A 14-page ‘restricted’ report prepared by the British intelligence agency MI5’s Centre for the Protection of National Infrastructure has recently come to light.

The report describes how China has attacked British defence, energy, communications and manufacturing companies in a concerted hacking crusade. It also details how undercover intelligence officers from the People’s Liberation Army (PLA) and the Ministry of Public Security approached UK businessmen at trade fairs and exhibitions, offering them ‘lavish hospitality’ and presenting nice ‘gifts’. Unfortunately for the recipients of the famed Chinese hospitality, the gifted cameras and memory sticks, tokens of Chinese friendship, contained electronic Trojan bugs which could enable hackers to remotely access their computers. According to the MI5 report, the Chinese government “represents one of the most significant espionage threats to the UK”.

China was also accused of ‘bugging and burgling’ UK business executives and setting up ‘honeytraps to later blackmail them’.

One thought that techniques like the one used against John Profumo, a British Defence Minister during the Cold War had been relegated to the dustbin of history and were only good for third rate Hollywood scripts, but the MI5 report says that “Chinese intelligence services have also been known to exploit vulnerabilities such as sexual relationships and illegal activities to pressurize individuals to co-operate with them.”

But today, cyber attacks by Chinese hackers are causing a lot more concern than these ‘honeytraps’. The public became aware of this new type of warfare after Google announced that it would reconsider working in China: the US search engine giant had been the victim of wild attacks originating from China. The attacks involved not only involve Google, but more than 30 companies whose servers were compromised by hackers; this included several human rights groups and some prominent Chinese dissidents. What provoked Google to react in such a sudden manner was the high sophistication of the attack. The attackers seem to have employed some techniques never seen before.

Ron Deibert and Rafal Rohozinski who worked on Tracking Ghostnet (a 10-month assessment of alleged Chinese cyberspying of diplomatic missions, ministries of foreign affairs, and international organizations) explained in the Christian Science Monitor: “As principal investigators in the Information Warfare Monitor, a project formed in 2002 to investigate and analyze the exercise of power in cyberspace, we have seen many of these types of attacks first hand in our research, and have followed closely those examined by other researchers.”

They believe that the Google attacks were unusual not only in ‘scope or sophistication’, but also ‘in terms of the high-profile nature of the victims’. According to cyber watchers, “targeted cyber attacks such as these will grow in frequency as cyberspace becomes more heavily contested. …solutions won’t be easy”.

This is the general opinion among experts, who also point to criminal organizations “thriving in the hidden ecosystems of cyberspace, profiting from cyberattacks, cybercrime, and cyberfraud”.

What about India?

Before leaving for his new assignment in West Bengal, former National Security Advisor M.K. Narayanan declared that China had ‘unleashed cyber aggression against India’. In an interview, he admitted that Chinese hackers had tried to penetrate the Prime Minister’s Office. The former NSA said that his office and other government departments were targeted on December 15 (the same day as Google and other US companies). The attack came through e-mail attachments containing a ‘Trojan’ virus which allows the hacker to penetrate the server and help himself to sensitive files. Officials had to be asked not to log into the server until the threat could be eliminated.

“This was not the first instance of an attempt to hack into our computers,” Narayanan told the journalist.

“People seem to be fairly sure it was the Chinese. It is difficult to find the exact source but this is the main suspicion. It seems well founded.”

Hardly a month later, The Tribune reported that “computer networks at sensitive establishments have experienced a second wave of cyber attacks from foreign-based hackers. Sources in the intelligence reveal that fresh attacks began on January 28 and about 25 computers were targeted.”

The attacked computers belonged to the National Security Council (NSC) Secretariat and the National Security Advisory Board (NSAB). The source of information was an official at the National Technical Research Organisation (NTRO) which is supposed to deal with cyber attacks.

According to the same source, even the Cabinet Secretary has been a victim: “Initial investigations revealed that 30 computers, including eight from the PMO, were compromised. This also involved two persons not on the regular posted strength of the PMO, prompting intelligence agencies to believe that the cyber attacks were backed by a high level of human intelligence, providing the whereabouts of key individuals and their portfolios and e-mail addresses. Others who came under attack from cyber space included the chairman of the Joint Intelligence Committee, chief of the Naval Staff, deputy chief of Naval Staff, PM’s special envoy, the three military intelligence services and establishments of the BSF and CRPF in Jammu and Kashmir.”

Again the Chinese ‘signature’ was suspected. The NTRO has apparently formed a rapid reaction team to deal with such attacks. They claim that their reaction time is about an hour-and-a-half. Experts consulted, however, dismiss this as pure wishful thinking, as attacks are now very sophisticated and not easy to notice.

But let us go back some years. In February 1999, the PLA Literature and Arts Publishing House in Beijing released a fascinating book written by Qiao Liang and Wang Xiangsui, two Senior Colonels of the People’s Liberation Army. The title of the book was Unrestricted Warfare.

The two Chinese officers prophesized the ‘destruction of rules’ in future warfare. They wrote: “The direct result of the destruction of rules is that the domains delineated by visible or invisible boundaries which are acknowledged by the international community lose effectiveness. This is because all principals without national power who employ non-military warfare actions to declare war against the international community all use means that go beyond nations, regions and measures.”

Interestingly they gave some examples: “Whether it is the intrusions of hackers, a major explosion at the World Trade Center, or a bombing attack by bin Laden, all of these greatly exceed the frequency bandwidths understood by the American military, …they [the US] have never taken into consideration and have even refused to consider means that are contrary to tradition and to select measures of operation other than military means.”

One of the reasons behind this thinking has been the arm-dealers lobby striving to sell military ‘hardware’.

But the Art of War is changing fast, very fast.

Many believe that the exhibitors at the Defexpo India 2010 in Delhi’s Pragati Maidan, were only ‘showcasing Land and Naval Systems’ of yesterday. The War of Tomorrow is being prepared behind some computer monitors in Sichuan or Hainan.

In an eye-opening article titled Cyber Warriors published in The Atlantic, James Fallows wrote that it was “rare to hear US military or diplomatic officials talk about war with China as a plausible threat” in the conventional sense of the term. “Yes, circumstances could change, and someday there could be a consensus to ‘take on the U.S.’ But the more you hear about the details, the harder it is to worry seriously about that now,” he says. However, it is different with a cyber war: “After conducting this round of interviews, I now lose sleep over something I’d generally ignored: the possibility of a ‘cyberwar’ that could involve attacks from China — but, alarmingly, could also be launched by any number of other states and organizations.”

The recent shutting down of the Black Hawk Safety Net, the largest hacker training center in Hubei Province is only an eye-wash, smaller centers working in close collaboration with the People’s Liberation Army will stay open and hacking will continue as before.

A few months ago, in a report prepared for the US China Economic and Security Review Commission, Northrop Grumman presented a list of electronic intrusions and disruptions originating from China since 1999. The conclusion was that in most cases it was difficult to say whether the activity was amateur or government-planned, but: “The depth of resources necessary to sustain the scope of computer network exploitation targeting the US and many countries around the world coupled with the extremely focused targeting of defense engineering data, US military operational information, and China-related policy information is beyond the capabilities or profile of virtually all organized cybercriminal enterprises and is difficult at best without some type of state-sponsorship.”

The Chinese State is clearly identified in these attacks.

Another conclusion of the Report is: “The breadth of targets and range of potential ‘customers’ of this data suggests the existence of a collection management infrastructure or other oversight to effectively control the range of activities underway, sometimes nearly simultaneously.”

It will probably take 10 years for the NTRO to prepare such a report and 10 more to make it public. Here, as in infrastructure development, India is far, far behind China. While it will take several more years to complete a deal for 126 Multi Role Combat Aircrafts (for some 11 billion dollars), for a much smaller budget, the Chinese will have found ways to neutralize the electronics of these planes.

But there is worse. In a forthcoming novel, Directive 51, John Barne envisages the collapse of the world ‘financial life’ (most of our ‘assets’ being kept inside some banks’ computer systems), the halt of most manufacturing systems, the evaporation of the technical knowledge and legions of other consequences. A truly frightening thought.

Let us hope that the Indian Government wakes up to the threat, and NRTO will truly be able to respond in one hour.

The practical lesson was to not point a camera toward uniformed groups of soldiers or police. The broader hint I took was to be more careful when asking about or discussing military matters than when asking about most other aspects of modern China’s development. I did keep asking people in China—carefully—about the potential military and strategic implications of their country’s growing strength. Ever since the collapse of the Soviet Union and consequent disappearance of the U.S. military’s one superpower rival, Western defense strategists have speculated about China’s emergence as the next great military threat. (In 2005, this magazine published Robert Kaplan’s cover story “How We Would Fight China,” about such a possibility. Many of the international-affairs experts I interviewed in China were familiar with that story. I often had to explain that “would” did not mean “will” in the article’s headline.)

The cynical view of warnings about a mounting Chinese threat is that they are largely Pentagon budget-building ploys: if the U.S. military is “only” going to fight insurgents and terrorists in the future, it doesn’t really need the next generation of expensive fighter planes or attack submarines. Powerful evidence for this view—apart from familiarity with Pentagon budget debates over the years—is that many of the neoconservative thinkers who since 9/11 have concentrated on threats from Iraq, Afghanistan, and Iran were before that time writing worriedly about China. The most powerful counterargument is that China’s rise is so consequential and unprecedented in scale that it would be naive not to expect military ramifications. My instincts lie with the skeptical camp: as I’ve often written through the past three years, China has many more problems than most Americans can imagine, and its power is much less impressive up close. But on my return to America, I asked a variety of military, governmental, business, and academic officials about how the situation looks from their perspective. In most ways, their judgment was reassuringly soothing; unfortunately, it left me with a new problem to worry about.

Without meaning to sound flip, I think the strictly military aspects of U.S.-China relations appear to be something Americans can rest easy about for a long time to come. Hypercautious warnings to the contrary keep cropping up, especially in the annual reports on China’s strategic power produced since 2000 by the Pentagon each spring and by the U.S.-China Economic and Security Review Commission each fall. Yet when examined in detail, even these show the limits of the Chinese threat. To summarize:

• In overall spending, the United States puts between five and 10 times as much money into the military per year as China does, depending on different estimates of China’s budget. Spending does not equal effectiveness, but it suggests the difference in scale.

• In sophistication of equipment, Chinese forces are only now beginning to be brought up to speed. For instance, just one-quarter of its naval surface fleet is considered “modern” in electronics, engines, and weaponry.

• In certain categories of weaponry, the Chinese don’t even compete. For instance, the U.S. Navy has 11 nuclear-powered aircraft-carrier battle groups. The Chinese navy is only now moving toward construction of its very first carrier.

• In the unglamorous but crucial components of military effectiveness—logistics, training, readiness, evolving doctrine—the difference between Chinese and American standards is not a gap but a chasm. After a natural disaster anywhere in the world, the American military’s vast airlift and sealift capacity often brings rescue supplies. The Chinese military took days to reach survivors after the devastating Sichuan earthquake in May of 2008, because it has so few helicopters and emergency vehicles.

• For better and worse, in modern times, American forces are continually in combat somewhere in the world. This has its drawbacks, but it means that U.S. leaders, tactics, and doctrine are constantly refined by the realities of warfare. In contrast, vanishingly few members of the People’s Liberation Army have any combat experience whatsoever. The PLA’s last major engagement was during its border war with Vietnam in February and March of 1979, when somewhere between 7,000 of its soldiers (Chinese estimate) and 25,000 (foreign estimates) were killed within four weeks.

Beyond all this is a difference of military culture rarely included in American discussions of the Chinese threat—and surprising to those unfamiliar with the way China’s Communist government chose to fund its army. The post-Vietnam American military has been fanatically devoted to creating a “warrior” culture of military professionalism. The great struggle of the modern PLA has been containing the crony-capitalist culture that comes from its unashamed history of involvement in business. Especially under Deng Xiaoping, the Chinese military owned and operated factories, hotels and office buildings, shipping and trucking companies, and other businesses both legitimate and shady. In the late 1990s President Jiang Zemin led a major effort to peel the PLA’s military functions away from its business dealings, but by all accounts, corruption remains a major challenge in the Chinese military, rather than the episodic problem it is for most Western forces. One example: at a small airport in the center of the country, an airport manager told me about his regular schedule of hong bao deliveries—“red envelopes,” or discreet cash payoffs—to local air-force officers, to ensure airline passage through the sector of airspace they controlled. (Most U.S. airspace is controlled by the Federal Aviation Administration; nearly all of China’s, by the military.) A larger example is the widespread assumption that military officials control the vast Chinese traffic in pirated movie DVDs.

The Chinese military’s main and unconcealed ambition is to someday be strong enough to take Taiwan by force if it had to. But the details of the balance of power between mainland and Taiwanese forces, across the Straits of Taiwan, have been minutely scrutinized by all parties for decades, and shifts will not happen by surprise. The annual reports from the Pentagon and the Security Review Commission lay out other possible scenarios for conflict, but in my experience it is rare to hear U.S. military or diplomatic officials talk about war with China as a plausible threat. “My view is that the political leadership is principally focused on creating new jobs inside the country,” I was told by retired Admiral Mike McConnell, a former head of the National Security Agency and the director of national intelligence under George W. Bush. Another former U.S. official put it this way: “We tend to think of everything about China as being multiplied by 1.3 billion. The Chinese leadership has to think of everything as being divided by 1.3 billion”—jobs, houses, land. Russell Leigh Moses, who has lived in China for years and lectures at programs to train Chinese officials, notes that the Chinese military, like its counterparts everywhere, is “determined not to be neglected.” But “so many problems occupy the military itself—including learning how to play the political game—that there is no consensus to take on the U.S.”

Yes, circumstances could change, and someday there could be a consensus to “take on the U.S.” But the more you hear about the details, the harder it is to worry seriously about that now. So why should we worry? After conducting this round of interviews, I now lose sleep over something I’d generally ignored: the possibility of a “cyberwar” that could involve attacks from China—but, alarmingly, could also be launched by any number of other states and organizations.

The cyber threat is the idea that organizations or individuals may be spying on, tampering with, or preparing to inflict damage on America’s electronic networks. Google’s recent announcement of widespread spying “originating from China” brought attention to a problem many experts say is sure to grow. China has hundreds of millions of Internet users, mostly young. In any culture, this would mean a large hacker population; in China, where tight control and near chaos often coexist, it means an Internet with plenty of potential outlaws and with carefully directed government efforts, too. In a report for the U.S.-China Economic and Security Review Commission late last year, Northrop Grumman prepared a time line of electronic intrusions and disruptions coming from sites inside China since 1999. In most cases it was impossible to tell whether the activity was amateur or government-planned, the report said. But whatever their source, the disruptions were a problem. And in some instances, the “depth of resources” and the “extremely focused targeting of defense engineering data, US military operational information, and China-related policy information” suggested an effort that would be “difficult at best without some type of state-sponsorship.”

The authorities I spoke with pooh-poohed as urban myth the idea that an electronic assault was behind the power failures that rippled from the Midwest to the East Coast in August of 2003. By all accounts, this was a cascading series of mechanical and human errors. But after asking corporate and government officials what worried them, I learned several unsettling things I hadn’t known before.

First, nearly everyone in the business believes that we are living in, yes, a pre-9/11 era when it comes to the security and resilience of electronic information systems. Something very big—bigger than the Google-China case—is likely to go wrong, they said, and once it does, everyone will ask how we could have been so complacent for so long. Electronic-commerce systems are already in a constant war against online fraud. “The real skill to running a successful restaurant has relatively little to do with producing delicious food and a lot to do with cost and revenue management,” an official of an Internet commerce company told me, asking not to be named. “Similarly, the real business behind PayPal, Google Checkout, and other such Internet payment systems is fraud and risk management,” since the surge of attempted electronic theft is comparable to the surge of spam through e-mail networks.

At a dinner in Washington late last year, I listened to two dozen cyber-security experts compare tales of near-miss disasters. The consensus was that only a large-scale public breakdown would attract political attention to the problem, and that such a breakdown would occur. “Cyber crime is not conducted by some 15-year-old kids experimenting with viruses,” Eugene Spafford, a computer scientist at Purdue, who is one of the world’s leading cyber-security figures (and was at the dinner), told me later via e-mail.

It is well-funded and pursued by mature individuals and groups of professionals with deep financial and technical resources, often with local government (or other countries’) toleration if not support. It is already responsible for billions of dollars a year in losses, and it is growing and becoming more capable. We have largely ignored it, and building our military capabilities is not responding to that threat.

With financial, medical, legal, intellectual, logistic, and every other sort of information increasingly living in “the cloud,” the consequences of collapse or disruption are unpleasant to contemplate. A forthcoming novel, Directive 51, by John Barnes, does indeed contemplate them, much as in the 1950s Nevil Shute imagined the world after nuclear war in On the Beach. Barnes’s view of the collapse of financial life (after all, our “assets” consist mostly of notations in banks’ computer systems), the halt of most manufacturing systems, the evaporation of the technical knowledge that now exists mainly in the cloud, and other consequences is so alarming that the book could draw attention in a way no official report can.

Next, the authorities stressed that Chinese organizations and individuals were a serious source of electronic threats—but far from the only one, or perhaps even the main one. You could take this as good news about U.S.-China relations, but it was usually meant as bad news about the problem as a whole. “The Chinese would be in the top three, maybe the top two, leading problems in cyberspace,” James Lewis, a former diplomat who worked on security and intelligence issues and is now at the Center for Strategic and International Studies, in Washington, told me. “They’re not close to being the primary problem, and there is debate about whether they’re even number two.” Number one in his analysis is Russia, through a combination of state, organized-criminal, and unorganized-individual activity. Number two is Israel—and there are more on the list. “The French are notorious for looking for economic advantage through their intelligence system,” I was told by Ed Giorgio, who has served as the chief code maker and chief code breaker for the National Security Agency. “The Israelis are notorious for looking for political advantage. We have seen Brazil emerge as a source of financial crime, to join Russia, which is guilty of all of the above.” Interestingly, no one suggested that international terrorist groups—as opposed to governments, corporations, or “normal” criminals—are making significant use of electronic networks to inflict damage on Western targets, although some groups rely on the Internet for recruitment, organization, and propagandizing.

This led to another, more surprising theme: that the main damage done to date through cyberwar has involved not theft of military secrets nor acts of electronic sabotage but rather business-versus-business spying. Some military secrets have indeed leaked out, the most consequential probably being those that would help the Chinese navy develop a modern submarine fleet. And many people said that if the United States someday ended up at war against China—or Russia, or some other country—then each side would certainly use electronic tools to attack the other’s military and perhaps its civilian infrastructure. But short of outright war, the main losses have come through economic espionage. “You could think of it as taking a shortcut on the ‘D’ of R&D,” research and development, one former government official said. “When you create a new product, a competitor can cherry-pick the good parts and introduce a competitive product much more rapidly than he could otherwise.” Another technology expert, who serves on government advisory boards, told me, when referring to the steady loss of technological advantage, “We should not forget that it was China where ‘death by a thousand cuts’ originated.” I heard of instances of Western corporate officials who arrived for negotiations in China and realized too late that their briefing books and internal numbers were already known by the other side. (In the same vein: I asked security officials whether the laptops and BlackBerry I had used while living in China would have been bugged in some way while I was there. The answers were variations on “Of course,” with the “you idiot” left unsaid.)

The final theme was that even though these cyber concerns are not confined to China, the Chinese aspects do deserve consideration on their own, because China’s scale, speed of growth, and complex relationship with the United States make it a unique case. Hackers in Russia or Israel might be more skillful one by one, but with its huge population China simply has more of them. The French might be more aggressive in searching for corporate secrets, but their military need not simultaneously consider how to stop the Seventh Fleet. According to Mike McConnell, everything about China’s military planning changed after its leaders saw the results of U.S. precision weapons in the first Gulf War. “They were shocked,” he told me. “They had no idea warfare had progressed to that point, and they went on a crash course to take away our advantage.” This meant both building their own information systems—thus China’s aspiration to create a Beidou (the Chinese name for the Big Dipper) system of satellites comparable to America’s GPS—and being prepared in time of war to “attack what they see as our soft underbelly, our military’s dependence on networking,” as McConnell put it, noting the vast emerging PLA literature on defending and attacking data networks.

Ed Giorgio, formerly of the NSA, has prepared charts showing the points of “asymmetric advantage” China might have over the long run in such competition. Point nine on his 12-point chart: “They know us much better than we know them (virtually every one of their combatants reads English and virtually none of ours read Mandarin. This, in itself, will surely precipitate a massive intelligence failure).” But James Lewis, of CSIS, pointed out an “asymmetric handicap”: “For all the effort the Chinese put into cyber competition, external efforts”—against a potential foe like the United States—“are second priority. The primary priority is domestic control and regime survival. The external part is a side benefit.” For many other reasons, the China-cyber question will, like the China-finance and China-environment and China-human-rights questions, demand special attention and work.

The implications of electronic insecurity will be with us in the long run, among the other enduring headaches of the modern age. The “solution” to them is like the solution to coping with China’s rise: something that will unfold over the years and require constant attention, adjustments, and innovations. “Cyber security is a process, not a patch,” Eugene Spafford said. “We must continue to invest in it—and for the long term as well as the ‘quick fix,’ because otherwise we will always be applying fixes too late.”

No doubt because I’ve been so preoccupied for so long with the implications of China’s growth, I thought I heard a familiar note in the recommendations that many of the cyber-security experts offered. The similarity lies in their emphasis on openness, transparency, and international contact as the basis of a successful policy.

In overall U.S. dealings with China, it matters tremendously that so many Chinese organizations are led or influenced by people who have spent time in America or with Americans. Today’s financial, academic, and business elite in China is deeply familiar with the United States, many of its members having studied or worked here. They may disagree on points of policy—for instance, about trade legislation—but they operate within a similar set of concepts and facts. This is less true of China’s political leaders, and much less true of its military—with a consequently much greater risk of serious misunderstanding and error. The tensest moment in modern China’s security relationship with the outside world came in January of 2007, when its missile command shot one of its own weather satellites out of the sky, presumably to show the world that it had developed anti-satellite weaponry. The detonation filled satellite orbits with dangerous debris; worse, it seemed to signal an unprovoked new step in militarizing space. By all accounts, President Hu Jintao okayed this before it occurred; but no one in China’s foreign ministry appeared to have advance word, and for days diplomats sat silent in the face of worldwide protests. The PLA had not foreseen the international uproar it would provoke—or just didn’t care.

Precisely in hopes of building familiarity like that in the business world, the U.S. Navy has since the 1980s taken the lead in military-to-military exchanges with the PLA. “I think both sides are trying to figure out what kind of a military-to-military relationship is feasible and proper,” David Finkelstein, of the Center for Naval Analyses, in suburban Washington, D.C., told me. “We have two militaries that, in some circumstances, see each other as possible adversaries. At the same time, at the level of grand strategy, the two nations are trying to accommodate each other. There is a major chasm, but both sides are working hard to bridge it.” Such exposure obviously doesn’t eliminate the real differences of national interest between the two countries, but I believe it makes outright conflict less likely.

A similar high-road logic seems to lie behind recommendations for cyber security in general, and for dealing with the Chinese cyber threat in particular. The NSA, which McConnell directed and where Giorgio worked, is renowned for its secrecy. But both men, along with others, now argue that to defend information networks, the U.S. should talk openly about risks and insecurities—and engage the Chinese government and military in an effort to contain the problem.

As a matter of domestic U.S. politics, McConnell argues that we now suffer from a conspiracy of secrecy about the scale of cyber risks. No credit-card company wants to admit how often or how easily it is cheated. No bank or investment house wants to admit how close it has come to being electronically robbed. As a result, the changes in law, regulation, concept, or habit that could make online life safer don’t get discussed. Sooner or later, the cyber equivalent of 9/11 will occur—and, if the real 9/11 is a model, we will understandably, but destructively, overreact.

While trying to build bridges to the military, McConnell and others recommend that the U.S. work with China on international efforts to secure data networks, comparable to the Chinese role in dealing with the world financial crisis. “You could have the model of the International Civil Aviation Organization,” James Lewis said, “a body that can reduce risks for everyone by imposing common standards. It’s moving from the Wild West to the rule of law.” Why would the Chinese government want to join such an effort? McConnell’s answer was that an ever-richer China will soon have as clear a stake in secure data networks as it did in safe air travel.

We’re naturally skeptical of abstractions like “cooperation” or “greater openness” as the solutions to tough-guy, real-world problems. But in making the best of a world that will inevitably be changed by increasing Chinese power and increasing electronic threats from many directions, those principles may offer the right, realistic place to start.

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