Mobbme

Story Highlights
Chinese hackers claim to have broken into Pentagon's system

The hackers met with CNN on an island near a Chinese naval hub

Hackers say Beijing secretly pays them at times, something the government denies

Official: "The Chinese government does not do such a thing

Chinese hackers: No site is safe - CNN.com

ZHOUSHAN, China (CNN) -- They operate from a bare apartment on a Chinese island. They are intelligent 20-somethings who seem harmless. But they are hard-core hackers who claim to have gained access to the world's most sensitive sites, including the Pentagon.


The leader of these Chinese hackers says there "is always a weakness" on networks that allows cyber break-ins.

1 of 2 In fact, they say they are sometimes paid secretly by the Chinese government -- a claim the Beijing government denies.

"No Web site is one hundred percent safe. There are Web sites with high-level security, but there is always a weakness," says Xiao Chen, the leader of this group.

"Xiao Chen" is his online name. Along with his two colleagues, he does not want to reveal his true identity. The three belong to what some Western experts say is a civilian cyber militia in China, launching attacks on government and private Web sites around the world. Watch hackers' clandestine Chinese operation »

If there is a profile of a cyber hacker, these three are straight from central casting -- young and thin, with skin pale from spending too many long nights in front of a computer.

One hacker says he is a former computer operator in the People's Liberation Army; another is a marketing graduate; and Xiao Chen says he is a self-taught programmer.

"First, you must know about the Web site you want to attack. You must know what program it is written with," says Xiao Chen. "There is a saying, 'Know about both yourself and the enemy, and you will be invincible.'"

CNN decided to withhold the address of these hackers' Web site, but Xiao Chen says it has been operating for more than three years, with 10,000 registered users. The site offers tools, articles, news and flash tutorials about hacking.

Private computer experts in the United States from iDefense Security Intelligence, which provides cybersecurity advice to governments and Fortune 500 companies, say the group's site "appears to be an important site in the broader Chinese hacking community."

Arranging a meeting with the hackers took weeks of on-again, off-again e-mail exchanges. When they finally agreed, CNN was told to meet them on the island of Zhoushan, just south of Shanghai and a major port for China's navy.

The apartment has cement floors and almost no furniture. What they do have are three of the latest computers. They are cautious when it comes to naming the Web sites they have hacked.

But eventually Xiao Chen claims two of his colleagues -- not the ones with him in the room -- have hacked into the Pentagon and downloaded information, although he wouldn't specify what was gleaned. CNN has no way to confirm if his claim is true.


"They would not publicize this," he says of someone who hacks the U.S. Defense Department. "It is very sensitive."

This week, the Pentagon said computer networks in the United States, Germany, Britain and France were hit last year by what they call "multiple intrusions," many of them originating from China.

At a congressional hearing in Washington last week, administration officials testified that the government's cyber initiative has fallen far short of what is required. Most alarming, the officials said, there has never been a full damage assessment of federal agency networks. Watch Pentagon bans Google from bases »

"We are here today because we must do more," said Robert Jamison, a top official in the U.S. Department of Homeland Security. "Defending the federal system in its current configuration is a significant challenge."

U.S. officials have been cautious not to directly accuse the Chinese military or its government of hacking into its network.

But David Sedney, the deputy assistant secretary of defense for East Asia, says, "The way these intrusions are conducted are certainly consistent with what you would need if you were going to actually carry out cyber warfare."

Beijing hit back at that, denying such an allegation and calling on the United States to provide proof. "If they have any evidence, I hope they would provide it. Then, we can cooperate on this issue," Qin Gang, a spokesman for the Chinese Foreign Ministry, said during a regular press briefing this week.

But Xiao Chen says after the alleged Pentagon attack, his colleagues were paid by the Chinese government. Again, CNN has no way to independently confirm if that is true.

His allegations brought strenuous denials from Beijing. "I am telling you honestly, the Chinese government does not do such a thing," Qin said.

But if Xiao Chen is telling the truth, it appears his colleagues launched a freelance attack -- not initiated by Beijing, but paid for after the fact. "These hacker groups in my opinion are not agents of the Chinese state," says James Mulvenon from the Center for Intelligence Research and Analysis, which works with the U.S. intelligence community.

"They are sort of useful idiots for the Beijing regime."

He adds, "These young hackers are tolerated by the regime provided that they do not conduct attacks inside of China."


One of the biggest problems experts say is trying to prove where a cyber attack originates from, and that they say allows hackers like Xiao Chen to operate in a virtual world of deniability.

And across China, there could be thousands just like him, all trying to prove themselves against some of the most secure Web sites in the world.

Exarecr

If China's hacking technology is comparable to China's everyday manufactured goods.....we have absoloutly nothing to worry about.

TopHatter

I wouldn't be too sure of that.

zraver

IIRC most of the sensitive stuff is kept on a seperate and encrypted isolated network.

Exarecr

China's desire to acquire now,learn later, means their Research and Development department functions on the "steal principal". We boost,we take, we steal any technology we can get away with while distributing merchandise stolen months or years ago. Though it may be old and slow technology to the west,its new in China. As long as we let China get away with blatant industrial espionage without sanctions or other forms of punishment then yes,eventualy they will become a high tech powerhouse. By around the year 2100, they can trade in their Super Nintendo for PS2,s while the rest of the world surfs the Global Holodeck.

gunnut

If they're really good, they would hack financial sites like Bank of America or Fidelity and make billions.

__________________
"Only Nixon can go to China." -- Old Vulcan proverb.

TopHatter

Well said, dead-on accurate in fact.

Not eventually. They're almost there, if not already.

Again, I disagree, for the very reason you put forth in the first part of your post.

The Chinese - unlike the Soviets - are actually able to manufacture what they steal, thanks to profit-minded Western companies that have made China the contract manufacturer of the world.

I personally deal with the PRC in the wholesale microchip market on a monthly, sometimes weekly basis. The bosses behind the usually-hapless "clerks" that I deal with are savvy and patient. They deal in useless fakes, stealing millions of dollars from Western idiots that are trying to make a fast buck buying from China. That kind of money is simply pouring into China, giving their private sector all the capital it needs or wants.

Believe me, these people sublimely clever. As they continue to cast off more the heavier shackles of Communism, they'll have all the tools and manufacturing capacity they need to make that Holodeck for the rest of the world.

An eager and money-hungry work force of 800 million, armed with begged, borrowed or stolen Western-supplied technology can't be wrong.

And eventually, they won't need to steal and copy it.

gunnut

That's where the hard work begins. Can their system produce enough imagination to create new products like our system does?

You can only steal and copy for so long. After reaching parity with your targets, there's nothing more to steal. Unless you can come up with your own stuff, you'll always be a step behind.

If China reaches a level of capitalism where they can come up with innovative products like us, wouldn't they be us? They would be closer to us than they would be to the China of old.

xinhui

I prefer some hard numbers.

n a recent report, the Organisation for Economic Co-operation and Development said spending on R&D in China had increased by a “stunning” 19 per cent a year in the decade from 1995. By 2005, R&D spending had reached $30bn, ranking China sixth in the world and more than doubling its R&D/gross domestic product ratio to 1.34 per cent, a level matching some OECD countries, it said.


FT.com / Reports - Innovation: Research and development is slow to grow

xinhui

Free Preview - WSJ.com

China's Spending For Research Outpaces the U.S.

By GAUTAM NAIK
September 29, 2006; Page A2



An unprecedented surge in research and development spending is helping China catch up with the two longstanding leaders in the field, the U.S. and Japan, a new study found.

R&D spending in China has been growing at an annual rate of about 17%, and is far higher than the 4% to 5% annual growth rates reported for the U.S., Japan and the European Union over the past dozen years. China's massive investments in education are also bearing fruit. In 2002, its industrial-research work force was 42% the size of the equivalent U.S. work force, up from 16% in 1991.

China is increasingly making its mark with scientific discoveries and patents held by its scientists. In 2003 China became only the third country, after the U.S. and Russia, to put a person into orbit on its own. Yesterday, Michael Griffin, administrator of the National Aeronautics and Space Administration, returned to the U.S. after a visit to China -- the first time a NASA administrator has visited that country -- to explore and expand space-program cooperation.

"China's significant investment in R&D is predicated on the assumption that they want to be a player and competitor both economically and militarily," said Jules Duga, senior analyst at Battelle Memorial Institute, a nonprofit trust in Columbus, Ohio, that runs labs for the government and industry.

The study, co-written by Mr. Duga, was conducted by Battelle and R&D Magazine and is being published today. The study included in its measure expenditures such as scientists' salaries and lab equipment in both the public and private sector, but excluded long-term capital expenditures such as buildings and major equipment.

China's technology-driven rise could heighten worries that the U.S. is ceding some of its competitive edge in science and technology to Asia's new power. America's share of total global R&D is estimated to slip slightly to 31.9% in 2007 from 32.7% last year, according to the study. Japan and Europe are projected to show similar declines, while China's share of global R&D is set to increase to 14.8% in 2007 from 12.7% in 2005.

But the U.S. remains an R&D powerhouse, investing $320 billion in such efforts last year, compared with $236 billion invested by the EU and $125 billion by Japan. Though China's R&D spending now makes up about 1.6% of its gross domestic product, up from about 1% five years ago -- it's still a far cry from the 2.6% of GDP that the U.S. invests, and the 3.2% of GDP that Japan invests.

In the last few years, the increase in U.S. R&D investment has been driven by military-related research. Roughly 60% of America's research and development originates from the private sector. In a ranking of the top five R&D-spending companies, four are American, including Pfizer Inc., Ford Motor Co., Microsoft Corp. and General Motors Corp. The other is Toyota Motor Corp. of Japan.

American firms also make the biggest biotechnology investments, according to the Battelle report. One spur: a continuing decline in the number of new drug approvals by large pharmaceutical companies.

Despite the shifting R&D landscape, "there's no need for the U.S. to panic," said Mr. Duga. Instead, he said, "the U.S. needs to be prepared for a change. We need to figure out how we can keep ourselves in a strong position" in crucial areas of science and technology. His prescription: Spend more on math and science education, and invest more in pure research, which U.S. industry increasingly has shunned.

Write to Gautam Naik at gautam.naik@wsj.com

xinhui

FT.com / World - China passes Germany in patent rankings


China passes Germany in patent rankings

By Frances Williams in Geneva

Published: October 16 2006 00:02 | Last updated: October 16 2006 00:02

China has overtaken European nations in the global ranking of patent applications to become the fourth largest source of filings, underscoring the increasing prominence of north-east Asian countries in intellectual property.

In its first comprehensive report on patent activity, published on Monday, the World Intellectual Property Organisation found China had a sevenfold increase in patent filings in 10 years.


Geneva-based Wipo, a UN agency, ranked Japan top of the world’s patent league, followed by the US, South Korea, China and the European Patent Office. These five patent offices accounted for three-quarters of all patents filed in 2004, the latest year for which comprehensive figures are available. Germany, a traditional source of patent applications, ranked sixth.

The report shows patent filings have increased in line with economic growth over the past 20 years, almost doubling to 1.6m globally in 2004. More than 5.4m patents were in force that year.

Filings in north-east Asia in particular have boomed as first South Korea and then China have become major industrial economies. Although Taiwan does not feature in the report because it is not eligible to join Wipo, officials said it would rank about 10th.

In China half the patent filings in 2004 were by foreign companies. Most in Japan and South Korea are still by local inventors.

The Wipo report comes as China prepares to face questioning in the World Trade Organisation this month on its compliance with intellectual property rules, including the internet sale of counterfeit goods.

The US and European Union have complained that Beijing is not doing enough to crack down on intellectual property theft.

The US Chamber of Commerce estimated that China accounts for 60-65 per cent of the billions of dollars US companies lose from intellectual property theft.

Copyright The Financial Times Limited 2008

xinhui

ays James Mulvenon from the Center for Intelligence Research and Analysis, which works with the U.S. intelligence community.

"They are sort of useful idiots for the Beijing regime."

He adds, "These young hackers are tolerated by the regime provided that they do not conduct attacks inside of China."



J Mulvenon is the leading PLA watchers out there right now, that statement carries weight.

xinhui

A Dragon In R&D
A Dragon In R&D
China's labs may soon rival its powerhouse factories—and multinationals are flocking in for tech innovation

xinhui

Groundbreakers
From biotech to nanotech, three Chinese pioneers look to lead the nation to a new scientific frontier
BY HANNAH BEECH | SHENYANG

TIMEasia Magazine: Groundbreakers

Nowhere is Asia's scientific revolution unfolding more dramatically than in China, where researchers are taking advantage of bounteous funds and pushing hard to fulfill a government mandate to innovate. Here are three Chinese scientists whose discoveries in the emerging biotech and nanotech fields could transform the way we live and help secure China's position as a scientific superpower:

xinhui

China aims to raise R&D investment to 2 percent of GDP by 2010


China aims to raise spending on scientific research and development to 2 percent of GDP by 2010, according to a government document issued on Friday.

The ratio edged up to a record 1.23 percent in China in 2004, far below the standard of developed countries.

The National Scientific and Technological Development Program of the 11th Five-Year Plan Period (2006-2010), issued by the Ministry of Science and Technology, says China will establish a national innovation system, a rational scientific and technological development structure and strive to make major breakthroughs and leapfrog development in certain major areas during the 2006-2010 period.