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The State Grid Corporation of China: Its Australian engagement and military linksThe State Grid Corporation of China: Its Australian engagement and military links
The State Grid Corporation of China (国家电网公司), the world's largest electric utility company, was one of the bidders for the $10 billion NSW electricity transmission network, TransGrid, in a consortium with Macquarie Infrastructure Real Assets. The company's bid was cleared by the Foreign Investment Review Board but was eventually unsuccessful.
In Australia, State Grid is already the major shareholder in the non-listed ElectraNet which operates the South Australian electricity transmission network and is seeking to expand its stake. State Grid also has shareholdings in gas and electricity distributors in Victoria and NSW. In 2013, Singapore Power sold almost 20% of listed SP AusNet and 60% of the shares in the unlisted SPI (Australia) Assets (branded as Jemena) to State Grid. So State Grid is now part-owner of Victorian electricity transmission and distribution networks, as well as Victorian, NSW and ACT gas distribution networks and transmission pipelines. It appears that major efforts have been made to reduce political sensitivities to Chinese ownership of essential infrastructure in Australia by initially taking only partial shares in these companies. Further, Jemena has just been announced by the Northern Territory Government as the preferred bidder for the $1 billion North East Gas Interconnector.
Within China, State Grid is the monopoly power distributor in all but five southern provinces. It is a massive state system under which there are a large number of provincial branches, branch companies and subordinate research institutes. State Grid is also intimately tied to a wide range of military and intelligence agencies across China, and relies on technologies from Huawei (华为), a company banned from bidding on infrastructural projects in both Australia and the US, and declared by a US congressional committee to be tied to the People's Liberation Army.
Subordinate companies and research institutes attached to State Grid include:
One of the major companies under State Grid is the Nanjing Nanrui Group (南京南瑞集团公司) whose subordinate companies generally bear the NARI name, such as NARI Technology Co., Ltd (国电南瑞科技股份有限公司). NARI is collaborating closely with the Beidou project, China's alternate satellite navigation system intended to rival GPS. Beidou is, inter alia, linked to intelligence collection and is a weapons tracking and targeting system. Beidou is overseen by NORINCO (中国北方工业公司), a PLA-backed weapons developer, which has recently signed an agreement with Alibaba, that involves the use of Beidou for cloud computing, big data accumulation and mining.
Another of NARI's subordinate companies, Beijing Nari Zhixin Microelectronics Technology (北京南瑞智芯微电子科技有限公司), also known as Beijing Nari Smart Chip (or IP Core), is one of the top semiconductor companies in China, and is tied together with the PLA's Information Engineering University (中国人民解放军信息工程大学) and others in the PLA-led China Visible Light Communications Alliance. Again, the links with China's communications intelligence activities are obvious.
In recent years, NARI has been expanding its presence in Australia. In April 2014 the NARI Group signed a 2.6MW rooftop power purchase agreement with an unnamed Australian customer. In December of that year, NARI won the bid for the Northern Sydney Substation Renovation Project from TransGrid. This month, NARI signed a contract with Jemena, 60% owned by State Grid, to provide control cables, medium-voltage cables, ABC cables and overhead conductors over the coming five years. The company proudly notes: 'The project will be conducive to NARI products entering the list of long-term product supply of several other Australian power companies'.
Other State Grid-linked companies include:
A very major concern is State Grid's involvement with Huawei (华为). Huawei flaunts its connections with State Grid and provides the company with its Supervisory Control And Data Acquisition systems, which allow massive data collection capacities. Integration of electrical and communications systems is growing apace and, with State Grid's smart grid project's passive optical networking technology (high-bandwidth data wiring that can be run inside electric power cables without interference), electricity networks are carrying and allowing the interception of internet, TV and telephony.
Australia blocked Huawei from participating in the NBN bidding process due to security concerns. This 2012 report by the US Permanent Select Committee on Intelligence concluded Huawei is tied to the PRC military and suggested that the company carries out R&D for China's military and intelligence services, including cyber-warfare units. Huawei's intimate ties with the Central Committee are reflected in the fact that it is named first in the list of state-linked operators that accompanied Premier Li Keqiang on his July visit to South America.
While the above are but a small sample of the immediately-identifiable relations of State Grid's subordinate institutes/companies, these examples are sufficient to show intense and worrying links between State Grid and China's military and intelligence communities. It is no exaggeration to say that a corporation as technologically sophisticated and as large and influential as State Grid is, through its companies, subsidiaries and research institutes, tied in some way to a wide range of intelligence and military organisations across China, with the relationships not restricted to the supply of electricity. They involve joint research, mutual provision of services, development of new technologies and materials, supply of equipment, electrical and electronic engineering collaboration, exchanges of staff, and a plethora of other interactions as required and determined by the Central Committee and its associated agencies in the implementation of state strategies.
State Grid is now operating in Australia with NARI and Huawei equipment. While its lack of success in the NSW Transgrid tender was a relief to many in the Australian security and intelligence communities, what does the company's continuing control of major infrastructure — and intent to control even more — mean for Australia's current and future security?
When a Chinese state-owned company with intimate links to the military and to China's intelligence activities gets the all-clear from the Foreign Investment Review Board to control major national infrastructure, and even to buy into the NSW electricity transmission network that carries optical-fibre communications between Australian government departments, the question must be asked: Are the processes of foreign investment consideration and approval in this country in need of revision? At the same time, the urgent need for a public database of Chinese investment in Australia has never been more clear.
Photo by TPG/Getty Images
Geoffrey Wade
About the author
Geoffrey Wade
Geoff Wade is a Visiting fellow at the Crawford School of Public Policy, Australian National University.