Sunday, May 26, 2013

Renewed terror threat needs a pro-active response

With the recent spate of attacks on soldiers, in London and Paris, and an incident on a UK bound plane from Pakistan which was diverted to Stansted under escort by fighter jets, there may be calls for more pro-active response with the general arming of police and sky marshals.

Police criticised

Police have been criticised for being too slow in responding to 999 emergency calls following the attack on a soldier in Woolwich in east London on Wednesday [22nd May]. Some eyewitnesses have claimed that the armed police response unit took some twenty minutes to arrive at the scene as regular officer apparently stood some distance away from where terror suspects Michael Olumide Adebolajo and Michael Oluwatobi Adebowale had butchered a soldier with knives and meat cleavers in broad daylight after first running him over with their car.

The Metropolitan Police have dismissed the allegations [LBC Radio Report] that they were slow to respond, saying that the armed response vehicle, or Trojan Unit, was at the scene within ten minutes of having received the call. However, even the police admit that regular officers had arrived earlier.

It is highly likely that police radio operators ordered the first officers to hang back until the arrival of specialist units, though this has not been admitted, and police radio logs have not been released to the general public. Such an order, given the situation and the information available, might have been justified.

Weighing up options

Police were undoubtedly aware that a man had been stabbed or even fatally injured on the streets of Woolwich. They may too have been informed that the attackers were still on the scene, brandishing knives, meat cleavers and a firearm. Given, too, that information may have been relayed that the men had apparently suspended their attack and that they appeared not to be showing hostility to the general public, any decision to hold back until armed support arrived may have been the best option. Indeed the men calmly stood around and asked members of the public to film them [YouTube].

Should regular police officers, armed only with pepper spray and a truncheon attempted to approach the two suspects, the following days headlines might have been very different. As it transpired the pistol in possession of one suspect was old and rusty and when discharged it blew off the man's thumb. But it could just as easily have been in full working order. Against ordinary officers, even with general issue stab-proof vests, there could easily have been several more deaths. Even aside of the gun, officers would, at the very least, have sustained serious injuries faced with attackers armed with knives and sharp meat cleavers.

On face value, scenes of vociferous police officers shouting at onlookers to "get back" after the suspects had been shot and incapacitated, seems ridiculous. Many of these same people had confronted the terror suspects, shouting at them, and even talking to them directly. Now, with the situation calm and fully resolved, officers were angrily telling the public to keep clear, despite the fact the danger had passed.

But these officers were only following usual protocols. Despite there now being no real danger, there was a scene of crime to protect. There may have been unknown or unseen dangers, which neither the public or police may have been aware. In fact early reports did not immediately suggest this incident was anything more than another violent stabbing on a London street, an event that is so commonplace that many such incidents rarely get reported [BBC]. 

The bigger question is whether all police need to be armed, and of course, appropriately trained to respond to deal with such incidents. However even the arming of police would not have stopped the murderous attack of soldier Lee Rigby. The attack on the soldier was swift, leaving him dead within minutes. Should the men have continued on a rampage and set about other members of the public, a more rapid response by law enforcement, armed with guns, might well have prevented further carnage [Woolwich attacks].

Threat to plane

Only days later a plane approached Britain from Pakistan and some reports suggest that two men had attempted to gain access to the cockpit. Authorities would later only confirm that the men had been arrested for "endangerment of an aircraft". But with the response of sending RAF Typhoon fighter jets to escort the plane to Stansted, a designated airport for hijacked aircraft, indicates how serious the incident was being viewed [BBC / Daily Mail]. 

Police boarded Pakistan International Airlines (PIA) flight PK709, originally en route to Manchester from Lahore, after it was diverted to Stansted. It is not clear if the men were apprehended prior to the plane landing, but there are surely questions whether sky marshals, as often used on Israeli or American passenger planes, might have been useful.

Paris soldier stabbed

Only three days had passed since the fatal attack on a British soldier on London's streets when a French soldier, one of three on an anti-terror patrol, was stabbed in the neck in Paris. Francois Hollande has dismissed any connection, though it seems likely that the incident was a copycat attack [Sky News]. 

The man wanted in connection to the Paris incident remains at large, and police across the French capital are now at a heightened state of alert.

Ongoing threat

It is less than a month since the Boston bombings which left three dead and dozens maimed for life. And while most Muslims have come out and widely condemned these recent atrocities, it is clear that there is a small but significant number of fundamentalist Muslims determined to perpetuate al-Qaeda style attacks on members of the public, law enforcement officers and members of the armed forces.

The supposed threat on board the Pakistan passenger jet may well have been a case of over boisterous and angry passengers venting their spleen, but the incident nonetheless highlights the risk that could be posed to aircraft. The US bombs, and the attacks on soldiers in London and Paris, are however a sharp reminder that the so-called War on Terror is far from over, even if the slogan is now rarely used. As such these incidents should be a wake up call both to authorities and the general public.

The public must become more vigilant, and report anything suspicious. Should someone have noticed the unattended bags containing the bombs at Boston, there might have been far less carnage. And so too of the security services who must see themselves not only as individuals who are to protect and serve the public but also as potential targets by extremists. Letting down one's guard is clearly not an option.

With reports of rising Islamophobia there is also the danger that the small number of terror attacks could precipitate a war on the streets of Britain as extremists on both side capitalise on such incidents [Sky News / Guardian]

tvnewswatch, Yunnan, China

Thursday, May 23, 2013

Tax evaders or convenient scapegoats

In recent months Google, in particular, has come under criticism for not paying its 'fair share' of taxes. But in a world driven by the fact that companies, both big and small, have a duty to their shareholders, as alluded to by Eric Schmidt in an interview with the BBC [MP3 audio right click and save as.. / BBC / Guardian], it is far from surprising that legal tax avoidance is rife.

"We have a fiduciary responsibility to our shareholders to account for things properly, so if we were, for example, to just arbitrarily decide to pay a different tax rate than we were required to, a more favourable one for example to a particular country, how would we account for that?" Schmidt says in defence of the way Google conducts its tax affairs. "How would we file the necessary paperwork, what would be the legal consequences in other countries?"

Google takes advantage of complicated, but oft used, legal structures to save billions of dollars every year. Of course governments lose out. And in a deficit torn country like Britain who can blame the government for not trying to divert attention by pointing fingers at tax evaders. However, there is an irony in that many of the tax havens used by multinationals, and even individuals, were set up by Britain herself.

Tax havens

Bermuda, the Cayman Islands and Gibraltar, all British dependencies, have been used by companies for decades because they either do not charge corporation tax or set it very low. There are dozens of tax havens dotted around the world, though Bermuda is often cited as being the location of choice for those wishing to avoid tax. Google uses what is known as  the "Double Irish" or "Dutch Sandwich" tax avoidance strategies, well known to tax experts.

Complicated route

In general such strategies would work by way of funnelling money through different countries. For instance, should a company in Europe, the Middle East, or Africa purchase a search advertisement - such as Adwords or Adsense - through Google, it would send the money to Google Ireland. The Irish government taxes corporate profits at 12.5%, but Google can mostly escape that tax because its earnings don't remain in the Dublin office, which reported a pretax profit of less than 1% of revenues in 2008, a percentage that has risen little since.

Irish law makes it difficult for Google to send the money directly to Bermuda, where there is no corporation tax, without incurring a large tax hit. So payments make a brief detour through the Netherlands, since Ireland does not tax certain payments to companies in other European Union states. Once money is in the Netherlands, Google can take advantage of generous Dutch tax laws. Its subsidiary there, Google Netherlands Holdings, a small office on the 34th floor of a modern tower block in the south of the city, is believed to pass about 99.8% of what it collects to Bermuda. The subsidiary managed in Bermuda is technically an Irish company, hence the "Double Irish" nickname.

Cutting tax bills

By sending its money to Bermuda, Google effectively cuts its tax bill in half, according to a 2012 report [Bloomberg / Owni / Daily Mail / Business Week]. Google insists it complies with all tax rules, and its investment in various European countries and other countries around the world, helps their economies. In the UK, "we also employ over 2,000 people, help hundreds of thousands of businesses to grow online, and invest millions supporting new tech businesses in East London," the Mountain View, California-based company said in late 2012.

Indeed, it cannot be argued that the company's products have done nothing but to improve productivity, whether it be in schools, small businesses or large corporations. While some British MPs may think Google's tax avoidance is 'evil', by boosting their profits, the company has more money to invest in its products which in turn provides more tools for business, lowers costs of cloud storage, increases the size of the company and thus the size of its workforce.

The same argument could be applied to other multi-nationals which avoid tax, though in the case of companies like Starbucks it is hard to see how having more coffee shops is going to help, other than to boost productivity with an extra hit of caffeine.

Looking for scapegoats

But with cash-strapped governments, and with economies in the West failing, there will be those looking for scapegoats. This week the charity Oxfam International published a report in which it claimed that tax havens under European Union jurisdiction hold €9.5 trillion [$12 trillion] in global offshore wealth, a figure which translates into $100 billion in lost government revenue each year. And, according to the study, it was the UK and its dependencies, such as the Cayman Islands and Bermuda, which accounted for about half of the total.

No-one is going to pass up on a free lunch, and companies like Google, Microsoft, Apple, Amazon, Starbucks, Dell, Vodafone, Cisco, Intel et al, cannot really be blamed for taking advantage of the legal tax loopholes. It is not just corporations that are taking advantage, however. Oxfam estimates that at least $18.5 trillion is hidden by wealthy individuals in worldwide tax havens, based on its analysis of data from the Bank of International Settlements, the International Monetary Fund and national authorities.

However certain governments, some of which have shouted the loudest in complaint, are themselves to blame for creating such tax havens. "European leaders have absolutely no excuse not to act when you see what proportion of this money is stashed right under their noses in tax havens for which they are responsible," head of Oxfam's EU office Natalia Alonso told Bloomberg in a statement.


Meanwhile some politicians have already found themselves in hot water, and been accused of hypocrisy, for taking advantage of offshore tax havens. Last week it was revealed that US Commerce Secretary nominee Penny Pritzker received $54 million last year from an offshore trust in the Bahamas, according to a disclosure report that describes an empire of casinos, hotels, energy companies and family trusts that may be worth more than $2 billion [Bloomberg].

By pointing accusatory fingers at the multinationals, that actually help drive the economy, politicians may have opened a can of worms that may eat away at their own credibility.

Perhaps its worth a thought how much more we rely upon the accused multinationals every day rather than our politicians - grabbing a coffee on the way to work while checking Gmail on an Apple iPhone before dropping into the office and begin tapping away on a Dell computer running Microsoft Windows with Intel inside... Oh and wait before you grab that sandwich at lunchtime from a well known High Street store. Last weekend the Guardian claimed even Marks & Spencer were playing the tax avoidance game.

Whilst one ponders that thought, cast one's mind back to the expenses scandal of 2009 when MPs were found to have frivolously wasted taxpayers money on duck houses, claims for food and second homes. Some were even accused of tax evasion! The amounts were perhaps derisory compared to the amounts of tax being lost from large corporations. At least the multinationals are staying within the law.

tvnewswatch, Yunnan, China

Friday, May 17, 2013

Google unveils multiple product improvements

While many watching Google's announcements at this years Google I/O event will have been all eyes on Glass, there were several other significant unveilings that might have been overlooked by some.

The search giant has continually strived to improve and streamline its array of cloud based products, and this week brought more than a few changes.

Mapping a new direction

Google Maps is set for a major overhaul with a new improved interface and suggestions based upon a user's searches within the product. While there will no doubt be some privacy campaigners crying foul at Google's collecting of even more information about its users, the suggestions could make maps much more personal and geared to an individual's tastes and preferences. Streetview has also been augmented with further additions to Google's underwater exploits [BBC].

Google has partnered with The Catlin Seaview Survey, which is taking the pictures and using Google tools to upload the pictures to Google Maps. Richard Vevers of the Catlin Seaview Survey and Jenifer Austin Foulkes, a business product manager for Google Earth & Maps, talked up Google's efforts to bring underwater panoramic images to Google Maps. The Catlin Seaview Survey has two major goals for this project, Vevers said. One is to document the state of the reefs for scientific study. And the other is to bring awareness of both the beauty and fragility of the ocean ecosystem to the public in the hopes that people will take action to protect them. So far, the group has managed to compile images from six different locations including sites off the Philippines, Hawaii and the Great Barrier Reef off of Australia [CNET].

Music streaming

Second up was the announcement that Google Music would now offer a music streaming service in addition to its being a locker for one's own personal music collection. To date Google Music has only rolled out across the USA, Canada, Europe and a handful of other countries, but with the ability to store up to 20,000 tracks for free, and an unlimited number of purchased material from its music store, Google Music has grown in popularity.

Now with a streaming music service set to rival Spotify and Pandora, Google may well begin to dominate the online music arena [SkyGuardian / WSJ]. Spotify charges people $9.99 per month to listen to as many songs as they would like on any device. It also has a free, ad-supported version. Pandora charges $3.99 per month for its radio-style service and has a free, ad-supported version. Apple and Amazon are also trying to compete in cloud music storage and streaming but Google is far more competitive in terms of its pricing. Google is currently offering its streaming service for $7.99 for early adopters until the end of June after which it will cost $9.99. YouTube, which is also owned by Google, recently launched a subscription service for some channels [Daily Mail].

Upload own books

Then there was the announcement that users of Google Books can now upload their own 'books' in either a PDF or Epub format. Files may be uploaded or chosen from items already stored in Google Drive. After a short processing time the files are converted and available to be read as an eBook across all devices signed in to the same account and, in the case of Android devices, with the Google Books app installed [CNET].

This last announcement is particularly useful for those wanting to read documents on the go. The displaying of a book/document in Google Books is particularly comfortable, especially on a tablet, and has several advantages over trying to read a PDF on such a device.

By adding to Google Books the file may be read in Sepia, Night or Day mode. Bookmarks may be added and even notes, as well as being synced across all platforms. Furthermore any book can be pinned, or saved, to the device for offline reading, a distinct advantage when travelling to certain countries where censorship or other regional issues may prevent access to one's book collection.

While Amazon's Kindle app facilitate the uploading of files which are subsequently sent to selected devices, formatting can be hit or miss. In addition page-turning can be slow, despite the fact the document is saved on the device, making things like sheet music difficult to use. The new upload facility is also a snub to Apple's iBooks which as yet does not offer uploads.

GMail payments

Another announcement that may have passed some by was Google's joining its Wallet payment service with its email service allowing users to send payments to anyone, even those not using GMail using their Google Wallet account. The drawback is that it has not yet rolled out to everyone and will only be available to GMail users in the United States [Forbes]. Gmail is also getting a slight facelift with "quick action" buttons [PCMag]. In a blogpost Google said the quick actions will roll out over the next few weeks.

Tweaking Google+

Google+ also saw some changes both to the overall display interface with multiple columns as well as a few tools that will enable those uploading photos to give them a tweak. In all there were 41 changes, though some are hidden away and may not be immediately apparent. Auto Enhance will automatically adjust things like contrast, brightness and colour levels as well as offering some more socially-focused tweaks such as touching up skin to hide blemishes. Those not wishing to hide their bad photography can of course turn the feature off [CNET].

The search giant also announced plans which some see as competition to the iPad in the classroom with Android Engineering Director Chris Yerga taking to the stage to introduce Google Play for Education. Apple is by far the leader in the education space, but with its new educational app marketplace, Google is clearly positioning itself such that it can begin to make a real play at challenging that dominance.

Google has already begun to recruit content partners, with NASA and PBS among those that have already signed on to make their content available to users when the store goes live in the autumn. It is not yet clear whether the new marketplace will be geared only to US students or if Google has plans for a more international audience.

Disappointment & criticism

Despite some key and exciting updates to Google's toybox there was a sense of disappointment too. There were no mentions of the much anticipated Android 5 or Key Lime Pie as it expected to be called. Nor were any new Android devices unveiled. However, it is anticipated that such announcements will come later in the year.

While Google has generally made Android fans and users of its services happy, it has not been a week for celebration for the company which has found itself in hot water after being scolded by British MPs for evading tax [BBC / Guardian]. The issues on tax evasion has focused particularly on multi-national companies including Amazon, Apple and Starbucks who often set up their main offices in countries with a low tax rate. While considered unethical, there is nothing technically illegal about such practices, though it has raised scorn from politicians and newspapers which have whipped up public anger, especially in Britain which is still struggling through a recession and experiencing widescale government cutbacks.

Glass concerns

US politicians too have been seeking answers from the company and asking for reassurances that Google's new smart spectacles, known as Google Glass, will respect personal privacy [BBC]. In a letter [PDF], signed by eight members of Congress, it requests answers from the Silicon Valley based company, such as how it will prevent Glass from collecting sensitive private data without user consent. Congress gave Google until 14th June to respond [The Inquirer].

The new product, which has yet to be released to the public, has already been widely criticised, especially in the tabloid press. At one end of the scale some merely call the new device geeky, creepy or nerdy [BBC]. At the other end of the scale critics say that the device could open up a Pandora's Box as regards people's privacy [BBC / The Register].

Google have so far only said the new augmented glasses will only be available to those aged over 13 years old, though some might consider that too young given the responsibilities and potential safety issues at stake [BBC / Daily Mail] In fact Google's concern with younger children using the device is less to do with privacy that the potential affects on the eyes. "Don't let children under 13 use Glass as it could harm developing vision," Google states on its website.

View ahead

For tech heads everywhere this recent IO conference certainly brought some excitement. For the average user of Google's services, there will perhaps be only a few raised eyebrows, or even a little confusion as some struggle to find their way around new interfaces. Google has changed the face of the Internet, and while a few may grip at the collection of data, through which Google targets advertising, for the most part the search giant has bettered many people's way of using the web. From reading books, listening to music, sharing documents, keeping track of appointments in Google Calendar, tracking financial data or just conducting a search for information, to many the Mountain View Chocolate Factory, as it is sometimes referred, is almost indispensable.

Of course there will be others that will stick to Yahoo mail or Microsoft's revamped Outlook [formerly Hotmail]. And while there is perhaps an issue of Google monopolising the Internet, it has to be said that other Internet company's offerings fail in their ability to do the same job as well. Remember AltaVista or Hotbot? And how big was your storage space in Hotmail or Yahoo before Google's GMail offered a Gigabyte of storage? In 2004 when GMail launched, its rival Hotmail offered only 1/500th while Yahoo Mail offered a mere 1/250th of what Google was offering [Time]. Now Google gives users more than 10 Gb of free storage and a multitude of products that make its rivals seem like mere amateurs. 

Google+ may yet to have ousted Facebook, but they too may be feeling a little pressured, just as Microsoft, Apple and others are. The future of the Internet may well have Google written all over it. Indeed to coin the title of Google CEO Eric Schmidt's new book, we are perhaps facing The New Digital Age.

tvnewswatch, Yunnan, China

Thursday, May 09, 2013

China angry over US accusations of cyberespionage

China has expressed anger over this year's Annual Report to the US Congress outlining China's military development. State organs such as Xinhua, The People's Daily and the China Daily were swift to criticise the report calling it "baseless" and referring to the "evil acts" of the United States [BBC].

Temper tantrums

In one tirade which could be described as a temper tantrum coming from a schoolboy caught cheating at cards the Global Times inferred the US report was nothing short of paranoia.

"The report is more like a mirror of America's mentality toward China's rise, namely a worry about China's increasing strength and a desire to maintain the US' strategic advantage," the editorial entitled "Pentagon report falls flat on its face" read.

The Xinhua report was just as scathing calling the publication of the US report an "unwise move" and describing it as "harmful to the aspiration of both countries to forge a cooperative partnership based on mutual respect, mutual benefit and a win-win situation."

The report also accused the US of interfering with China's internal affairs by commenting on the situation across the Taiwan Straits by claiming "the PLA (People's Liberation Army) has developed and deployed military capabilities to coerce Taiwan or to attempt an invasion, if necessary."

US accused by China

In response to accusations of cyberespionage China retorted its often repeated line that it opposed any forms of computer hacking and was itself the victim of cyberattacks and even suggested the United States was the "largest source" of such attacks.

Meanwhile China's ministry spokeswoman, Hua Chunying blasted the US allegations saying, "We're willing to carry out an even-tempered and constructive dialogue with the US on the issue of Internet security. But we are firmly opposed to any groundless accusations and speculations, since they will only damage the cooperation efforts and atmosphere between the two sides to strengthen dialogue and cooperation." [NYT]

Defensive claims

While claiming China's military build was purely defensive, China's media reports seem to conveniently ignore its assertiveness in the South and East China Seas and recent incursions into Indian territory, as well as its bullying rhetoric concerning what it calls the Diaoyu Islands [People's Daily]. 

"China has repeatedly stated the defensive nature of its national defense policy," China's media claimed, citing white papers published in April that "made it clear that its armed forces have always been a staunch force to uphold world peace and regional stability."

The concerns and protests seen in India, Japan, the Philippines and other Asian countries over China's assertiveness in the region would somewhat contradict this sweeping statement.

Evidence of attacks

Whether or not China is under sustained cyberattacks, as claimed, it offers very little evidence. Meanwhile there is a mountain of evidence pointing to China's continued cyberespionage, hacking attempts and malware distribution, as well as IP theft.

From Google's claims of cyberattacks in late 2009 and early 2010, said to be part of a wider hacking enterprise known as Operation Aurora, to McAfee's Operation Shady Rat [PDF] report and the recent Mandiant report [PDF], there is clear evidence showing China's concerted and sustained cyberattacks on western companies, institutions and governments.

Changing tack

This year's US report to congress, an 83 page document [PDF], was far more abrasive than previous reports [2006 PDF / 2007 PDF / 2008 PDF / 2009 PDF / 2010 PDF / 2011 PDF / 2012 PDF]

For the first time it directly accused the Chinese military of perpetrating cyberattacks aimed at gleaning information to bolster China's military strength with stolen technology. China vehemently refutes such allegations but most editorials in western publications are unconvinced by China's denials.

"There seems little doubt that China's computer hackers are engaged in an aggressive and increasingly threatening campaign of cyberespionage directed at a range of government and private systems in the United States, including the power grid and telecommunications networks," The New York Times declared in its editorial published the day after the critical report was made public. Bloomberg's BusinessWeek were just as dismissive of China's explanations, publishing an article entitled "Yes, the Chinese army is lying to you" 

Until now the Obama administration had avoided directly accusing both the Chinese government and the People's Liberation Army of using cyberweapons against the United States in a deliberate, government-developed strategy to steal intellectual property and gain strategic advantage. Now the United States were not so shy at pointing an accusatory finger.

China accused

"In 2012, numerous computer systems around the world, including those owned by the US government, continued to be targeted for intrusions, some of which appear to be attributable directly to the Chinese government and military," the report stated.

China's primary goal was to steal industrial technology, the report went on to say, but added that many intrusions were also likely aimed at obtaining insights into American policy makers' thinking. It warned that the same information-gathering could easily be used for "building a picture of US network defense networks, logistics, and related military capabilities that could be exploited during a crisis."

America's position on how it tackles the issue of cyberattacks has gradually shifted from veiled accusations to more pointed and direct statements. Before the publication of this week's report, the US had already made representations to the Chinese. In April Secretary of State John Kerry and Treasury Secretary Jack Lew visited China and raised the cyberhacking issue. Their protestations were, however, dismissed by Qian Xiaoqing, deputy director of the state Internet Information Office, who told Reuters, "Lately people have been cooking up a theory of a Chinese Internet threat, which is just an extension of the old 'China threat' and just as groundless."

"Jeopardizing trust"

The rhetoric has certainly become louder, but what will it mean for bilateral relations. The US, to some degree, is reliant on China for its buying up of debt, the import of so-called rare-earths, and other trade. China too is also reliant on the US for investment as well as the provision of much needed trade. The question is how much one country is dependent upon the other, and whether either country could survive should relations sour to the extent that imports and exports between the two dry up. 

China has made threatening and pointed remarks suggesting that the US report could " jeopardize mutual trust between the world's two largest economies and create obstacles in the development of their relationship." The US have also indicated that continued attacks could damage relations, and hope that by increasing the pressure China will be forced to come to the table to discuss these issues of cyberattacks.

China might be under the belief it can continue along the same road, without any major consequences. But as has already been seen some corporations have already decided to quit doing business in the Middle Kingdom.

Future questions

Google closed down its self-censored mainland China search engine in March 2010 due to cyberhacking of Google source code and attempts to steal the passwords of hundreds of Gmail accounts, including US officials, journalists and Chinese activists.

Google was not the only company attacked. At least 34 companies, including Yahoo, Symantec, Adobe, Northrop Grumman and Dow Chemical, were also attacked, according to congressional and industry sources. However, at that time few were willing to admit they had been attacked, lest they anger China or create panic amongst shareholders.

But the hacking continued and hit the headlines once again this year when The New York Times and The Wall Street Journal revealed that they had been hacked from China. Bloomberg's BusinessWeek a month later exposed a network of hackers, digging all the way down to a vacation photo of a People's Liberation Army professor from Zhengzhou who had exposed his real identity by launching a small telecom side business that allowed investigators to connect his real name with his cyber-identity. The magazine followed the trail of Joe Stewart, director of malware research at Dell SecureWorks, who said he tracks 24,000 Internet domains "that Chinese spies have rented or hacked for the purpose of espionage."

Then only days later, Mandiant, an American private cyber security company, issued its explosive report which traced "one of the most prolific cyber espionage groups in terms of the sheer quantity of information stolen" to the neighbourhood of a PLA building in Shanghai that houses an intelligence organization known as Unit 61398 [NYT].

Seeking a response

Congress is searching for ways to respond with some calling for ever stronger measures to counter the continuing attacks. Mike Rogers, a Michigan Republican and chairman of the House Permanent Select Committee on Intelligence, is focused on making China pay a price. "Right now there is no incentive for the Chinese to stop doing this," The New York Times quoted Rogers as saying in February. "If we don't create a high price, it's only going to keep accelerating."

It was "beyond a shadow of a doubt" that the Chinese government and military was behind growing cyberattacks against the United States, Rogers said, adding that the US was losing the war to prevent such attacks.

"They use their military and intelligence structure to steal intellectual property from American businesses, and European businesses, and Asian businesses, re-purpose it and then compete in the international market against the United States," Rogers told ABC's This Week.

Eliot Engel, a New York Democratic party representative and ranking member of the House Foreign Affairs Committee, said that there had to be greater consequences for Chinese cyberhacking and cyberespionage, and called for sanctions and indictments against those responsible, as well as limiting access to visas.

"I think we have to make it very clear to them that they – this cannot be business as usual," Engel said. "If they're going to continue to do this to the extent that they're doing it, there's a price to pay."


At the time Rogers warned that the US was not prepared to deter such cyberattacks from continuing. "If you're going to punch your neighbour in the nose, best to hit the weight room for a couple of months," Rogers said. "We're not ready yet, we are completely vulnerable to this."

Maybe the US has been taking time out to workout in the gym and feels it is ready to take on the card cheats. But like any playground scrap, it could end in just a few grazes or escalate into a larger brawl.

tvnewswatch, Yunnan, China

More reports: BBC / CNN money / CNN GPS / Guardian / Telegraph / Bloomberg / NYT / IBT / CNET / NextGov / National Defense Magazine / BusinessWeek / WSJ blog

Saturday, May 04, 2013

Chinese food scandal finds rat disguised as mutton

Consumers in Britain may still be reeling following the horse meat scandal, but bear a thought for the Chinese who this week learned that they may have unwittingly been eating rat, fox or mink instead of mutton or beef.

The state news agency Xinhua reported that a total of 904 people had been arrested in connection with the production of fake beef and mutton made from rat and fox. The Ministry of Public Security (MPS) said on Thursday that since 25th January police had uncovered 382 cases involving meat-related offenses, and seized more than 20,000 tonnes of meat.

According to the report the criminal gangs had used several processes to disguise the meat including water-injection and the use of chemicals, some of which were reported  to be carcinogenic. The operation was said have been worth more than 10 million RMB [$1.62 million].

The ministry cites other cases where criminals had tampered with food. One investigation uncovered an operation where the suspects had been using hydrogen peroxide solution to process chicken claws to make them whiter, and potentially more appealing to the consumer. The criminals had been operating since July 2011, producing more than 300 kg of processed chicken feet every day, and raked in more than 4 million RMB [$650,000].

Food safety is a massive issue in China. In the past there have been scandals concerning melamine added to milk, including baby formula which left at least 6 children dead and hundreds of thousands sickened.

Xinhua reported that police were now focusing on crimes involving dairy products, according to an unnamed official, adding that there were some deep-seated food safety problems yet to be solved.

While the publication of the news might be seen as a way of being transparent, consumers may be wondering why the news has only now been made public given that some criminal operations were uncovered some months ago. Many will also be wary of meat products still on the shelves. Processed chicken claws may have been packaged and sold to shop months ago, complete with its cocktail of hydrogen peroxide, an oxidizer used in the bleaching of human hair and paper as well as in the treatment of wastewater. There may also be many slices of frozen rat, mink or fox sitting in freezers all across China.

With reports of an ongoing investigation into milk production, consumers in China may be wondering if anything is really that safe to eat.

[WSJ / BBC / GuardianXinhua / CRI English]

tvnewswatch, Yunnan, China

Friday, May 03, 2013

Is China heading for a fall?

With China's economy slowing and foreign businesses questioning their future in the Middle Kingdom, some commentators are suggesting the country may be heading for financial and even political collapse.

Slowing growth

This week Reuters reported that China's factory-sector growth had eased in April as new export orders fell for the first time in 2013. The report drawn from a private survey suggested that the recession in the euro zone recession as well as sluggish US demand for Chinese manufactured products might pose risks to China's economic recovery.

"The slower growth of manufacturing activity in April confirmed a fragile growth recovery of the Chinese economy as external demand deteriorated and renewed destocking pressures built up," said Qu Hongbin, chief China economist at HSBC.

This week even China's state owned news agency, Xinhua, acknowledged the downward shift. "China's non-manufacturing sector shrank in April with its purchasing managers index (PMI) at 54.5%, down 1.1 percentage points month on month,"  Xinhua said in a tweet.

Chinese growth is slowing after an almost unprecedented three decades of strong growth. But the question is by how much. The other major question is whether any slowdown or even fall into recession might affect western economies which are still attempting to pull themselves out of an economic downturn that has lasted nearly five years [BBC].

There are some that are relatively optimistic and believe that China will weather the storm. However, not everyone is so hopeful. Gordon Chang, author of the book The Coming Collapse of China,  speaking on the BBC World Service programme Business Matters this week, suggested that China was heading towards a financial implosion that would be far more significant than the recessions seen in the US and Europe.

"Failing economy"

"Essentially we've got an economy that is failing," says Chang. "It's not growing at the 7.7% that the national bureau of statistics claimed for the first quarter of this year. It's growing more like two or three percent when you look at like electricity statistics, corporate results, price indices, manufacturing surveys; and this is a problem for a government that has primarily based its legitimacy on the continual delivery of prosperity."

With economic failure looming, the government needs to create distractions. In the last year it has done so successfully, rallying support in nationalistic causes such as China's territorial disputes within the South China Sea, particularly with Japan.

"Essentially what we've seen over the last year or so is the government fall back on nationalism, the only basis of legitimacy left," Chang observes. "And that is creating problems as China is creating friction with its neighbours from India in the south to South Korea in the north, you see a political system in disarray, with a leadership transition that has not yet been consolidated, and we know that because Bo Xilai, that charismatic politician from Chongqing hasn't been tried yet, which means the political factions inside the communist party have yet to figure out what to do."

"But the real problem for the Chinese Communist Party is essentially that most people in China do not believe that a one party system is appropriate for a modernising society,, which means that the Communist Party can coerce, but I don't think that it can lead. And I see problems very soon... In 2001 I said it was going to be in a decade, I'm a year and a half out of time, but I think we're going to see this within one or two years"

Debt and overspending

The argument amongst the optimists is that China is still nonetheless seeing growth. However Chang maintains that the statistics don't necessarily paint a full picture or are being misread.

"The problem is that in 2009, 2010, you had an economy that was legitimately growing at double digit rates. Now you have growth that may be as low as 3%, and the real issue is you have a lot of economically useless production which is technically creating Gross Domestic Product but nonetheless it is economically harmful and you have the buildup of debt."

"The buildup of debt is something the leaders in Beijing cannot avoid, and with this time-bomb eventually it's going to go off. We know that because it goes off in any society where you've got too much debt. And China probably has a debt to Gross Domestic Product ratio of maybe 150 or 160 percent, well above the US's 103%, and this is a problem for Beijing."

In fact local debt by itself may exceed more than $3.2 trillion dollars according to one former finance minister, Xiang Huaicheng, raising further worries about government spending at a provincial level [Bloomberg]. Such concerns have even prompted credit ratings agency Fitch to downgrade China's sovereign credit rating from A+ to AA- [BBC].

Roads to nowhere

Everywhere in China the signs of rot are apparent. In an insatiable quest to dominate green energy, China's banks have pumped billions into solar-panel manufacturing, creating hundreds of factories and vaulting China into the world's largest producer. But the sector has become a victim of its own excess. Companies are failing, symbolized by the recent bankruptcy of market leader Suntech Power [BBC]. Steel companies continue to invest in new capacity even though debt is rising and losses mounting. Each mill is backed by local officials eager to create jobs but dismissive of the larger costs. The investments top up GDP, but not the health of the overall economy [Time].

The "economically useless production" of which Chang talks can be seen in the form of dozens, if not hundreds of ghost cities that have sprung up across China in the past five years. There has also been a continual explosion in the construction of roads and railways, some of which go to places that have yet to be built.

Effects of a collapse

Any collapse, either of the regime or China's economy would, as Chang says, be "monumental". He insists that such a scenario will occur because "nothing is going right for the party right now."

"It's taking on everybody internally and many nations externally. I think most people are going to be shocked, but when the party does fail, and it will fail spectacularly, people are going to say 'Oh my God', and we are going to perhaps have financial crises, and you can also see that this could all end very badly with general conflict in Asia and we're moving in that direction unfortunately with China sending its troops deep into Indian territory this month (April) [Defense News], and also China sending its ships into Japanese territorial waters [NYT]. All of these things are very important, and I think they could spell the event that history will remember for centuries."

Attacks in cyberspace

China is not only being assertive in its territorial claims. It's aggressiveness can also be seen in cyberspace. Increasingly western governments in particular have complained of China's cyberattacks, all of which China denies [The Atlantic].

Such attacks are of course potentially destructive, but they are also undermining business and trust between China and the West. For western companies operating inside China there are many issues at stake.

The 2013 Business Climate Survey [PDF], released on 29th March, shed light on how US firms felt about China's Internet restrictions. Of some 325 respondents, 55% said that China's censorship negatively affected their capacity to do business. Some 62 percent said the disruption of search engines such as Google made it more difficult to obtain real-time market data, share time-sensitive information, or collaborate with colleagues based outside China. Furthermore, 72% of respondents said that slow and unstable Internet speeds, slow due to the fact that foreign sites especially had to pass by China's censorship filters, impeded their ability to efficiently conduct business in China.

While 38% of respondents said their companies were shifting resources to cloud-based computing, only 10% said they would consider using cloud services based in China, with the top concern cited being security risks. Moreover, 26% of respondents said they had already been victims of data theft with some 40% saying the risk of data theft in China seemed to be growing [Business Week].

Such controls, and continued cyberattacks - often an attempt to obtain intellectual property and so corner another manufacturing sector - could eventually prove disastrous for China. Companies and organisations outside China are already looking at ways of blocking Internet traffic coming from China by setting up their own internal firewalls blocking Chinese IP addresses. China could, in the future, find itself being locked out of the Internet rather than preventing access to the Internet.

Should productivity become an increasing problem for companies based in China, it is possible that many could shift operations elsewhere. Some low end manufacturing companies have already begun moving to other Asian countries, such as India, Bangladesh, Vietnam and Thailand.

Should more hi-tech companies find China is too restrictive or insecure, they too may up sticks. Such a scenario would doubtlessly send China's economy spiralling. After all, China relies just as much of foreign investment as the world might, at present, depend upon cheaply manufactured products from China.

Indeed, China may not be the world saviour that some economic commentators have suggested.

Not the saviour

"China is not the engine of global growth. To be the engine of global growth you've got to take the imports of other countries to create prosperity elsewhere. Well China through its predatory trade policies is actually taking growth from other countries. And so I don't think we can say that China powers the global economy," Chang says.

While there may be a massive psychological shock from any collapse of China, Chang insists the world will adjust. "Low end manufacturing is already leaving China," Chang observes. "And after a while we'll recognise that the world can get along without China and markets will eventually adjust."

"Markets are very deep and very resilient and they can absorb almost anything." But what of China, should such events as described above unfold?

Uncertain future

Will China close its doors to the world and become more insular? Will its Internet become even more restrictive? Could the country tear itself apart as different factions vie for a slice of the pie?  Already there are rising tensions between Muslims and Han Chinese in parts of Xinjiang. Could there be a repeat of the 19th century insurrections such as the Panthay Rebellion in Yunnan that left over a million dead?

China has been born out of a constant tide of revolutions, and while there has been relative calm and order since Mao united the country under one flag there is no reason to assume that the state of flux is at an end.

tvnewswatch, Yunnan, China