Abstract

In this new series of monthly podcasts, Dr Alessandro Arduino and Dr Ameem Lutfi invite eminent speakers to share what they see in the future of warfare, as well as the transformation and transition of security architecture in the Middle East, North Africa and Central Asia. Through these podcasts, we will observe how uniformed soldiers, or boots on the ground, are being replaced by private military companies and automated weapons, and will also notice a shift in the theatres of war, from territorial borderlands to shared oceans, air and cyberspace.

In this podcast, we will talk about the role Chinese private security companies play in the industry.

Listen to the full podcast here:

Full Transcript: 

Ameem: Welcome to the fifth episode of the National University of Singapore’s Middle East Institute’s podcast series Boots Off the Ground: Security in Transition from the Middle East and Beyond.  In this series, we look at the future of warfare which will see uniformed soldiers, or boots on the ground, being replaced by private military companies, autonomous weapon systems and cyber weapons.

My name is Ameem Lutfi and I will be the co-host for the series along with my colleague Alessandro Arduino.

Alex: We are very glad to have with us today Mr Qing Liu, manager in the top Chinese private security firm Huaxin Zhongan.  The company is headquartered in Beijing and it is considered a leading private security provider specialised in commercial vessel protection.

Thank you for joining us today Mr. Liu.

Alex: In our latest podcast, we had with us Mr Jamie Williamson from ICoCA discussing the importance of regulation and transparency in the private security sector. If I am correct HXZA is one of the few Chinese members of ICOCA. Why is that? What advantages does HXZA see in being part of an international regulatory body? Why have other Chinese companies not done the same?

Liu Qing: Thank you Alex and Ameem, very glad to participate on your podcast.

HXZA supports the global quality standards in the private security sector since the company’s incorporation. That is why HXZA was motivated to become a founding member of ICoCA and actually last year received full ICoCA Certification.

We became the first company in Asia to get both ISO 28007 and ICoCA certification, and the first in China to begin audit for ISO 18788 and PSC-1. We will complete our audit as soon as the corona virus situation is over.

This is important when operating in sensitive environments such as the maritime domain, and across Asia and Africa (our core target markets), evidencing a better service than our competition.

HXZA tries to improve the quality of our services, promote a responsible brand, and be a force for good. We want to create positive impacts where we operate. There is no better way to show this than through ICoCA certification. It provides a review of our management systems beyond ISO to include social responsibility and human rights compliance too.

HXZA achieving ICoCA Certification is a huge milestone for us as we continue to maintain the high standards expected by our customers.

As the largest maritime security service provider from China, holding a majority share of the Chinese market, we want to differentiate our service level from the competition and show that we are not only a leader in number of transits, but completely committed to quality, as well.

ISO 28007, now considered as the mandatory minimum standard in this industry was not enough for compliance of top international and Chinese clients due to the nature of our work.

ICoCA certification is better. It shows to our customers that HXZA’s services remain market-leading. Having ICoCA certification as a voluntary maximum standard above ISO 28007 adds quality assurance to our brand which clients cannot find elsewhere.

This has opened up new opportunities for HXZA beyond China, as international clients, especially those from Europe, now see the enhanced service quality available from HXZA.

While we are still the only, we hope we that the other Chinese PSCs operating in the complex land and sea environments follow us and work toward obtaining ICoCA certification.

Ameem: To follow up, do you think a Western regulatory body, such as the Swiss based ICoCA, satisfies the needs of the Chinese private security sector? Or is there a need to design codes of conduct with quote-unquote Chinese characteristic?

Liu Qing: Perhaps we can separate this question into two parts– the international market and the domestic market.

ICoCA provides a great platform focused on the international market. It is a framework for our overseas business to be sure we meet international norms. This is important, and it is also more sophisticated than what most Chinese, or even foreign PSCs can achieve.

The Chinese domestic market is less complicated, less dangerous, and does not meet the operating environment the ICoC is made for. But there are many parts of the ICoC that can benefit China.

In fact, I am on the steering committee for developing a Chinese National Standard for security services and suggested incorporation of several key components of the ICoC ，ISO18788 and PSC.1 to be put in the National Standard. Let’s see how it turns out.

Alex: One of the things that sets Chinese private security apart from its western rivals is that they operate under a Chinese law forbidding its citizens abroad from carrying weapons. In my understanding, to work around this limitation Chinese companies have to hire foreigners to do the actual work of carrying guns. How does this impact your operations? Does it seriously set Chinese companies back from the global competition? and in your is there a need to rethink this law?

Liu Qing: Key points from my understanding to answer question about weapons:

1. 1. Currently Chinese law forbid Chinese citizens to carry weapons and also forbid PSCs to operate armed security within China territory. Only state owned companies allow for armed escort security provided for cash and valuables in transit.
   2. Up to now, there is no law forbidding Chinese PSCs to operate armed security outside China.
   3. We don’t think Chinese security personnel carrying weapon is a key issue for provision professional services in most of our target markets outside of China.
   4. It doesn’t set Chinese PSCs back from the global competition. Today’s competition in global market are technologies, solutions, management… in stead of USE of LETHAL FORCE
   5. I haven’t heard big arguments about a need to rethink this kind of laws but on contrary, we don’t think use of force is best solution to solve today’s global security issues. Chinese government is trying to regulate overseas operations of Chinese PSCs in compliance of laws of Chinese, international and countries where they operate.
   6. The government never encourage Chinese PSCs to focus on development of armed security and Chinese PSCs already realize that to arm Chinese security personnel is a double edged sword which may not necessary result in Chinese PSCs being more competitive than western PSCs

Ameem: Just for more elaboration, who are the foreigners that get hired by Chinese PSC, and how are they recruited? As in are they retired police or military officer’s native to the zone of operation? Or do they also include what we call, ‘third country nationals’, that is staff who are neither Chinese nor local to the site of operation? Also, is the role of foreign nationals limited to guard duty or they also hired as managers or trainers?

Liu Qing: This is an excellent question. HXZA incorporates all the above human resource solutions.

We have evaluated the market by looking at what works and what does not. Not only for HXZA or Chinese PSCs, but also foreign companies. Ineffective localization has caused business failure.

We want localization both in the host country as well as for the client. While always ensuring legality, we recognize that operating overseas with 100% Chinese security teams is not effective. If our personnel do not speak the local language, know the local customs, have the relevant licenses then of course we hire local nationals to support our activities, usually in mixed teams: Chinese and Local.

In some places based on the threats and costs, we do hire third country nationals. This is not some bad catch-phrase, but a very effective solution for preventing complacency or complicity of local guard teams exposed to local conflicts, and also providing our clients, especially foreign clients, with security personnel who speak their language.

For example, several of our Russian speaking or Arabic speaking clients request security personnel which speak the language of the principals. This keeps the operation very comfortable. We also work with both foreign and local trainers, and have some foreign management personnel.

The background of the personnel are many. Of course in the security industry many personnel have military or police experience. But our services are much wider than that. We also have retired diplomats, insurance experts, medical professionals, salesmen, and data analysts. All have a diverse background. Diversity is our strength.

As for hiring and recruitment, our policies and procedures are certified to the ICoC and we are an equal opportunity employer. Candidates can apply online and will then go through our vetting process. Overseas we may hire directly or via a local partner or subsidiary, depending on the circumstances.

Alex: I want to now move on to a discussion of perceptions. When I was presenting my book China’s Private Army one of the recurring questions was, are Chinese PSCs just the PLA in disguise? What is your response to this question?

Liu Qing: To answers above, I prefer to brief on history of Chinese security service industry. First stateowned security company was established in 1984 which was a start point of modern security services in China. There were only stateowned security companies allowed to operate in the first 20 years and number of stateowned companies up to 3000 at it’s peak. But private owned security companies are growing very fast in recent 15 years since this industry opened to private sectors. Up to date, there are more than 8000 thousand PSCs with 500 million security personnel but stateowned security companies decreased from 3000 down to 1000.

Still PLA concern is a common point raised by the foreign media, but people who know the industry see that is a competitive and open market.

In fact, the Chinese private security industry is less government affiliated than its western counterparts. Western PSCs have provided a range of military and security services to their home-country governments or third-country governments directly— Chinese government outsourcing of security services, especially armed solutions is very small: regulation isn’t even in place yet to allow security service contracting with most government organs including the PLA.

An important point about Chinese PSCs are not  PLA in disguise outside of China: Although need of protecting Chinese overseas investments and business opportunities are increasing rapidly in recent years, there are very small number of Chinese PSCs among over 9000 companies having operation or capabilities to expend their operation outside China till today.

We are also competing with western PSCs and local PSCs to gain contracts from even Chinese stateowned companies or investments. Most of Chinese companies are still contract foreign security service providers in manned guarding, risk assessments, crisis management, threat intelligence information.. etc. Chinese PSCs business overseas is fully market oriented. We are not even able to influence the government to gain contracts from stateowned companies and many of these contracts, such as embassy security are often awarded to well known foreign PSCs, not Chinese ones.

Moreover, the best-of-breed PSCs in China are all open books: their incorporation and founding documents are publicly available, owners and directors publicly listed online (unlike in other primary incorporation states of PSCs).

Their doors are open to welcome customers, they do financial audits by known accounting firms, ISO certification by foreign certification bodies, human rights certification by ICoCA, compliance checks by Lloyd’s underwriters, and many other inspections and licensing audits by Chinese and foreign governments alike.

The media may paint the private security sector as an industry of secrecy, but in reality it is more transparent than almost any other sector.

Ameem: In our previous interviews, most of our speakers have commented that the industry suffers greatly from a Hollywoodized caricature of mercenaries as blood thirsty killing machines. Do such perceptions impact the industry in China? Do you have to spend time in clarifying the difference between actual private security and Wolf Warrior?

Liu Qing: Perhaps in the media there is a confusion between private security services like we provide which are protective in nature and military contracting or even mercenary activity which can be considered offensive.

Our clients are mostly large commercial enterprises with a sophisticated understanding of the private security market, regulations, and services we offer. Under no circumstances is there any real confusion outside of the press or those intentionally looking to conflate the two very different services.

In the public eye, There was confusion by Chinese media in China that Chinese PSCs could play  Hollywood roles for protecting Chinese nationals and assets at overseas. It was quite hotspot few years back. A movie called Wolf Warriors showed in 2015 was very popular in China. But its just a movie. It is misrepresenting the security business and we also try to educate the public that Chinese PSCs are trying to compete with western counterparts in know-how and intellectual aspects not in use of force. In reality, sophisticated PSCs serve clients as managers of risks and enablers of business in complex environments, this is the model we are working on.

Alex: One of the other common perception I recorded during my research on Chinese private security companies in the African continent is the fact that the clients being state owned enterprises are not good judges of risk and are often unwilling to spend money on hiring professional and qualified security service. Would you this is still true? And does HXZA have any plans on expanding its client base to include foreign private companies?

Liu Qing: As Chinese companies go global with the Belt and Road Initiative and threats to Chinese assets and personnel increase, Chinese companies will  select capable security solutions that meet their needs and budget.  It is truly a supply and demand market.

Some clients have low security budgets and cannot afford quality services. These clients know the risks well but for whatever reason cannot pay for a good security solution.

So we spend time on this issue, educating clients on the threats as well as the risks of working with low quality security service providers and try to raise the budgets. In addition to physical risks, this includes legal liability and reputation.

As for foreign clients, HXZA actually already has a growing client base of foreign private, publicly traded, and state owned companies from Eurasia, Europe, and the Middle East. Our work with such clients is going to continue as more foreign clients realize our quality and service level.

Ameem: Can you tell us more about your existing client base. If I am right, much of HXZA’s work revolves around anti-piracy efforts. So, our shipping companies your main client? Or do you also work for port-management companies, insurance firms, or even other private manufacturers? Also, what does the work for these different entities entail. Is there more to it than patrolling of high-seas? Do you also perform roles such as hostage-negotiations?

Liu Qing: The maritime security industry is currently going through a period of consolidation. HXZA is in a stable growth position. Our market expansion reflects the profile of other medium size Chinese business in general, going from national to international.

Our growth in the maritime sector, in particular, is based on foreign vessel operators, who now see the quality and effectiveness of our Chinese-led solutions as equal, or perhaps even superior in some cases, to the alternatives.

We do also work with Chinese port management and port construction companies. Even though these ports are related to the maritime industry, we consider the security activities in port as land security operation—very different to our armed maritime security service aboard commercial vessels.

Regarding crisis management: HXZA is the only Chinese company appointed as named crisis response manager for K&R insurance policies by a major European under-writer, so we are quite involved in assisting insureds avoid, prevent, and respond to incidents both onshore and offshore.

Alex: So why focus on maritime security? Also, given the rapid expansion Chinese infrastructural projects world over with Belt and Road Initiative do you see a greater role for HXZA in securing Chinese investments on foreign soil?

Liu Qing: Even though HXZA is most well known abroad for our maritime security business, it is a small part of our company, only around 7% of turnover. In addition to our maritime operation, our main business is manned guarding and technology in China where we have over 22,000 employees you can see guarding banks, airports, universities, and other such locations across the country.

As our Chinese client companies go global, so must their security service providers. From soft services such as logistics planning, journey management, and business pathfinding, to armed executive protection and site security around the world—HXZA is ready to be there.

Our main overseas markets are South Asia and Africa. And we are currently pursuing expansion through our owned subsidiaries and via joint ventures with local companies.

In the Middle East and Latin America we have also been fortunate to develop opportunities. Core services include static security, executive protection, CCTV operators, static site security, training, risk assessment, K&R response, and security technology integration.

Ameem: China has taken a very hands-off approach to violent conflicts in the Middle East and South Asia. Do you think this hesitance to directly interfere opens greater space for PSC to provide security without shifting the political balance? In other words, do you foresee a greater role for Chinese PSC in the broader Middle East?

Liu Qing: I see a more dangerous world and a world in which Chinese assets and personnel will be at greater risk.

This is not necessarily to do with any specific government approach, but is the reality on the ground as Chinese enterprises and tourists go global.

So there is a role for qualified and capable Chinese PSCs to serve Chinese and even foreign clients in these regions.

Currently most clients are working with western or local PSCs. Will they continue to rely on foreign security service providers? Or will equal level Chinese security companies rise in the market? Time will tell, and industry leaders must prepare their businesses to meet these market opportunities.

Alex: Singapore is a very active port and one the leading logistic hub in South East Asia, do you foresee an increasing role for Singapore in the insurance sector related to security from Kidnapping for Ransom or anti-piracy insurance, as well as a regulator hub for the Asian private security market.

Liu Qing: Singapore is a special place and it is likely that logistics and financial services from Singapore will play more of a role in trade.

Insurance is still controlled from London and that is unlikely to change soon.

HXZA is the only Chinese PSC appointed by a top European insurance company as a named crisis response service provider for K&R insurance policies. For the China market these policies are being written in accordance with the law, either in China, at Lloyd’s in the UK, or offshore depending on the risk exposures and compliance requirements. Perhaps the Singapore market can grow in the future for Chinese clients if the products are not available elsewhere.

Ameem: We will end with a question that we are asking all our guest: what will the future of warfare and security management in a complex environment look like in the coming 30 years?

Liu Qing: Well this is a big question, perhaps I can speak from the Chinese perspective.

Major changes are happening in global security. The change is faster than before due to technology. The technology we use also worsens conflicts and creates a more dangerous security situation—since lower cost and available technology not only helps security forces, but also grows the capability of bad actors.

The success of companies in the private security business will depend on mixing traditional guarding and technology to offer better protective security combining on-site, mobile and remote guarding with electronic security solutions, fire safety, and risk management for both corporate and government clients.

Hostile elements around the world, including criminal and terrorist groups have targeted foreign workers, businessmen and diplomats in kidnappings.

Now, with China’s rise, infrastructure projects worldwide, Chinese-led networks throughout the Belt-and-Road Initiative countries, Chinese assets and Chinese nationals have become highly attractive targets in the eyes of bad guys.

Chinese private security companies can use these market trends, develop solutions which meet international standards to support private and public clients. If they succeed, they will become top security providers in the global market.

Alex: Thank you Mr. Liu for joining us today.

I also want to thank MEI, without whom this podcast would never have been possible, namely Eugene Lim, Lim Wei Chean, Alastair Loh from the Events and Communications teams and MEI Associate Director Carl Skadiang. Also, special thanks to all our listeners. Please follow us on the various social media platforms and send us your comments and feedback. We would love to hear from you. In closing, I want to plug our next podcast with the United Nations working group on mercenaries.