Europe has security scanners linked to China's military and govt.

Authorities have placed security screening devices manufactured by one Chinese company at some of the most sensitive locations in the world. This Chinese company has deep ties with China's military and the top levels of the ruling Communist Party.

Europe has security scanners linked to China's military and govt.

Davos is the site of the World Economic Forum. The largest ports in Europe. From Amsterdam to Athens, there are airports. NATO's borders to Russia. All depend on Nuctech equipment, which quickly became the largest company in the world for vehicle and cargo scanners.

Nuctech was expelled from the U.S. several years ago due to national security concerns. However, it has made inroads in Europe and has installed its devices in 26 EU member states according to records of public procurement, government, and corporate records that were reviewed by The Associated Press.

Both sides of the Atlantic are concerned by Nuctech's complex ownership structure and expanding global footprint.

Many Western policymakers and security officials are increasingly concerned that China might use Nuctech equipment as a way to undermine key transit points or gain illicit access to personal, government or industrial data.

Nuctech's critics claim that the Chinese government has effectively sub-subsidized Nuctech so it can compete and give Beijing power over critical infrastructure in the West, as China strives to be a global technology leader.

These devices are processing sensitive data. This includes personal, military, and cargo data. There might be trade secrets at risk. It's important to ensure it's in the right hands," stated Bart Groothuis who was director of cybersecurity at The Netherlands Ministry of Defense and a member of European Parliament. "You are dependent on foreign actors that are a geopolitical enemy and strategic rival."

He is not alone in claiming that Europe does not have the tools necessary to resist potential encroachment. Different member states have different views about Nuctech's security threats. There has never been an open public count of the number and locations of Nuctech devices installed on the continent.

Nuctech dispels these concerns and says that Nuctech's European operations are compliant with local laws. This includes strict security checks as well as data privacy rules.

"It's not our equipment; it's your data." Robert Bos, deputy general manger of Nuctech in The Netherlands, said that the customer determines what happens to the data.

He claimed that Nuctech was the victim of unfounded claims, which have reduced its market share in Europe by nearly half since 2019.

Bos said to AP that it was "quite frustrating to be honest." "In all the 20 years that we have delivered this equipment, we have never experienced any data breaches or data leakages." We have never seen any evidence of this.

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It's not a company.

Nuctech is now at the forefront of the U.S.-China technology dominance battle. Security screening has become increasingly interconnected and data-driven.

The company manufactures scanning systems for people, luggage, and cargo. It also makes explosives detectors, interconnected devices, and devices that can facial recognize, measure body temperature, and identify passengers or tickets.

Nuctech's parent company, Nuctech, explains on its website that Nuctech is more than just a hardware supplier. It integrates "cloud computing and big data with safety inspection technologies and products to provide clients with high-tech safety inspection solutions."

Critics worry that Nuctech will be unable to comply with Beijing's demands to turn over sensitive data regarding the people, cargo and devices it scans. China's national intelligence laws require Chinese companies to give data to state security agencies. They fear that Beijing could exploit Nuctech's European presence to collect big data on cross-border trade flows, pull from local networks information like passenger information or shipping manifests, or even sabotage trade flow in conflict.

Nuctech's July 2020 Canadian government security review found that Xray security scanners could be used to secretly collect, transmit and compromise information, alter scan results to permit transit of "nefarious," devices.

In late 2020, the European Union established measures that could be used to verify Chinese foreign direct investments. However, Brussels policymakers claim that there are no EU-wide systems to evaluate Chinese procurement. This is despite growing concerns over unfair state subsidies and lack of reciprocity.

"This is becoming increasingly dangerous. Although I would be happy if a few airports had Nuctech systems in place, it is a problem that many regions have taken advantage of the dumping prices," stated Axel Voss (a German member of European Parliament working on data protection). This is becoming a more pressing security issue. It might seem like a strategic investment by the Chinese government.

Nuctech has been rebuffed by the U.S., home of OSI Systems, one U.S. commercial rivals. Concerns have been raised by the U.S. Senate Committee on Foreign Relations and the U.S. National Security Council as well as the U.S. Transportation Security Administration and the U.S. Commerce Department Bureau of Industry and Security.

In an email, the U.S. Transportation Security Administration informed AP that Nuctech had been found ineligible for sensitive security information. TSA stated that Nuctech products "are not authorized for screening passengers, baggage, accessible properties, or air cargo in the United States."

The U.S. included Nuctech to its Bureau of Industry and Security Entity List in December 2020. This restricted exports for national security reasons.

A U.S. government official said that it was more than just commercial. It's using state-backed businesses, with state subsidies and low-ball bids for access to European critical infrastructure. This includes civil airports, passenger screenings, seaports, and cargo screening.

According to European officials, Nuctech's bids may be 30% to 50% lower than their competitors' in Europe. This is according to Nuctech's competitors, U.S.-based officials, and Chinese researchers. They may also include sweeteners such as favorable loans and extended maintenance contracts.

Nuctech's European main competitor Smiths Detection complained in 2009 that it was being squeezed from the market by such practices. The E.U. Nuctech cargo scanners were subject to an antidumping duty of 36.6 per cent.

"Nuctech is the first to offer below-market bids that no one can match. It's not an ordinary price, it is an economic statecraft cost," stated Didi Kirsten Tatlow (co-editor of "China's Quest for Foreign Technology"). "It's really not a company. They're more like a wing in a state development drive.

Bos from Nuctech said that the company keeps its prices low by making in Europe. He said, "We don’t need to import goods from other countries or the U.S." "Our supply chain with local suppliers is efficient, that's why we can be very competitive."

Nuctech's success stories are numerous. Nuctech, which has opened offices in Rome, Madrid, and Brussels, claims it has served customers in over 170 countries. Nuctech claimed in 2019 that it has installed over 1,000 security checks in Europe for ports, customs, and civil aviation.

Norwegian Customs issued a call in November 2020 to purchase a new cargo scanner at the Svinesund checkpoint. This complex of grey, squat buildings is located at the Swedish border. Two other companies and an American competitor complained that Nuctech had an advantage because of the terms.

Although the specifications were changed, Nuctech still won the contract. Jostein Engen (director of procurement at the customs agency) said that China beat its competitors on quality and price. Nuctech was not disqualified by any ministries in Norway.

Engen stated that Nuctech must be treated equally by Norwegian Customs. We can't do any other thing following EU rules for public tenders.

For their Russian border crossings, four of the five NATO member countries -- Estonia, Latvia and Lithuania -- have bought Nuctech equipment. Finland has also purchased Nuctech equipment.

According to testimony from parliament, the two biggest ports in Europe, Antwerp and Rotterdam, handled more than a third, respectively, of all goods entering and exiting the EU's ports.

Other important states near the EU's borders, such as the U.K. and Turkey, Ukraine, Albania and Belarus, have also bought Nuctech scanners. Some of these were donated or financed using low-interest loans from Chinese state bank, according to government announcements and public procurement documents.

London, Amsterdam and Brussels, Athens and Florence, Pisa and Venice, Zurich and Geneva, as well as more than a dozen other Spanish airports have signed agreements for Nuctech equipment and procurement documents and corporate announcements.

Nuctech claims it supplied security equipment for the Olympics of Brazil in 2016. Then, President Donald Trump's visit in 2017 to China and the World Economic Forum 2020 in 2020. According to records, it has also supplied equipment to U.N. agencies.

CONCERNS RISING

Skepticism has increased as Nuctech's market share grows.

After a government assessment, Canadian authorities rejected a Nuctech standing offer to provide Xray scanning equipment to more than 170 Canadian diplomatic posts around the globe.

Lithuania, which is embroiled in a diplomatic dispute with China over Taiwanese, stopped Nuctech providing scanners at airports earlier this year. A national security review determined that the equipment couldn't operate in isolation, and there was a risk of information being leaked back to China. Margiris Abukevicius (vice minister for international cooperation, Ministry of National Defense), said that she had been involved in a diplomatic feud between China and Lithuania.

In August, Lithuania approved a deal to install a Nuctech scanner at its border with Belarus. Two officials from Lithuania told AP that there were only two bidders: Nuctech and a Russian firm. Both of these companies presented national security issues and it was not possible to reissue this tender.

Abukevicius stated that it was an ad-hoc decision to choose between worse and better options. Abukevicius said that the government was working on a roadmap to replace all Nuctech scanners in Lithuania, as well as a legal framework for banning purchases of untrusted equipment in government institutions and critical sectors.

Nuctech is also facing headwinds from human rights concerns. The company has business relationships with police and other authorities in Western China's Xinjiang, where Beijing is accused of genocide by mass incarceration of minor Uighur Muslims.

Despite the pressure from U.S. policymakers and European policymakers for companies to cease doing business in Xinjiang by European governments, Nuctech has continued to receive tens of million dollars in contracts from European governments. These contracts are sometimes backed up by European Union funds.

Nuctech's Chinese website states that China's western regions including Xinjiang are important business areas. Multiple contracts have been signed to supply X-ray equipment for Xinjiang’s Department of Transportation and Public Security Department.

According to Chinese government records, it has provided license plate recognition devices at a checkpoint in Xinjiang and integrated security systems for the subway in Urumqi. It frequently displays its security equipment at trade shows in Xinjiang.

"Companies such as Nuctech directly support Xinjiang’s high-tech police force and intrusive methods of suppressing ethnic minorities." This should be considered when Western governments or corporations interface with Nuctech," Adrian Zenz, a researcher who documented abuses in Xinjiang as well as evidence of Nuctech's activities in the area, said.

Bos from Nuctech said that he understands those views but that the company does not condone politics. He stated that "our daily goal is to provide equipment to make the world safer and more secure." "We don’t interfere with politics."

COMPLEX WEB OF OWNERSHIP

Nuctech opened a factory at Poland's Nuctech plant in 2018, with the tagline "Designed and manufactured in China"

Nuctech's ownership structure can be so complicated that it can be hard for outsiders understand its true lines of influence.

Scott Kennedy, a Chinese economist policy expert at The Center for Strategic and International Studies, Washington said that it can be difficult to understand how companies such as Nuctech are organized and operated because of the ambiguous borders between the Communist Party and state companies in China. These boundaries have only become murkier under China’s leader, Xi Jinping.

"Imagine if the roles were reversed. Kennedy stated that if the Chinese were to acquire this equipment for their airports, they would want many assurances. China has started a high-tech self sufficiency drive to avoid foreign technology being used in their supply chains.

It is evident that Nuctech has been linked to Chinese academic, military, and government interests since its inception.

Nuctech was established as an offshoot from Tsinghua University in Beijing. It grew with the support of the Chinese government, and was for many years managed by Hu Jintao, the son of China's former leader.

Datana, a Dutch company that specializes in economic intelligence and China research, has mapped Nuctech's ownership structure and discovered a dozen major entities at four levels of shareholding. This includes four state-owned entities and three government entities.

Tongfang Co. holds a 71% stake in Nuctech, making it the largest shareholder. Tongfang's largest shareholder is Tongfang Co., which has a 71 percent stake. CNNC, a state-run energy conglomerate and defense conglomerate, is also the investment arm. CNNC is classified by the U.S. Defense Department as a Chinese military corporation because it shares advanced technologies with the People's Liberation Army.

Xi further blurred the boundaries between China's civil and military activities, and increased the power of China's ruling Communist Party in private companies. One way is the creation of numerous government-backed financing vehicles that speed up the development of technologies with both commercial and military applications.

One of those vehicles was the National Military-Civil Fusion Industry Investment Fund. It announced in June 2020 that it would take a 4.4 per cent stake in Nuctech, its majority shareholder. The Tongfang board could also be a director. Tongfeng stated that it never happened because of "changes in market environment."

There are also other connections between Nuctech and the fusion funds.

According to Qichacha (a Chinese corporate information platform), CNNC has a 21 per cent interest in Nuctech. It also holds a stake in the fund of more than 7 per cent. They also share personnel: Chen Shutang is a member the CNNC Party Leadership Group and chief accountant of the company. Records show that he serves as director of the fund.

Jaap van Etten, a former Dutch diplomat, is the CEO of Datenna.

Nuctech claims that its operations are shaped not by politics but market forces. CNNC, however, doesn't have control over its corporate management and decision-making.

Bos from Nuctech said, "We are a regular commercial operator in Europe that must obey the laws." "We are here with local staff, pay tax, participate in the social community, and have local suppliers.

Experts say that these touchpoints provide further evidence of government and military interest in the company, and are a sign of Beijing's strategic interest.

Tai Ming Cheung, a professor at UC San Diego’s School of Global Policy and Strategy, said that "Under Xi Jinping the national security elements of state are being fused together with the technological and innovation dimensions of state."

"Military–civil fusion is one key battlefield between the U.S.A. and China. The Europeans will need to determine where they stand.

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