Thread by @C4ADS

NEW REPORT: In “Open Arms”, we analyze China’s Military-Civil Fusion (MCF) ecosystem and map the supply chains the People’s Liberation Army uses to procure sensitive tech using a sample of 1,665 entities linked to China's defense-industrial base. (1/x)

c4reports.org/open-arms

The CCP is increasingly depending on its civilian economy to develop its military capabilities. After analyzing 65,727 international trade & 429 investment transactions by our sample, we pinpointed 14 risk indicators that a company may be contributing to PLA supply chains:

But what’s the big problem with MCF? MCF is ushering Chinese civilian companies into the defense economy even as they are encouraged to innovate by adapting foreign tech. This relationship creates clear risk that sensitive tech from abroad could find its way into the PLA’s hands.

Starting from 51 publicly known companies & universities supporting PLA research, development, & acquisition, we expand their networks to 1,665 companies, which includes many importing potentially dual-use goods from the United States, Japan, Germany, South Korea, and France.

And what are the PLA buying from Chinese companies? We structured 8,430 procurement tender announcements & found all kinds of things, from smart systems to infrared devices. Despite increasing use of MCF’s competitive bidding system, 71% of tenders seem to go unfulfilled.

For investment, the 1,665 sample companies we identified also acquired stakes in 64 non-Chinese companies across 20 jurisdictions within the last 10 years. Beijing’s state-owned defense contractors, not private companies, dominate MCF-linked trade and investment in our sample.

Our paper also dives into 3 case studies, including 2 instances of North American & European tech winding up in China’s increasingly advanced naval weapons systems. These cases detail how this happens and how to evaluate future risks of similar incidents happening again.

The case of China South Rail (CSR) shows how publicly available information can be used to trace how a seemingly commercial deal was coopted for military purposes. Even as CSR was transferring UK semiconductor expertise to China, it was applying for military production licenses.

Open Arms shows that public data can be used to spot supply chain risks created by MCF. Our methodologies are empirical and reproducible, so go ahead and use them to judge whether your tech may be exposed to China’s defense supply chains!

For more on MCF and Chinese military and tech developments, follow the authors that are on Twitter: @D_Thorne and @BenSpevack.

And many thanks to @Kate_OKeeffe for her awesome @WSJ piece covering Open Arms!

https://twitter.com/Kate_OKeeffe/status/1176817648476262400