September 17, 2019

Event Coverage Highlight

Bill Holstein Discusses China’s Tech Campaign Against US in ‘Art of War’

William J. Holstein, left, and Barbara Demick.

by Chad Bouchard

There’s no shortage of recent headlines about China’s digital incursions and boundless appetite for data, from cyberattacks on businesses and theft of personnel information for U.S. government employees, to spy chips in tech devices used by the U.S. military. Amid this trickle of stories, it can be easy to miss undercurrents. William J. Holstein, a past president and longtime member of the OPC, has placed these headlines in context, bolstered with his own reporting, in his new book The New Art of War: China’s Deep Strategy Inside the United States.

On June 5, Holstein discussed the book at Club Quarters with Barbara Demick, who served as Beijing bureau chief for the Los Angeles Times from 2007 to 2017. Demick told attendees that “I thought I knew this story of what China is doing in the United States, and I didn’t until I read the book.”

Holstein said China employs a style of hacking that leaves no fingerprints, like that of a hacker group known as APT 10 that infiltrated IBM’s cloud computing system by posing as legitimate users for four years.

“The clear and consistent Chinese pattern is that they make copies of the data they want, then exfiltrate it through email channels, so they left no footprints.”

Holstein said China’s Ministry of State Security is orchestrating much of the digital espionage campaign through other hacker groups, and has gained access to companies that are several levels down the U.S. Navy’s supply chain.

He said much of this high-tech war is being waged on an economic scale, with China legally acquiring technology companies, gaining access to “pitch meetings” in Silicon Valley where Chinese-backed venture capital firms gained access to as much as 50 percent of the flow of deals, “giving the Chinese access to emerging technologies before the Pentagon does.”

Holstein posits that the two countries’ economic models have set the stage for an asymmetrical tech war. Demick quoted a line from the book, “It’s the very porous nature of American democracy that allows the Chinese strategy to work.”

He said while the Chinese system facilitates big moves and coordinated research, the U.S. has suffered problems that stem from policies on developing technologies.

“People who are against [U.S. regulation] say, ‘well, you’re picking winners and losers, you’re interfering in the free marketplace,’” Holstein said. “We just have not been able to overcome this ideological argument.”

He said China also uses soft influence to manipulate the U.S. system, such as funding at universities to quash possible criticism, and getting Hollywood to self-censor by funding studios.

Demick asked about Huawei, the Chinese tech company the U.S. blacklisted in May from doing business with U.S. firms over national security concerns. Holstein said the case illustrates how the Chinese state-owned enterprise system caught the U.S. off guard with advanced technology, namely 5th-generation cellular technology.

“They’re trying to do this across the board. Quantum computing, supercomputers, artificial intelligence, and on and on. They are trying to use their considerable wealth and legitimate expertise as well as stolen expertise to leapfrog us,” he said. “So here’s a case where they have come up with a technology we have no answer for. We were caught sleeping. This is like Sputnik in the 50s, to my mind.”