China Exploits Fleet of U.S. Satellites to Strengthen Police and Military Power

Beijing reaps benefits from the sensitive equipment, despite U.S. law, aided indirectly by private-equity giant Carlyle Group and Boeing Co.

By Brian Spegele and Kate O’Keeffe
AsiaSat 9 headed into orbit at Baikonur, Kazakhstan, in September 2017. AsiaSat

Orbiting 22,000 miles above Earth, a fleet of American-built satellites is serving the Chinese government in ways that challenge the U.S.

Nine of these satellites have been part of efforts to connect Chinese soldiers on contested outposts in the South China Sea, strengthen police forces against social unrest and make sure state messaging penetrates far and wide, according to corporate records, stock filings and interviews with executives.

A tenth satellite, under construction by Boeing Co., would enhance China’s competitor to the U.S. Global Positioning System. Besides civilian uses, the navigation system could help China in a potential conflict, such as in guiding missiles to their targets.

U.S. law effectively prohibits American companies from exporting satellites to China, where domestic technology lags well behind America’s. But the U.S. doesn’t regulate how a satellite’s bandwidth is used once the device is in space. That has allowed China to essentially rent the capacity of U.S.-built satellites it wouldn’t be allowed to buy, a Wall Street Journal investigation found.

Tangled webs of satellite ownership and offshore firms have helped China’s government achieve its goals. Some of America’s biggest companies, including private-equity firm Carlyle Groupin addition to Boeing, have indirectly facilitated China’s efforts, the Journal found.

AsiaSat 9, the Hong Kong company’s most powerful U.S.-made satellite to date, being prepared for launch in September 2017. Photo: AsiaSat

All this appears to run counter to the U.S.’s stance of confronting China’s military buildup and condemning what international watchdog groups describe as widespread human-rights abuses by China’s police. That includes in far-flung territories, where the satellites help the government beam communications. Current and former U.S. officials who reviewed the Journal’s findings called the satellite deals worrisome examples of China using U.S. commercial technology for strategic gain.

“It’s a serious ethical and moral problem as well as a national-security issue,” said Larry Wortzel, a former chairman of the bipartisan U.S.-China Economic and Security Review Commission, a group that advises Congress.

Boeing, in response to questions, said it has put on hold its latest satellite deal involving China, the one that would bolster the Chinese rival to GPS. Boeing said it complies with all U.S. laws, as did Carlyle.

China and the U.S. are locked in a battle to dominate the world’s top technologies, such as biotech, chips and communications. U.S. officials say Beijing at times turns to espionage and cyberhacking to achieve its goals. In other cases, such as in the commercial satellite industry, it creatively sidesteps U.S. regulations and leverages American companies’ eagerness for revenue to reap the benefits of the technology it needs to further its strategic goals.

The Chinese satellite workaround has persisted for years. U.S. officials and industry players have said the profits American satellite exports generated could be reinvested in development to keep the U.S ahead. Some defense officials also said China’s use of U.S. satellites gave Washington valuable insight into its rival’s space capabilities. They assumed China would use U.S.-built satellites for benign purposes such as broadcasting sports.

A Hong Kong company called Asia Satellite Telecommunications Co. has long been a bridge between mainland China and U.S. satellite makers. AsiaSat is jointly controlled by Citic Group—a conglomerate owned by China’s central government—and Carlyle, which together own about 75% of the firm.

Under U.S. export controls, semiautonomous Hong Kong is considered separate from mainland China, so AsiaSat could buy U.S. satellites despite being partly Chinese-owned. Over the years, AsiaSat has put in orbit nine satellites built by U.S. companies, including Boeing and SSL, a Palo Alto, Calif., unit of Colorado-based Maxar Technologies Inc.A majority are still operating.

AsiaSat offers communications services across the Asia-Pacific, such as news and sports broadcasting. Its English-language financial filings and other statements make little mention of the use of its bandwidth by China’s government.

A fuller picture emerges in dozens of Chinese-language statements on the website of a Citic unit that has been responsible for marketing AsiaSat’s bandwidth in mainland China over the past decade.

Since AsiaSat launched its first satellite around 30 years ago, the Chinese government has used it to link state-run broadcasters to the provinces. “The country is rich and the military is mighty,” Citic said on its website in 2015 after AsiaSat helped broadcast a lavish military parade in Beijing. “Satellite communications are evidence of the nation’s development.”

China’s Ministry of Public Security has described satellites as core to police operations. Its records show the ministry relied on a satellite called AsiaSat 4, manufactured by Boeing, and one called AsiaSat 5, made by SSL, as it worked to build rapid-response forces capable of providing real-time audio and video from the field.

Citic’s satellite unit for years touted its links to the Chinese government. In 2008 and 2009, Citic said, AsiaSat’s satellites helped ensure communications for authorities as they quelled antigovernment protests and riots in Tibet and in Xinjiang, a heavily Muslim region in far-northwest China.

At a 2011 industry conference, a Citic manager listed the Ministry of State Security, China’s main spy agency, and the military as among a long list of end users of its satellite capacity for emergency responses, according to a copy of the presentation reviewed by the Journal.

Citic referred questions from the Journal to AsiaSat. AsiaSat declined to comment on individual users of its bandwidth.

In a statement, AsiaSat said China’s military wasn’t a direct customer but used capacity that was first procured by telecommunications operators for disaster relief.

AsiaSat said it didn’t know how the authorities used its bandwidth in response to the Tibet and Xinjiang uprisings. It declined to comment directly on whether its bandwidth is being used today by the police in Xinjiang, where authorities have been building an all-encompassing surveillance state and sending as many as a million ethnic Uighurs to internment camps. AsiaSat said it had no ability to retroactively monitor the contents transmitted via its satellites.  
AsiaSat’s chairman is a managing director of Carlyle, which is among the largest and most politically connected private-equity firms, investing in sectors including defense, telecom and health care. Former U.S. Defense Secretary Frank Carlucci was Carlyle’s chairman for a decade. Former Secretary of State James Baker and the late President George H.W. Bush served as paid advisers at one time.

Carlyle said in a statement that AsiaSat’s equipment supports phone and web communications for Chinese phone companies’ customers, “just as IntelSat provides service to Verizon or AT&T in the U.S.”

“It is effectively a pipe,” Carlyle added, “and AsiaSat, because of privacy issues, doesn’t monitor or regulate the content that flows through it.”

A Carlyle spokesman added that the private-equity firm sends annual reports to the State Department to confirm AsiaSat’s compliance with U.S. export controls, ensuring that sensitive technical information is shared with authorized users only.

Starting in 2013, Citic said a Chinese state telecom operator tapped the Boeing-built AsiaSat 4 to provide 3G mobile internet to the Spratly Islands in the South China Sea. There, China has been building military infrastructure in a bid to control waters also claimed by the Philippines, Vietnam and others.

“Communications have always been a difficult problem for the soldiers and civilians facing hardships on the islands, making their lives, work and battle preparations hugely inconvenient,” Citic said at the time. U.S. officials began objecting to what they saw as Beijing’s militarization of the South China Sea, but China pushed ahead, with Citic saying connection speeds had been boosted to 4G in 2016.

A year later, Citic pledged to help China “uphold the country’s maritime rights and interests,” repeating a phrase the military and Foreign Ministry often use.

AsiaSat described its services in the South China Sea as being available for any user who needed it, including “fishermen and people on cruise ships or public vessels.”

Roger Tong, AsiaSat’s chief executive, said in an interview the company also previously provided coverage to China’s coast guard, but it didn’t engage directly with the military.

He said AsiaSat’s American purchases added more than $1.5 billion to the U.S. economy.

“AsiaSat should be seen as a success story in how two superpowers should work together,” Mr. Tong said.
The company’s financial filings show it earns around a quarter of its revenue from China, with the rest coming from offering connectivity elsewhere such as rural Australia. AsiaSat said its commercial technology doesn’t have advanced security features required for military communications. It said it takes regulatory obligations seriously.

AsiaSat 6, based on Space Systems Loral 1300 platform, was launched in September 2016. Photo: AsiaSat

China’s Defense Ministry, in response to questions about the deals, said: “Covering the full extent of our country’s territorial sovereignty is a very ordinary matter.”

Meanwhile, AsiaSat decided to drop U.S. government-funded outlets Radio Free Asia and Voice of America. They have been a thorn in the side for Beijing, beaming coverage of politically sensitive topics. AsiaSat in recent months told the U.S. Agency for Global Media, which manages the outlets’ contract, that it wouldn’t extend satellite services beyond June.

AsiaSat’s Mr. Tong said the decision was made for purely commercial reasons.

SSL, the Palo Alto satellite maker, has sold five satellites to AsiaSat in the past decade. SSL said it complied with all relevant U.S. laws, and the satellites didn’t include military encryption technology.

“Our satellites are built for commercial use,” said David Lihani, the company’s chief trade compliance officer.

Boeing said the satellite that became AsiaSat 4 was built under a deal negotiated by Hughes Space & Communications, pushed forward by Boeing after it acquired Hughes. Boeing said it wasn’t aware of any transfer of satellite technology that would have violated its export license. It said it was neither possible nor required by law to monitor each bandwidth user after a satellite it built is in space.

“The State and Commerce departments over four administrations—and most recently in 2017—have reviewed and approved export licenses for the AsiaSat satellite constellation to provide commercial bandwidth services to the Asia region, including China,” Boeing said.

A separate Journal investigation in December showed how a Chinese state-owned firm used offshore financing to funnel around $200 million to a commercial satellite project under development by Boeing. The company cancelled that deal following the report, citing customer default, and federal agencies launched investigations.

A Commerce Department spokesman said that though the agency regulates satellite exports, it doesn’t regulate bandwidth usage.

Commerce “regularly updates its regulations to counter evolving national security threats,” the spokesman said, and has a policy of denying export licenses when exports are contrary to the national security or foreign policy interests of the U.S., including promoting human rights.

The State Department, which also regulates satellite technology, said the U.S. “strongly urges companies to implement stringent safeguards to ensure that their commercial activities do not contribute to China’s human-rights abuses.” It condemned Beijing’s militarization in the South China Sea.

One of the latest transactions involving offshore companies and U.S. space technology involves an advanced satellite Boeing has contracted to build called Silkwave-1.

At the center of the deal is a Hong Kong company called CMMB Vision Holdings Ltd.Its founder, Chau-Chi Wong, was born in mainland China and attended Harvard University before eventually working for Goldman SachsGroup Inc.

Chau-Chi Wong, CEO of CMMB Vision Holdings, playing violin at a company office in Hong Kong last month. Photo: Billy H.C.Kwok for The Wall Street Journal

Mr. Wong said he had a deep affinity for the U.S. but was also a Chinese patriot. “We need the best technology for China,” he said.

Mr. Wong said his company could help alleviate congestion on China’s cellular network by using Silkwave-1 to broadcast content to connected devices, such as cars, rather than have people rely solely on cellular data. In a national emergency or wartime, he said, this could theoretically enable China’s leaders to connect to its 1.4 billion people with rapid nationwide alerts.

A U.S.-based partner of CMMB Vision, called New York Broadband LLC, which Mr. Wong also partly owns, will purchase the Boeing satellite, then essentially lease its capacity to CMMB Vision, Mr. Wong said. It’s a complicated arrangement that he and Boeing said U.S. officials had approved.

Soon after it inked the deal, CMMB Vision said China’s top economic planning body designated its work a “key national development project.” In Beijing, CMMB Vision then gave a majority stake in its China operation to a state-run broadcaster, a move Mr. Wong said was to comply with Chinese regulations.

Mr. Wong said his company wants to support President Xi Jinping’s Belt and Road initiative to deepen China’s influence in the developing world, with plans to extend the Silkwave-1’s services beyond China’s borders.

A cyclist riding past satellite dishes at AsiaSat offices in Hong Kong. Photo: bobby yip/Reuters

The company also plans to use the Boeing-built satellite to increase the precision of Beidou, China’s military-backed alternative to the U.S. GPS. In late 2017, CMMB Vision’s China joint venture partnered with a unit of China Aerospace Science and Technology Corp.—a state-owned space equipment and weapons producer—to use satellite signals from CMMB Vision to make Beidou more accurate.

U.S. officials have described Beidou as critical to China’s global ambitions. An April report by the U.S.-China Economic and Security Review Commission said Beidou could both improve China’s missile guidance and reduce its reliance on GPS.

Mr. Wong said Silkwave-1 would support Beidou’s commercial applications only. Pressed on whether he could guarantee China’s military wouldn’t benefit from his satellite, he said it would be illogical for the military to use such commercial technology.

“If out of desperation they want to use it, that they can do,” he said. “It’s not our business model.”

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