By Brian Spegele and Kate O'Keeffe
Orbiting 22,000 miles above Earth, a fleet of American-built
satellites is serving the Chinese government in ways that challenge
the U.S.
Nine of these satellites have been part of efforts to connect
Chinese soldiers on contested outposts in the South China Sea,
strengthen police forces against social unrest and make sure state
messaging penetrates far and wide, according to corporate records,
stock filings and interviews with executives.
A tenth satellite, under construction by Boeing Co., would
enhance China's competitor to the U.S. Global Positioning System.
Besides civilian uses, the navigation system could help China in a
potential conflict, such as in guiding missiles to their
targets.
U.S. law effectively prohibits American companies from exporting
satellites to China, where domestic technology lags well behind
America's. But the U.S. doesn't regulate how a satellite's
bandwidth is used once the device is in space. That has allowed
China to essentially rent the capacity of U.S.-built satellites it
wouldn't be allowed to buy, a Wall Street Journal investigation
found.
Tangled webs of satellite ownership and offshore firms have
helped China's government achieve its goals. Some of America's
biggest companies, including private-equity firm Carlyle Group in
addition to Boeing, have indirectly facilitated China's efforts,
the Journal found.
All this appears to run counter to the U.S.'s stance of
confronting China's military buildup and condemning what
international watchdog groups describe as widespread human-rights
abuses by China's police. That includes in far-flung territories,
where the satellites help the government beam communications.
Current and former U.S. officials who reviewed the Journal's
findings called the satellite deals worrisome examples of China
using U.S. commercial technology for strategic gain.
"It's a serious ethical and moral problem as well as a
national-security issue," said Larry Wortzel, a former chairman of
the bipartisan U.S.-China Economic and Security Review Commission,
a group that advises Congress.
Boeing, in response to questions, said it has put on hold its
latest satellite deal involving China, the one that would bolster
the Chinese rival to GPS. Boeing said it complies with all U.S.
laws, as did Carlyle.
China and the U.S. are locked in a battle to dominate the
world's top technologies, such as biotech, chips and
communications. U.S. officials say Beijing at times turns to
espionage and cyberhacking to achieve its goals. In other cases,
such as in the commercial satellite industry, it creatively
sidesteps U.S. regulations and leverages American companies'
eagerness for revenue to reap the benefits of the technology it
needs to further its strategic goals.
The Chinese satellite workaround has persisted for years. U.S.
officials and industry players have said the profits American
satellite exports generated could be reinvested in development to
keep the U.S ahead. Some defense officials also said China's use of
U.S. satellites gave Washington valuable insight into its rival's
space capabilities. They assumed China would use U.S.-built
satellites for benign purposes such as broadcasting sports.
A Hong Kong company called Asia Satellite Telecommunications Co.
has long been a bridge between mainland China and U.S. satellite
makers. AsiaSat is jointly controlled by Citic Group -- a
conglomerate owned by China's central government -- and Carlyle,
which together own about 75% of the firm.
Under U.S. export controls, semiautonomous Hong Kong is
considered separate from mainland China, so AsiaSat could buy U.S.
satellites despite being partly Chinese-owned. Over the years,
AsiaSat has put in orbit nine satellites built by U.S. companies,
including Boeing and SSL, a Palo Alto, Calif., unit of
Colorado-based Maxar Technologies Inc. A majority are still
operating.
AsiaSat offers communications services across the Asia-Pacific,
such as news and sports broadcasting. Its English-language
financial filings and other statements make little mention of the
use of its bandwidth by China's government.
A fuller picture emerges in dozens of Chinese-language
statements on the website of a Citic unit that has been responsible
for marketing AsiaSat's bandwidth in mainland China over the past
decade.
Since AsiaSat launched its first satellite around 30 years ago,
the Chinese government has used it to link state-run broadcasters
to the provinces. "The country is rich and the military is mighty,"
Citic said on its website in 2015 after AsiaSat helped broadcast a
lavish military parade in Beijing. "Satellite communications are
evidence of the nation's development."
China's Ministry of Public Security has described satellites as
core to police operations. Its records show the ministry relied on
a satellite called AsiaSat 4, manufactured by Boeing, and one
called AsiaSat 5, made by SSL, as it worked to build rapid-response
forces capable of providing real-time audio and video from the
field.
Citic's satellite unit for years touted its links to the Chinese
government. In 2008 and 2009, Citic said, AsiaSat's satellites
helped ensure communications for authorities as they quelled
antigovernment protests and riots in Tibet and in Xinjiang, a
heavily Muslim region in far-northwest China.
At a 2011 industry conference, a Citic manager listed the
Ministry of State Security, China's main spy agency, and the
military as among a long list of end users of its satellite
capacity for emergency responses, according to a copy of the
presentation reviewed by the Journal.
Citic referred questions from the Journal to AsiaSat. AsiaSat
declined to comment on individual users of its bandwidth.
In a statement, AsiaSat said China's military wasn't a direct
customer but used capacity that was first procured by
telecommunications operators for disaster relief.
AsiaSat said it didn't know how the authorities used its
bandwidth in response to the Tibet and Xinjiang uprisings. It
declined to comment directly on whether its bandwidth is being used
today by the police in Xinjiang, where authorities have been
building an all-encompassing surveillance state and sending as many
as a million ethnic Uighurs to internment camps. AsiaSat said it
had no ability to retroactively monitor the contents transmitted
via its satellites.
AsiaSat's chairman is a managing director of Carlyle, which is
among the largest and most politically connected private-equity
firms, investing in sectors including defense, telecom and health
care. Former U.S. Defense Secretary Frank Carlucci was Carlyle's
chairman for a decade. Former Secretary of State James Baker and
the late President George H.W. Bush served as paid advisers at one
time.
Carlyle said in a statement that AsiaSat's equipment supports
phone and web communications for Chinese phone companies'
customers, "just as IntelSat provides service to Verizon or
AT&T in the U.S."
"It is effectively a pipe," Carlyle added, "and AsiaSat, because
of privacy issues, doesn't monitor or regulate the content that
flows through it."
A Carlyle spokesman added that the private-equity firm sends
annual reports to the State Department to confirm AsiaSat's
compliance with U.S. export controls, ensuring that sensitive
technical information is shared with authorized users only.
Starting in 2013, Citic said a Chinese state telecom operator
tapped the Boeing-built AsiaSat 4 to provide 3G mobile internet to
the Spratly Islands in the South China Sea. There, China has been
building military infrastructure in a bid to control waters also
claimed by the Philippines, Vietnam and others.
"Communications have always been a difficult problem for the
soldiers and civilians facing hardships on the islands, making
their lives, work and battle preparations hugely inconvenient,"
Citic said at the time. U.S. officials began objecting to what they
saw as Beijing's militarization of the South China Sea, but China
pushed ahead, with Citic saying connection speeds had been boosted
to 4G in 2016.
A year later, Citic pledged to help China "uphold the country's
maritime rights and interests," repeating a phrase the military and
Foreign Ministry often use.
AsiaSat described its services in the South China Sea as being
available for any user who needed it, including "fishermen and
people on cruise ships or public vessels."
Roger Tong, AsiaSat's chief executive, said in an interview the
company also previously provided coverage to China's coast guard,
but it didn't engage directly with the military.
He said AsiaSat's American purchases added more than $1.5
billion to the U.S. economy.
"AsiaSat should be seen as a success story in how two
superpowers should work together," Mr. Tong said.
The company's financial filings show it earns around a quarter
of its revenue from China, with the rest coming from offering
connectivity elsewhere such as rural Australia. AsiaSat said its
commercial technology doesn't have advanced security features
required for military communications. It said it takes regulatory
obligations seriously.
China's Defense Ministry, in response to questions about the
deals, said: "Covering the full extent of our country's territorial
sovereignty is a very ordinary matter."
Meanwhile, AsiaSat decided to drop U.S. government-funded
outlets Radio Free Asia and Voice of America. They have been a
thorn in the side for Beijing, beaming coverage of politically
sensitive topics. AsiaSat in recent months told the U.S. Agency for
Global Media, which manages the outlets' contract, that it wouldn't
extend satellite services beyond June.
AsiaSat's Mr. Tong said the decision was made for purely
commercial reasons.
SSL, the Palo Alto satellite maker, has sold five satellites to
AsiaSat in the past decade. SSL said it complied with all relevant
U.S. laws, and the satellites didn't include military encryption
technology.
"Our satellites are built for commercial use," said David
Lihani, the company's chief trade compliance officer.
Boeing said the satellite that became AsiaSat 4 was built under
a deal negotiated by Hughes Space & Communications, pushed
forward by Boeing after it acquired Hughes. Boeing said it wasn't
aware of any transfer of satellite technology that would have
violated its export license. It said it was neither possible nor
required by law to monitor each bandwidth user after a satellite it
built is in space.
"The State and Commerce departments over four administrations --
and most recently in 2017 -- have reviewed and approved export
licenses for the AsiaSat satellite constellation to provide
commercial bandwidth services to the Asia region, including China,"
Boeing said.
A separate Journal investigation in December showed how a
Chinese state-owned firm used offshore financing to funnel around
$200 million to a commercial satellite project under development by
Boeing. The company cancelled that deal following the report,
citing customer default, and federal agencies launched
investigations.
A Commerce Department spokesman said that though the agency
regulates satellite exports, it doesn't regulate bandwidth
usage.
Commerce "regularly updates its regulations to counter evolving
national security threats," the spokesman said, and has a policy of
denying export licenses when exports are contrary to the national
security or foreign policy interests of the U.S., including
promoting human rights.
The State Department, which also regulates satellite technology,
said the U.S. "strongly urges companies to implement stringent
safeguards to ensure that their commercial activities do not
contribute to China's human-rights abuses." It condemned Beijing's
militarization in the South China Sea.
One of the latest transactions involving offshore companies and
U.S. space technology involves an advanced satellite Boeing has
contracted to build called Silkwave-1.
At the center of the deal is a Hong Kong company called CMMB
Vision Holdings Ltd. Its founder, Chau-Chi Wong, was born in
mainland China and attended Harvard University before eventually
working for Goldman Sachs Group Inc.
Mr. Wong said he had a deep affinity for the U.S. but was also a
Chinese patriot. "We need the best technology for China," he
said.
Mr. Wong said his company could help alleviate congestion on
China's cellular network by using Silkwave-1 to broadcast content
to connected devices, such as cars, rather than have people rely
solely on cellular data. In a national emergency or wartime, he
said, this could theoretically enable China's leaders to connect to
its 1.4 billion people with rapid nationwide alerts.
A U.S.-based partner of CMMB Vision, called New York Broadband
LLC, which Mr. Wong also partly owns, will purchase the Boeing
satellite, then essentially lease its capacity to CMMB Vision, Mr.
Wong said. It's a complicated arrangement that he and Boeing said
U.S. officials had approved.
Soon after it inked the deal, CMMB Vision said China's top
economic planning body designated its work a "key national
development project." In Beijing, CMMB Vision then gave a majority
stake in its China operation to a state-run broadcaster, a move Mr.
Wong said was to comply with Chinese regulations.
Mr. Wong said his company wants to support President Xi
Jinping's Belt and Road initiative to deepen China's influence in
the developing world, with plans to extend the Silkwave-1's
services beyond China's borders.
The company also plans to use the Boeing-built satellite to
increase the precision of Beidou, China's military-backed
alternative to the U.S. GPS. In late 2017, CMMB Vision's China
joint venture partnered with a unit of China Aerospace Science and
Technology Corp. -- a state-owned space equipment and weapons
producer -- to use satellite signals from CMMB Vision to make
Beidou more accurate.
U.S. officials have described Beidou as critical to China's
global ambitions. An April report by the U.S.-China Economic and
Security Review Commission said Beidou could both improve China's
missile guidance and reduce its reliance on GPS.
Mr. Wong said Silkwave-1 would support Beidou's commercial
applications only. Pressed on whether he could guarantee China's
military wouldn't benefit from his satellite, he said it would be
illogical for the military to use such commercial technology.
"If out of desperation they want to use it, that they can do,"
he said. "It's not our business model."
Write to Brian Spegele at brian.spegele@wsj.com and Kate
O'Keeffe at kathryn.okeeffe@wsj.com
(END) Dow Jones Newswires
April 23, 2019 11:17 ET (15:17 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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