China's Internet policy begins new arms race

Did Google oversimplify its ambitions with its expansion into China and give the government signals that said they would comply and then have second thoughts? Did the Chinese government underestimate the consequences it has had on Google and was Google appropriately prepared to do business in China?
Written by Doug Hanchard, Contributor

Agendas: Every government always has them and not all are public. Competition for attracting local and foreign investments to their country is a balance of agendas being accomplished. The variables considered to attract capital account for how policies are both complex and simple in nature to implement.  The type of industry plays a significant role in government policies and its agendas it wants to achieve. The level of oversight in an industry plays a significant role in the balance equation. Some, such as the automotive industry, pose little threat to the security of a nation while others bring significant concern, such as telecommunications. These are big concerns from the Chinese government's point of view.

Did Google oversimplify its ambitions with its expansion into China and give the government signals that said they would comply and then have second thoughts? Did the Chinese government underestimate the consequences it has had on Google and was Google appropriately prepared to do business in China?

China's initial silence was not a surprise, until it passed a week and then continued to be silent until Secretary of State Clinton issued several statements which required some kind of reaction from the Chinese Minister of Trade which simply denied government involvement and reinforced that China's Internet laws will be strictly adhered to. China's political experience on the world stage is one that is steep in traditional views and concepts, rarely wavering from public announcements of policies dating back to the end of World War II. Its message has always been a simple one: China is a great, free, democratic nation with a happy population and will prosper regardless of what the rest of the world does. Rarely has it voiced its opinion on world affairs on its own unless linked to the former Soviet Union throughout the 1970's to the mid '80's. When it has had disagreements, it has done so quietly through diplomatic channels. Defense of its policies in the press are always short and to the point sequence of events. The heavy lifting has always been behind the scenes. This incident changes the complexity of its response and the decision to follow traditional denials is going over like a 404 file not found disaster. Some are beginning to wonder if China recognizes the diplomatic and commercial stakes involved. This is China's first modern corporate challenge and it does not have vast amount of experience to deal with multiple corporate government affairs executives relaying concerns back to their respective governments, who are in turn calling in ambassadors to have a nice little chat.

China is country that is attempting to achieve what the former USSR did in the 1980's without the chaos, civil disobedience and instability that has shaken every former border of Russia since Mikhail Gorbachev introduced the former Soviet Union to perestroika in 1986 and dissolution 1991 through Glasnost. Needless to say, the Government of China not only observed the good, bad and ugly which transpired over the next 30 years, it knows that if it attempted an identical path it would likely unfold with even worse results. China's political institutions are also younger versions of Stalin and Lenin's versions of communism, and Mao certainly took a far different approach to the management of what was to become China's version of the Politburo.

Even with all the difficulties it saw Russia go through, China's political apparatus knows it needs to reform. If there is one talent the Chinese government officials know anything about, it's arithmetic and the number of people, systems, infrastructure and elements of government that have been in place since 1949 are in need of significant change, overhaul and reform, let alone maintainenance. There is an old guard within the government and change does not come easy to them. Others know it is far overdue but some patience and careful planning is required; it cannot be achieved overnight. China is evolving to a market-based economy, along with freedom and new policies. In a country where change is rare, the past 15 years have seen nothing but constant change since the repatriation of Hong Kong in 1997. China in one repect is renewing itself, hoping to avoid the mistakes of what has happened to its ally in the west and yet still has many that want to maintain the ideals of the past. Technology is practically forcing the two ideologies on a collision course.

If there is one constant belief that the political old guard has, it's the doctrine of control and strength in preventing outside interference which was reinforced by the Japanese invasion during World War II and was the principle rationale why it exists today. This doctrine combined with technology offers powerful tools to the old guard that still has significant power in China. Knowledge of the opposition is the value of any intelligence agency and the Ministry of State Security (MSS) in China is a master with few equals, particularly when harnessed with a scientific and mathematics community that is one of the strongest in the world. This brings about the other possible reason why China's MSS hackers and agents carried out this attack. The government's old guard is suspicious about all outside influences, not just one issue or set of policies (such as human rights), but all issues. Commerce is something China does out of necessity, not desire. It would rather be left alone in isolation if it was possible. It could be argued that commerce is why China throughout its history has gone through so many variants of feudalism and communism.

This incident doesn't just impact Google, but every foreign high tech company doing business in China like Nokia, Motorola, Cisco, HP, Microsoft and many others.  Google found security breaches that go beyond a simple intrusion, but actual network connection tampering has been suggested. Articles are coming out suggesting that Google's Chinese staff is away from the office because the MSS has placed intelligence agents within the company. None of this should be surprising in anyway given the nature and conditions that should be expected. Google didn't calculate the consequence and China did and succeeded, perhaps too well. Concerns should be raised about Chinese access to technology manufacturing under the management and direction of some of the companies I just mentioned. Imagine your new cell phone or laptop WIFI Digital Signaling Processor (DSP) chipset that has a Chinese designed and embedded Trojan program built right into the one of hundreds of chips in it. Think it hasn't happened before? You would be wrong in that assumption. China's industries have been hammered over the past two years over management of its commodity industries like pet food, milk products and medical information handling of the SARs virus in 2005.

Corporate security professionals have learned valuable lessons from this incident. China's intelligence ability internally and externally has now become more difficult. This exploit has clearly put the international world on the defensive.  The intrusion detection and firewall technology battle now elevates to the next level. China will continue collecting intelligence data via the Internet and as a consequence, a different kind of arms race has begun.

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