By Anna Schecter
Rock Center
The Chinese are playing dirty in the international spy game, according to current and former intelligence officials at the highest levels of government.
“This is stealing American wealth. It's stealing American jobs. It's stealing American competitive advantage,” General Michael Hayden, former head of the Central Intelligence Agency and the National Security Agency, said in an interview with NBC News.
Hayden’s comment was echoed by a House Intelligence Committee report released on October 8th warning that two Chinese telecommunications companies, Huawei and ZTE, could be funneling sensitive information back to Beijing, and cautioned American carriers to avoid doing business with them.
Intelligence Committee Chairman Mike Rogers, R-Mich., told NBC News that the Chinese have targeted every sector of the American economy.
“Everything you can possibly imagine we have seen the Chinese make a concerted effort to steal that information and use it for their own economic advantage,” he said.
That includes blueprints for the next generation of auto parts, formulas for pesticides and pharmaceuticals, and other information that makes American companies competitive in the global marketplace.
Though the United States limits its espionage to national security interests, intelligence officials said, China has launched a well-organized campaign to steal American corporate secrets via the Internet.
“I know states steal secrets. Our states steal secrets. And we're actually pretty good at it. But we self-limit. We steal things that are valuable and useful for your security, for your liberty and for your safety,” Hayden said.
One of the first to find himself on the front lines of the economic cyber war with China at the corporate level was Brian Shields. He was a computer security specialist for Nortel, a giant Canadian telecommunications company.
A success story from the early Internet age, Nortel made cell phone and computer network equipment. At its height, the company employed 20,000 people in the U.S.
Shields said he first got wind of the Chinese in Nortel’s network in 2004. An employee working in highly technical research and development saw some curious activity on a computer server. His documents were being downloaded apparently by a senior executive named Brian McFadden, who worked in a completely different department.
Shields said McFadden had not downloaded anything. Instead, someone had hacked into the computer network using McFadden’s stolen password. Shields said he discovered that seven passwords had been stolen, including that of then CEO Frank Dunn.
Though Shields could never determine who the individual hacker was, he was able to track the activity to servers in Shanghai and Hangzhou, China.
In total more than 1,400 documents were stolen including product designs and valuable customer information, according to Shields.
“They could know what companies we're buying, how much. They could know where we saw our future product. They could know where we saw our profitability,” he said.
After the attack, Shields said he watched his company steadily lose business, while a competitor, Huawei, began to grow. Nortel went bankrupt in 2009, while Huawei has become one of the world’s premiere telecommunications companies. Shields said he believes Nortel went under as a result of spying by companies like Huawei.
Most industry insiders say that Nortel was a victim of bad business decisions coupled with the burst of the Internet bubble.
A spokeswoman for Nortel said the company responded appropriately to the 2004 attacks and “found no evidence of wide spread security issues.”
Huawei has denied stealing from Nortel or any other company. In a statement emailed to NBC News, the spokeswoman said the company has "the highest respect for the intellectual property of others."
In response to October 8th's House Intelligence Committee report, a Huawei spokesman said the accusations were based on rumors. The company defended its record as a member of the Fortune 500 list of the largest companies in the world.
“For the past 25 years, we have held an upstanding record…We have been emphasizing that Huawei is committed to cooperating transparently with any and all government agencies who wish to carry out an open and impartial dialogue about our company and the products and services that have made us successful internationally,” read a Huawei statement responding to the report.
Huawei has already sold equipment to a dozen small carriers in the U.S.
The Huawei spokesman said company is a “partner to the U.S. high-tech industry” and “helps create jobs in the U.S.”
ZTE released a statement saying that the company is China’s “most transparent, independent, globally focused, publicly traded telecom company.”
Click here to read a full response from ZTE
Click here to read a full response from Huawei
In response to this story, China’s Foreign Ministry Spokesman Hong Lei denied stealing from any corporations, adding that last year the Chinese helped international agencies address hundreds of cyber-attacks.
“China is also a victim of cyber-attacks, and we take a firm stance on continuously playing an active role in international cooperation,” Hong Lei told NBC News.
But top American brass said they are exasperated by China’s efforts to portray themselves as victims. Hayden said it is time to hold China accountable.
“Don't treat me like a child. We know what you're doing. We have good evidence with regard to what you're doing. And if you continue to do what you do actions will have consequences,” said Hayden.
Rogers advocated that the White House make Chinese cyber espionage the number one issue in bilateral relations with China.
“They do respond to embarrassment. And we ought to embarrass them for being thieves of the research and development of the United States of America.”
Editor's Note: Rock Center with Brian Williams airs Thursdays at 10pm/9c on NBC.
Leave a Comment:
They don't have to hack American sites to attack the American economy. All they have to do is visit the Chinese work sites where Apple Iphones, Ipods, Ipads are manufactured and take whatever they want. I have been expecting a "Cphone" for a couple of years now. Chinese Phone, manufactured from American design specifications given to the Chinese by the idiots at Apple, make their products in China to sell to Americans. I'll wait for the Cphone. It will cost 30% less than the Iphone.
They don't have to hack American sites to attack the American economy. All they have to do is visit the Chinese work sites where Apple Iphones, Ipods, Ipads are manufactured and take whatever they want. I have been expecting a "Cphone" for a couple of years now. Chinese Phone, manufactured from American design specifications given to the Chinese by the idiots at Apple, make their products in China to sell to Americans. I'll wait for the Cphone. It will cost 30% less than the Iphone.
Well America, instead of accusing China of stealing from American corporations either put up or shut up. Rumors, innuendos, suspicions, and so called 2nd hand information is just that. If you have proof put it on the table for the world to see. Why not tell the news and show the facts as they are instead of spinning the news to camouflage our own business failings and other agendas.
Lan Gook, are you serious? Tell me about knock off Ford Trucks. China, as a country, is the biggest intellectual thief on the planet.
Come on Lan, thats a weak argument. The Chinese are renown for copying, http://www.businessinsider.com/22-best-knockoff-products-2009-11?op=1
and dont think we are excusing nor ignoring the garrison you built overnite in the Spratly's.
This is no uncommon for China. They stole high speed train technology from the Germans, Fighter Jet Technology from the Russians, and the list goes on. They have been doing it for some time with absolutely zero accountability.
We should boycott products made in China as much as we can (sadly it's hard to do in realty, since they make so many of our products). But, I will continue to pay more for products made anywhere but China every chance I get!
Oh and what about the defective electronics (Made in China) that were put in our military planes? Why the hell are we buying anything for our military from any other country? Again, accountability - if you contract with the Dept of Defense and they catch you using knock off anything's from China (or any other country) you go to jail. Plain and simple. Our national security is much more important than the bottom line profit. I wish the Obama Administration would get that!
Whatever the corporations create will be made in China or another country anyway. The only thing made here off American sweat is weapons and trash which cannot support an economy.
It's the politicians jobs to force these companies to make their products here or be taxed and tariffed heavily. But since there's a revolving door in Washington between the politicians and their corporate bosses, that will never happen.
Protectionism is not politicians' jobs. We're part of the WTO for a reason.
If you want to elect someone to tell you how to run your company, go ahead, but you'll be surprised to find that it actually decreases prosperity, not the other way around. Economics is stronger than government.
SF, did you use the word 'prosperity'? are you the 1%? or are you in a different USA?
ALL of the electronic gear has military capacity. More than enough is stolen from us, and our greed for profits, has given the rest of our intellectual property to our competitors and enemies. We are stupid for greed.
We know the Chinese has been stealing intellectual assets from the West, we are dumb enough to ship our manufacturing of such products to the land of thieves and then use those products for our security.
Screw WTO, it has been a disaster for the US, since not everyone plays with the same rules. Why do we play? GREED.
It's the politicians jobs to set taxes and tariffs on these companies and countries importing to the largest consumer base in the world. If you don't want to make your product here, that's fine, but bringing it back won't be a corporate transfer, it's gonna cost you more than it would to make it here.
I was referring to the numerous corporate executives with prominent positions in Washington, and the numerous former politicians working for these same corporations.
The WTO is a joke at best, don't be naive.
Our economy and government is run by the banks and corporations thanks to legislation like NAFTA and the destruction of democracy outside of our country at the hands of our government officials.
BTW, forcing companies to make their products here will go a long way towards prosperity as it will create MILLIONS of jobs and we won't be reliant on our current economy based on perpetual war and trash.
On June 29, 1956 the National Interstate and Defense Highways Act was enacted. The control of the 2012's Information Highway is of the same, if not greater, national importance.
Except that the "information highway" is an international object that is shared. So its "national importance" applies to all countries, not just ours.
While I'm skeptical of the actual extent of economic espionage, it's definitely plausible that the Chinese government uses its intelligence agencies to steal industry secrets. It's well-documented that State Owned Enterprises in China receive a number of substantial favors from the government, including access to cheap loans, protection from competition, and protection from China's own laws. It isn't a stretch at all to imagine that hackers trained and funded by the government intelligence services do cyber espionage for SOEs as well.
Still, our "intelligence officials" had better have some strong evidence for their claims (probably acquired from our own espionage. Go figure).
Commies china do not understand that your idea is yours and you can make money yourself on your idea....capitolizm....
in china your idea is not yours. it is the peoples. Communiszm. ......the state makes the money and idealy spreads the wealth for every one. Dose that sound familar.
Wake up! Just follow the money folks......... China doesn't have to steal anything from America - America's corporate racketeers and their WS henchmen give China whatever they want on a silver platter..for a price - It's all about the money and f**k the people, the country, the environment and the world. America has trained them well. Have no fear though - America will make up anything she loses the next war. WAFJ
Now, I suppose Mitt is going to develop a fail safe way of securing our intellectual property and make it a presidnetial campaing issue, with the outsourcer in chief in charge.
The Banks people....Like Nostracomas has said, "follow the money." They give companies incentives to make buku bucks on the short-terms and the lemmings follow. It doesn't help that the government is allowing this to continue.
I suppose now Mitt will make the issue a presidential debate issue and he will come to the rescue as the Outsourcer in Chief.
Take a look at GE (Obama's pet corporation). Yes, they created jobs alright....in CHINA. Obama forgot to mention the jobs that were created were mostly in china. GE cut 32,000 jobs right here in the US, while creating a plan to invest $2 billion (yes, with a B) into China.
But, wait....there's more!!! GE made $14.2 billion in profits, but paid no federal income tax. They also got $3.2 billion in federal tax credits (thanks to your commander in chief). On top of that, between 2008 and 2010 GE spent $85 million on lobbying while paying an effective negative federal income tax rate. Do you understand now why Obama has the music jamming & fist pumping to all those tax credits he's handing out? Do you see the connection?
Now tell me who is the Chief Outsourcer? You can speculate about what Romney would do, but look at what Obama HAS done. I'll take my chances with Romney! I have seen what Obama is all about.
I love the way Obama tries to convince voters that he will cut taxes for the middle class and increase taxes on the wealthier, despite the fact everything he has done is contrary to this. He wants you to believe what he says and forget what he has done. How can people be this gullible?
I have been preaching this for decades, the chinese do nothing but steal and lie about anything and everything.
They are the biggest thieves and liars in the world.
Yet, our extremely corrupt congress continues to bend over and kiss their butts every chance they get.
Our congress ships american jobs to them, our congress ships companies to them, our congress bends over and lets the chinese shove it to them every chance they get.
The chinese are slowly and surely taking over corporate america and everything that goes with it. Yet our corrupt congress lets them cheat us, lets them steal from us, lets them buy anything they want to in the usa, our congress is not run by the us government, it is run by the chinese.
Every president, especially this one, has done nothing but kiss the chinese butt during all of their years in office, this one even apologizes to them for embarassing them, will not stand up to them, and will do nothing about the trade imbalance we have with them.
Quit sucking up to the chinese america, and wake up and get your heads out of your asses, they are stealing everything from us.
Greed! The communists in China have it; the capitalists in the U.S. have it. Corporate executives here are no more or less moral than the commissars there. All's fair in love, war, and business.
Makes me wonder what is out there in the future.
Where will this lead to. This is happening so quickly.
I would like to see more information on this subject.
This comment is powerful:
“Everything you can possibly imagine we have seen the Chinese make a concerted effort to steal that information and use it for their own economic advantage,”
This is what we get for letting people like exlax ETCH-A-SKETCH along with his corrupt Republican corporate MONARCHY do business over there! NOTHING BUT UNCONTROLLED CAPITALISTIC GREED of which there is NO END IN SIGHT!!!
Capitalism ISN'T WORKING, WON'T WORK & NEVER WILL WORK in a Democratic country like we USED TO BE! Their GREED IS ONLY EXCEEDED BY THEIR BLATANT CRIMINAL CORRUPTION!!
The Chinese are SPYING on the Republican corporte MONARCHY because they KNOW how CORRUPT THEY ARE!!! We, the 99% American People KNOW how CORRUPT THEY ARE TOO! That's why we are voting 100% STRAIGHT DEMOCRATIC to rid our selves of their BLATANT CRIMINAL CORRUPTION once & FOREVER!! BELIEVE IT, NOTHING COULD BE TRUER!!
Not only did China steal technology from Nortel, but they have also stolen vast amounts of technology from the leading hardware manufactorer Cisco Systems. The chinese have been flooding the market over the last 10 years with reverse engineered counterfiet router modules, cards, chip sets, the list goes on....
The Chinese are still moderate communists by today's standards, let's not forget that. While they may not be the 3rd riech, everything is still state controlled. It would not be surprising in the least if the Chinese state was sponsoring cyber espionage from its telecommunication hubs.
And just what kind of free market is invading Iraq for oil benefits or Afghanistan for mineral concessions perhaps and for the benefit of multi-national corporate intersts at our taxpayer expense and the blood and sanity of our military men and women. What kind of espionage is that, taking right out in the open for first dibs on a variety of business concessions? it is all for the vaovr of the rich stockholders and giant institutional investors of all kinds expecting the highest return for big bucks invested. We are also expecting high returns for partnering with chinese businesses and access to their gigantic markets too.
They may have learned quite a bit since losing their silk worm monopoly.
What a bunch of sour losers who are obviously envy of China's immense
success over US in economic and manufacturing field with an idiotic display of accusation, inuendo and hysteria.
Grow up and accept the reality that US is in decline and the days of her bullying others will be soon over.
Intentionally a little short-sighted are you? The US will seem like Mother Theresa once the Chinese get a grip on your country's economic gonads.
Another great story by Ms. Schecter! The government can hide behind corporations, which in turn can shield individuals-- makes it very hard to prosecute anyone!
Only takes a few minutes for a chink to pound out another kid and then has a lot of time on his hands.
Makes me wonder what is out there in the future.
Where will this lead to. This is happening so quickly.
I would like to see more information on this subject.
This comment is powerful:
“Everything you can possibly imagine we have seen the Chinese make a concerted effort to steal that information and use it for their own economic advantage,”
Really America is going to play the victim card? If the Chinese are hitting us, shut up and hit them back 10 times harder. This is nothing new, all countries with the capability to do so have been stealing secrets since before most of us were born. Nobody in China will get in trouble for this, and nobody in the U.S. will get in trouble if they get caught doing the same thing to China. The minute we begin to play victim means we have given up and admitted that China can out-maneuver us.
Chinese Huawei and ZTE are experimenting on world level, by supressing a protest like in Iran by getting the guys who participated in revolution and in India by starting a protest by sending SMS messages and it is the so called international spy game.
They were very much sucessful in China, whoever is protesting were tracked easily. Now it looks like, no one is able to get Chinese Technology stealed.
“This is stealing American wealth. It's stealing American jobs. It's stealing American competitive advantage,” General Michael Hayden, former head of the Central Intelligence Agency
I would call this paranoia. Nobody is stealing from you, you dumb asses.
What an incredible pile of fuzzy justifications for US's own cyber warfare activities.
"Stealing American competitive advantage", "<i>could be</i> funneling sensitive information", "everything you can possibly imagine". Actually, I can imagine quite a lot, so these arguments are less than persuasive.
And the example provided is an eight year old event that probably took minutes to execute? Too bad Brian Shields is no Clifford Stoll.
I find it hard to believe that this is a real concern about industrial spying because of the lack of timely specifics. Seems much more likely that this is just one of a pile of arguments being spun up to support the notion of spying in and on US by US whether CIA, NSA, FBI or any other TLA. FISA re-authorization being a current example where it looks like US really wants to junk the Bill of Rights because those pesky amendments make it difficult to just hoover up all electronic transmissions. Never mind the distance between having a record in a database and having useful information in your hands. It's a bad argument to support a bad plan.
Just ask yourself, who is out there in the world setting the example for cyber warfare with Stuxnet and other projects. Why, it's US!
ps - This also holds true for US setting a horrible example about the efficiency of flying killer robots, aka political assassination strikes. Try to tell yourself that this won't come back to haunt US all too soon.