In The Media

Cyber-Snooping by China: Is Anyone Really “Shocked”?

by Hugh Stephens

China-US Focus
August 22, 2014

On July 29, during Canadian Foreign Minister John Baird’s visit to China, the Canadian Government announced that Canada’s National Research Council (NRC) had been the victim of a cyber-attack by a "highly sophisticated Chinese state-sponsored actor" which had recently managed to hack into the NRC’s computer systems.

Exactly when the attack occurred, or what information was compromised, was not revealed but the fact that the information was released publicly during Baird’s visit to China was no doubt intended to send a signal to the Chinese that this kind of activity has the potential to undermine the moves by both countries toward closer relations. Baird, who was in Beijing to prepare for the fall visit to China by Prime Minister Stephen Harper, is reported to have raised the attack with his counterpart, Foreign Minister Wang Yi, in a “full and frank exchange of views”. China, not surprisingly, denied any involvement in the hacking incident. However, just a few days later, on August 4, a Canadian couple that operated a coffee shop in Dandong, a Chinese city on the border with North Korea, was arrested on charges of espionage and stealing state secrets. No information on the exact nature of the charges has been made available but it appears that the couple, Kevin and Julie Garratt, who have lived in China for 30 years, were involved in efforts by evangelical groups to assist North Korean Christians. Given the vagueness and secrecy surrounding China’s state security laws, this activity could have put them into legal jeopardy but again, just as with Canada’s timing in “calling out” China on cyber-spying charges during Baird’s visit--which was interpreted as an attempt to send a shot across Beijing’s bow--the timing of the arrests has been seen by many as China’s retaliation for Canadian actions.

These apparently reciprocal actions will do nothing to strengthen Canada-China relations, which have generally been on the mend. Commentators in Canada, including Canada’s former ambassador to China (now retired), in an op-ed published prior to the arrest of the Garretts called on the Government of Canada to respond to China with skill, not rhetoric, and argued that despite the distasteful reality of cyber-snooping (by many countries, not just China), Canadians need to recognize that their “future prosperity, security and well-being depend on maintaining (an) intelligently self-interested relationship with China.” China’s ambassador to Canada, Luo Zhaohui, also waded into the op-ed wars, with a piece entitled “China and Canada: We Can Manage our Differences”.

Luo’s article, published in Canada’s leading national paper, The Globe and Mail, was intended to remind Canadians of the stakes involved in the bilateral relationship—and no doubt was an attempt by the Chinese Foreign Ministry to lower the temperature in a bilateral dispute that can be laid largely at the door of China’s security agencies. Luo noted China’s $50 billion in investment in Canada, the annual two way trade of $55 billion (largely in China’s favor, a fact not highlighted by Luo), the fact that China is the largest source of foreign students in Canada and one of the fastest growing sources of tourists plus the usual litany of areas of exchange and cooperation, twin cities, etc. Luo closed with a plea to not allow “cases of illegal activities” to kidnap bilateral relations.  What will happen next is anyone’s guess although the hope is that both sides will step back and allow their common interests to overcome their current differences. One sign of this could be a Chinese decision to expel the Garratts from China rather than locking them up for the next few years. While after 30 years of working in China they would no doubt prefer to stay, expulsion would certainly be preferable to time spent in a Chinese prison, after which expulsion would follow in any case.

This case offers a cautionary tale for US-China relations where accusations of cyber-spying have clouded the bilateral agenda. When US Justice Department officials indicted five PLA officers attached to Shanghai PLA Unit 61398 for cyber-espionage against several US companies, China retaliated against US high-tech companies operating in China. Edward Snowden’s revelations have, at the very least, cast some doubt on US claims that they do not spy for commercial purposes and do not use private companies for spying. An added complication is that with regard to China, the line between a private commercial enterprise and the state is less clear than in the West, and what constitutes information for national security as opposed to commercial purposes is also less clear. It has to be accepted in the modern world that states will use intrusive electronic means to collect information that is valuable to them.

By using various forms of retaliation, from arresting the Garratts on apparently flimsy charges to investigating US companies such as Microsoft, Apple and Qualcomm, China is making it clear that “naming and shaming” will not deter them from doing what they perceive to be in their political and economic interest, although they will always hide behind “plausible deniability”. Both Canada and the US have too much at stake in their relations with China to allow hacking incidents to derail their larger bilateral agendas. The best response is to expect that other countries, including China, will be active in seeking to exploit weaknesses in computer systems, both governmental and private, in order to obtain information and intelligence, and then to take effective defensive measures to protect against these intrusions.

It is to be expected that the US and Canada will do what they need to do to advance their national interests, as will China. Those national interests are arguably best served by protecting one’s assets as fully as possible while dealing with inevitable incidents—whether spying or cyber-espionage—in a firm but non-public manner, away from the spotlight of the media. De-escalate the rhetoric and focus on finding areas of cooperation. Ambassador Luo’s article is evidence that China is trying to extend the olive branch, while at the same time admitting no culpability and making no commitment to change its behavior.

How will Canada respond? The immediate fate of Kevin and Julie Garratt probably hang in the balance. If they are quietly deported from China, it will be a sign that pragmatism has prevailed; if they disappear into the Chinese prison system, Ambassador Luo’s statement that “in pursuit of common interests for our two peoples, there are no difficulties that cannot be overcome” will have little hope of being realized. Resolution may not come until Mr. Harper’s visit to China at the time of the APEC summit in November. A successful visit will be a sign that Canada and China have been able to set aside the hacking incident and move on. In the meantime, Canada, the US and other Western companies with strategic assets would do well to build a better firewall.

Hugh Stephens is Senior Fellow at the Asia Pacific Foundation of Canada, a Fellow of the Canadian Defence and Foreign Affairs Institute and Principal of TransPacific Connections. He has more than 35 years of government and private sector experience in Asia. 

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