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Chinese hackers pose a growing threat to U.S. firms

Escalating cyber attacks on Google and other companies alarm government officials who say the U.S. may be powerless to stop the online industrial espionage.

January 15, 2010|By Jessica Guynn
  • A worker at a Beijing office checks stories and photos of the Dalai Lama on the Google China search page. Google has threatened to pull out of China after a series of cyber attacks originating from that nation.
A worker at a Beijing office checks stories and photos of the Dalai Lama on… (STR / AFP / Getty Images )

The scale and sophistication of the cyber attacks on Google Inc. and other large U.S. corporations by hackers in China is raising national security concerns that the Asian superpower is escalating its industrial espionage efforts on the Internet.

While the U.S. focus has been primarily on protecting military and state secrets from cyber spying, a new battle is being waged in which corporate computers and the valuable intellectual property they hold have become as much a target of foreign governments as those run by the Pentagon and the CIA.

"This is a watershed moment in the cyber war," James Mulvenon, director of the Center for Intelligence Research and Analysis at Defense Group Inc., a national-security firm, said Thursday. "Before, the Chinese were going after defense targets to modernize the country's military machine. But these intrusions strike at the heart of the American innovation community."

The attacks on Google and several dozen other companies have alarmed government officials and lawmakers who warned that the U.S. may already be losing the battle to protect the nation's besieged cyber infrastructure.

"The recent cyber intrusion that Google attributes to China is troubling and the U.S. government is looking into it," White House spokesman Nick Shapiro said Thursday.

Rep. Anna Eshoo (D-Menlo Park), a senior member of the House Select Committee on Intelligence, called China a pervasive hacker. "This behavior is unacceptable. We used to use the term 'highway robbery.' This is high-tech robbery."

The cost has been huge, according to a recent study by a congressional advisory panel, the U.S.-China Economic and Security Review Commission. While it is hard to quantify the value of the intellectual property that is stolen by the Chinese each year -- because many businesses do not like to report getting hacked -- Dan Slane, chairman of the commission, estimated it was in the hundreds of billions of dollars.

Hacker strategy

Alan Paller, director of research at the SANS Institute, a Bethesda, Md., security firm, said Chinese hackers target Western companies with an approach dubbed "1,000 grains of sand," meaning they go after every piece of information in search of competitive intelligence. Most companies keep silent about the attacks, but they draw heavy scrutiny from law enforcement officials.

"The odds of the 25 biggest companies in California not being fully compromised by the Chinese is near zero," Paller said. "That is true of companies across the country."

China defended its Internet policies at a news conference Thursday. Jiang Yu, spokeswoman for China's Ministry of Foreign Affairs, said China's Internet is open and welcomes foreign companies. She also said Chinese law prohibits hacker attacks but declined to say whether the Chinese government is bound by the law.

Google on Tuesday revealed that it had fallen prey to a series of cyber attacks originating from China. The Mountain View, Calif., Internet giant said it believed the attackers wanted access to the e-mail accounts of Chinese human rights activists. But the incursions, which also included theft of intellectual property, raised the possibility that the hackers were also attempting economic espionage.

Google took the bold stance of making the attacks public, catching the Chinese government off guard. The company's defiance of the world's most populous country stunned observers. It also prompted questions about the scope and nature of the attacks.

"For a big multinational company to consider leaving a critical market means the overall damage to its operation and assets is likely to be greater than the benefits," said Oded Shenkar, a professor of business management at Ohio State University and the author of "The Chinese Century." "Google is not only making a human rights statement; my educated guess is that there is much more to it than that."

It is unclear exactly where the attacks came from, and Google was careful not to directly accuse the Chinese government of orchestrating them. But Chinese cyber spying has been a persistent problem for years with dozens of attacks on commercial, government and military targets, analysts say.

A growing menace

The attacks against the U.S. are ramping up, according to the congressional U.S.-China commission, which noted in October that Chinese espionage was "straining the U.S. capacity to respond."

The report focused on an attack on one company, concluding that it was supported and possibly choreographed by the Chinese government. The report also alleged that China's military, the People's Liberation Army, is responsible for aspects of cyber spying and has created cyber warfare units.

McAfee Labs, which has analyzed the attacks on Google and other companies, said Thursday that the hackers had deployed highly sophisticated "advanced persistent threats" that in the past were primarily used against governments. The attacks targeted individuals with known access to valuable corporate information.

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