Corporate Espionage Cases Traced to China

January 17, 2011 Updated: January 17, 2011

WASHINGTON—China stealthily integrated itself into America’s telecommunications market over the past several years and is taking advantage of the United States’ superior name brand to further its goals, alleges a U.S. China Economic and Security Review Commission (USCC) report this month.

China is “able to affiliate their products with the excellent reputation of U.S. brands in global markets. China’s technology industry now appears to be a de facto part of the American communications industry landscape,” states the USCC report in its introduction.

A major issue is that China aggressively bulldozes its way into every conceivable market, most importantly the technology sector, crushing its competitors with cheaper subsidized products (often filching the technology from foreign companies doing business in China), forced technology transfer, cyber attacks, corporate spying, or acquisition of foreign companies.

The Commission sent out a warning signal stating, “Investments would increase China’s leverage in the U.S. marketplace and beyond (even if indirectly through joint ventures and third parties) and could eventually provide China access to or control of vital U.S. and allied information, networks, or segments of critical supply chains.”

Espionage in High Gear

“Lurking in the cybershadows is a far more insidious and sophisticated form of computer espionage. … Such attackers represent the elite—a dark army of cyberspies targeting the heart of corporations around the world where trade secrets, proprietary data, and cutting-edge technologies lie locked away in digital fortresses,” according to an investigation on Chinese cyber attacks by The Christian Science Monitor (CSMonitor) last year.

Experts suggest that one tool of the espionage trade is cyber espionage, a highly effective tool that has been employed a number of times and was more often than not found to originate in China.

“The China threat is constant. If there’s valuable intellectual property out there, there are people in China and elsewhere who want to take it. It’s the new battlefield—low risk and low investment with high gain,” said Shawn Carpenter, forensics analyst for cybersecurity company NetWitness, in the CSMonitor article.

In 2010, Canadian cyber attack experts discovered spyware nicknamed “GhostNet.” The spyware was found to originate from Hainan Island Internet accounts, where the Chinese army intelligence is located.

The USCC report also sees China as the main culprit in stealing trade secrets via cyber attacks. “There is growing public concern over the impacts of cyber espionage incidents that appear to originate in China.”

Congressional and industrial sources said that computer attacks on companies, including Google, Yahoo, and defense contractor Northrop Grumman have increased, although these companies, outside of Google, have remained quiet about it.

“Online attacks that appear to come from China have been an ongoing problem for years, but big companies haven’t said much about this, eager to remain in the good graces of [China],” according to an article on Computerworld’s website.

According to expert opinion, these companies downplay incidents for fear of losing access to the so-called lucrative Chinese market.

Next: Chinese students are trained in the U.S.