
As China Hacked, U.S. Businesses Turned a Blind Eye - derchu
https://www.npr.org/2019/04/12/711779130/as-china-hacked-u-s-businesses-turned-a-blind-eye
======
watertom
Forget about the hacking.

U.S. business walked into China and handed over all of their technology and
Intellectual Property, just to have it used against them by the Chinese
government. China has only resorted to hacking lately in order to get more
technology and IP.

~~~
TaylorAlexander
And I think that’s a good thing. Intellectual Property is harmful to most and
only benefits a few. If we abandoned the notion we’d be better off.

~~~
NicoJuicy
Samsung spend 130 million on research on bendable phones.

It got stolen by China. How can that be justified?

[https://edition.cnn.com/2018/11/30/tech/samsung-china-
tech-t...](https://edition.cnn.com/2018/11/30/tech/samsung-china-tech-
theft/index.html)

~~~
rcw4256
As a result of this 'theft', consumers now have more bendable phone options.

~~~
sgt101
But in the future they will see less innovation as R&D is further slashed.

~~~
izacus
I see this thrown around all the time when we talk about monopolizing IP and
having huge corporations put their lawyer boots on smaller company throats...
but is it really true? Will making IP protection weaker actually stifle
innovation? Was innovation in industrial era hugely stuffled by not protecting
every single patent a huge multi-national conglomerates throw out?

~~~
sgt101
Well, yes, hence the development of patents.

"The English patent system evolved from its early medieval origins into the
first modern patent system that recognised intellectual property in order to
stimulate invention; this was the crucial legal foundation upon which the
Industrial Revolution could emerge and flourish." ([1]Wikipedia)

Without patents what you do is create trade secrets, patents publish the
concepts that are protected, they are fully disclosed (or the patent is junk)
and after 25 years _anyone_ can use them. The 25 years is the time that you
have to get payback on your invention - forcing investment in development
_now_ before your monopoly expires.

[1]
[https://en.wikipedia.org/wiki/Patent](https://en.wikipedia.org/wiki/Patent)

------
CharlesColeman
> Hickton opened an investigation and quickly set his sights on a special unit
> of the Chinese military — a secretive group known as Unit 61398.
> Investigators were able to watch as the unit's officers, sitting in an
> office building in Shanghai, broke into the computer systems of American
> companies at night, stopped for an hour break at China's lunchtime and then
> continued in the Chinese afternoon.

> ...

> But when Hickton went to the companies, eager for them to become plaintiffs,
> he ran into a problem. None of the companies wanted any part of it. Hickton
> says they had too much money on the line in China.

There really ought to be a law that mandates that 1) companies disclose any
and all hacking incidents/data breaches they become aware of and 2) co-operate
with the government in the investigation of those breaches.

Though I'm a little confused why they would need the "the companies to become
plaintiffs." Wouldn't hacking be a criminal matter that's would be directly
prosecuted by the government? Did they want to go against the hackers both
criminally and civilly?

~~~
subcosmos
Why is it that intelligence agencies are still conducting their activities
during their countries working hours?

You'd figure it would be easier to find nocturnal neckbeards anyways.

~~~
scintill76
In this case, the timezones probably line up to make Chinese working hours the
best time to do this work.

------
_cs2017_
> unfair business practices originating from China are costing the American
> economy more than $57 billion a year, White House officials believe

And yet the companies who supposedly lose that money don't care.

It reminds me a little of the $200-250B "lost" to piracy by the movie and
music industry ([http://freakonomics.com/2012/01/12/how-much-do-music-and-
mov...](http://freakonomics.com/2012/01/12/how-much-do-music-and-movie-piracy-
really-hurt-the-u-s-economy/)). To be more precise it reminds me of how
everyone likes to create large impressive numbers that prove their point or
support their agenda.

~~~
westiseast
I suspect the amount is a mix of things:

* Investment in IP that then gets stolen. * Loss of potential earnings as American companies are locked out of Chinese markets * Loss of actual earnings as American/global consumers switch to Chinese companies (eg huawei) that are accused of unfair business practices or receiving unfair government subsidies.

Some companies “don’t care” because they aren’t actually losing money, they’re
just not making as much as they could be.

But other companies are ‘coerced’ into not caring because what happens if they
complain? They lose Chinese government contracts. They effectively admit to
shareholders that their IP has been stolen and lost. They waste time and
resources fighting unwinnable legal battles against Chinese national champions
(ie. the Chinese state).

I’ve met plenty of small/medium sized business owners who are so sickened by
their experiences with China and the Chinese market that they’re happy to just
ignore it all and save themselves the heartache.

~~~
_cs2017_
If you count being locked out of the Chinese markets, I think the number is
actually much, much larger than $50B. But that seems to be rather unrelated to
hacking? In fact most countries openly or secretly try to lock out foreign
owned businesses. If the point is that China does it more than others, perhaps
it's true, but it's a lot more complex issue than outright hacking.

~~~
westiseast
I think the hacking and being cut out of domestic markets is fairly closely
linked.

If you’ve already stolen the IP, you don’t need to let the foreign business in
to provide that service.

Possibly even more widespread though has been the standard practice over the
last 20 years of lettin foreign businesses setup shop in China,
hacking/stealing all their tech, then the state uses its legal/political
resources to make life horrendously difficult for the original foreign
business.

------
aristophenes
The government sponsored professional hacking team that was mentioned in the
article was the focus of the infamous APT1 report by Mandiant (now FireEye),
with investigations from 2006 and later:
[https://www.fireeye.com/content/dam/fireeye-
www/services/pdf...](https://www.fireeye.com/content/dam/fireeye-
www/services/pdfs/mandiant-apt1-report.pdf)

There have been many APT groups named and tracked since then, not just in
China.

~~~
tgragnato
Oh, memento. Those events fit the climate described in the article.

> Intrusion Truth's controversial approach of anonymously unmasking
> government-backed hackers and exposing a foreign intelligence agency is
> something new and seen as a method to put pressure on Chinese companies
> cooperating with state-sponsored hacking efforts.

[https://www.zerohedge.com/news/2018-10-04/intrusion-truth-
my...](https://www.zerohedge.com/news/2018-10-04/intrusion-truth-mysterious-
group-doxing-chinas-hacking-army) \-
[https://motherboard.vice.com/en_us/article/wjka84/intrusion-...](https://motherboard.vice.com/en_us/article/wjka84/intrusion-
truth-group-doxing-hackers-chinese-intelligence) \-
[https://twitter.com/intrusion_truth](https://twitter.com/intrusion_truth) \-
[https://intrusiontruth.wordpress.com](https://intrusiontruth.wordpress.com)

~~~
dmix
Also even naming the group APT which was a corporate buzzword at the time (for
advanced persistent threat aka anything above script kiddies and aimless
bots).

~~~
Spooky23
APT is anything that happens to you.

------
rrggrr
USGOV and all but the largest businesses don't mesh. The solution to the
spying threat is extending tort liability and statutory damages to negligence
when there are compromises. Not different than product safety, liability will
make quick work of the problem.

~~~
nostrademons
Who's the plaintiff in your suggestion? The article is not about companies
leaking Americans' private data to China (though I'm sure that happens too),
it's about them turning a blind eye when _their own_ company confidential
technology and product designs are stolen by China. For tort liability to be a
factor here, the company would have to initiate a lawsuit against itself,
which would never happen.

The type of industrial espionage described in the article is actually a form
of temporal arbitrage - it's present shareholders stealing from future
shareholders and then hoping to unload the shares before the consequences of
their decisions are reaped. In order to get access to the lucrative Chinese
market _now_ (and goose this quarter's earnings), they put up with Chinese
industrial espionage that results in reduced competitiveness 10 years down the
road. In 10 years, they probably won't be working at the company, nor will
they hold many shares, and so the consequences don't affect them personally.

This is a big problem in general (not just with industrial espionage - short-
termism also affects labor practices, financial health, social fabric,
environmental pollution, and global warming), but it's hard to see how any
legal solution would fix it. Future shareholders are generally not entitled to
sue until they actually become shareholders, at which point everybody says
"Well, you should've known how fucked up the company was when you bought the
shares". Similarly, unborn children don't get a vote on societal policies that
may destroy the earth or society they live in before they're born. Usually the
best alternative is just to deal with the problem with band-aids in the
future, once it becomes widely recognized as a problem.

~~~
pm90
> In order to get access to the lucrative Chinese market now (and goose this
> quarter's earnings), they put up with Chinese industrial espionage that
> results in reduced competitiveness 10 years down the road.

Alternate reality: they stay alive instead of being hammered in earnings by
their competitors, invest increased earnings to get better at security and
prevent future data exfiltrations, use their existing corpus of innovation to
get even more competitive and continue to exist long into the future.

Innovations are important and must be protected. But the short-sightedness of
today is partially driven by a change in reality: the rate of technological
advances is brutally fast.

------
sonnyblarney
"When I pressed them on why they were not taking stronger action against
China, their response was, 'We have a multifaceted relationship with China.' "

And this is it: don't want to upset the promise future sales. And this is how
'dividing and conquering' works. One side speaks with 'one voice', the other
with 'thousands of little voices' \- and it's game.

~~~
creato
And the one company highlighted in the article as speaking out is on the verge
of being broken up by Western governments. The western world is being played
like a fiddle.

Negotiating power is everything, and western democracies and their private and
corporate citizens have absolutely none compared to autocratic regimes.

~~~
math_and_stuff
That one company has also completely reversed its stance over the last year
and now openly defends censoring human rights and complying with the CCP's
surveillance demands.

Google has no reason to hold its head high.

~~~
vatueil
Why is Google singled out for reprobation when, as the article points out,
they've spoken out more than other companies?

Sure, no one is spotless, but as it stands it's Microsoft that runs a censored
search engine (Bing in China) and Apple that handed over its Chinese users
iCloud encryption keys.

To be fair, you could say Apple and Microsoft had their reasons for doing so
(as people including the Chinese themselves have argued). But why all the
focus on Google then? Is the idea of a Chinese search engine (which has since
been cancelled) worse than actually running a censored search engine such as
Bing China?

It's gotten to the point where people commonly think Google is cozier with
Chinese authorities than other companies, when if anything it's the opposite.
That seems perverse.

~~~
math_and_stuff
I completely agree with the argument that Google is no worse -- and have
publicly campaigned to this effect -- but I was responding to the claim that
Google should be proud of its history of standing up against authoritarian
pressure. It no longer deserves that honor.

But, yes, Microsoft and Apple are equally, if not more, deserving of shame.

------
paulcarroty
“Honey or condensed milk with your bread?” he was so excited that he said,
“Both,” and then, so as not to seem greedy, he added, “but don’t bother about
the bread, please.”

(c) Winnie the Pooh

------
novaRom
I remember iRobot was quite popular few years ago here in Europe, today
everybody buys much cheaper Chinese devices. Same about smartphones:
Apple/Samsung->Huawei. Same about Quadrocopters. It looks like it's just a
matter of time until CPUs, GPUs, FPGAs, E-vehicles will be designed/produced
by Chinese companies.

------
novaRom
Look, you can really protect your intellectual property in Europe and in USA,
but you cannot do that in the rest of the world. It means your innovations
will be copied and much cheaper products will be created. You can protect your
own internal national market, but you cannot compete on all the remaining
world markets. So what to do? End of intellectual property? Back to trade
secrets? Even this will probably not help in long term.

------
aheneghana
China hacked. Because it seems they are better at their job than their
counterparts in the U.S. - saw first hand their capability. Small cubicles, 3
sq yd, 30 in a row, all with different language skills, ( any language ),
Computer science graduates from the No 1 University in China. Pay is a
fraction of what a compatible grad is being paid in the U.S. No competition.
High pay won't make the leverage.

------
anonymous_fun
I saw Mr. Hickton speak a few nights ago. It was really an interesting talk
about some of the challenges for the future:
[https://www.youtube.com/watch?v=8Zktw-m5hTI](https://www.youtube.com/watch?v=8Zktw-m5hTI)

------
freeflight
It's super weird how everybody considered Trump odd for his hate for China,
yet these days so many people just repeat the, usually completely baseless,
anti-China FUD.

Whether it's Huawei supposedly spying on everybody or the Chinese government
putting implants on Super Micro boards, nothing is too absurd to be spread by,
out of all parties, Five eyes themselves.

Does China hack? Of course, so does the US, it even steals IP from allies. But
I seriously doubt the damages for that go into the $57 billion, that's just a
piracy-damages like inflated number. In reality, a whole lot of interesting
innovation, particularly on the hardware level, has already been happening in
China for years already. They gonna out-make the US maker movement, on a
massive scale [0].

[0] [https://youtu.be/SGJ5cZnoodY](https://youtu.be/SGJ5cZnoodY)

~~~
whenchamenia
There is plenty of truth to much of the china situation, not just FUD. While
the Potus has bounced between 'i love china' and 'we need to do something
about these people', the rampant IP theft negatively affects nearly everyone
on HN.

~~~
freeflight
> There is plenty of truth to much of the china situation, not just FUD.

Yet FUD is all we get and people eat it up like the best thing ever.

Even here on HN barely anybody questioned the Super Micro narrative, even tho
that Bloomberg story was super sketchy from the very beginning by not
disclosing who did that audit, just like their inability to produce a sample
of the chip.

Trump also never "bounced" on China, China is pretty much the only thing he
doesn't bounce on, it's been his one constant since the election [0] and just
because he throws an "I love China" in there, does not reflect or change any
of his policy decisions. This is much more "I love my enemies because they are
so stupid" posturing [1] than an declaration of actual sympathies.

[0]
[https://www.youtube.com/watch?v=RDrfE9I8_hs](https://www.youtube.com/watch?v=RDrfE9I8_hs)

[1] [https://abcnews.go.com/Politics/10-times-trump-attacked-
chin...](https://abcnews.go.com/Politics/10-times-trump-attacked-china-trade-
relations-us/story?id=46572567)

------
netsa
I think the root cause is because of China has no human-rights.

------
adinobro
How is this any different to the NSA and Chinese companies?

We already know the NSA did this to Huawei for multiple years.

~~~
wpasc
One could make the case that Chinese businesses and governments have a tighter
relationship where the fruits of such hacking could be used to benefit
businesses. While the NSA/other US gov agencies may be hacking chinese
companies, I have yet to see any indication that it is done for the purposes
of IP theft and/or anything is being shared with US businesses.

~~~
hansjorg
[https://www.bbc.com/news/world-
europe-32542140](https://www.bbc.com/news/world-europe-32542140)

~~~
Mindless2112
"[Checking] whether European companies were breaking trade embargos" is not
the same as government-assisted industrial espionage.

~~~
hansjorg
The EU claims information obtained by the US government was fed to amongst
others Boeing and McDonnel Douglas.

