China steps up the arms race in the digital cold war

The digital cold war between China and the United States grew chillier still this week with a surprise raid of the offices of US technology giant Microsoft in four cities across China on Monday.

Around 100 State Administration for Industry & Commerce staff members pounced on Microsoft’s offices and seized documents and computers as part of an anti-monopoly investigation.

According to a statement released by SAIC, the raids were aimed at finding information about how Microsoft bundles its software together and about some of its security features.

Pressure on US tech companies has intensified following disclosures by former US National Security Agency contractor Edward Snowden about their close collaboration with US intelligence agencies.

Microsoft has desperately tried to stave off a backlash like this for months. Brad Smith, the tech giant's top lawyer, has been at the forefront of a PR offensive aimed at rallying industry heavyweights to make spying on customer information harder for governments.

But Snowden’s revelations showed that Microsoft, perhaps more so than any other tech company, bent over backwards to accommodate the requirements of the NSA. The company had helped the NSA circumvent encryption for access to user data from platforms like Outlook and Skype.

China is still smarting from the US Department of Justice’s clumsy attempt to indict five Chinese military officials on cyber spying charges in late May. Not long after that, Chinese authorities announced they were banning the use of Windows 8 by government employees.

Chinese media reports have alleged that the operating system was being used to obtain confidential information from Chinese citizens. Google and Apple have also been criticised by state media for allegedly cooperating with US intelligence agencies. In November last year, Qualcomm disclosed they were being investigated over anti-trust issues too.

During his time in Hong Kong, Snowden revealed to the South China Morning Post that the NSA had targeted China’s Tsinghua University in extensive hacking attacks and that they had spied on Chinese mobile phone companies and stolen SMS data.

Perhaps most galling for the Chinese government has been the revelation that the NSA had been planting ‘backdoors’ directly into Huawei’s networks -- which the US had alleged time and again that China itself was doing.

One of the stated reasons for the NSA snooping into Huawei was to establish whether, as American officials have long contended, the company is truly independent, or a front for the People’s Liberation Army. If they've found the smoking gun, they’re keeping it to themselves.

The logic behind America and Australia’s snub of Huawei on national security grounds is precisely what is informing China’s increasingly aggressive attitude towards US tech firms (The long sting in Abbott's Huawei snub, November 7). The Chinese government now sees information security as an even more strategically important national security issue.

Chinese telco companies have been quietly amputating Cisco routers from the country’s internet backbone and the government is starting to reconsider the wisdom of using IBM servers in their banks.

Beijing is simply fed up with the hypocrisy of the US government and major technology corporations and is using the Snowden revelations as an opportunity not only to build its own technological independence, but to rival American tech companies across the globe.

The era in which US technology firms have dominated the globe at the same time as its government engages in the most far-reaching espionage may be drawing to a close. Snowden’s revelations are starting to look like a catalyst of sorts that is accelerating the process of China’s own rise as an internet and technology force.

Chinese President Xi Jinping is clearly taking a personal interest in selling China’s technological prowess to countries who are now more open to alternatives to potentially compromised US products and services.

In Brazil two weeks ago, Xi witnessed the launch of the Portuguese version of China’s Baidu search engine. Baidu’s Robin Li, Alibaba’s Jack Ma and Huawei’s Ren Zhengfei had accompanied Xi to South Korea just a few weeks earlier.

To internet users in these markets, President Obama’s repeated assurances that “there is no spying on Americans” is of zero value.

For their complicity in a scheme that saw the data of millions of internet users around the world siphoned off for snooping, American companies are feeling the blowback on their bottom lines.