New Zealand is better-known for its rugby and agricultural exports than exports of components, equipment and software for possible military end-use.
But a recent submission to Parliament’s justice select committee by University of Canterbury China expert Professor Anne-Marie Brady says New Zealand’s “small but advanced export-focused industrial sector” is exporting products that can and are being used to make equipment and weapons for the Chinese military.
This is alarming, or should be. For a start, China’s increasingly aggressive approach to international relations is a concern around the world. It is embroiled in disputes with the United States (trade), Canada (hostages), India (border), and Vietnam, Philippines and Japan (South China Sea). Taiwan and Hong Kong are seeing more Chinese interference, and criticism about China’s human rights abuses is growing more strident. President Xi Jinping is said to be preparing the country for an “inevitable war”.
New Zealand also has obligations under various international agreements that are supposed to prevent dual-use (military/civilian) technology being exported to countries which haven’t signed up to the same protocols.
Under the Customs and Excise Act, the export of software and technology is controlled if items are listed on a Strategic Goods List, that includes military and dual-use technology.
In addition, catch-all measures prohibit the export of goods, software and technologies not on the Strategic Goods List but which may be intended for use in things like biological and chemical weapons or are bound for countries on the United Nations arms embargo list.
The Ministry of Foreign Affairs and Trade believes the controls are inadequate “to manage the risks we face from exports to military users in countries of concern” and proposes widening the scope of the rules to all countries and changing the definition of military end-use so it includes more activities.
Following public consultation, new rules are expected to be announced in the next few weeks.
Brady says the Chinese Communist Party (CCP), under Xi Jinping, is engaged in a rapid militarisation programme.
Since 2015 China has implemented a military-civil fusion policy designed to use research undertaken in its civilian sector for military use.
For its military modernisation, China needs the best technology, whether it is missile guidance or voice recognition, and if it is off-shore, China wants it.
Brady says the technology transfer is happening through academic exchanges, investment in foreign companies, espionage and hacking.
"The New Zealand government has to manage the security risk of some of these links against the economic advantages. Yet there are deep vested interests in getting the New Zealand government to turn a blind eye to these links," she says.
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One of the examples of tech-transfer she cites is the P-750-XSTOL, a rugged and versatile 10-seater utility aircraft made by Pacific Aerospace, based in Hamilton. The company has about 100 staff.
Pacific Aerospace was fined $74,000 in 2018 for breaking United Nations sanctions by exporting aircraft parts worth about $6700 to North Korea in 2016.
In 2014 the company was part-purchased by a subsidiary of BAIC, a Chinese state-owned enterprise that specialises in making military vehicles.
According to Brady’s paper, the P-750 has now been developed as China's first drone cargo plane and has been adapted to drop off supplies in difficult terrain.
However, Pacific Aerospace chief executive Mark Crouch says Brady’s claims about the P-750 are misleading.
His company’s joint venture with BAIC in 2014 was designed to supply aircraft to help open the Chinese general aviation market, he says.
An aircraft sales organisation called BPAT was formed in China to sell P-750 aircraft to Chinese-licensed operators and in 2015 a P-750 was sold to a Chinese third party.
Crouch’s company had the aircraft, Pacific Aerospace’s 100th P-750, ready the following year and sent it off.
“Unbeknown to any of the staff or management of Pacific Aerospace that aircraft was later converted into an unmanned civilian cargo aircraft by a company called STAR UAV (unmanned aerial vehicle) in conjunction with a number of Chinese aeronautical organisations. The modified aircraft was given the model number AT200 and was to be used to trial the use of cargo UAVs for SF Express, a larger Chinese courier company.
“At no point in this conversion were any Pacific Aerospace staff consulted or otherwise made aware of this project. The first time Pacific Aerospace was aware was when the AT200 was launched to the public at the 2017 Zhuhai Air show.”
Crouch said his company had been assured only one aircraft was converted and that it had been destroyed in a landing accident in October 2019.
“For Ms Brady to insinuate that there is some form of mass conversion programme is simply misleading and poorly verified,” he said.
“Pacific Aerospace will not be involved or offer any assistance to any similar projects in the future. Any insinuation or claims to the contrary will be vigorously defended,” he added.
According to defence trade publisher Janes, SF Express has a strategic co-operation agreement with the People’s Liberation Army (PLA) and reports the AT200 drone is in production.
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Another example in the paper is the famous Martin Jetpack, developed by Christchurch company Martin Aircraft, partly with government money.
In 2014 Martin Aircraft signed an investment deal with KuangChi Science, a Chinese company founded on new materials invisible to microwave signals. The technology was allegedly stolen from Duke University in the United States by Ruopeng Liu, who completed his PhD at Duke.
Liu denies any theft and Duke University told NBC News in 2018 it had no evidence its intellectual property was stolen. The university was opening a campus in China at the time.
KuangChi Science became Martin Aircraft's main shareholder in 2016 and took manufacturing overseas. The situation now is unclear and Martin Aircraft no longer has a presence in New Zealand, other than as a registered company. KuangChi Science did not respond to emails.
Glenn Martin, Martin Aircraft’s founder, says foreign government entities, including from the United States, were interested in his jetpack. He was told the Israeli foreign intelligence body Mossad had broken into his premises.
“Naturally anything can be used by the military. They wear clothes and eat food so wool farmers to baked beans are used by them.”
During his tenure at Martin Aircraft (he left in 2015), Kuangchi had no access and no influence on product development, he says. The first public demonstration of the Martin Jetpack was in Oshkosh, Wisconsin, and by then he had already turned down an offer to show the jetpack at Fort Bragg in North Carolina.
He believes Brady’s submission is an example of an expert having a conclusion then finding evidence to support it.
“I certainly agree we need to be wary of the current Chinese intentions. Having said that, to quote Sigmund Freud, ‘sometimes a cigar is just a cigar’.’’
A further example of technology transfer in Brady’s submission is a deal between Huawei Technologies NZ and Auckland-based company Rakon, which makes crystal oscillators used in GPS, telecommunications gear, missiles and satellites. Huawei, which Brady says is linked to the Chinese Communist Party’s United Front Work Department, uses Rakon’s frequency control products in its handset and smart devices.
Rakon began manufacturing in China under a joint venture in 2011 and sold 80 per cent of the shares in the Chinese venture to Chinese company ZheJiang East Crystal Electronic in 2013.
Brent Robinson, Rakon’s chief executive, says Brady’s submission, in its references to Rakon, is “either factually incorrect or [based on] inaccurate suppositions. These are potentially damaging to Rakon and its reputation”.
Rakon did sell oscillator products to China for telecommunication infrastructure including 4G and 5G networks, but they were the same products sold to and used by other network equipment providers globally.
“Rakon did previously own an 80 per cent share in a Chinese company established in 2011 for the purpose of manufacturing low-cost oscillators for the mobile phone market. When the market became completely commoditised, Rakon exited the mobile phone market segment and the business in China was sold in 2013. The sale of the business did not involve the transfer of any high value New Zealand technology to the buyer.”
Brady also mentions Chinese company Iflytek, an artificial intelligence start-up specialising in voice recognition technology, that has links to the Chinese military.
In 2019 Iflytek signed a co-operation agreement with New Zealand company Rocos Global, based in Auckland. The partnership is working on creating an intelligent speech interaction programme for robots.
Rocos tells Stuff it does not provide its platform for military or police use in China – “now or in the future”.
“Nor is the platform used for any military or police applications. Rocos partners with iFlytek to manage commercial robots in the Chinese market such as cleaning and hotel delivery robots, with a recent example being the coordination and planning of the cleaning and delivery robots to be used at one of the venues of the Beijing [Winter] Olympics in 2022. Rocos controls all access to its solution - globally - and it is hosted on Microsoft's cloud platform. No third party has access to, or the ability, to distribute Rocos software for any use.”
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Brady says her intention with her submission, one of many, is to assist Government deliberations about how to deal with China’s efforts to access military-related technology and know-how from New Zealand enterprises and universities.
”One of the first steps New Zealand needs to take to address the problem of covert PLA technology transfer activities via our businesses and universities is to implement existing law and promote awareness of those laws among university academics and business innovators, as well as the wider public.”
