15 Facts You May Not Know About the Google China Incident

After reviewing articles from many sources in the media, I have compiled a list of certain  facts and figures regarding   the recent cyber attacks  from China and the subsequent stunning announcement from Google.   Some  of these are surprisingly under-reported  in the media so you may or may not know them.  Here they are in no specific order  :

  1. Over 34 companies were targets of the attack and appear to have been carefully selected to be in industries in which China is lagging. Sources say that one aim of the attack was to steal high-tech information in strategic industries to give China a competitive economic edge.   For example,  the attacks on defense companies were  aimed to steal information on weapons systems. The attacks on  technology companies were mainly to get the  source code  of the companies flagship products.
  2. Sources also say that the second aim of the  attacks was  to get  politically sensitive information to  ensure the survival of the regime.   This was stated by James A. Lewis, a cyber and national security expert at the Center for Strategic and International Studies.
  3. The attacks revealed the existence of a vast cyber espionage network –  GhostNet – with origins in China — that at last count had  infected  at least 1,295 computers in 103 countries. Of the infected computers  close to 30% can be considered as high-value diplomatic, political, economic, and military targets (including the office of the Dalai Lama, foreign embassies, large corporations and government offices).
  4. GhostNet spreads by “phishing” – i.e.  sending fake emails that appear to come from familiar names with contextually relevant subject lines to specific recipients with attachments that contain the malware or Trojan programs that infect the computer and take advantage of known flaws in the software installed on the target computer.
  5. GhostNet uses  a Trojan  program  known as gh0st RAT that allows the attackers to gain complete, real-time remote control of target computers.  The  infected computers have been traced  to be   controlled from commercial Internet access accounts located on the island of  Hainan, People’s Republic of China.
  6. GhostNet is capable of taking full control of infected computers, including searching and downloading specific files, and  operating attached devices, including microphones and web cameras. The attacker can  not only control but also see and hear everything that is happening at the target computer, remotely !
  7. The attackers also exploited a flaw in Adobe’s  Acrobat  PDF Reader.  This flaw was  discovered  on Dec 15, 2009  but was  fixed only on Tuesday, Jan 12, 2009  — the day of the   Google announcment.  (So everyone should head on down to Adobe and download the fix immediately). Update : 1/17/2010 : McAfee reports  that these initial reports about a flaw in Adobe Acrobat are false. The flaw that was actually exploited was in Internet Explorer 6.
  8. China currently has between 300 million to  400 million active internet users – more than any other nation in the world including the US.  By 2013, China is estimated to have 840 million active internet users – again the largest internet  population of any nation. Chinese will at that point replace English as the most widely used language on the Internet.
  9. The two top internet search engines in China are Baidu and Google. Baidu controls 61% of the market and Google 31% – together accounting for 94% of all  searches done in China.
  10. Although Baidu is widely reported as a Chinese owned search engine – its majority stock holders are actually American institutional investors like Morgan Stanley and Fidelity.   It is traded on the NASDAQ (stock : BIDU) and was taken public by American firms.   Its initial funding came from Silicon Valley Venture Capital firms including  Draper Fisher Jurvetson and IDG Technology Venture.  Google itself was an early stage investor but sold its stake when it entered the Chinese market.
  11. Google entered China in 2006 with the launch of Google.cn   after much internal debate and after agreeing to censor results in compliance with the Chinese Government’s policies.   However, Google.cn  does display  a message informing Chinese users that their searches  may not display all results in order to comply with the policies of their government.
  12. It has been suggested by Peter Scheer of Huffington Post  that the  majorty shareholders who are  US investors could potentially pressure Baidu’s Board to c0-operate with Google and defy  China’s censorship policies. “That would be extraordinary—corporate civil disobedience squared.” he says in a blog post today.
  13. Google is projected to earn between  $250 million to $600 million in revenues from China this year, a very small fraction (between 1% to 2.5%)  of  Google’s  $22 billion annual  revenues.
  14. Google’s founders, Larry Page and Sergey Brin together own  shares with 58% of the voting power of all shares and have veto power over everyone else, including the company’s chief executive, Eric Schmidt who has less than 10%.  Google’s founders have very strong ideas about ethical business practices. They  even advised people not to buy Google’s stock during their IPO in 2004,  unless they felt comfortable with their unconventional approach to business.
  15. Shareholder proposals demanding that Google defy China’s censorship policies have been presented to the board several times since 2006 when Google entered China.  So far, CEO Eric Shcmidt has consistently voted against these proposals  in order to protect Google’s  franchise as China becomes the largest internet market.   Larry Page has also  voted against these proposals.  Sergey Brin  whose family fled communist Soviet Union when he was six, has abstained from voting to show his symbolic support of the proposals.  The incident on Tuesday jas apparently tipped the scale in favor of these proposals.
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