Is Chinese government running up the Jolly Roger?

China’s not winning friends outside its borders with its unyielding stand against Google, its large-scale, highly sophisticated and continuing hacking into corporations and political activists' email accounts, and its newest effort to force technology companies to hand over their software and encryption codes if they want to sell anything to the Chinese government.

Heavy-handed Chinese government interference and intervention is starting to bite China in its pocket book:

Worried about reports of Chinese hackers and spying, the Indian government has effectively barred local mobile phone operators from making deals with Chinese telecommunications manufacturers, according to the head of India’s main cellular industry trade group….

The government had told operators in December that it was worried that a foreign company could install spying software, and asked local operators to examine foreign manufacturers carefully, Mr. Mathews said. But in recent months, the Indian government has lifted the restriction on most foreign manufacturers; those that are not cleared are “principally Chinese,” he said….

Mr. Mathews said the government had decided to “lock down all the barnyard doors,” because of concerns about Chinese hackers.

According to a report released last month by the Citizen Lab at the University of Toronto, a gang of computer hackers based in China conducted an extensive spying operation in India that began last year, obtaining sensitive information, including documents from the Ministry of Defense.

Even China’s response to India’s response to Chinese hacking demonstrates Beijing’s hard-line attitude. Instead of acknowledging worldwide concern about Chinese hackers and vowing to bring the hacking under control, Beijing is trying to threaten India into buying Chinese routers and communication equipment:

The Indian government’s behavior would violate World Trade Organization “principles of ‘national treatment’ if they only ban importing equipment from China but continue importing from the United States and Europe,” said Zhang Huiling, a spokeswoman for the China Chamber of Commerce of Import and Export of Machinery and Electronic Projects.

And now many suspect the Chinese government of trying to enable faster copying of Western technology by forcing firms to hand over their crown jewels to do business with Chinese local, state or national governments:

China is expected to issue regulations on Saturday requiring technology companies to disclose proprietary information like data-encryption keys and underlying software code to sell a range of security-related digital technology products to government agencies, American industry officials said on Friday…

One concern is that the rules will allow the leak of crucial foreign technologies to Chinese competitors who are seeking to build a technology industry on a par with the West….

To be certified, companies apparently would have to give government-connected testing laboratories encryption algorithms, software source code and design specifications that, for many of the products, are regarded as sensitive trade secrets.

In interviews, American industry officials argued that the rules not only sought details well beyond what was needed to certify the products, but that there were few safeguards to protect the proprietary information from outsiders.

Even scarier, China originally wanted to force all technology firms doing business in China to hand over their crown jewels:

Nkenge Harmon, a spokeswoman for the United States trade representative in Washington, noted in a statement that the Chinese first planned to apply the rules to all technology purchases, but later scaled them back to apply only to purchases by local, provincial and national governments.

The Chinese government seems to be saying China’s becoming so big and important that they can use any trick or law to accomplish their domestic goals with little fear of repercussions. Chinese leaders are so used to getting their way that they doubt companies or governments will stand up to them, but I suspect Chinese hacking, domestic favoritism, etc. have angered or scared so many that China’s leaders will be surprised by the pushback.

Posted by James on Saturday, May 01, 2010