innovative capacity of the private sector and perhaps coordinated efforts with allied nations. Participation in international standards bodies, long-awaited data privacy legislation, and industry solutions for IoT security would benefit from such coordination and help mitigate Beijing’s challenges.
To meet China’s IoT challenge, other states can take several measures, including:
Stricter data privacy and security laws: other nations can introduce stricter laws and regulations to protect the privacy and security of their citizens’ data. This may include requiring IoT companies to obtain explicit consent from users before collecting or sharing their data and imposing sanctions for data breaches or misuse.
Participate in international standards bodies: other states can actively participate in international standards bodies that set technical standards for the IoT and related technologies. This can help ensure that these standards are transparent, non-discriminatory, and protect the interests of all stakeholders.
Stimulating IoT Innovation: other states can stimulate innovation in IoT and related technologies by supporting research and development, assisting startups and small businesses, and fostering a favorable regulatory environment.
Strengthen cooperation with allies: other states can strengthen cooperation with like-minded allies to advance their common interests in IoT and related technologies. This may include sharing experience of best practices, and coordinating research and development policies and collaboration.
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