Mercenary Espionage and Chinese Deniability.

US Chamber of Commerce

Despite it happening at the business end of 2011, the hacking of the US Chamber of Commerce ( seemingly  by Chinese agents), shocking as it wasn’t in this information age, seemed as nostalgic and interesting an example as any of the diplomatic intrigue and excitement of the Cold War. In 2012 this comparison hardly needs more encouragement, as online at least and in the world of espionage, a war has been running between the US and China since the war in Kosovo. The narrative of China enacting nefarious schemes against US interests has gained mainstream acceptance in the West and vice versa in China. But just how true are the now countless, recent reports of Chinese state culpability in hacking attacks against the West, and are they indicative of conflicts to come and the PRC’s future policies?

Certainly China has a huge footprint in terms of web users (300 million netizens and rising) and is known to account for a relatively proportionate percentage of the net’s hacking activity, though little of this can be attributed to hackers with State support, let alone to the State itself. China vigorously denies all allegations of hacking and is perhaps a bigger victim of Chinese hackers than the US, but there are many very clear, recent examples of attacks on foreign nations that demonstrably are connected to China.

Recent attacks on the Chamber of Commerce, Google, the website for the Nobel Foundation, the offices of the Dalai Lama, the US’s armed drone fleet, US Meteorological satellites and other examples all have an undeniable Sino tang to them. They were certainly perpetrated either by the PRC or by pro-PRC groups with State protection or support. The evidence regarding the attack on the Chamber of Commerce, for example, points to perpetrators with an interest in the CoC officers assigned to Asian affairs, was traced back to Chinese IP addresses and resulted in the CoC network printing out error messages in Mandarin for a week. Likewise these attacks were well organised and informed, pointing at the very least to PRC coaching if not direct involvement. Similar attacks on Google and the Nobel Prize Foundation’s site can only really link; motive-wise, to the PRC, whereas the recent hacking of US satellites and the US drone fleet via infected versions of Adobe Reader could have only been achieved by China or Russia.

 By now the Americans are used to what the rise of Chinese net power means for them, but they still have no real way of ensuring against it. As Mr Chavern; the CoC Chief Operating manager said to Wall Street Journal reporters; “It’s nearly impossible to keep people out. The best thing you can do is have something that tells you when they get in”. Though they have no real defence against it, or perhaps underlining that fact, America’s relative impotence in this area sees them threatening war over it. In May of 2011 the Pentagon released a report stating that computer sabotage by another country could, in the right circumstances, constitute an act of war. None of the Pentagon’s tough ‘Cold War talk’ seems to mean anything to China though, as when it comes to aggressive acts of computer espionage, they more often than not resort to outsourcing to keep their hands clean.

Publicly China’s go-to team for Cyber-espionage matters is the ‘Blue Army’ a recently publicised elite taskforce drawn from an ‘exceptionally deep’ talent pool of civilian and military personnel. The Blue Army could probably account for most of the hacking activity attributed to the CPC, if only they didn’t spend most of their time defending China. But the CPC doesn’t need a state run force when it can turn to civilian groups to get the job done. In an interview with a former PLA general who gives the game away with an admission of guilt, he states that China’s online strength lies in the nation’s hacking culture; “It’s just like Ping Pong. We have more people playing it, so we are good at it.” The Blue Army, are for the most part a wholly defensive force (according to the CPC), and there is little direct evidence to question this, notably because most of the high profile attacks from China can been attributed to three civilian hacking syndicates: the Honker Union, GhostNet and the Red hacker Alliance.

These civililian groups, with CPC guidance, are more than capable of taking down most targets, whether that means hacking the offices of the Dalai Lama, taking down Google Asia or stealing from the lightly defended Chamber of Commerce website. Mostly these groups are made up of self-sufficient cells of hundreds and thousands of hackers who just like any other group, go after foreign targets for money or fame. But whether these groups obtain PRC assistance, occasionally work for the PRC or are a front is irrelevant, they have tacit impunity in China. The best of the hacking community, like with what happens to some arrested hackers in the West, are co-opted and some are even idolised as national heroes. The difference is that the US certainly doesn’t allow their hackers a free pass for attacking foreign nations and they certainly wouldn’t hand them the reins. In China outsourcing net attacks to these groups, whether through direct channels or not, is beneficial as a case of deniability, whereas in the West the opposite is true; it would be considered a huge liability.

Liability or not, for the meantime it does seem like it will be Chinese policy to hide behind, enable and outsource to these domestic groups, who while off the leash will launch many more (albeit sometimes clumsy) attacks on anti-PRC targets. Deniability trumps tact, but how this strategy would play out in a worst case scenario; with one or more Chinese groups taking it upon themselves to do real damage to the US or its allies?  The possible consequences make this strategy, if that is what it is, look reckless. Though it may be technically true, foreign nations will not buy claims of Chinese innocence if domestic hacker groups hiding under the grey areas of Chinese policing take it upon themselves to do something big out of turn. IT experts and governments worldwide all know about the relative freedom that some hackers operate under in China and this effectively de-fangs their effectiveness as a scapegoat. Rather than a baseless threat, this may be the point of the Pentagon’s warning in 2011; reign in the hackers, we are prepared to punish you for their behaviour.

Considering China’s vast internet security system deniability is no defence.

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The Great, Phoney Currency War

Led by the United States, many western nations’ strong concerns about the undervaluation of the Chinese RMB have been public knowledge for half a decade. Following China’s recent economic rise, these concerns have slowly gained critical urgency and widespread support however, especially so after the 2009 recession which saw Western unemployment numbers spike as Chinese trade surpluses skyrocketed. The undervalued RMB, which is closely controlled by the Chinese government, is a large reason for the worldwide trade imbalance and despite Western complaints has only risen from 8.3 to 6.5 RMB against the dollar in five years, this despite the dollar losing two fifths of its value over the same period and the Chinese economy overtaking both Europe and Japan.

Looking at these figures, coupled with the almost universal acknowledgement of financial trackers, there seems little doubt that the CCP is deflating the Yuan’s potential via currency exchange manipulation. This method, according to Paul Krugman of the New York Times is “a combination of an export subsidy and an import tariff”; both designated illegal by the WTO and involves pegging the RMB to the dollar and strictly controlling the exchange rate as the it fluctuates.

Despite these arguments however, the CPC seems deaf to the indignation of the West and violently opposed to any outside interference or criticism of their monetary system. This Chinese disregard came to a head last month as lawmakers in the US crossed party lines to attempt to rectify the issue in the senate through a trade tariffs bill.

The Currency Exchange Rate Oversight Reform Act of 2011, was passed by the US senate in mid October by a relatively non partisan group of Republicans and Democrats whose co-sponsors; senators Brown and Shumer stated after the bills passing that; “today we are fighting back”, the United States has ended “the unilateral disarmament approach we have taken for the past decade.”

This fighting talk has been mirrored in the warnings from the Chinese media too, who have threatened nothing less than a tit-for-tat trade war if the bill is passed by the US house and President’s Office. Citing economic and trade “analysts”, Wang Jianhua and Li Yunlu argued in a People’s Daily article that “long-held fears of a brewing trade war between the United States and China will become a horrible reality, hurtling the world economy into disorder and recession” if the new law goes ahead. The article went on to quote the vice director of a CPC department of economics, Zhao Jinping who all but confirmed the sentiment regarding the senate bill by saying that its implementation would make “a trade war between China and the United States… inevitable”.

Second and third and fourth articles written on the 12th , 13th and 14th, two from People’s Daily and one from the Global times aped the sentiment of Jianhua and Yunlu’s article in predicting the inevitability of a trade war, whose menace would usher in a great depression to make the 1930’s look tame. On the more extreme end of the spectrum according to Jianhua and Yunlu this would see “millions” more unemployed Americans as well as the repatriation of millions more Chinese migrant workers back to their hometowns. Furthermore this bill could damage the mining sector in South America, Australia and Africa as well as the high-end manufacturing sectors of Japan, the European Union, and North America. The two go on to state in their apocalyptic vision, that the resulting protectionism of nations could plunge markets “into prolonged turmoil, and the already severe European and U.S. debt crises may escalate rapidly”.

Cui Tiankai, Chinese Vice Foreign Minister

The aforementioned October 12th article from People’s Daily carried quotes from the Chinese Foreign Ministry’s vice minister, Cui Tiankai, which placed serious weight behind these threats. Cui, in claiming that the bill violated WTO regulations concluded that “the only result would be a trade war between China and the US” and that ominously, “it would be a lose-lose situation for both sides.”

The result of all of this conflict, according to the Chinese press, is that the incident serves the crass political needs of the two US parties heading into elections looking for outside sources to blame for the economy. This Chinese narrative; that American scapegoating of the RMB is the beginning and end of an issue already mired in the failings of the democratic system, belies an inability to consider Western concerns and is no good for international relations. The rancorous and condescending way in which the CPC has responded to the bill and the historical grievances behind it will do their reputation no favors either. In effect the CCP has done very little in the last five years to allay Western concerns, further, not once in any of the articles released in the aftermath of the bill did any Chinese publication make mention of the ‘undervaluation’ other than to simply say that Western claims were “supposed” or “unfounded”.

On this issue China seems to be publicly prepared to let the ‘world burn’ rather than to cede or negotiate in any capacity to Western concerns, despite the strong evidence behind them. As such, Chinese worries about the “high tech” and “mining sectors” of foreign regions seems facetious; it is evident that this conflict is another example of Sino/US conflict, especially when considering China’s expressed threats to engage in brinksmanship and eye for an eye diplomacy. It all seems for nothing though, whether because of timidity or the development of alternative strategies to deal with the trade surplus, both the house majority leader John Boener and the White House have signaled that they will scupper the tariffs bill.

Considering the bill’s impotence, and acknowledging that the CCP is most likely aware of it, is it best to assume that on this issue that China is just trying to look tough by scaling a monetary ‘molehill’?

 

The PRC Cautions Noda.

The swearing in of Japan’s new Prime Minister this month, Yoshiko Noda, despite his unusual background, has played out as a relative non- event in the international news sphere. This is perhaps unsurprising considering the severity of the 2011 Tuhoku earthquake, the resulting nuclear fallout from damaged power plants and also the fact that Noda is Japan’s 8th head of state in under 10 years, and, at least in the minds of some; not destined to be around for long.

Noda’s appointment has gone relatively unnoticed except in two nations, one obviously being Japan where he is a rare kind of politician, being from a poor and politically unconnected family. Despite his roots however, Noda graduated from a prestigious political sciences University and is touted as an economist of note; as such his appeal is both in being a populist and the pragmatic choice in a nation suffering through an unprecedented recession. The second nation where Noda’s appointment has been front page news is in China, where previous comments from Noda about Japanese war criminals has outraged many at the same time as the media has picked over the effect that recent Japanese political instability has had upon Sino-Japanese relations.

Despite its’ recent economic and environmental woes, Japan still has the third largest economy in the world and is one of China’s largest trading partners. Economically at least, the relationship between the two is very important for Japanese businesses, Chinese technological advancement and the region as a whole. As such, the airing of China’s presumed worries about the new Japanese head of state, if not also useful for pressuring Japanese foreign policy, are valid. In Japan however there will be distrust over the ingenuousness of Chinese claims and demands as there are longstanding historical precedents of the Chinese taking advantage of Japanese political disarray. Considering this, their deeply troubled past and recent territorial conflicts in the East China Sea; without a doubt, the Sino- Japanese political relationship is as dysfunctional as two peaceful states can have.

An August 2011 article by China Daily titled, “Kan’s Woeful Legacy”makes the case for disillusionment regarding territorial disputes over the Daiyou Islands as well as Japanese worries about the PRC military which the China’s Daily argues is scaremongering for political effect. The article lays most of this blame for bad relations on the previous administration of Naoto Kan which famously imprisoned a Chinese fishing boat captain who strayed into contested waters and rammed a Japanese lifeguard boat. The article gives the new Prime Minister Noda the benefit of the doubt on these issues, but charges him responsible for repairing ties between the two nations; “the incoming Prime Minister and his Cabinet will need the political wisdom to emerge from the hawkish shadows of the previous disposition”.

A second article, a direct Chinese to English translation of a People’s Daily article by Zhao Qizheng, also from August, echoes the same sentiment as the aforementioned China Daily piece. Citing research that shows “how weak the ties between the two countries’ people are”; with 70% of Chinese citizens and close to 80% of Japanese citizens holding unfavourable opinion of the other, the article demands a steadier hand when it comes to “sensitive issues” like the Daiyou conflict. Here again the blame is lain at the feet of Japan, with the implication that China expects more from the new administration.

A final article from the nationalistic Global Times, late in August by Liu Linlin however, piled on the new Japanese Prime Minister for recent statements he made, backing up Chinese apprehensions about his hawkish past and support of Imperial Japan-era war criminals. Though correct in a technical sense due to Japanese political wrangling, Noda’s statements to the Japanese parliament that some “class A” war criminals were not in-fact, criminals in Japan was cited by the article as being deeply offensive to all Asian peoples. The article went on to argue that, as 2012 is the 40th anniversary of the establishment of political ties between Japan and China that Noda has “an opportunity to repair ties and strengthen cooperation” and that the only way for him to do that would be to step up and take the responsibility upon himself.

Two final articles by People’s Daily on the 30th and 31st of August also made the argument that Japan was to blame for the recent diplomatic low between the two nations. Settling on Japan’s “revolving door leadership” as an impediment to consistency of relations as well as their belligerent stance on war criminals and disputes over inalienable and “integral part(s) of China’s territory” the articles roundly condemned previous Japanese foreign relations and demands better from Noda. However, in a manner that could be seen as the offering of a fig leaf to the new Prime Minister, both articles made pains not to blame Noda directly, despite his perceived hawkish, war crime-denying past. Indeed, disregarding the last article’s undiplomatic stance towards Daiyou; “Beijing is willing to shelve differences… on condition that Tokyo recognized China’s complete sovereignty” much of the noise from the PRC re Noda seems to have taken the form of positive reinforcement, assuming he can keep his hawkish impulses under control.

For a man that has made notably hawkish statements throughout his career, especially regarding Japanese war criminals (he once denounced a sitting Prime Minister for not going to the notorious Yasakuni Shrine) the PRC’s response to Noda has been notably muted. In gently warning Noda, China is neither giving Noda ammunition against the prospect of the PRC “meddling in Japanese foreign policy”, nor goading him into further brinksmanship for the sake of appearing strong in his new position. Though standing intransigent on the old matters of Chinese sovereignty to any and all historical claims, for the most part the Chinese are showing responsible and shrewd political behaviour; and thus the newly annointed “mature actor” has now served the ball into Noda’s court.