IBM partnership with China raises concern

By | April 21, 2015

The partnership between China and American computer giant IBM is raising concerns among many and it’s hitting into the efforts made by the White House. Shen Changxiang, who was taking care of the cybersecurity of China’s strategic-missile arsenal and headed computer-security research for the navy has given warning to the country for the threats it may pose for relying on American technology.


Despite of this in December, a former old military engineers, one of the China’s top-ranking cyber official secretly started working with the American Tech giant IBM. According to the statement from the Beijing government, Shen’s work is to assist a little-known Chinese company to absorb and build upon key technologies that belong to IBM. In the past year, the IBM has agreed and obtained permission to US exports law to provide the Chinese company with a partial blueprint of the servers and software that run on them. On behalf of the Chinese Government and the supervisor of the IBM project, Shen is assisting Teamsun develop and manage the supply chain of computers and software atop IBM’s technology.

Through this, the country aims to create a domestic tech industry that will no longer need to depend on the American products, thus bypassing any security concerns. Though what IBM is doing in China is no different from its actions elsewhere, IBM’s activities in China have become sensitive. The partnership is running against the Obama administration’s efforts to convince China to stop its policy of needing US-based companies to open up their technology to win access to the Chinese market.

Criticisms have raised that IBM is giving way to Chinese demands and prioritizing short-term business gains over longer-term political and trade issues. Its actions may encourage other American companies to break ranks and give way to new Chinese regulations, out of concern that IBM will get benefits by cooperating with the country.

An Analyst at the Center for Strategic and International Studies, James.A.Lewis, “People do feel angry about what appears to be accommodation with the Chinese.” He also added, “And you have to kind of expect that, particularly at a time when you have the whole U.S government ginned up to push the Chinese on this.”

When asked IBM about this, it replied that as a part of the global program called Open Power, it is being open with its licensing technologies. Open Power which IBM started in 2013 consists of 120 members worldwide, including Google and Samsung Electronics. Less than 20 belong to China among the 120. The ultimate aim of the program is to offer base technology that can be enhanced by licensees and promote global partnerships and business opportunities.’

Our Open Power partners in China are getting access to the same technology that we make available to all Open Power members around the world,” Edward Barbini, a spokesman wrote in an email. “we have been very transparent with all our stakeholders on this strategy, including the Obama administration, about our plans to expand both the Open Power community and IBM’s technology partnership around the world.”

Recently, an interview posted on the Teamsun’s website the vice president, Huang Hua, said the company’s new potential and capabilities would assist in addressing the security concerns of the local Chinese companies better. Mr.Huang of Teamsun’s strategy team said that this process of sharing technologies with IBM, Oracle and EMC would reduce the capability gap and bridge the space between Chinese and the American companies and create products that could replace those sold  by companies in the USA.

When contacted Teamsun and IBM about it, they declined to comment on it. A spokesperson with the United States Trade Representative declined to comment on IBM’s strategy in China. Apart from this IBM has many more business projects in China. The company has shown a green flag to license the advanced chip technology that works as the core of the servers to separate Chinese company, Suzhou PowerCore. IBM also says it has discussed with the clients about allowing them to make local encryption over z13 mainframe computer, which would help in China, where a proposed anti-terror law requires domestic companies to offer encryption keys or use local Chinese encryption standards.

IBM’s partnership with Teamsun and Suzhou PowerCore through the Open Power program is part of the company’s strategic shift away from its traditional hardware, software and services businesses to new cloud data and mobile offerings. IBM as it makes the transition, has been reported of fall in revenue in its quarterly earnings. IBM’s chip and server technology are widely prevalent in the banks of China.

While Beijing has been working on the innovation policies to boost the domestic tech industry, the disclosures in 2013 of online spying efforts by the United States made by the former National Security Agency contractor gave the officials in China the needed evidence to expedite plans to accustom sensitive industries such as banking and energy off the foreign technology.

Shen has been working for a while to push out the U.S tech companies out of China. In 2009, he warned of global communications surveillance by the USA. He also said, expansion of the U.S military’s online attack and defense has made the Internet the fifth strategic front of the country, following land, air, ocean and space. He says that area becomes vulnerable to be attacked through cyber by the United States.

Shen added in the statement to the state-run media, “That poses a severe challenge to the cyber security of China, and we should actively respond, accelerate the building of our cyber secure system and safeguard our cyber security and state sovereignty.”