The Tsinghua-Nuctech Connection
Original publication: 2/22/23
Last update: 2/24/23
Author: K. Olbert
A HOSTILE TAKEOVER
In December of 2019, Zhao Weiguo (趙偉國), the Chairman of Tsinghua Unigroup Company (清華紫光), vowed to “fight to the end” a secretive fund’s takeover proposal, amplifying an unusually public dispute over the troubled chipmaker’s US$9 billion rescue plan.
Zhao Weiguo, whose company, Beijing Jiankun Investment Group Company (健坤投資集團), controlled 49% of the debt-ridden semiconductor giant Tsinghua Unigroup, doubled down on his rare outburst against a takeover bid led by JAC Capital (建廣資產管理). Zhao vowed to unearth the true backers behind JAC, a fund headed by a mysterious and reclusive financier named Li Bin (李濱, who also goes by Brighten Li) which had kept a low profile until its consortium — which included a company called Wise Road Capital — emerged as Tsinghua Unigroup’s winning bidders.
Despite Zhao Weiguo's efforts to fight off the hostile and shadowy takeover bid, it was eventually approved by a Beijing court.
THE TSINGHUA UMBRELLA
Under the Tsinghua Unigroup umbrella are UNISOC (formerly Spreadtrum Communications), a Chinese fabless semiconductor company headquartered in Shanghai which produces chipsets for mobile phones, and Yangtze Memory Technologies Corp. (YMTC), another Chinese state majority-owned semiconductor integrated device manufacturer specializing in flash memory (NAND) chips.
Both Tsinghua Unigroup subsidiaries (UNISOC and YMTC) have been involved in all sorts of joint research and development and commercialization projects with American companies, including Intel, Micron, HP, and Western Digital and there’s little doubt that the Biden administration's recent sweeping new limits on China’s access to semiconductors, in part, reflected that. Moreover, Tsinghua Unigroup has been involved in the buildout of government cloud services for 17 of China's national ministries and commissions, 24 provincial-level governments, and more than 300 prefectural, urban and county governments. They've also been involved in the buildout of some 200+ university clouds.
But there's more to the story. Much more. In April of 2022, it was revealed in a Chinese regulatory filing that Tsinghua Unigroup’s parent company, the massive, leviathan Tsinghua Holdings — which is 100% owned by President Xi Jinping's alma mater, Tsinghua University — would itself be transferred to the Sichuan State-owned Assets Supervision and Administration Commission (SSASAC)… for free.
The provincial government agency would *then* transfer the assets of Tsinghua Holdings to the State-owned Sichuan Energy Industry Investment Group (SCEI). The plan was said to not affect subsidiary Tsinghua Unigroup’s own restructuring.
Tsinghua Unigroup’s Chairman Zhao Weiguo — formerly a humble shepherd from Xinjiang who rose to the unlikely position of running China Unigroup — was subsequently arrested in mid-July of 2022. This analyst is sure that the Department of Commerce and others have been very focused on Tsinghua Unigroup, at the urging of people like famed Silicon Valley investor Jim Breyer (former Secretary of Transportation Angela Chao’s brother-in-law) — who is (or was) on the Tsinghua University School of Economics and Management’s board of advisors — as well as other Silicon Valley scions who have been fretting over their semiconductor supply chains. Tsinghua Unigroup, however, isn't even the most important subsidiary under the Tsinghua Holdings umbrella… not by a long shot.
Reports around the time of his arrest mentioned a curious fact: that Tsinghua Unigroup‘s Chairman, Zhao Weiguo, was a friend of former Chinese Communist Party General Secretary Hu Jintao’s son, Hu Huifang.
And who is Hu Haifeng? Hu Haifeng was the former chairman of a company called Nuctech from 2003 until 2008, which is part of separate subsidiary of Tsinghua Holdings called Tsinghua Tongfang… which is, again, now being restructured by the Sichuan Energy Investment Corporation (SCEI). (To clarify this: Tsinghua Holdings is the multi-billion dollar parent super-conglomerate, and Tsinghua Unigroup and Tsinghua Tongfang are its smaller — but still utterly massive — subsidiary conglomerates.)
In 2008, Hu Haifeng was promoted to Communist Party Secretary of Tsinghua Holdings (which, as we already mentioned, controls over two dozen major subsidiaries, including Tsinghua Tongfang, which in turn controls Nuctech). If one properly understands the Chinese Communist Party to be an ideologically-driven transnational organized criminal organization — a criminal parastate which exists both outside and throughout the Chinese state and state-owned enterprises — then to be Party Secretary of a major conglomerate is rule over one's own fiefdom of Party-sanctioned crime.
Former Nuctech chairman Hu Haifeng’s father, Hu Jintao, of course, also led the Central Military Commission from 2004 until 2012, in addition to his time as Party General Secretary from 2002 until 2012. There isn't a precise analogy to be found, but (for the purposes of comparison) imagine if Jenna Bush had used her father's connections to lead a critical nuclear-related company like Westinghouse, if, in this alternate reality, Westinghouse was majority-owned by Harvard's Endowment. That, in hypothetical terms, would be similar to the very real situation with Nuctech, Hu Haifeng, and Hu Jintao.
Nuctech, by the way, is listed on the BIS Entity List as “Tongfang Nuctech Technology Ltd.”
A 2020 diagram from Nikkei showing Tsinghua Unigroup's connections to the Chinese state.
Tsinghua Holdings' subsidiary TusHoldings has built science and technology parks in the US, UK, South Korea, Russia and Israel. Its IT and security company Tsinghua Tongfang’s subsidiary, Nuctech, works in 150 countries, including providing security equipment for the Rio Olympics, Belgian railways and the Australian customs department. Tsinghua Holdings also has a renminbi-denominated fund with Japan’s SBI Holdings and once even had an asset management company with the New Jersey-based investment manager Lord Abbett.
AN EPIC DRUG BUST
In 2019, during the height of Australia’s souring relations with China, two New South Wales landscapers were arrested after importing an excavator to Port Kembla from South Africa. Why arrest two poor blokes over an Caterpiller excavator? Because hidden inside that Caterpillar excavator was a narcotic butterfly: more than 300 packages of pure Colombian cocaine… some 270 to 384 kilos (according to different reports). At street value, that cocaine could’ve been worth upwards of $144M. Moreover, it represented something like half the cocaine that Australian Border Forces would be expected to interdict in an entire year… at least in any normal year. And were it not for the Chinese-made Nuctech scanner that was used to scan the excavator, police likely would’ve never made the bust.
And what a fantastic bust it was! Or was it?
This analyst has no special insight into this investigation, but one could speculate that perhaps this “epic bust” was something else altogether. Perhaps it a clever intelligence play by a transnational criminal syndicate that’s working *with* Nuctech to corner the market on X-ray scanners in order to facilitate smuggling activities around the globe in the never-ending cat and mouse game between police and organized crime. The importers, its alleged, didn't even know what was hidden in the excavator until it was en route to Australia.
“What?!” you might say. “Why would you intentionally have $144M worth of your finest product seized by Australian police?!” This is purely speculation, but just think about it for a moment from a criminal counterintelligence perspective.
One big bust to leave Australian citizens talking for years...
One big bust to make Australian customers officials look good for having purchased Chinese-made Nuctech X-ray scanning technology during the height of deteriorating relations…
One big bust to keep Australian anti-narcotics investigators smug and distracted while a cumulatively larger amount of drugs, packaged in smaller shipments, sneaks through…
After all… if you're a transnational drug syndicate that's partnered with Nuctech, you'd theoretically know not only what gets scanned, but when and where it gets scanned, now wouldn't you? In fact, you might even have some special insight into flaws in what the machines can detect and how to properly package drugs in such a way so as to evade their detection.
(This analyst has no insight into Australian counternarcotics investigations into South African criminal syndicates and their potential collaboration with Chinese intelligence, if any investigations should happen to exist. This speculative vignette has been shared for simple expository purpose of explaining the massive problem with Nuctech scanners. For readers interested in verified stories from the darker side of Chinese organized crime and intelligence, Willful Blindness, by Sam Cooper, is highly recommended.)
A DETOUR INTO NUCTECH AND XINJIANG
Nuctech’s X-ray scanners and other security equipment were used at the 2014 World Cup, the 2016 Olympic Games, the 2016 Paralympic Games in Brazil, the 2015 Milan Expo, the 2015 Wimbledon tennis tournament, and the 2018 Summit of the Americas. They were almost certainly used at the Beijing 2022 Genocide Olympics as well. Nuctech products operate in some 150 countries (!) around the world.
It's worth pointing out that Kazakhstan is perhaps Nuctech's largest partner outside of China, with nearly all of Kazakhstan's border crossings using Nuctech scanners. This, of course, makes sense… after all, Nuctech is majority owned by Tsinghua Tongfang, a subsidiary of Tsinghua Holdings, but also minority (16-19%) owned by China National Nuclear Company (CNNC). As a CNNC subsidiary, Nuctech's role in securing China's uranium supply chains (from Kazakhstan) is perhaps its most important corporate mission. In 2019, Nuctech received a contract for the modernization of 11 border checkpoints in the nation of Kazakhstan, which produces roughly half of the world’s uranium supply. In June of 2022, the former chief of Kazakhstan's Border Guard Service, Lieutenant General Darkhan Dilmanov, and several of his former subordinates were detained on corruption charges, after the earlier arrest of Karim Massimov, the 13th Chairman of the National Security Committee. It a safe bet to assume that kleptocrat Nazarbayev, Massimov, and others were compensated handsomely by Nuctech and its associates for giving Nuctech the border checkpoint modernization contract.
Nuctech products are used for border control at Hongqilafu, Xinjiang (the world’s highest dry port, Khunjerab dry port) which is a major trading post on the Karakoram Pass between Pakistan and its nuclear big brother: China. Nuctech reaches deep into Europe, too. For instance, YuXinOu Railway (渝新欧铁路) is a freight rail route linking Chongqing, in the inner part of China, with the world’s largest inland (wet) port in Duisburg, Germany, the Duisburg-Ruhrorter Häfen. The YuXinOu railway passes through Ürümchi, East Turkistan/Xinjiang and transits to the scenic Alashankou border crossing’s Dzungarian Gate between Xinjiang and Dostyk/Druzhba, Kazakhstan. (Alashankou, Xinjiang has been envisaged by the Chinese as a possible major uranium hexafluoride trading hub, so obviously Nuctech products secure the entire route.) It then continues on into Russia, Belarus, and Poland, before finally reaching Germany. Goods from Zhengzou, Shenzhen, Chengdu, and elsewhere transit the YuXinOu Railway route, which is partly operated by DB Schenker China, a subsidiary of Deutsche Bahn. And guess what? It appears that Nuctech scanners cover the entire route from Germany to China… a potential nuclear-powered dagger into the heart of NATO Allied security.
It gets better: Nuctech has supplied airport, seaport, and/or rail cargo scanners to four of the five NATO nations that border Russia (Estonia, Latvia, Lithuania, Poland) and to *both* Belarus and Ukraine! If the Chinese regime decides at some point that it wants to ship massive amounts of weapons to Russia and Belarus, they already have the physical security apparatus in place to make sure those weapons safely reach their destination… and we'd have very little insight into those shipments until those weapons reached the battlefield.
Besides Alashankou, the other major border post between Kazakhstan is Xinjiang is Khorgas. Goods are transshipped here that originate in Lianyungang or Chengdu. They’re headed for the Caspian Sea and, ultimately, the German port of Hamburg, which Olaf Scholz has just recently partially leased to the Chinese, over the protests of some 81% of the good and decent German public. It appears that most of that intermodal route in covered by Nuctech scanners as well.
THE THIRD RAIL: ORGANIZED CRIME AND CORRUPTION
Given the way China’s party patronage system works, and given the very public decapitation of the Communist Youth League faction (Hu Jintao) by the Shanghai faction (Xi Jinping), this analyst believes that it’s possible (if not likely) that Xi’s faction has just seized control of the bulk of China’s illicit, extraterritorial drugs and weapons trafficking activities… a Beijing-based transnational criminal enterprise centered around Tsinghua University and the Beijing State Security Bureau which this analyst believes (1) has leveraged Nuctech's growing global footprint, (2) has likely been a retirement perk shared amongst former high-ranking Party leaders and their close kin, (3) has likely operated through the high-tech business community and possibly trade/industrial groups.
If so, this would be a *massive* consolidation of power for Xi Jinping, as China's licit (if questionable) “white glove” and illicit (and disavowed) “black hand” activities have historically not been consolidated under the same political patron. In other words, if this analyst is correct in their reading of events, Xi Jinping is now not only General Secretary of the Chinese Communist Party, Chairman of the Central Military Commission, and so forth, but now *also* “the Godfather” of the bulk of China's state-sanctioned illicit activities… in Triad terms, that makes him the “Mountain Master” (山主) or the “Dragonhead” of official Chinese state-sanctioned, intelligence-directed crime.
The elevation of Chen Jining, environmental engineer and former Tsinghua University president, to the Politburo and to be Shanghai's new Party Secretary is further evidence of this, if any should be needed. (He’s being described as one potential rising candidate to succeed Xi in 2027.)
THE NUCLEAR AND MISSILE THREAT
China is thought to possess some 150 tactical nuclear warheads on its short-range ballistic, and, this analyst is increasingly confident, long-range cruise missiles. Dissenting from current public Defense Intelligence Agency-backed assessments on China's nuclear weapons program, this analyst further assesses that the PRC’s clandestine nuclear buildup is likely to lean more towards tactical nuclear weapons to deter “limited nuclear war” scenarios than is currently understood, with a buildup that will strongly favor tactical, short-, intermediate-, and medium-range ballistic missiles (theater-range ballistic missiles) and extended range cruise missiles as delivery platforms… *despite* the regime’s very public flexing of its MIRV ICBM Dongfeng-series strategic deterrent and its thus-far scant mention of pursuing any type of tactical, offensive nuclear deterrent.
Indeed, if this analyst is correct in this assessment, in terms of the PLA's future deployed deterrents, a tactical-heavy, strategic-light mix with a primary focus on forward deployment of shorter-range missile forces to the Tibetan plateau and other potential hotspots would fit well within existing Chinese strategy. As long as they're pursuing the largest peacetime weapons buildup in history, it makes abudant sense that they're going to do so while leaning heavily into utilitarian weapons that they conceivably might actually use (i.e., in conflict with India) versus doomsday deterrents that they hope to never use versus the United States. That DIA and STRATCOM continue to publicly assess that China's will lean heavily into a long-range strategic nuclear deterrent while completely neglecting a short-range tactical deterrent indicates that there's something very wrong with the assessment process. For instance, highways and even train lines being built in the Tibetan plateau are clearly being built to accommodate mobile launchers for theater-level ballistic missiles.
Furthermore, given strategic efforts by Nuctech to dominate the market for cargo scanners for BRI, CPEC, etc., railways and ports, including via COSCO, CSSC, etc. port access and ownership agreements, this analyst assesses cargo container (i.e., rail-mobile) launchers to pose an extremely grave and understudied risk not only to India, but to NATO forces, vessels, and, potentially, territory. Our present diplomatic overtures of “strategic competition” and our tunnel-vision focus on microchips and data security at the expense of a greater focus nuclear and missile issues are completely out of step with the risk China’s regime poses to Allied security.
To be abundantly clear to the Tony Blinkens of the world: we are not in “strategic competition.” We are in “phase zero conflict.” We simply don't realize it. While we're fretting over microchips, the Chinese are selling cargo scanners to the Phillipines and inking port agreements with nation after nation after nation… ports where Nuctech scanners and, in a worst-case scenario, container-launched missiles might conceivably show up. In military terms, what the Chinese are doing is classic operational phasing, but it's occuring at a very large scale and disguised as commerce, and because of that, our geostrategists are failing to comprehend it.
When China attempts to move on Taiwan, we will quickly find out that we are entering a new phase: Phase One. During Phase One, the Chinese will attempt to deter the United States and Allied nations from coming to Taiwan's defense. Nuctech's global footprint will help with that immensely; we'll wake up one morning and realize that it was a paralyzing mistake to give the Chinese a beachhead for their containers at major Western ports. (Fortunately, one can imagine a few novel checkmate moves that we could slide up our sleeves as well, however it remains to be seen if we'll have “leaders” competent enough to employ them.)
If that weren't enough — in case this analyst doesn't have you attention yet — of the aforementioned estimated 150 tactical nuclear weapons that the Chinese regime is thought to possess, this analyst assesses with moderate confidence that two may have been detonated underground during the Party Congress (and if not the warheads themselves, then “exploding bridgewire detonators” which might be used to detonate such warheads). More on that shortly.
THE COMING SINOPEC SHALE GAS REVOLUTION
In October of 2022, China's Sinopec — the world's largest refiner, by volume — announced that it had struck a massive high-yielding shale gas exploration well in the southwestern Sichuan basin with a daily gas flow of 258,600 cubic meters.
This seems like a clue as to why Tsinghua Holdings itself was transferred to the Sichuan State-owned Assets Supervision and Administration Commission (SSASAC) and then re-transferred to the Sichuan Energy Industry Investment Group (SCEI). It appears to this analyst that the Party, at a high level, is quietly restructuring Tsinghua University’s massive holdings company and its subsidiaries (and all the licit and illicit intelligence-connected business those enterprises encompass)… and that they’re using the oil and gas industry in Sichuan, and as we’ll soon see, in Xinjiang, to do so.
Determining what's happening inside SCEI and Tsinghua Holdings is very difficult, as they're opaque funds, but from a sovereign finance perspective, combining Sichuan Energy Industry Investment Group's real, provable mineral assets with Tsinghua Holdings' intellectual, real estate, and other assets (and liabilities) on one master balance sheet does actually make good business sense, as SEIC could in theory provide operating capital during Tsinghua Holdings' restructuring. Moreover, future revenue from future oil/gas exploration (i.e., from Sinopec projects in Sichuan and Xinjiang) could in theory be borrowed against in such a way as to keep things solvent or to provide funds for expansion. If the Chinese are seeking energy exploration partnerships with Gulf States, SEIC would be a logical vehicle to facilitate that, as well.
Analyst's note: it may very well be the case that Tsinghua Holdings is, in large part, an outgrowth of China's Ministry of State Security, and that Tsinghua Unigroup companies' strong and early focus on microchips actually reflects MSS strategy dating back to the 90s and 00s… for instance, emanating from what was formerly the Ministry of State Security's Tenth and Eleventh Bureaus (the Scientific and Technological Information Bureau and Electronic Computers Bureau). Moreover, the leveraging of oil/gas industry assets in furtherance of intelligence objectives as part of a larger national strategy would actually be taking a page from America's (old) playbook, as American intelligence (the CIA) was quite involved with (and in some senses, almost in financial symbiosis with) the oil/gas industry up until the late 1990s (at least). Indeed, as this analyst explains in the Nuclear Blackmail timeline, to an extent, the CIA still does appear to rely on the oil/gas industry in some respects (look no further than Hunter Biden and Burisma). Russian intelligence likewise appears to be enmeshed in Russia's oil and gas industry. That China would mimic such behavior by transferring the clearly-intelligence-connected Tsinghua Holdings to the custody of Sichuan Energy Investment Group shouldn't come as a surprise.
ALL ROADS LEAD BACK TO XINJIANG
In August of 2022, China Petrochemical Corp, or Sinopec, acquired crude oil and natural gas from a newly-drilled oil reserve about 8,000 meters (that’s 8km) deep in the Tarim Basin of Northwest China's Xinjiang Uyghur Autonomous Region (AKA Occupied East Turkistan). This high-yield reserve in Sinopec's Shunbei oil and gas field is estimated to be capable of producing 244 tonnes of crude oil and 970,000 cubic meters of natural gas each day, according to Sinopec. Located in the central and western regions of the Tarim Basin, Sinopec's Shunbei project has an average reservoir burial depth of more than 7,300 meters (that’s 7.3km). It actually has *41* ultra-deep drilling wells with a vertical depth exceeding 8,000 meters (8km).
On October 16th, 2022, hours before Xi Jinping’s opening speech to the 20th National Congress of China’s Communist Party, at a depth of approximately 10,000 meters (10km), a roughly 5.0 magnitude earthquake struck near Kashgar, Xinjiang/East Turkistan. 10km is a depth that's well within reach of Sinopec's engineers, if they should've chosen to drill that deep.
October 16th was a significant day for another reason: on 16 October 1964, the People’s Republic of China conducted its first nuclear test (at Lop Nur), making it the fifth nuclear-armed state after the USA, the USSR, Britain and France. It was a uranium-235 implosion fission device with a yield of 22 kilotons (photo shown on right).
On 23 October 2022, as the 20th Party Congress was ending — with Nuctech's former Chairman Hu Haifeng’s father, Hu Jintao, publicly ushered away — a second earthquake occurred with the same magnitude (5.0) and near the same depth (10km), in Xinjiang, not far from Kashgar. What're the odds of two natural earthquakes of approximately similar magnitude and depth occuring in the same region and bookending the Party Congress? The odds are astronomical.
Producing a seismic event that registers 5.0 on the Richter scale from “explosive fracking” would require an explosion with a (roughly) 5.8 kiloton TNT-equivalent yield (if this analyst's math is correct). While that seems small for two tactical nuclear weapons — but by no means infeasibly small — the fracking charges could’ve also come from two exploding-bridgewire detonators (or “EBW’s”) which are used to detonate a nuclear weapon, rather than warheads themselves. Coincidentally, EBWs have been floated by scientists for possible use in Sichuan, rather than Xinjiang… again, both places where Sinopec is operating.
(See this analyst's Nuclear Blackmail timeline for additional information on these likely explosive fracks, as well as for information on America's own nuclear fracking program… particularly the entries dated 16 October 2022 and 23 October 2022.)
It seems to this analyst that China’s Tsinghua criminal enterprise is insolvent and is being restructured atop China’s oil industry. Xi’s visit to the Kingdom of Saudi Arabia was quickly moved up from 2023 to December of 2022. In this analyst’s assessment, the two explosive, earth-rattling warning shots bookending the Party Congress and Xi’s reversal on coal production earlier this year together indicate that a broader restructuring of the Chinese energy sector is underway. Breaking the nuclear fracking taboo was a move designed to influence futures markets… if not at the level of publicly-traded oil markets, then at the sovereign, interpersonal leader-to-leader level.
America and her allies don’t have a response, since both the oil and uranium markets are effectively cartelized, and this administration seems intent on pursuing a policy of foreign energy supply chain dependence, prioritizing ecological virtue-signaling over any kind of serious, hard-nosed energy security strategy.
Aside: as best this analyst can tell, this administration’s only breakthrough plans for bolstering energy security center around Bill Gates' Chinese-backed HALEU (high assay, low-enriched uranium) play, TerraPower, which is hoping to build a prototype reactor in Wyoming… however that's assuming we can even domestically produce HALEU by 2025, which is unlikely. And if we can't produce our own HALEU domestically, we’ll have to buy it from Russia (or, as certain figures in the administration would likely prefer, from Iran). Either way, those HALEU supply chains, if they're approved, will stretch through China. TerraPower, for readers who might not be aware, is Chinese-backed, and Bill Gates, for readers who don’t know, is a clear agent of Chinese influence (although in fairness to both, they've recently partnered with Japan).
(You can read more about uranium supply chains on the 12 April 2017 entry on the Nuclear Blackmail timeline.)
Compounding this problem with Nuctech is the fact that the Mexican government is poised to purchase Nuctech scanners for its side of the US-Mexico border. VP Kamala “Border Security” Harris appears uninterested in, or unaware of, this clear and present danger to US national security. So far, it seems our only response has been a stern warning letter from US Ambassador Salazar to Mexican officials. No threats have been made to cut Mérida Initiative funding of other security assistance. No efforts have been made to subsidize Astrophysics (made in America) or RapiScan (made mostly in India) cargo scanners to ensure our border is secure. Nothing.
Cartel economics are such that flows of drugs and weapons are countervailing and strongly linked: more guns go out, more fentanyl and other contraband comes in. Having ineffective security on one side of the border causes problems on both sides. In other words, having high failure rate Nuctech scanners — perhaps *intentionally* high — on the Mexican side is likely to overwhelm our capacity to interdict illicit cargo on the US side.
That of course doesn’t include the massive threat Nuctech cargo scanners pose in terms of sensitive data sent back to China. These are essentially black box AI systems, and we have no assurances on where that data is going. That data can give the MSS, PLA, and other criminals critical insight into “who (and what) is where (and when).”
A FINAL THOUGHT
With his father publicly purged and no doubt fearing for his own safety, after the Party Congress, former Nuctech chairman and Tsinghua Holdings Party Secretary Hu Haifeng — now the Party Secretary of Lushun City — praised Xi’s report to the 20th Congress in glowing, neon, iridescent language, saying it “shines with the brilliance of the truth of Marxism, and reflects the needs of the country, the aspirations of the people, and the aspirations of the future.”