Sometimes it feels like everything we buy comes from China. While that is partially true, many of the items we purchase do come from China, that’s more of a quantity than dollar value assessment. The majority of the personal items we purchase from China are relatively inexpensive goods. The average American spends around 6% of their personal expenditures on goods from China for a total of – $29 billion.

One area that our current negotiations with China seek to improve is in strengthening the protections around Intellectual Property (IP). It’s estimated that Chinese IP theft costs the US between $225 billion and $600 billion a year. That’s apparently bad enough that the need for stronger IP protections is one of the few things that both US political parties seem to be able to agree on.

China has also required foreign US investors to partner with Chinese firms, often State Owned Enterprises (SOE), in order to gain access to Chinese markets. This practice has resulted in Chinese domestic corporations legally funneling manufacturing and technical expertise into their own production lines that then compete with the original investor.

China has also essentially become the default choice for larger companies that want to lower production costs to both maximize profits and reduce costs to their consumers. Cheaper labor, rapid and inexpensive transport of raw materials, large quantity production, fast production and high quality keep Chinese manufacturing costs per item at a minimum.

This may change in the near future as currently (according to Bloomberg) the lowest prices for manufacturing can be found in Indonesia, next are India, Mexico, and Thailand. China is now in 5th place before Taiwan which takes the 6th place. The US surprisingly is in 7th place.

China enjoys other advantages like being able to build an entire product at just a few suppliers, since most can do more than one manufacturing process, all with minimal shipping and customs friction.

Even American multinational technology conglomerates like Cisco rely on China’s discounted manufacturing to provide better prices to their customers.

Recent trade disputes have targeted things like smart phones, drones, networking equipment and 5G implementation. Something these items all have in common is that they’re all commonly or necessarily connected to internet access.

Let’s hypothesize for a moment that a less than scrupulous entity with a history of including backdoor access was able to successfully market products that held almost the entirety of your personal data. Products that fly almost everywhere taking high quality pictures, some percentage inevitably even in sensitive or secure areas. Let’s say they were even able to sell the products that form the core of the US or even global internet connectivity.

What would you suppose they might do in a scenario where these products could provide a military advantage if they reported ‘home’, or transmitted sensitive data ‘home’, or just flat out broke the internet at an inconvenient time for an adversary?

Let’s assume that China hasn’t provided a backdoor into any of these devices — yet. All of these devices are normally configured to check ‘home’ for updates, any of which could alter any aspect of the code running on these devices.

Would it make sense to put your neighbor, who has ‘borrowed stuff’ in the past in charge of your home security? If he is known to have snooped around on your computer, would you give him the password to access your WiFi?

This may seem like paranoia but these are real and legitimate concerns that have been cause for unease within the US government for decades. While a conflict with China doesn’t seem inevitable in the immediate future, it’s not entirely outside the realm of possibility either.

You naturally face less risk when a product is backed by a trusted provider that has simply decided to send just their manufacturing to China while retaining control of the finished product. This is why we and the world at large are comfortable buying core networking equipment that is manufactured in China but controlled by the aforementioned Cisco rather than a Chinese SOE.

It doesn’t make sense to pay someone for the privilege of being at their mercy if you wind up in a disagreement with them, but that’s exactly what we are doing if we do not heed this logic.

While there’s a distinction between US government and US corporations the same is not entirely true of China which is home to 109 corporations listed on the Fortune Global 500, only 15% of which are privately owned.

While the imbalance in trade with China may be a concern, it is the potential for interruption of our national security that should keep you up at night.

As always: Compute Safely

By Ty Gay, Network Systems Engineer