I am retired and take educated guesses on all things financial.

January 13, 2010

January 13, 2010: Investors Should See "Red" Over Massive Corporate Espionage

Enough is enough.

Corporate espionage emanating from China has reached too far. It is high time that investors recognize that western business in China, and in most democratic industrial societies, is under relentless attack by computer hackers and other agents under the watchful, deliberate eye of mainland China's government apparatus. Tens of thousands of times a day, corporate data systems are hacked. Proprietary information worth billions of dollars is stolen as a routine matter, sanctioned by the Chinese government. A recent German finding concluded that Germany loses over $50b annually in product and 30,000 jobs due to industrial espionage coming from "over a million" worldwide Chinese data mining assets. German intelligence reports that many companies are reluctant to report Chinese espionage due to fear of losing markets in China. In the United States, the estimate is almost incalculable. Do a google search on Chinese Industrial Espionage and you receive 110,000 hits. Within the US military, it is well known that Chinese hackers and other intelligence assets are probing everything from infrastructure to our space defense program. At one secret US base, Chinese computer intrusions number over 13,000 per day (yes, per day, at one facility). We are spending billions to keep ahead of China while losing hundreds of billions to them in product and proprietary information. As one business leader stated recently, any Chinese national or Chinese-related individual almost should be assumed to be mining data for the mother country. Yes,it is that bad.

Russia is on par with China gathering data. A Google search indicates over 72,000 hits on this scourge. Computer networks tied to Russian Intelligence are sophisticated and relentless, obtaining hundreds of billions of dollars worth of information and military data. Russian hackers number an estimated 100,000, based in Russia and elsewhere, feeding mined information to improve Russian technology on the cheap at western company's expense. Even more brazen, Russia ignores contract law, inviting companies into the country to, say, explore for natural resources. When these companies build infrastructure and provide technology to finally make a profit, they are often mysteriously thrown out and their assets gulped up by a Russian court, then given to an oligarch-run entity under the watchful eye of Moscow with profits propping up the Russia regime.

Neither China or Russia deserve to be held in esteem or as equal trading partners on the world stage. They are predatory, criminal operations that hark back to their formative, communist years. Both want to be the dominant players on the world stage by 2020 (generally the date estimated by major western intelligence agencies), overwhelming "corrupt" western democracies by using our technology against us. Meekly ignoring or trying to negotiate an end to their grotesque espionage tactics is done at our peril. Western companies that continue to exercise business as usual with these two dictator-centric nations are foolish and expressly complicit promoting illegal and dangerous power-politic designs.

Those that witnessed the pleasure Baidu employees expressed with massive street demonstrations and fireworks celebrating Google's threat to leave the country because of a rash of industrial espionage directed against their company (Wednesday) are seeing but one manifestation of the joy Russia and China take at ripping off other nation's best and brightest technologies and in the case of Africa, natural resources through bribes and payoffs to African state leaders.

They are winning. We are losing. It is time to stop the insanity. As many companies and almost all investors pulled out of Hitler's Germany, so should we contemplate doing as such to Russia and China. Make no mistake, they are our enemies and wish to do us harm.

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