The US and India have both decided, following national security reviews, to ban equipment made in China from being installed in the server rooms of major telecommunications companies and Internet service providers. Therefore, it came as a surprise when Taiwan, during its negotiations on the Cross-Strait Agreement on Trade in Services earlier this year, came up with plans to allow Chinese capital investment in local category-2 telecommunications companies.
Considering the data security concerns with Chinese-made equipment, how can we allow Chinese capital to be invested directly in upstream Internet and communications service providers and to provide such services in Taiwan?
While Taiwan prepares to take this foolish step, most people — even government officials and legislators — do not realize that this clause of the service trade agreement is a Trojan horse strategy of the electronic age.
Taiwan’s negotiators think that category-1 telecommunications service providers are more important than category-2 providers, so we should only open up the less important category. It is true that category-1 companies — telephone companies that have their own physical lines — operate on a larger scale than those in category 2 — those that do not have physical phone lines, but lease them. However, for many people Internet communications have become more important than telephone calls, and Internet services are precisely the area that we are going to open up to Chinese investment.
According to the terms of the service trade agreement, Taiwan will not allow Chinese businesses to run closed networks leased by members of the public engaged in certain kinds of business. The fact that the Chinese side conceded to this shows that it has given up on the idea of directly running client services in Taiwan, and will instead follow the path of indirect investment as a way of obtaining seats on the boards of Taiwanese companies and having those win contracts to do business on their behalf.
Furthermore, Taiwanese companies, influenced by threats and inducements from the Chinese government, may well sacrifice the interests of Taiwanese service users in order to obtain Chinese telecommunications network licenses. China is initially only allowing Taiwanese companies to offer services in its Fujian Province. Later, when Taiwanese companies want to extend their investments to other provinces, they may be forced to contract network services out to Chinese companies that obtain licenses to operate category-2 telecommunications in Taiwan. This would allow Chinese operators to gain control over a large number of Taiwanese users’ network communications, so personal and business details could be passed to the Chinese government when it demanded them.
Taiwanese companies may also be pressured into allowing Chinese to invest indirectly which would help them in acquiring seats on local boards of directors and grant them influence over operations. This would give investors sufficient influence to interfere in the running of Taiwanese operators and allow the Chinese government to act as a de facto policymaker.
Another possibility is that Taiwanese operators might open backdoors to their own network communications systems so that departments favored by the Chinese government could penetrate those systems and collect users’ communications data.