China’s Cyberattack on Google Rattles Tech Industry

China’s Cyberattack on Google Rattles Tech Industry
January 22, 2010

Jim Lakely

Jim Lakely is director of communications at The Heartland Institute, co-director of Heartland’s... (read full bio)

A key to Google’s successful entry into the Chinese market has been its willingness to adhere to the communist government’s demands to censor Web searches of inconvenient topics—such as the Tiananmen Square Massacre, the religious sect called the Falun Gong, and the efforts to liberate Tibet.

And the company adhered to that principle until January 12, when Google traced to Chinese operatives a spate of cyberattacks and clandestine Web surveillance targeting the search giant and other foreign tech companies. Now Google is threatening to leave the Chinese market altogether—if the government doesn’t kick it out of the country first.

“These attacks and the surveillance they have uncovered—combined with the attempts over the past year to further limit free speech on the Web—have led us to conclude that we should review the feasibility of our business operations in China,” Google said in a statement on its corporate blog. “We have decided we are no longer willing to continue censoring our results on Google.cn, and so over the next few weeks we will be discussing with the Chinese government the basis on which we could operate an unfiltered search engine within the law, if at all.

“We recognize that this may well mean having to shut down Google.cn, and potentially our offices in China,” Google said.

Cyberattack Reverberates
The attack on Google’s Gmail accounts—which the company the Chinese government carried out to track global human rights activists and Chinese dissidents—has rattled the tech industry worldwide. The incident even spurred Secretary of State Hillary Clinton to utter some of her most critical words toward China since taking office a year ago.

In a January 21 speech on Internet Freedom at the Newseum in Washington, DC, Clinton called on the Chinese government to “conduct a thorough review of the cyber intrusions” on Google, and demanded that the investigation be “transparent.”

“The Internet has already been a source of tremendous progress in China, and it is fabulous there are so many people in China now online,” Clinton said. “But countries that restrict free access to information or violate the basic rights of Internet users risk walling themselves off from the progress of the next century.

“The United States and China have different views on this issue,” she added. “And we intend to address those differences candidly and consistently in the context of our positive, cooperative and comprehensive relationship.”

Dangerous Business?
Google’s experience in China raises questions about what a Western company’s expectations should be when it decides to do business in a closed and controlling society. Even agreeing to play by a host country’s rules, Google learned, doesn’t guarantee the government will hold up its side of the bargain.

“Google faced the same challenge that free traders always do: Should you do business with a country whose laws and governments are inimical to your values?” said Jon Henke, president of Digital Society, an online technology policy think tank. “I think Google made a utilitarian decision that doing what they could in China, even with restrictions, would be better than doing nothing. I think that was the right decision.

“However, it appears that the Chinese government could not abide by even their own limited and oppressive social contract,” he added. “If Google wants to defy the Chinese government, I applaud them. Sic semper tyrannis.”

Alani O. Kuye, managing partner of Norwalk, Connecticut-based data management firm Phantom Data Systems, has little sympathy for Google—which should have expected this to happen eventually.

“If you want to dance with the devil, you have to play his way,” Kuye said. “This is what Google should have taken into consideration. China doesn’t fit into Google’s core philosophy, as it’s a controlled environment. Why they went into China in the first place still befuddles me.”

Engaging in ‘Cyberwarfare’
Craig Robinson, chief operating officer of GlobalSCAPE, Inc., a San Antonio, Texas-based information security firm, said Western tech companies need to carefully assess the risks to their data when conducting business internationally. That is especially true “in countries with privacy rights that differ materially from those in the company’s primary country of business.”

“By western standards, China has a longstanding, adversarial stance on freedom of speech that telegraphed its their potentially drastic actions while investigating human rights activists,” Robinson said. “China’s actions can be considered a form of cyberwarfare.

Robinson notes the Congressional Research Service long ago revealed China has openly discussed its cyberwarfare capabilities—and not just toward military targets, but civilian enterprises.

“The bottom line is that any company, including Google, can choose to enter a market if their lawful business interests and activities drive such a decision,” Robinson said. “However, companies now will better appreciate the potential direct threats, such as cyberattacks, and indirect threats, such as adverse public opinion, that may result from such business operations.

“Google is an international giant. If a behemoth with global influence can suffer from direct attacks, other businesses must take note and address their policies accordingly,” he added.
 
The Damage Spreads
The full extent of the China-based attacks on private and government computer systems is still unknown. But this was not the first time China was caught hacking into American servers. Several potentially catastrophic bugs were discovered in the computer systems of America’s electrical grid last year. Traced to China, they were never triggered.

While the cyberattack on Google has received the most attention, at least 34 U.S.-based companies were also victimized—including Yahoo, Symantec, Adobe, Northrop Grumman and Dow Chemical. Those companies have not announced any changes in their policies toward China, let alone plans to leave the country.

However, Patrick Chovanec, an associate professor at Tsinghua University’s School of Economics and Management in Beijing, said the Chinese government may have finally gone too far.

"China has always operated on the assumption that, no matter how they might grumble, foreign investors will ultimately accept whatever strictures China dishes out because nobody, in the end, is willing to walk away from the Chinese market,” Chovanec said. “Google’s decision seriously undermines that assumption. There is a breaking point.”

James G. Lakely (jlakely@heartland.org) is co-director of the Center on the Digital Economy at The Heartland Institute and managing editor of InfoTech & Telecom News. Follow InfoTech & Telecom News on Twitter.

Jim Lakely

Jim Lakely is director of communications at The Heartland Institute, co-director of Heartland’s... (read full bio)