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1 The Firecracker Report
We invite you to read more on our blog The Firecracker Report
. 
Google’s Mysterious Threat to Pull Out of China
- Is a Covert WAR Brewingbetween the U.S. and China?
In an extremely intriguing development today Google threatened to close down its Chinaoperations after unearthing a highly sophisticated attack aimed at accessing gmail accountsof Chinese human-rights activists. According to Google the attacks originated in China andincluded accounts of U.S. and E.U. based activists. Google made the announcement today inits blog-post titled"A New Approach to China".
 
In mid-December, we detected a
highly sophisticated and targeted attack
on ourcorporate infrastructure originating from China that resulted in the theft of intellectualproperty from Google. This attack was not just on Google. As part of our investigation wehave discovered that at least twenty other large companies from a wide range of businesses--including the Internet, finance, technology, media and chemical sectors--havebeen similarly targeted. We are currently in the process of notifying those companies, andwe are also working with the relevant U.S. authorities.By labeling these attacks as "highly sophisticated" Google is essentially pointing a finger atthe Chinese government/ intelligence agencies. That the cyber attack has been elevated toa U.S. national security threat level, is evidenced by the State Department's involvement,and a statement by Secretary Hillary Clinton in which she asked Beijing to respond toGoogle's allegations. A report in the Telegraph offered further details:
 
The State department said that Mrs Clinton had met with executives from Google andMicrosoft, as well as with
Cisco Systems, which provides much of China's internetinfrastructure
, to discuss how to stop countries from "stifling" access to information.Most interestingly, the Telegraph went on to point out that:Next week the US is to launch a new technology policy to help citizens in
other countries
 to gain access to an
uncensored internet
.Returning to Google's announcement, Google's blog outlined the reasons why Google hasdecided to potentially pull out of China completely:We have taken the unusual step of sharing information about these attacks with a broadaudience
not just
because of the
security and human rights implications
of what wehave unearthed, but also because this information goes to the heart of a
much bigger
 global debate about
freedom of speech
.We launched Google.cn in January 2006 in the belief that the benefits of 
increased accessto information
for people in China and a more open Internet
outweighed ourdiscomfort in agreeing to censor some results
. At the time we made clear that "we will
 
 
2 The Firecracker Reportcarefully monitor conditions in China. These attacks and the surveillance they haveuncovered--combined with the attempts over the past year to further limit free speech onthe web--have led us to conclude that we should review the feasibility of our businessoperations in China. We have decided we are no longer willing to continue censoring ourresults on Google.cn, and so over the next few weeks we will be discussing with the Chinesegovernment 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, andpotentially our offices in China.We do not doubt the veracity of Google's claims. Cyber warfare is the covert game nationsplay, and these attacks are nothing new. Several U.S. military and scientific institutionssuch as NASA - with far more sensitive national security information have been the target of hacking from China.In November 2008, a bipartisan U.S. Commission to analyze economicand national security relationship with Chinaconcluded that, "China has stepped up its capacity to penetrate U.S. computer networks to extract sensitive government and privateinformation".However, what we question is the following:1.
 
Why is Google threatening to close operations at this juncture - i.e. four years afterthey entered China knowing full well that they will have to censor information tocomply with Chinese government regulations. In 2006, Google seemed to completelydisregard the human rights and freedom of speech considerations arguing that "thebenefits of providing increased access to information to Chinese citizens outweighedthe discomfort of censorship". Then why the sudden about face and embracing of altruistic values such as "freedom of speech" now?2.
 
If the U.S. Government has not stopped doing business with China, despite itsCommunist status, countless cyber attacks, stealing of state secrets, human rightsabuses and lack of freedom of speech and democracy, then why the about face byGoogle?3.
 
The link between the Chinese Government's (implied involvement but not explicitlystated by Google) hacking of gmail servers to extract dissident information andGoogle closing its
entire
operation in China (search engine and cell phones runningon Android) is tenuous and illogical at best. While the attacks are no doubt serious,we wonder if they are serious "enough" for a company like Google to forsake theworld's largest internet subscriber market.4.
 
So far Google has not had much success in China's internet search market havingcaptured only 1/3 market share. Its chief competitor Baidu.com controls theremaining 2/3. In addition by pulling out of China Google does not stand to lose toomuch, as pointed out by Bloomberg:"A pullout would deprive Google of an estimated $600 million in annual revenue [
out of total revenues of $24 billion, thus a very
 
 
3 The Firecracker Report
small percentage
] and may help domestic Baidu extend its lead in the world‟slargest online market. “There‟s no other competitor, so if Google pulls out, Baidu
is
left by itself,” said Erwin Sanft, an analyst at BNP Paribas SA in Hong Kong".
Now Google has to have factored in the scenario that the Chinese government callsits bluff and asks them to "leave".5.
 
It is
highly unlikely
that the Chinese government will acquiesce to allowing Googleto operate an unfiltered search engine, especially when Baidu, a domestic Chineseplayer (that the government can control), holds a 2/3 market share. In the currentshaky economic scenario the Chinese government will try its level best to keep a lidon citizen's dissent. To do this it has unfortunately resorted to severe censorship of the Internet banning services such as facebook, twitter and youtube. Even so, theChinese government is not illogical in this endeavor - it is well aware of covertcampaigns launched by the U.S. government via facebook and twitter in Iran to helpoverthrow the Iranian government. China is not about to let the U.S. push the samefate on its own government.So in our opinion, what all this posturing boils down to is the fact that a new and dangerouswar-front has opened up - one between the U.S. and China. Currently the war is economic,
political and covert in nature. The U.S. government knows that the nation‟s fiscal situation is
abysmal and that China holds the trump card over its fate by being its largest creditor. Inaddition faced with rampant joblessness, a weakened U.S. consumer is more dependentthan ever, on cheap goods manufactured in China. While cheap Chinese imports allow theFed to keep a lid on domestic inflation, they do not alleviate rampant U.S. unemployment.Protectionist pressures are growing on a desperate U.S. government struggling to fix theunemployment situation. This tussle has led to the imposition of trade sanctions againstChinese companies on non-strategic sectors like certain steel and tire imports.To top this situation neo-con hawks in the U.S. government and military accustomed to thenation being the world's sole super power, fear the rapid rise of China. They fear the globaldomination of a Communist nation and this in turn has led to naval and airspace incursionsinto Chinese territory by the U.S. military, as well as the geo-political blockages by the U.S.to severe Chinese access to the world's mineral and oil resources. The current crisis in theMiddle East an oil rich region is a direct result of this strategy.As the economic situation deteriorates, these tensions are only going to escalate. While theU.S. government is not going to start a military excursion with China anytime soon, strategyhawks know that one way to slow the rise of China and reduce its grip on America'seconomic collar is to create a suitable diversion for the Chinese government. The U.S.intelligence apparatus, which has several decades of experience staging coups andoverthrowing democratically elected governments across the world, is now staging a similarpolicy with China.
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