Introduction by Stephen Gregory, Opinion section editor of The Epoch Times.

Ethan Gutmann speaks at the first English Jiuping forum at the National Press Club in Washington, D.C.

We're very pleased today to have with us Ethan Gutmann. Mr. Gutmann is the author of Losing the New China, a book that is indispensable for not only understanding China today but for understanding the effect on the United States of our policy of engagement with China. He's here today to share a few thoughts about the Internet, one of America's great gifts to China's dictatorship to control the Internet in China. Ethan?

Ethan Gutmann: Thanks and I'm very glad to be here. I'd just like to open with a quote. Actually it's from my book, Losing the New China. My publisher says to mention the book every chance you get.

It's a quote from Peter Lovelock, a buddy of mine and a very respected Internet analyst based in Beijing. He says, "These are Marxists. Control the means of communication. Embrace the means of communication. Fill it with Chinese voices. If they can block the outside and block relationships between Chinese voices, no one will listen."

Now I want to talk about the Internet today because it's central to the future of China and its political system. No, I'm not an historian of the Communist Party. I'm not an optimist about the Chinese future nor am I completely a pessimist. I am just a writer. I write about what I know.

As a Beijing business consultant for several years, I do know that Lovelock's statement rings true because I saw it happen. Say three or four years ago, working from my office in a Chinese T.V. studio, I received an e-mail from a U.S. friend using a browser based hotmail account. And the words in the e-mail, certain words such as, "China," "unrest," "labor," and " Xinjiang" were in weird halftone brackets as if the words had been picked out by some sort of filter. I'd never really seen anything like it. But I assumed at the time that this was some kind of glitch. Some kind of remnant of a keyword search program from a Chinese State Security computer. And the electronic janitor had somehow neglected to pick it up. What I didn't realize at the time is that the capability to search inside my e-mail--which was very primitive by the current standards--probably came from an American company operating in China.

Another thing we know is that the Chinese Communist Party could not have controlled this radical new means of communication without overwhelming technical assistance from North American corporations. So I want to talk about that pivotal role that American IT corporations played and then I want to turn to a little more detail--to what North American companies such as Cisco, Nortel, and Sun Microsystems are up to right now.

Back in the 1990's few areas of American enterprise in China carried as much moral glamour as the Internet. Every technical advance and every market restriction lifted were perceived not only as business opportunities for American information technology companies but they were also seen as potential advances for Chinese democracy.

The Chinese leadership of the Communist Party however had different objectives. Their objectives were: first of all, don't get left behind. Focus on science and technology. Modernize. Get rich. The second was to block the outside. As Zhu Rongji said back in 1996, "Better to kill a thousand in error than to let one slip through." Instead fill the Internet with Chinese voices and Chinese nationalism and make China the dominant power on the Internet by 2005. The next point was to use the Internet as a specific political tool. You would create government websites to lend an appearance of sophistication, openness and accountability. These had never been seen in China before: Regulations that had never been on the books were suddenly online. Monitor the Chinese Internet. Look at it as if it were a focus group. Preempt public concerns before they reach the boiling point. Identify enemies using the Internet. Suppress them with formerly unheard-of speed and efficiency. Finally modernize military communications and tactics including the ability to wage Internet warfare.

Now--even if we, as businessmen, were aware of these objectives we tended to underestimate the Chinese leadership's ability to actually carry them out. The engineers told us that the Internet's architecture was just way too clever for this stuff. It was too egalitarian: The message would always get through. Our accountants told us that our technological and financial momentum would simply outpace the Chinese regulatory framework again and again. Human rights advocates told us that the Internet was a reporting and organizing tool. Overseas dissidents in the U.S. saw a platform. And Chinese dissidents saw a link to the global community. As for surveillance we all assumed that State Security in China could acquire practically any routine communication they liked, but could they collate this stuff? No. The correct answer was: Not yet.

I would like to briefly sketch out the construction of China's firewall. And in my book I call it "Great Wall Version 1.0." During construction of the first public access web by Global One in 1996, Chinese authorities suddenly became interested in keyword searching--looking into the packets of information flowing across the Internet. The authorities wanted to block forbidden websites: Western news, religious, and political sites--and so on. But the Chinese Internet architecture was not standardized at the time. So Cisco--among other companies--competed for the contracts and eventually Cisco agreed to produce a specially configured firewall box which would allow the Chinese authorities to block the forbidden web on a national scale. And Cisco sold them at a discount. Somewhere in this process, I talked to a Cisco representative, a manager at Beijing headquarters, and he told me, "We don't care about the Chinese government rules, it's none of Cisco's business." However it is part of Cisco's business. Because three-quarters of China's routers, even today, are Cisco-made.

Now the Internet is a dynamic place. And really this wasn't enough. This could just stanch the flow of information coming in a little bit. So the search engines had to be controlled too. So enter Yahoo!--the top portal in China. They are under intense scrutiny by the State Information Bureau and, according to their former head rep, they patrolled their chat rooms, censored comments, and disabled search phrases such as "Taiwan independence," and "China democracy." AOL-Time Warner made similar arrangements and considered directly informing on dissidents if the PSB (Public Security Bureau) so requested. Now the crackdown (which I call Great Wall Version 2.0) began in October 2000 and went on until May 2001. During this period the Chinese authorities unveiled new laws: First, install internal monitoring software in cyber cafes across China and across the web and censorship of all political or news activity. Second, Internet service providers had to suddenly hold all Chinese user data for at least 60 days: their phone numbers, times they went online, their surfing history. For those who didn't care to censor their web activity they had used "proxy servers"--that was a technical method to circumvent the firewall. Suddenly proxy servers were being hunted and blocked. In April 2001 the Ministry of Public Security decreed the construction of the Golden Shield Project--a nationwide digital network designed to strengthen central police control and increase the efficiency of retrieving records of every citizen in China.

The real question here is why had the authorities waited until 2000 to do this. People were jumping online. The Chinese Internet population was doubling every six months at that point. I have a couple of theories; one is that they were allowing a kind of a "Hundred Flowers" period of relative Internet freedom. The idea was to create a dragnet for malcontents--the old Maoist tactic. Another thing was just to attract massive investment--and especially to get American technology, encryption, firewall, surveillance and viruses in place.

At this point we get into the beginning of Great Wall Version 3.0. And the entry into it was signaled by Cisco and other companies such as Motorola and Siemens suddenly crowding into the security China 2000 Trade Show in Beijing. Suddenly surveillance was becoming a boom market. Motorola sold encrypted communications systems to the Beijing police at this time. Nortel was a huge player; they were incredibly active in trying to sell Chinese authorities wraparound surveillance capabilities. Yet their cost was very high. And the Chinese government at that point wanted to cheap out and may have initially chosen to rely on such smaller companies Netfront, RSA Securities, Watchguard even using cheap things like spyware. So critical technologies were handed over for free--Nokia and Motorola competed to give the Chinese advanced location tracing. These are mobile technologies that can be used to hunt down fugitives. If you get into a Beijing cab, they can find where you are. So suddenly you're entering the world of "The Matrix"--literally to escape the police you have to throw your phone into the trash. At the same time Network Associates (that's McAfee), Norton Anti-virus and Trend Micro of Tokyo gained entry to China by donating 300 live computer viruses to the PSB. This fit right in with Chinese military doctrine, which called for preemptive use of viruses on the U.S. or Taiwan to create an "electronic Pearl Harbor."

Now the other aspect to Great Wall Version 3.0 was voluntary censorship. For the first time, companies went out of their way to avoid offending the Chinese government. Articles that the Chinese government didn't like would mysteriously disappear from websites. At the same time the use of artificial intelligence was introduced into the Internet--that is, programs that surfed along with you, just ahead of you, finding political content. These so-called "neural nets" could actually learn what a political website looked like. They could learn what a pornographic website looked like, what a gambling site looked like, and they got very, very good at this. And at the same time they would track the individual user.

Now, the final component: surveillance actually becoming the sale posture. There was a very interesting sale show that Shanghai held a couple of years ago, called "The China Information Infrastructure Expo." And it was blessed by Li Runsen, who heads up the Science and Technology Commission for the PSB. At the Nortel booth a senior engineer assured me that they had developed a "hundred-percent packet capture system" and they said that it was specifically designed "to catch Falun Gong." At the Sun MicroSystems booth, Ms. Angela Ying urged me to press my finger onto the screen. And then she explained that they were setting up a national fingerprint and facial recognition system with a Chinese partner named Golden Finger. They were going to use this to imbed in a national ID card for Chinese state security. She said it will be a "total solution." Sun would provide the hardware, the server and the computing power, Sony would provide the surveillance cameras and Golden Finger would provide the Midas touch with Chinese public security.

Now, Cisco's booth dwarfed all the others. The entrance was ringed by video screens showing burly cops from Seal Beach, California, pulling Americans out of their cars and frisking them. They were whipping out Cisco mobile handsets linked directly to databases: Surveillance footage from stores, waiting rooms, bathrooms and other public places. Now--this slick Chinese presentation of America as an efficient police state with no pesky legal impediments or search warrants required was juxtaposed by soundbites of John Chambers, Cisco's CEO.

Cisco scored top billing for the presentations; their powerpoint presentation was entitled "The Cisco Network Solution for the Golden Shield Project." The language speaks for itself: "telephone solutions for police surveillance," "mobile solutions," and "video solutions for the increase of social stability." In case you missed the point of all this, Cisco's Chinese brochure actually featured a prominent schematic with an American state trooper--potbelly, shades, and all--connecting remotely to nationwide police databases. Now Zhou Li, the systems engineer from the Shanghai branch, gave me an enthusiastic sales pitch for all this, and he called it "Policenet." He said it had just been launched in China. He explained that Cisco's diagram of the policeman linking back information was technically accurate, but didn't capture the full scope of what Cisco had accomplished. We are not just talking about accessing a suspect's driving record here, he explained. Cisco provides a secure connection to provincial security databases allowing for thorough cross checking and movement tracing. A Chinese policeman or PSB agent using Cisco's equipment can remotely access the suspect's "danwei" or work unit, thereby accessing reports on the individual's political activity, family history and so on. Even fingerprints, photographs and other imaging information will be available at the tap of a screen.

This wasn't actually just a sale's pitch: since then Harry Wu called several police stations posing as a buyer and was able came back with the result that Cisco has actually has built the entire structure for the national PSB data base with real-time updating and mobile-ready capabilities. And as of June 2003 it's already resident in every province in China except Sichuan. The salesman however, confirmed to me that the Chinese police could even remotely check if the suspect had contributed to a website in the last three months. They could access the suspect's surfing history, and read their e-mail. It was just a question of the bandwidth.

Now creating a special firewall box--which Cisco did--to be used to censor the Chinese web may have been the original sin. And it was a significant cornerstone in constructing the Big Brother Internet, but it was not illegal per se. Yet the products Sun MicroSystems are now selling to China appear to be directly flouting The Foreign Relations Authorization Act of 1990-91--which suspends issuing licenses for the export to China of any crime control or detection instruments or equipment.

Now no president has ever tried to remove these laws. Yet they're clearly not being enforced. When President Bush visited Shanghai in 2002, certain exemptions on bomb-sniffing technologies were temporarily lifted because of the (very legitimate) fear of a terrorist attack. However according to a U.S. government source some major American corporations are now using that as a precedent to try to override the entire policy. Maybe they don't need to bother though; the fact is that China is the largest rapidly expanding market IT on earth. So we all understand it's extremely tempting to play the Chinese game--particularly for companies such as Cisco, Sun and Nortel, which are trying to make up for market corrections at home.

Now up until now these companies have depended on the perception that Internet technologies are new, relatively undefined, and they are a grey area. But they're not. This is a black market. It's a black market where state-of-the-art equipment is being sold to the Communist Party. Cisco is no longer assisting the censorship of the Chinese web. They're actually assisting the round up of Chinese dissidents of all manner and stripe. Internet dissidents are the fasting growing group of political prisoners in China.

Now I'm just going to touch very briefly on the military situation today. We're all aware that American companies have been transferring dual-use technology to China for some time. In fact, you can even make the argument that continued technology transfer from American companies is preferable to China building its own research and development capability. But that situation no longer holds either. Motorola has now outsourced over eighteen major research and development plants to China, all on par or better than U.S. standards. These plants serve the Ministry of Science and Technologies "863" project--that is fourth-generation wireless and mobile technologies with cutting edge military and commercial applications. There are no background checks on the Chinese engineers and the research goes directly out to the People's Liberation Army. They're not alone: IBM, Honeywell, Microsoft, GE and Lucent are involved. The rate of transfer in this case has outrun the pace of innovation. It's a vicious cycle. American security is the loser.

Now all these IT American companies want to present themselves and their technologies as globally neutral--and to avoid the appearance of taking sides. You can make the case that in the early days of the Internet it looked like this system would outrun anything the Communist Party dreamed up to stop it. But at this point can we really construe their recent actions as neutral? Even if we turn a blind eye to the military implications of technology transfer to the People's Liberation Army, assisting the construction of the world's biggest "Big Brother" Internet is not some sort of relativist byproduct of globalization. It's a deeply destructive act. It's an attack on America's strategic interests. It's an attack on American values. An attack on America's image abroad. But more than that, it's an attack on the global cause of democracy and free speech. Most of all it's an attack on the Chinese people.

Now the fact is that we do have the leverage; we have the leverage in China to stop this. On the east coast of China you won't find anyone who is not tied directly or indirectly to American trade. We also have the leverage in America.

My book came out, and basically, was very critical of the American business community for not following certain standards in China. And I've often had to make it very clear that where I'm coming from: I'm not saying that capitalism cannot lead to a freer China over time. I believe it can. I believe that the Communist Party is undergoing a crisis--there's no question about that. And so I'll say again what I believe for the record: The dream of capitalism and the Internet and money in people's pockets throughout China overwhelming China's current system and the Communist Party--is not dead. On the contrary, it's the best hope that China has. But we have to use the power.

It's up to us, activists, journalists, watchdogs, Congress, the home office, anyone who's involved with China business or even obliquely involved in any Chinese affairs, not to be fooled and to begin a mid-course correction. The beginning of that correction process is to lay down the communication infrastructure for revolution. And that correction process begins with--hopefully--with this discussion today. Thank you.

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