Insider Brief
- China’s work in quantum computing and communications could undermine encryption standards and accelerate data-driven surveillance, according to a report from the National Endowment for Democracy (NED).
- The report warns that China’s “harvest now, decrypt later” approach and its leadership in quantum-secured communication systems pose risks to cybersecurity, corporate data, and democratic institutions.
- Analysts recommend accelerating the transition to quantum-resistant cryptography, increasing transparency in AI surveillance and engaging in international standard-setting to counter authoritarian digital norms.
China’s progress in quantum computing and communications could undermine encryption standards and accelerate the global spread of data-driven surveillance, according to a report from the National Endowment for Democracy (NED). The report, Data-Centric Authoritarianism: How China’s Development of Frontier Technologies Could Globalize Repression, warns that emerging technologies, including quantum, artificial intelligence (AI), and digital currencies, are solidifying Beijing’s tech-enabled governance model while influencing authoritarian regimes worldwide.
The analysts suggest that China’s quantum advances could shift the balance of cybersecurity, particularly through the potential to break conventional encryption and the export of quantum-secured communication systems. The implications of this extends beyond espionage and state surveillance to corporate data security, financial transactions, and democratic resilience in an era of accelerating technological competition.
Data Security Under Threat
China has dedicated substantial resources to quantum research, arguably outpacing U.S. government funding in key areas of quantum computing and cryptography. The NED report states that China’s investment in quantum technology is times greater than the U.S. planned government spending as of 2023. Researchers at China’s Hefei National Laboratory for Physical Sciences, alongside firms such as Origin Quantum and QuantumCTek, are leading efforts to build quantum processors and secure communication networks.
A major concern raised in the report is the “harvest now, decrypt later” strategy, where encrypted data is stored today with the expectation that future quantum computers will be able to crack it. Current encryption relies on mathematical problems that classical computers cannot solve efficiently, but quantum systems capable of running Shor’s algorithm could theoretically break these protections.
The U.S. National Institute of Standards and Technology (NIST) has been working on post-quantum cryptography to counteract this threat, but the transition remains in early stages. The report emphasizes the urgency for civil society groups, journalists and human rights organizations to adopt quantum-resistant cryptographic methods before adversaries gain decryption capabilities.
Quantum Communications: Security or Control?
Beyond decryption, China is leveraging quantum technologies for secure communications, deploying a national quantum network and operating the Mozi satellite, which reportedly facilitates space-to-ground quantum key distribution (QKD). The report highlights that China has conducted quantum communications tests with Russia and is exploring expanding this network among BRICS nations, which now include Brazil, Russia, India, China, South Africa, Egypt, Ethiopia, Iran, and the United Arab Emirates.
While QKD promises theoretically unbreakable encryption, the report warns of potential vulnerabilities.
“First, quantum computing is expected to eventually enable any state or non-state actor that possesses this technology to circumvent encryption that protects communications,” the analysts state. “Second, if the quantum communications providers who are first-movers in this space adopt cryptography standards and equipment that include backdoors for official government use, information conveyed over quantum networks will be vulnerable to state surveillance — potentially either by the governments that import these technologies, or by the home countries of companies that provide quantum services.”
Democratic nations have taken steps to mitigate China’s dominance in quantum communications. The European Union launched the EuroQCI initiative, and the U.S. has ramped up funding for quantum networking research. Still, China’s lead in quantum-secure infrastructure raises concerns over global standards-setting, as its approaches could become the default for nations integrating quantum communications into their cybersecurity frameworks.
AI-Powered Surveillance and Quantum Integration
China’s advances in quantum technology intersect with its AI-powered surveillance infrastructure. The report describes AI-powered “city brains” in smart cities, which integrate data from facial recognition, social media, and public records to automate law enforcement decision-making. It also highlights the role of PRC companies like CloudWalk, Megvii, and SenseTime in developing AI systems optimized for tracking and monitoring populations.
Quantum computing could enhance these systems by accelerating the processing of vast amounts of surveillance data.
The report states: “Notably, Chinese tech platform Origin Quantum states on its website that its quantum computing technology can aid with speech and image recognition and processing as well as pattern matching more broadly, underscoring the potential symbiotic relationship between quantum computing and AI-powered surveillance.”
As quantum technology matures, it could be used to refine AI-driven predictions of political dissent or protests, further reducing the time window for civic movements to organize before authorities intervene.
Digital Currencies and Financial Surveillance
China’s digital yuan, or e-CNY, represents another facet of data-driven governance with geopolitical implications. While adoption within China has been slower than anticipated, the report notes that China is pushing cross-border digital currency transactions through the mBridge project, a blockchain-based settlement system that includes financial institutions from Hong Kong, Saudi Arabia, Thailand, and the UAE.
Unlike decentralized cryptocurrencies such as Bitcoin, central bank digital currencies (CBDCs) provide governments with direct control over transactions.
Direct links between central banks and individuals, governments can immediately access and monitor user data, rather than requesting it from third-party financial intermediaries, according to the report.
For authoritarian regimes, CBDCs present an opportunity to enhance financial surveillance and restrict opposition funding. The spread of China’s digital yuan could also undermine the effectiveness of U.S. financial sanctions, particularly against Russia and Iran, by reducing reliance on SWIFT, the dominant international banking messaging system.
Geopolitical and Industry Response
The U.S. and its allies have taken steps to counterbalance China’s technological influence. The CHIPS Act, enacted in 2022, provides funding for quantum research. The Senate is beginning debate on a $2.5 billion bill to bolster quantum efforts. Another strategy is focused on export controls have been imposed on quantum-related technologies. However, the NED report suggests that export controls alone may not be sufficient to prevent China from shaping global standards in quantum cryptography, AI surveillance, and digital currencies.
The report calls for democratic governments to engage in international standard-setting fora to prevent authoritarian digital norms from becoming the default. It also recommends accelerating efforts to implement post-quantum cryptography, fostering privacy-preserving technologies, and tracking the diffusion of China’s surveillance infrastructure.
The Future of Data-Centric Authoritarianism
The report presents a stark picture of how China is using quantum and other frontier technologies to cement its model of governance, both domestically and abroad. It argues that, without countermeasures, democratic institutions risk being outpaced by an ecosystem designed for data-driven control.
The analysts conclude: “The rapid and complex technological transition we are witnessing suits authoritarian regimes, and Beijing in particular. It presents a window of opportunity not only to challenge the technological edge of democratic states, but also to weaken the established rights to privacy, anonymity, and freedom of expression and assembly. The danger of data-driven authoritarianism can only be mitigated if democracies recognize the centrality of data in today’s governance systems and work consciously to present an alternative to authoritarian approaches. It is high time that democratic societies double down on building data and technological ecosystems that are transparent, accountable, and infused with democratic values. Leveraging their robust innovation ecosystems in tandem with the power of vibrant, pluralistic civil societies, democracies must chart a rights-respecting path to unlock the benefits of emerging technologies for people around the globe.”
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