[ISN] China's latest boom industry: spying on British businesses

[InfoSec News]

http://business.guardian.co.uk/story/0,16781,1639928,00.html

Richard Norton-Taylor and Nils Pratley
November 11, 2005
The Guardian 

The president enjoyed all the pomp and protocol that traditionally
come with a state visit, reflecting the importance of the man, and the
emerging superpower that he represents. But as China's Hu Jintao
tucked into his filet de sole pompadour during the banquet at
Buckingham Palace on Tuesday, and again as he flew back to Beijing
yesterday after his three-day visit, Britain's security services were
left pondering a more delicate issue: how many of the president's
entourage had been left behind?

While on the diplomatic and commercial level relations between the two
countries appear to be flourishing, with British ministers and
businesses eager to cash in on China's booming economy, the security
services are concerned about what is happening under the surface. MI5
has become increasingly anxious about an increase in spying by the
Chinese. Officials are unsure how widespread it is, and what impact it
is having. The agency believes that "at least 20 foreign intelligence
services are operating to some degree against UK interests", and say
the Chinese and Russians concern them most.

The Chinese, security sources said yesterday, have become supreme
opportunists, hoovering up information on the "grains of sand"  
principle: picking up the smallest pieces of information whether
relating to business, industry or security and closely analysing them
back home.

Justin King, managing director of C2i, a UK counter-espionage
consultancy, said yesterday that businesses were all too aware of what
is happening, particularly when they hire Chinese staff.

"The Chinese are desperate to find out everything about how western
companies operate and how they are structured. It is old-fashioned
human intelligence gathering - it's thousands of years old and it
works. Employers should plan for the fact that there is a strong
likelihood information, even if it is low-level stuff, will be fed
back to China."

Whitehall officials cited examples:

* After the deaths last year of 21 Chinese cocklers at Morecambe Bay,
  the Chinese government sent over what was described as a "police
  delegation" to help identify the dead men and offer any other
  assistance to their British counterparts. However, the delegation
  was suspiciously big, leaving MI5 worried that it contained spies.
  "MI5 took certain measures to counter them," said a well-placed
  Whitehall source.

* After 58 Chinese stowaways were found dead in the back of a lorry in
  Dover, the Chinese government again sent a large delegation to help
  Kent police identify the men before the trial last year. A member of
  the team was later found logging on to the police national computer.
  It is unclear what he found out.

* One British company anxious to develop its business with China
  recently invited a delegation to visit its factory in the UK. The
  Chinese authorities sent a delegation, but only a few of them turned
  up. The rest were believed to have travelled around Britain inviting
  themselves to defence and research establishments.

Security sources say if a British company creates a fuss about
visitors who fail to turn up, the Chinese threaten to cancel the
company's licence to trade.

The Chinese are interested in particular in scientific and hi-tech
developments. "The Chinese economy is booming but what they are short
of is information technology and modern processing, manufacturing and
design skills," said Mr King.

When Chinese nationals work in the west, he added, "our clients'
experience is that they have mixed loyalties".

Mr King said: "We have come across cases where Chinese nationals are
working at the heart of British companies' IT security departments
with access to entire databases. To my mind, that is a business risk
too far."

In Britain, China is said to be focusing on niche products, including
security and surveillance systems, and especially dual use equipment -
items that have a civil as well as military use.

But the FBI is also growing anxious about the impact of Chinese spies
within the US. In February the bureau's assistant director of
counter-intelligence, David Szady, urged US businesses to help the
service stop the theft of business and technology secrets. He cited
Russia, Iran, Cuba and North Korea but focused mainly on China, saying
there were about 3,000 front Chinese companies in the US.

Security sources say the speed and effectiveness with which the US
conducted the 1991 Gulf war was a "wake-up call" for the Chinese.

Mr Szardy said US companies should "partner up" with FBI agents to
protect security. But some would always get through, he said. "Even as
we increase our numbers of agents, we can't possibly totally stop it.  
If you have a little national asset, whatever it is ... they want that
little thing that you produce. And they need it to make their missile
fly straight or so they can compete in electronic warfare."