China and Two Sets of Technology Standards in the Supply Chain

Close to 90 percent of all commerce is shipped via maritime transportation. Lloyd’s of London report combined container throughput figures regarding the top 100 international ports grew by 2.5 percent in 2019. Splash247 has posted an interesting article explaining that the Chinese government may be toying with supply chain data systems, creating concerns in maritime transportation.

“There has been progress within the maritime and shipping sector in creating a digital maritime ecosystem that is in the early stages of addressing data platform interoperability. The focus on the development of a common set of data communication standards would enable development of functional APIs, allowing seamless data exchange. However, recent geopolitical tensions, not just between the US and China, but between China and other nations as a response to Covid-19 is raising an interesting dilemma.[1]’

“Current trends are suggesting that the pursuit of common standards to facilitate API development and data set communication is morphing into debate around an emerging two parallel systems and associated digital ecosystems. This was hinted at in a recent article. There are now clear indicators that this dilemma is growing. Unfortunately, this is being played out just as the maritime sector recognizes the broader ‘maritime ecosystem’ as opposed to the previously ‘port ecosystem.’ Adoption of global multimodal standards allows all players along the supply and logistics chain to reap maximum benefits. This transition within the shipping sector to common data standards to improve interoperability brings commercial scalability to IoT networks. However, focus on the benefits is masking the geo-political divide in application. Failure to recognize this emerging dilemma may result in choked supply chains and intermodal transport networks.’

“Global trade will have two sets of technology standards, one to suit China’s Belt and Road Initiative (BRI) and the other built around industry requirements - while there has been much discussion on smart containers and the benefits thereof, this article aims to unmask the geopolitical issues that are beginning to affect the progress of these data nodes. Ultimately this could derail attempts to have a seamless integration of data across several shipping platforms. Smart containers are proving to be an important building block, particularly as they provide data and information in near time.

“The Digital Container Shipping Association (DCSA)[2] has published a new set of IoT connectivity standards that has progressed radio interoperability gateways across ports, terminals and other third parties. With progress in common data communications standards there is greater visibility of cargo movement.’

“Data being shared includes cargo location, temperature, and journey data. Importantly, access to this information allows the beneficial cargo owners (BCO) to better plan and optimize operations as they have greater accuracy around ETA’s as well as the condition of the cargo. The benefits to the BCO is obvious as it takes away the guess work as to who / what is responsible for cargo at a specific point in time, as well make timely decisions to correct transit issues as they arise.’

“Creating this situational awareness is essential to empower traffic management, particularly for the BCOs who deal directly with last and first mile delivery through multiple modes of transport. Data standards allowing common communication is therefore an essential building block for the BCO. However, they need alerts and messages to flow automatically with their own IT system irrespective of operator or IoT platform. They need one interface that will allow optimization of the supply chain.’

“With smart solutions having significant benefits, why is there a divide emerging? As logistics and supply chain increasingly digitizes, there is a growing reliance on the global internet and associated IT infrastructure. Whether it is the 400 submarine cables or 5G WiFi base stations, access to these data highways is vital for smart platform development. However, access is increasingly being made more difficult. The primary issue being raised has to do with data integrity and cybersecurity. With international faith in China as a good corporate citizen wanes, concerns are now being raised as to what IoT technology is to be used as well as data storage and ownership. There is now proper debate around the protocols that need to be in place before data can be shared. This is resulting in a duality in digital smart ecosystems, one built around Western standards whilst the other ecosystem is being built around China’s BRI.’

“Developments suggest that the issue is escalating at pace. The Pacific Light Cable Network[3] was meant to see Hong Kong serve a global data hub that would meet exponential growth in bandwidth requirements. This cable, announced in 2016, is experiencing major difficulties, with the US Justice Department in June, blocking approval to the Hong Kong connection and suggesting that it would be in the national interest to use the cable’s Taiwan and Philippines spurs. With the Peng Group acquiring Pacific Light, it stated that the cable was in line with the BRI plan to build global influence through infrastructure. Compounding concerns was the statement out of Beijing that China needs to optimize the laying of submarine cables and extend its influence under the BRI. It appears that is the landing station that is of more concern than the cable itself. Whilst they are connected, the large bandwidth required for smart port / city / supply chain will not be forthcoming.’

“The importance of common standards has not been lost on China’s BRI. Initially developing a cost-effective track and trace system through the BeiDou satellite system (BDS) and rolling it out along the BRI, it broke reliance on the US GPS Navstar satellites or European Galileo programs. BDS, as part of the Digital Silk Road, is now entrenched in many BRI-aligned countries. Developing nations are dependent on the BDA and any attempts to withdraw from BDS would have significant consequences for those that rely on subsistence agriculture.

“The BRI is now focusing on a ‘whole of transport ecosystem’ that will use 5G capability to co-ordinate all transport corridors, including the port. It looks to integrate, and share data required to better plan and optimize logistics along entire supply chains, whether it be by land, water, or air. The plan is that by 2025 there will be fully digitally integrated movement of goods and services along the BRI trade network. There has been progress in this endeavor along many fronts. Recently there has been a strategic alliance between China Merchants Port Group, Alibaba and Ant Financial that will integrate 41 ports and 25 other countries with logistics companies, customs, contactless export / import transactions.’

“China has recognized that global technology standards are the barrier to achieving its BRI ambitions. This is being addressed by the implementation of China Standards 2035, an initiative tasked with writing global standards for next generation technology. It will set the tech specifications on how technologies work interoperably. Focusing initially within China, the plan is a coordinated standard applied across global markets. China wants to set the global standards for the likes of 5G, IoT and AI. These standards will align with other industrial policies such that China becomes the global leader in high tech innovation. However, what these plans fail to recognize is that standards are driven by industry groups and set by industry bodies. They are consensus and rules based, not centrally imposed.’

“This suggests that global trade will have two sets of technology standards, one to suit China’s BRI and the other built around industry requirements. This divide could well mean that companies who want to trade with China and others, will need two technology platforms. Integrating these platforms will make for the smart maritime ecosystem of the future – however cyber security and data integrity concerns suggest that there is a long road ahead.’

Mundy Penfold Limited (MPL) has recently presented a report on the rise in container shipping.[4] MPL explains in this report that the container ‘revolution’ has both facilitated and driven globalization. “The transfer of production to low-cost regions and increasingly complex supply chains have been the major factors generating trade growth. There are risks with this system. Increased protectionist pressures are directly impacting on growth and calling this model into question. This uncertain background is combining with technical shifts in container shipping and ports to multiply risks and place pressure on trading margins. The levels of risk are now as high as those that followed the financial crisis.” The MPL study, Container Terminals: Paths to Profitability, develops new forecasts, trends and scenarios for future demand development for the period to 2030. The MPL website provides links to the full report and supports the importance of proper cyber security and ports/land, rail and maritime shipping.

Military, energy, and transportation analysts believe the purpose of developing a dual supply chain data network, could be used to force usage if the agreed upon network is compromised. China’s alternate network would give the Chinese strong control on supply chain data communications upon a major data communication failure.

Red Sky Alliance has been monitoring the Chinese cyber practices for the past 9 years, as well as taking a sharp focus in the maritime transportation sector. Our RedXray and CTAC tools can help protect your networks by identifying underground intelligence indicators of compromise (IoC) to blacklist all forms of malware. We provide both internal monitoring in tandem with RedXray notifications on ‘external’ threats to include, botnet activity, public data breaches, phishing, fraud, and general targeting.

Red Sky Alliance is in New Boston, NH USA. We are a Cyber Threat Analysis and Intelligence Service organization. For questions, comments or assistance, please contact the lab directly at 1-844-492-7225, or feedback@wapacklabs.com