Opinion: The real problem with China

Our columnist casts a jaundiced eye at hand-wringing over technology and Beijing

It's never a surprise to see people yelling at one another on the Sunday morning talk shows, but a recent exchange concerning U.S. policy caught my eye. One of the combatants kept stating that China is a potential threat. His opponent, attempting to counter, kept repeating that he just came back from China and that everyone is wonderful and that China is a perfectly friendly country.

When it's laid out like that, of course, you see the problem in that debate right away: apples and oranges. I have also been to China, and I also believe that the Chinese are generally good, honest people. But there is the wider world stage to consider, and in that world, we've got to be aware of Chinese policy -- both political and economic.

Fundamentally, China's interests are adversarial to those of the U.S. The nation's ruling powers have different beliefs in the form and function of government, as well as their own perspective about what is best for their country's economy and long-term security. This creates a lot of security and espionage issues.

Moreover, China is one of the worst offenders when it comes to espionage against the U.S. and its companies. China has over 3,000 front companies operating in the U.S., and it regularly attempts to recruit people working in non-Chinese companies to spy for China. Just about all of my Fortune 500 clients have been victims of Chinese espionage efforts, leading to hundreds of millions of dollars of losses. To give just a couple of examples, General Motors Corp. purchased a Chinese car and then removed the body panels and found them to fit perfectly on a similar GM car. And semiconductor companies have found Chinese companies manufacturing the exact same chips that they make.

While I help my clients attempt to protect their assets as best they can, I expect China to do what it can to grow the Chinese economy and secure the country. I do not agree with the methods of the Chinese leadership nor with its domestic policy of throttling certain types of political discussion, but again, it's a sovereign country and can do whatever it wants toward its goals within its own border. (I discuss the full threat posed by China, as well as its methods and motivations, in my book Spies Among Us.)

With that in mind, I believe that recent Senate hearings and the current criticism of Google Inc., Yahoo Inc. and the like represent the height of hypocrisy. These U.S.-owned firms doing business in China are adhering to Chinese law and responding to Chinese court orders that resulted in the arrest of Chinese dissidents and reporters. While China abuses human rights as most Westerners would describe them, we can't tell U.S. companies to disobey the laws of the countries in which they choose to do business.

I was outraged to see senators criticizing Google CEO Eric Schmidt and other dot-com executives for filtering Internet searches and responding to Chinese warrants seeking the identity of dissidents using those services. Frankly, it's disingenuous for the U.S. to start complaining now. The fact is that the U.S. government, as well as the U.S. companies that preceded Yahoo and Google into the Chinese marketplace, have been coddling the Chinese government at every opportunity for well over a decade.

Senators who are now telling Google employees that they should risk going to jail previously stood by without paying even lip service to Chinese human rights violations, not to mention espionage against the U.S. and its companies. On top of that, they take no actions to actually free the dissidents in question. Congress is, in short, asking selected dot-com firms to take a political stand that the U.S. government is unwilling to take itself.

Likewise, most of the individuals who find it easy to condemn Google and Yahoo are doing so as they work on their computers, watch their TVs, listen to their iPods and drive their cars -- all of which are likely built in, or constructed with significant parts from, China. They may think they're striking a noisy blow for freedom, but practically speaking, most of them are making their biggest "statement" by further increasing the trade deficit.

Having spent time in China talking to the Chinese, it's clear to me that the boycotts that occurred after 1989's Tiananmen Square massacres resulted in significant damage to the Chinese economy and did create a reluctance to similar actions in the future. However, neither the U.S. government, nor its companies, nor its consumers have expressed similar concerns over anything else China has done since.

While it's easy to paint Google and Yahoo as villains, it's the lack of any other significant action by supposedly concerned legislators and consumers that makes for the real villains. Again, while I wholeheartedly disagree with China's harsh policies against dissent, China is a sovereign country that believes it is doing what is best for itself, and you haven't given Chinese leaders reason to do anything different.

Meanwhile, the U.S. government has made one high-profile (but once again, low-intelligence) effort to prove itself security-conscious where China's concerned. There has been a lot of talk about how much of Lenovo Group Ltd., the largest PC manufacturer in China, is actually owned by the Chinese government and why that might pose a security risk if Lenovo-built computers (particular the popular ThinkPad line, which Lenovo acquired in 2004) are used by U.S. State Department employees.

Let's assume that China has a controlling interest in Lenovo. What does that imply, and why would the U.S. ban Lenovo computers from operating on classified Department of State networks? In the worst-case scenario, you must assume that the Chinese government, whether or not it directly controls the company, can strongly influence any Chinese firm. Theoretically, China could implant Trojan horse software into the hardware, firmware and software that would cause the systems to fail or would allow for back doors for Chinese intelligence or military agencies.

Such a sequence of events is not without antecedents, both a lot closer to home than Beijing. The National Security Agency supposedly convinced Crypto AG, a Swiss cryptography company, to give the NSA a backdoor into its cryptographic devices. Likewise, the U.S. Department of Defense banned Check Point firewalls, because Check Point Software Technologies Ltd. is an Israeli company and the company would not allow the U.S. government to look at the source code.

To secure State Department computers against the worst-case scenario I've described, the department would have to reverse-engineer the Lenovo computers and all preinstalled code to see if there are any suspicious system modifications. They would actually have to reverse-engineer a lot of individual systems, since it would be possible for China to modify only a subset of the systems sold to the U.S. government. Testing a number of individual systems in this fashion would be very expensive in both time and money.

But why should the U.S. government confine its worries to Lenovo? Just as the NSA was able to influence a Swiss company, China might be able to influence companies in other countries. Moreover, computers from most manufacturers are constructed in or composed of parts that are manufactured in China and other Asian countries. While a Chinese-controlled company might well be susceptible to Chinese government influence in putting in back doors, it is just as likely that computers or components from any other company or country are equally compromised.

Again, I expect that China, and every other sovereign country for that matter, would attempt to do such things to further its own interests. However, there is little reason to believe that Lenovo computers present significantly more risk than any other computer composed of parts manufactured outside of the U.S.

As with the uproar over Google and Yahoo's business practices in China, there's plenty of noise coming from Congress and certain consumer factions over the use of Lenovo computers, but precious little evidence that any of those parties understand the true scope of the problem or their myriad contributions to it -- or has the faintest idea how to effect real progress, whether toward greater human rights or better security.

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Copyright © 2006 IDG Communications, Inc.

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