U.S. Restricts Exports to Chinese Quantum Firm

QuantumCTek, which has provided services to Chinese military entities, received items from U.S. and Western companies through intermediaries in recent years

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By Samuel Rubenfeld and Edmund Xu

Wednesday, November 24, 2021

China’s first publicly traded quantum technology company, QuantumCTek, fell under U.S. export restrictions on Wednesday for acquiring American items to support military applications, according to the U.S. Department of Commerce.

QuantumCTek, which had soared in its 2020 debut on the Shanghai stock exchange, was one of eight China-based companies added Wednesday to a Commerce Department export controls list as part of an effort to prevent U.S. technology from being used in Chinese quantum development. 

More than two dozen entities were added to the U.S. list overall, including a Shanghai-based subsidiary of QuantumCTek, according to a regulation to be published in the Federal Register.

Quantum computing is an emerging field that could revolutionize problem solving, with significant economic and security implications, according to an explanation page from the U.S. Department of Energy. China is using the technology to support military applications, including counter-stealth and counter-submarine ambitions, as well as development related to encryption, the Commerce Department said.

Western components: QuantumCTek received chips, power modules and other components from U.S. and Western companies in recent years via Chinese intermediaries, an investigation by Kharon found. 

The company also owns Shandong Institute of Quantum Science and Technology Co., Ltd., which has multiple permits to carry out Chinese military research and production activities, Kharon found.

The Shandong Institute also received “military secrets”-related subsidies worth nearly RMB 2 million from the General Armament Department Financial Settlement Center, a unit of the Equipment Development Department (EDD), which was sanctioned by the U.S. in 2018.

Military joint ventures: QuantumCTek has also established joint ventures with Chinese state-owned military firms to advance quantum research, Kharon found. 

The company holds a 40 percent share of Wuhan Aerospace Sanjiang Quantum Communication Co., Ltd., which is also a QuantumCTek service provider, according to Chinese securities disclosures. The other shareholder, records show, is a subsidiary of China Aerospace Science and Industry Corporation (CASIC), which is on a U.S. Treasury Department list of Chinese military industrial complex companies.

QuantumCTek also entered into a joint venture agreement with state-owned telecom giant China Telecommunications Corporation to carry out research and development for commercial quantum encrypted communication technology, according to a report by Sina News, a Chinese media outlet. China Telecom is also named on the U.S. list of Chinese military-industrial companies. The partners aim to integrate quantum communications with other technologies such as 5G, big data and the cloud, the Sina News report said. 

Researchers at the Chinese Academy of Sciences (CAS) and the University of Science and Technology of China (USTC) used technologies provided by QuantumCTek to develop a quantum processor faster than Google’s quantum Sycamore processor, they said earlier this year in a research paper. 

Several authors of the research paper are affiliated with the Hefei National Laboratory for Physical Sciences at Microscale, a laboratory located at USTC which was also listed Wednesday. CAS and USTC both own stakes in QuantumCTek, as does Pan Jianwei, the leading author of the study, records show.

Two of the authors are also listed as being affiliated with the Henan Key Laboratory of Quantum Information and Cryptography, which is overseen by the Chinese military. The U.S. in June 2020 broadened its controls on exports to Chinese military end users and for military end use (MEU).

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