The Slow Drain on America (Part II): Espionage, China, and American Business

 Previously I addressed America's increasing awareness of the associated risks in cyber and digital systems, yet so many commercial businesses still lack hardened security programs capable of protecting sensitive information. Espionage between nation-states has taken a popular new form over the last decade and civilian America is slow to understand this new phenomenon of spying tactics. Commercial businesses and government has fallen in love with the advantages of new technology but due to the preference of ease of data that tech brings, many still hesitate to address this new set of problems and vulnerabilities our technology systems present. The reality is today that cyber-crime and cyber-espionage are big business opportunities for individuals and nation-states. This new form of espionage is affecting the economic and political relationships between countries and has changed the shape of modern warfare to become full of sneaky and canvassed attacks; many times going completely unnoticed by victims who are uneducated on the underlying goals of the attacker.

Where is the largest part of the "cyber drain" coming from?

A formidable threat to the strength and competitiveness of the U.S. economy is China, but what the American population largely does not understand is the Chinese strategic objectives behind draining U.S. business data and industry IP.

jjachinasupplies sees cyber warfare as a valid form of international business and military competition, and is pursuing what it calls "information dominance.'' Mandiant recently traced many of the U.S. attacks to a Shanghai office building that likely is the home of the People's Liberation Army's cyber warfare unit.

These low-grade types of commercial cyber attacks are also increasingly originating from other countries like Russia, Taiwan, Turkey, and North Korea, many of the most notable and damaging recent intrusions have been traced back to China. So far, perpetrators of Chinese cyber attacks have been able to carry out their thefts of both military and economic secrets at virtually no cost.

Many countries engage in economic espionage using cyber, but the Chinese are by the far the worst actors. A report generated by the Office of National Counterintelligence Executive stated, "the People's Republic of China is the world's most active and persistent perpetrator of economic espionage, hundreds of billions in American R&D have been stolen by the Chinese government in this continuing assault on our economy, and America's competitive edge will continue to erode until and unless our government defends our national interest by taking effective countermeasures." I encourage U.S. businesses not to wait for Uncle Sam to provide their needed cyber protection; it will not come swiftly and likely not sufficiently.

It is important to note that not just the largest companies are vulnerable, the greatest increase has been in attacks towards small to medium sized businesses. Recently an industry report noted a U.S. furniture company with 100 employees had designs stolen and it was reported that six months later, the Chinese were shipping furniture back to the states at half the prices, quickly the company was out of business. Whether dumping steel or stealing secrets, the motive for the Chinese is the same: keep their economic engine running, and maintain stability at home while simultaneously undermining the economic power of the United States.

Researchers at the Center for Foreign and National Security Policy at the Heritage Foundation said, "The Chinese bet the farm on this (stealing secrets) because they have virtually no R&D. The only way for them to keep up with western economies is to steal. They take everything, then sort through what they have and discard what they don't need." To put the R&D issue between our two countries into perspective, per capita, the China R&D expenditure is $248.16 compared to the United States expenditure of $1,275.64. Clearly the Chinese are relying on someone else's R&D rather than their organic efforts. Chinese companies have already been sued for stealing DuPont's proprietary method for making chemicals used in plastics and paints.