Category Archives: China

Huawei’s Threat to Communications Networks

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Updated: Saturday, 2/15/2020

“Most people are starting to realize that there are only two different types of companies in the world: those that have been breached and know it and those that have been breached and don’t know it. Therefore, prevention is not sufficient and you’re going to have to invest in detection because you’re going to want to know what system has been breached as fast as humanly possible so that you can contain and remediate.” Ted Schlein, a venture capitalist with Kleiner Perkins Caufield & Byers.

To begin the discussion, it is important to understand that communications, such as telecommunications and internet data networks, are vital to national security and are critical infrastructure for every sovereign nation. Since critical electrical grids, 5G technology, autonomous vehicles and even hospitals rely on the communication networks.

U.S. Intelligence Sharing

U.S. Defense Secretary Mark Esper warned allies that letting the Chinese firm Huawei build their next-generation, or 5G, network risks their security cooperation and information sharing arrangements with U.S. intelligence and national security agencies. The U.S. SECDEF remarked that, “reliance on Chinese 5G vendors, for example, could render our partners’ critical systems vulnerable to disruption, manipulation and espionage,” in a speech at the high-level Munich Security Conference in early 2020. “It could also jeopardize our communication and intelligence sharing capabilities, and by extension, our alliances.”

“National security is a serious matter and I do not think it is improper to discuss such details in a public forum.” Narendra Modi

One recent morning on Yahoo Finance, an on-air guest was dismissive about Huawei 5G technology and the U.S. Administration’s allegations that the Chinese technology giant has built backdoors to communication networks that they installed across the globe. Additionally the on-air guest stated that the Trump Administration needs to provide evidence of Huawei’s complicity to spy for China.

What the guest commentator omitted from his less than transparent comments was that unlike U.S. technology and telecommunications companies, Huawei has functioned as a tool for surveillance and espionage for the Communist Chinese government. In addition, they have been significantly subsidized for more than a decade by the Chinese authoritarian government. Thus, this is the reason that they can substantially underbid their Western competitors on 5G network projects across the globe.

Furthermore, despite Huawei’s adamant denials, they have built backdoors into the communications systems that include Huawei technology, equipment and software, or in networks that have been installed by them or their affiliates. Essentially, a backdoor is a method of bypassing a network’s security protocols to access communications or computer network.

Vodafone in Italy

U.S. Intelligence agencies have repeatedly warned allies regarding the potential threat posed by Huawei’s technology if installed in 5G networks. Back in April 2019, Yahoo Finance reposted a Bloomberg article that Vodafone Group, Europe’s biggest phone company, discovered hidden backdoors in the software installed by Huawei that could have given Huawei or the Chinese government unauthorized access into the Vodafone’s voice and data network. Although the backdoor was discovered and reportedly removed by Huawei, subsequent investigations by Vodafone discovered the the backdoor remained.

“We’re talking about the fate of our economy and the questionable resiliency of our Nation’s critical infrastructure. Why are experts so polite, patient, and forgiving when talking about cybercrime, cyber security, and National Security? The drama of each script kiddie botnet attack and Nation State pilfering of our IP has been turned into a soap opera through press releases, sound bites and enforced absurdity of mainstream media. It’s time for a cybersecurity zeitgeist in the West where cyber hygiene is a meme that is aggressively distributed by those who have mastered it and encouraged to be imitated by those who have experienced it.” James Scott.

Deterring Chinese cyber-espionage

We must not allow ourselves either to be misled by Chinese repeated denials or to rely solely on U.S. entertainment media’s reporting by omission regarding the cyber security risks posed to U.S. and its allies’ communications networks once Huawei’s equipment is installed. Effectively, Huawei is a Chinese Communist state-controlled enterprise. And, it operates at the behest of the Chinese Communist Party in surveilling their own citizens, and assisting with spying and espionage against foreign nations.

Bottomline, Huawei, and its affiliates, represent a national security threat to the United States, our allies, and our privacy. If they’re permitted to install their technology, equipment and software in critical communications infrastructure, backdoors and unencumbered access would exist. Their technology does pose a real threat to the economy, the critical communications networks and the critical infrastructure that relies on the communications backbone.

References:

  1. https://www.defensenews.com/congress/2020/02/15/esper-huawei-5g-could-risk-us-information-and-security-ties/?utm_source=facebook.com&utm_medium=social&utm_campaign=Socialflow+DFN
  2. https://www.c4isrnet.com/battlefield-tech/it-networks/5g/2020/02/12/white-house-claims-huawei-equipment-has-backdoor-for-spying/
  3. https://www.state.gov/huawei-and-its-siblings-the-chinese-tech-giants-national-security-and-foreign-policy-implications/
  4. https://www.forbes.com/sites/haroldfurchtgottroth/2017/05/08/chinese-government-helps-huawei-with-5g/#67ea148b6bae
  5. https://www.rickscott.senate.gov/sen-rick-scott-attorney-general-barr-keep-huawei-out-us-markets
  6. https://securityfirstcorp.com/cyber-security-quotes/

Schwab Sector Views: New Sector Ratings for the New Year | Charles Schwab

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Macro environment:  Rising stocks and Treasury yields, fading U.S. dollar

We continue to see a gap between the health of the manufacturing sector and that of the services sector and consumers. Despite recent U.S.-China trade war de-escalation, manufacturing activity remains under strain from ongoing tariffs, new tariff threats and still-elevated trade policy uncertainty, combined with slow global growth. On the other hand, the services sector continues to thrive amid strong consumer confidence and consumption, in large part due to a strong job market. 

While economic momentum overall has slowed, we do see signs of stabilization in both the United States and abroad. Accommodative monetary (central bank) and fiscal (tax cuts and government spending) policies have provided a strong tailwind for the global economy. The signing of a “phase-one” trade deal between the U.S. and China, combined with congressional passage of the new U.S.-Mexico-Canada (USMCA) trade pact, have eased some trade uncertainty. Amid this apparent global economic revitalization and shrinking trade risk, Treasury bond yields have risen, the value of U.S. dollar has declined and U.S. stocks have advanced to record highs.

However, geopolitical risks—while reduced somewhat—remain elevated, and equity valuations are high. Given this combination, we think bouts of increased volatility and more frequent pullbacks are possible. This doesn’t necessarily mean the rally won’t keep going—it’s likely the strong momentum in stocks may continue until there is a catalyst sufficient to deflate the current extremely bullish investor sentiment—but the risks need to be considered.
— Read on www.schwab.com/resource-center/insights/content/sector-views

Jobs, Coronavirus, and the Budget | First Trust Economics Blog

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Brian S. Wesbury, Chief Economist

Date: 2/10/2020

In January, US payrolls expanded by 225,000, not only beating the consensus forecast, but also forecasts from every single economics group.  Since January 2019 (12 months ago), both payrolls and civilian employment – an alternative measure of jobs that includes small-business start-ups – are up 2.1 million.  The labor force – those who are either working or looking for work – is up 1.5 million, while the jobless rate fell to 3.6% from the 4.0%.

The labor force participation rate (the share of adults who are either working or looking for work) increased to 63.4% in January, the highest reading since early 2013.  Participation among “prime-age” adults (25 to 54) hit 83.1%, the highest since the Lehman Brothers bankruptcy in 2008.   

Meanwhile initial claims for unemployment insurance hit 202,000 in the last week of January, and initial claims as a percent of all jobs are at the lowest level ever.  In other words, the job market and the economy look strong.

Only a few months ago, some analysts were saying that the inversion of the yield curve – with short-term interest rates above long-term rates – was signaling the front edge of a US recession.  Now a recession seems nowhere in sight.

Lately, financial markets have become very jumpy on any news – good or bad – regarding the coronavirus.  We aren’t immunologists (or doctors) and would never make light of a virus that has killed more than 900 and infected over 40,000, but data released by the World Health Organization (WHO) cautiously suggests a positive turning point has been reached.

— Read on www.ftportfolios.com/retail/blogs/economics/index.aspx

U.S. Markets Overreacting

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Updated:  Monday, 2/3/2020 at 8:25 am

We never want to downplay the threat posed by the Novel Coronavirus in China and globally. The highly contagious coronavirus is a pneumonia-causing illness that infects an individual’s respiratory tract. It is now responsible for a reported 360 deaths in China as of Monday morning and 17,000 infections, according to Chinese officials and official figures from the World Health Organization. Furthermore, it can be confidently assumed that the Chinese Communist government has drastically under reported the magnitude of the spread and the total number of its citizens effected by the virus.

Consequently, the U.S.represents a relative virgin population for the Novel Coronavirus. Americans have little to no immunity to this strain of virus from previous spreads or vaccination.  Thus it does pose a potential temporary risk and impact to the U.S. economy.

Subsequently, the World Health Organization has declared the fast-spreading coronavirus a global health emergency — a rare designation that should help to contain the spread and outbreak.

On Friday, the Federal government decided to quarantine Americans arriving on U.S. soil from Wuhan and the Guangdong province in southern China. Additionally, the U.S. initiated measures to screen passengers arriving from all other regions of China. Those found without symptoms are released and asked to self isolate themselves for the fourteen days, the prescribed incubation period for the Coronavirus.

U.S. Influenza Season

However, most Americans are not aware that the CDC estimates that there has been 25 million cases of seasonal influenza in the U.S., 250K hospitalizations and 20,000 deaths reported. This is not abnormal for influenza season in the U.S. Moreover, influenza has been assessed as widespread in Puerto Rico and in 49 states.

Image if the media chose to report these statistics like the quantity of seasonal influenza cases, hospitalizations and deaths in the U.S. every hour and had quasi-infectious disease experts on-air to pontificate about the potential severity and potential deaths. Additionally, image if they had their reporters stoke fear by wearing a nurse’s mask to cover their respiratory system and displaying concern in their voices while reporting live from a mall in Chicago.

More than likely, the market would have been impacted by the over reporting of news.

Conclusion

Bottom line, the market has been  freaking out over the coronavirus outbreak, which doesn’t pose a threat to any long-term investor, as long as they remain calm and disciplined.  The media’s coverage and reporting of the coronavirus might be best described as over-dramatic. The effect has been the market sell off and market volatility. Additionally, the media appears to be now over hyping the preventive measure U.S. officials have taken to prevent the spread of the highly contagious virus on U.S. soil.

Friday’s U.S. stock market two percent sell off was definitely an overreaction to the over-reporting and over-hyping by the U.S. entertainment media.

References:

  1. https://www.cdc.gov/flu/weekly/index.htm#ILIActivityMap

Coronavirus is less deadly than SARS — but that also explains why it’s so contagious – MarketWatch

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Two months into the epidemic, the coronavirus has not proven to be as deadly as the SARS virus. That, however, may also help explain why it’s spreading so quickly. It has an incubation period of up to two weeks, which enables the virus to spread through person-to-person contact.

The coronavirus, a highly contagious, pneumonia-causing illness that infects the respiratory tract, is now responsible for 213 deaths in China as of late Thursday and 9,692 infections worldwide, according to Chinese officials and official figures from the World Health Organization.

SARS, or severe acute respiratory syndrome, infected 8,096 people worldwide with approximately 774 official SARS-related deaths; most of those infections occured during a nine-month period from 2002 to 2003. Even with 43 new fatalities reported over 24 hours, the fatality rate remains steady.

SARS had a fatality rate of 9.6% compared to the fatality rate of 2.2% for the coronavirus.

SARS had a fatality rate of 9.6% compared to the fatality rate of 2% for the coronavirus. However, that death toll could rise as the weeks progress, and drug companies scramble to come up with a vaccine for the virus. Whether the fatality rate remains steady has yet to be determined.

— Read on www.marketwatch.com/story/coronavirus-is-less-deadly-than-sars-but-that-may-explain-why-its-so-contagious-2020-01-30

Buy the dip in stocks and then sell the rip higher – Bank of America

That’s the strategy that strategists at Bank of America Securities appears to be espousing for investors, amid swings in U.S. stock benchmarks that have become increasingly gut-wrenching in the aftermath of a coronavirus outbreak in China that appears to be giving bullish investors at least a momentary pause after a record-setting rally.

For the week, the S&P 500 index and Dow are on track for a more than 1% loss, and the Nasdaq is on pace for a 1.2% drop, after Chinese authorities on Thursday said that more than 7,700 people have been infected with the Asian influenza, with at least 170 dead. Moreover, the Centers for Disease Control and Prevention confirmed the first case of person-to-person spread of coronavirus in Illinois. There are now six confirmed cases of coronavirus in the U.S., two of which are in Illinois

China’s Seven Deadly Trade Sins

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China has not been partners in good faith in trade and economic negotiations. They’re an authoritative Communist Dictatorship that enslaves it citizens for the empowerment of the Party

The U.S. and the Western multinational enterprises have enabled and fueled China’s extraordinary quarter century economic and global geopolitical growth. While the U.S. goal is Free Trade, Individual Freedom and Democratic Capitalism. U.S. companies are getting fed up with the force technology transfer by companies doing business in China and the Chinese firms exporting and selling those products in the U.S. market.

China’s Seven Deadly Sins

1. Stop stealing Western intellectual property,

2. Stop forcing technology transfers,

3. Stop hacking U.S. computers,

4. Stop dumping into U.S. and Western markets and putting our companies out of business,

5. Stop state-owned enterprises from heavy subsidies,

6. Stop the importation of fentanyl, and

7. Stop the currency manipulation

They’ve reneged on the Hong Kong autonomy agreement, they reneged on the agreement signed in the Oval Office with President Obama regarding the militarization of the South China Sea. In 2015, China’s President Xi stood with President Obama in the Rose Garden at the White House and promised (lied) that “there is no intention to militarize” a collection of disputed reefs in the South China Sea known as the Spratlys.

President Obama stated on his way to the 2016 G20 Summit in Hangzhou China. That “If you sign a treaty that calls for international arbitration around maritime issues, the fact that you’re bigger than the Philippines or Vietnam or other countries … is not a reason for you to go around and flex your muscles,” Obama added, according to Reuters. “You’ve got to abide by international law.”

Military analysts have criticized President Barack Obama’s administration for having been too timid in countering China aggression and militarization in the South China Sea. Critics, for instance, have faulted the previous administration for not conducting more frequent freedom of navigation patrols. “China’s militarization of the South China Sea has been a gradual process,

Source: https://www.nytimes.com/2018/09/20/world/asia/south-china-sea-navy.html