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.
The European Chamber of Commerce (EuroCham) in Vietnam will host a talk on preventing industrial espionage during a luncheon in Ho Chi Minh City next month.
Dr. Roman Hummelt of International Management Consultants (IMC) and author of “Industrial Espionage – Strategic Risks and Prevention” will discuss special risks of industrial espionage for foreign affiliates abroad and suggest several defense methods.
“Industrial Espionage – Causes and Prevention – Protection of Confidential Information in Foreign Affiliates” will be held on February 22 at Park Hyatt Saigon, 2 Lam Son Square, District 1.
The luncheon will cost members and co-hosts VND600,000 (US$30) per person, while non-members will have to pay VND900,000. Participants have to register online for the event.
DUBAI, United Arab Emirates – The United Arab Emirates is strongly denying any link to an alleged spy ring uncovered by Oman, a neighbouring Gulf country.
A statement by the UAE’s foreign ministry says the nation is “shocked and surprised” by the claim and promises to assist Oman in any investigations. The statement was posted Monday by the state news agency WAM.
Oman on Sunday said it dismantled a spy ring linked to the UAE that targeted government and military operations.
Omani authorities have given no other details, but suggested that arrests have been made.
It marks a rare display of tensions between the close allies.
China used honeytraps and spying interns in industrial espionage, according to leaked French intelligence files.
One report claimed a top researcher in a major French pharmaceutical company was wined and dined by a Chinese girl and ended up in bed with her.
“When he was shown the recorded film of the previous night in his hotel room . . . he proved highly co-operative,” said an economic intelligence official.
In another case, an unnamed French company realized too late that a sample of its patented liquid had left the building after the visit of a Chinese delegation. One of the visitors had dipped his tie into the liquid to take home a sample and copy it.
Companies should do more to protect themselves from prying eyes among the 30,000 Chinese students who conduct internships in France, experts warned.
Among the most frequent methods cited by French intelligence is the so-called “lamprey technique”, which usually takes the form of an international tender for business. “The aim of the project is to attract responses from developed countries,” notes the report. When Western companies vie to respond, they are cajoled and “told to improve their technical offering”.
“Each (company) tries to outdo the other, once, twice, several times until the Chinese consider they’ve had enough.” Once key information has been gathered, the bidders are told the project has been shelved and the information is used by the Chinese to develop its own products.
A prime example was a recent multi-billion dollar tender to build China’s high-speed train. France’s TGV was a bidder. As part of the process, the French embassy in Beijing organized a six-month training course for Chinese engineers. Soon afterwards China brought out its own high-speed train remarkably similar to the TGV and Germany’s ICE train.
Another technique is the “mushroom factory”, in which French industries create a joint venture with a local Chinese firm and transfer part of their technology. Later local rivals emerge, “offer identical products and are run by the Chinese head of the company that initiated the joint venture”. A third technique is to turn the tables on a foreign firm by accusing it of counterfeiting. Schneider Electric was taken to court over a hook in its fuse box, which it patented in 1996. Its Chinese rival Chint started building the same hook, took Schneider to court in China for copying its design and Schneider was ordered to pay a $49.5 million.
Renault, the French carmaker is embroiled in an espionage scandal involving three top executives over allegations they were paid to hand over car secrets to a Chinese firm.
New York – According to intelligence agencies, China is enlisting beautiful women for corporate espionage in the West. How does the dreaded “honeytrap” method work?
According to leaked French intelligence files, China has been employing beautiful female spies — the dreaded “honeytrap” method — and blackmail to steal business secrets from French executives. And it wouldn’t be the first time that China has used such tricks to gain access to privileged information. Here, a brief guide:
How does the “honeytrap” work? A beautiful woman wines, dines, and even beds a mark to get information from him, a la many a Bond flick. The French intelligence reports cite a case in which a young Chinese woman slept with a top French researcher at a major pharmaceutical company, a man unaware that she was a spy and that the encounter had been videotaped. “When he was shown the recorded film of the previous night in his hotel room… he proved highly cooperative,” says an intelligence official.
Have other countries fallen victim to Chinese “honeytraps”? Yes, in early 2010, Britain’s MI5 accused the Chinese government of using honeytrap schemes to hack into corporate British computer networks. Two years earlier, MI5 had distributed a document titled “The Threat from Chinese Espionage” to security officials, British banks, and businesses, explicitly warning executives of honeytraps and subsequent blackmail attempts: “Chinese intelligence services have also been known to exploit vulnerabilities such as sexual relationships and illegal activities to pressurize individuals to cooperate with them,” it read. “Hotel rooms in major Chinese cities such as Beijing and Shanghai which have been frequented by foreigners are likely to be bugged. Hotel rooms have been searched while the occupants are out of the room.”
What other means of espionage are the Chinese reportedly using? Other techniques cited by French intelligence officials include the “lamprey” and the “mushroom factory.” The lamprey technique involves soliciting business proposals from Western countries, and then rejecting the applications, telling bidders that they need “to improve their technical offering”; the Chinese then use what they’ve learned from the bids to develop their own products. In a recent incident, France’s TGV bid on a proposed high-speed Chinese train project, and even arranged a six-month training course for Chinese engineers, only to watch China build its own train that looked “remarkably similar” to the TGV trains. In the mushroom factory technique, local Chinese firms partnered with French companies in a joint venture, only to be bested by local “rivals” that were actually run by the original Chinese firm. Danone, a French dairy company, reportedly fell victim to this trick.
