Secretary's Remarks: Statement on Google Operations in China Tue, 12 Jan 2010 22:09:29 -0600

Hillary Rodham Clinton

Secretary of State

Washington, DC

January 12, 2010

________________________________

 

We have been briefed by Google on these allegations, which raise very serious concerns and questions. We look to the Chinese government for an explanation. The ability to operate with confidence in cyberspace is critical in a modern society and economy. I will be giving an address next week on the centrality of internet freedom in the 21st century, and we will have further comment on this matter as the facts become clear.

With any luck this will overshadow the recent obsession with currency devaluation. I am very curious to hear more about exactly what went on in this hacking attempt, as Google would not go to the US government unless they were very, very concerned about what had transpired during this attack.

From what I can find out, it appears Adobe Systems was also a target. It looks like that besides accessing activist emails, this attack's primary motive was to gain access to high-end intellectual property (source code) in all target corporations. I would posit that their plan was to use whatever material they could get to bolster their domestic software industry, though there could be some political advantage I am not seeing.

It is also very huge that at this dinner Clinton attended just a few days ago, Cisco Systems (which builds the routers and switches that make the internet what it is) and Microsoft (which has also been under extreme scrutiny for censorship of Bing) were both present along with Google. Twitter being there is also important, but more or less expected given its design has become so popular in the United States while being explicitly incompatible with China's system.

Judging by the chatter back and forth on Twitter, but more so in the back-alley communication networks of the Internet such as IRC, there is a moderate cyber-war going on now between US and Chinese nationalist hackers. Nothing major as of yet. It would seem that aside from a few American counter-attacks, there are mostly preparations being made for a Chinese retaliation for 'Google attacking Chinese pride'. Chinese hackers (or 'honkers' 红客 as they like to be called, the literal translation of hacker is heike 黑客, but they frequently utilize the 'red' image) are frequently lambasted as prone to error in their attacks due to emotion overriding precision, so United States hackers tend to wait for the Chinese to make the first move, then massively counter-assault based on information garnered during the imprecise Chinese assault.

Though considering Baidu was hacked by the Iranian Cyber Army just the other day, one could expect the cybersecurity situation in China to be tight in the coming weeks.

Iran - Outnumbered Riot Police Beg Protesters Not To Hurt Them

I've been doing some analysis of Twitter traffic concerning Iran in regards to China. I thought it would be interesting on a small scale, but throughout today a new tag has appeared, #CN4Iran, that is rallying the Chinese on Twitter in support of Iran. It became one of the 'trending topics' on Twitter (namely one of the top 10 'said' things on Twitter in the whole world) and is enjoying considerable use right now.

Here are some links I have gathered.

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The Chinese have been noting their support through the shared usage of the tag #CN4Iran, which is updated live at this URL:
http://search.twitter.com/search?q=%23CN4Iran

A repeating message that is coming through time to time is "First Iran, Then China!"

http://search.twitter.com/search?q=first+iran+then+china

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CN4Iran: Chinese join Iranians over Twitter

http://thenewschronicle.com/cn4iran-chinese-join-iranians-twitter/122802184/

"The Chinese Inspired by the People of Iran" on CNN's iReport.

http://www.ireport.com/docs/DOC-375048

There is some loose talk of hoping for a future "Iran For China' #IR4China

http://search.twitter.com/search?q=%23IR4China

An example propaganda poster that has come out of China.

http://twitpic.com/vgzmg

As some of you may know, a China Daily supported Twitter-variant was hacked immediately following its launch several days ago by domestic hackers, and that is just one example of how much contention exists in regards to the use of the protocol in China. The Twitter website is blocked in China, as well as many popular tools for using it, but there still remain ways to route oneself out of China.

I've also seen several versions of Liu Xiaobo's 'Charter 08' circulated in Farsi.

I'll be following this closely.

Internet and Unrest-- CASS Blue Book Analysis

The Nanfang Dushibao, Guangzhou, on December 22 discussed a portion of the 2010 CASS Blue Book that remarks that the combination of cell phones and internet to spread information and excite a response exceeds the government's ability to respond to it. In their list of the top 77 incident that attracted wide attention in Chinese society, they found that in 30% of these cases it was postings on the web that attracted great popular attention to these incidents.  The CASS report mentioned cases where local government cut off communications or even ordered hotels not to accept customers to stop information from spreading.

Failing to react, another response, resulted in public confidence in the government declining.  The article concluded with a discussion of some hotlines to which people can complain about inappropriate internet postings and mentioned government websites that accept citizen complaints, mentioning that 37 provincial level leaders and 40 local level leaders have opened up mailboxes to receive complaints.  A list of 20 incidents in which the Internet played an important role is listed after the article.

David Cowhig

I won't make any bold proclamations of how, but if anything was going to be a catalyst for a spontaneous out-of-control series of riots on a nation-wide scale in China, I'd wager it would start online.

To imagine what access to the Internet in China is like, imagine the chaos that would have happened if foreigners showed up in 16th century Europe and implemented 10 television networks. The point I'm getting at is that skipping all the procedural steps of a civilization ('core') developing a civil society domestically has drastic consequences. These procedural steps of civil society's development lead to the construction of new tools like newspapers, telegraphy, radio, television and the Internet that expand civil society further. These tools were all at one point in Western history, the cutting edge 'skin'/boundary of civil society as a communicable idea.

The Internet effectively overlays China's domestic civil society 'core' with a foreign civil society 'skin' it needs to expand to fit. Yet China's civil society 'core' hasn't been gradually expanding, like it did in countries where the 'skin'/tools that are newspaper, radio, television and now Internet were developed over time, it has instead exploded near-instantaneously in every direction out of simply having newfound mobility within the limits of the huge foreign civil society 'skin' it adopted (The World Wide Web).

The fact that the Communist Party wired their entire country in the late 80's and 1990's with the tools/'skin' of western civil society has lead us to where we are now. Rule of law is likely the only answer to these new 'core' civil society demands. However, rule of law hasn't been able to catch up domestically in China because rule of law generally evolves concurrently with the technology/'skin' of a civil society (and Law's origins are primarily to address the issues that the civil society creates). Accordingly, rule of law has historically developed through precedent and deliberation on boundary-pushing civil society issues over reasonably longer periods of time. China is being asked to have deliberation and develop precedents at an absurdly fast rate. Shifting to rule of law is important, but there is no other option than to do so gradually; concurrent deliberation around the nation-state concerning issues of the civilization 'core' brought up from the new technology 'skin' must (and will) establish many small precedents for addressing civil society needs that will then build on each other over time to 'reform'. There probably is no alternative.

Much more generally speaking, this case of a foreign civil society 'skin' being overlaid on an economic/geopolitical powerhouse with a radically different civilization 'core' has no real precedent in world history. The consequences of this are going to be ridiculously important to study going forward.

Full article available here.

Chinese Government To Police Social Games

On the Chinese Internet, “harmony” is a euphemism for censorship. Mafia games were “harmonized” over the Summer, for example, as they “embody antisocial behavior like killing, beating, looting and raping” and “gravely threaten and distort the social order and moral standards, easily putting young people under harmful influence” according to the Ministry of Culture.

Foreshadowing the government’s imminent policing of social games, Chinese netizens are now picking—not stealing—crops from their friends’ farms.  Five Minutes, the developer of the smash hit Happy Farm (the first SNS farm game), confirmed that the terms had been voluntarily changed in an interview with BloggerInsight.  This comes as the government is “considering specific social gaming laws and regulations, to be enacted as early as next year… to end the chaotic market conditions,” according to ChinaNews, which scooped the story on Wednesday last week.

A string of negative press has hit social games in China, which may signal a propaganda campaign by the government to besmirch social games.  Many of the stories are fake, according to industry insiders. Just last month, a doctor’s fatal neglect of an infant in critical condition wasblamed on his play of Happy Farm while on duty, though further investigation concluded that he was on a QQ Chinese Chess Game. Happy Farm is also blamed for destroying jobs and relationships.

This is a classic case of attempting to do something about a problem by going after the symptoms instead of the cause. While there is something to be said for removing "stealing" from an online game and preventing "virtual vandalism", the point of the matter should be that these behaviors ought not to carry over into the real world so readily and easily. If these behaviors are so prevalent, removing the factors that lead to them existing in social games isn't going to disperse the mentality, only prevent its expression.

The real question here is why exactly are these online games bringing out these traits in people, and what does it say about a government when its chief reaction to an undesirable trait is to block the expression of it rather than acknowledge and confront it? There is an interesting analogy later on in the piece of social media games as being an addictive substance to be regulated ala cigarettes, and a digital space to be regulated similarly to casinos. It is odd that in the country which invented the term to 'brain-wash' there is little action being done to encourage people away from these addictive habits, but instead to regulate them firmly. Profit is tantalizing, but repressing desires through institutional restraints does not get to the core of the problem. In the United States, regulation on speed limits has proven to be a moot piece of legislation; where the average speed of most cars exceeds it by 5mph on any given trip. 

It is also interesting that the article notes 'Chinese games are more competitive' by their very design. If one thing is certain, expecting a social game to be fun without any notion of competition is going to be a concept very hard to come by. The fact that this competition is expressed through in-game outlets such as vandalizing property and stealing doesn't speak so much of desire, but of what is considered an acceptable means of expressing it, serves as an interesting lens to what it means to compete in China.

Read the full article here.

Accused of plucking Plurk, Microsoft pulls microblog service

Canadian startup Plurk, a Twitter-like social networking site that has gotten quite popular in China, accused Microsoft China of not only stealing the service's design, but 80 percent of the service's code too. In response, Microsoft has pulled its microblogging site, which goes by the name of Juku and was developed by a third-party vendor for the company's MSN China joint venture. Redmond has also started working with the joint venture to thoroughly investigate the charges, and so far has "acknowledged that a portion of the code they provided was indeed copied. This was in clear violation of the vendor’s contract with the MSN China joint venture, and equally inconsistent with Microsoft’s policies respecting intellectual property."

The whole story begins with a Plurk blog post explaining that the team could not believe Microsoft's blatant theft. "We were first tipped off by high-profile bloggers and Taiwanese users of our community that Microsoft had just launched a new Chinese microblogging service that looked eerily similar to Plurk. Needless to say we were absolutely shocked and outraged when we first saw with our own eyes the cosmetic similarities Microsoft's new offering had with Plurk. From the filter tabs, emoticons, qualifier/verb placement, Karma scoring system, media support, new user walkthroughs to pretty much everything else that gives Plurk its trademark appeal, Microsoft China's offering ripped off our service."

Plurk did code comparisons to come up with the 80 percent figure.

 This is a really astounding example of the absolute worst case scenario of what intellectual property theft can be. Yet it is just downright surprising that a company as vast and expert in programming as Microsoft would  end up in a situation of having picked such a failure of a contract partner. Forget all of the positive rhetoric and examples as of late by the Chinese government going after intellectual property fraud, this is going to be extremely humiliating to China's tech world and cause every company with coders in China to re-evaluate and investigate their work.

As much as I try to take an even-handed approach on issues regarding China, this is a case where there is truly no excuse for what has gone wrong. It is downright criminal to both believe one could get away with such code theft and then trying to sell it to a prestigious company as your own with almost no modification. It is both a tremendous breach of any semblance of legal society, no doubt violating both IP laws as well as the written contract signed, it also breaks the important bond of trust between groups that all societies know and value.

Microsoft has done the best it can to cover for this disaster, but what is going on here will not be good for Sino-American corporate relations. This scandal will be a case-study that all other major companies will be taking note of when they consider working with China, and presents the greater challenge of achieving respect for copyright, and more generally the rule of law, in the Chinese state. 

Read the full article here.

Twenty-two Rules for Zhejiang Businessmen

Twenty-two Rules for Zhejiang Businessmen
The following document was reportedly found on the wall of a Zhejiang businessman’s office, and has since been circulated widely among Chinese bloggers.
Chinese link: http://jiaren.org/2009/11/30/zhejiang-businessman-22-rules/ 

Twenty-two Rules for Businessman from Zhejiang Province
1. Persist in watching CCTV-1 News.
2. Don’t readily trust an agreement or a contract.
3. You yourself must keep your word, as a promise is worth a thousand ounces of gold. But this doesn’t apply to those who always break their word.
4. Don’t conduct business where you can afford the win yet can’t afford the loss.
5. Don’t input too much in advance, and save enough strength for yourself.
6. There’s nothing in the world that you can’t do, yet businessman can achieve something while refusing to do something else.
7. Be careful when choosing a partner.
8. Don’t have family members in your team.
9. Don’t sleep with a woman who has a conflict of interest with you.
10. Don’t tell the details of your business to your woman.
11. You can bribe but don’t be a tainted witness at court
12. Don’t commit tax evasion or tax fraud, but learn how to do legal tax avoidance.
13. You can make use of journalists but don’t trust them.
14. Don’t be ostentatious, unless you’re a real Mr. Big.
15. Stand in the middle, and don’t engage in any political faction battles.
16. Don’t care much about the gain and loss of money and interests.
17. Don’t show off your money.
18. The right to speak lays with the capital. But you shouldn’t let others know easily how much right to speak you hold.
19. Learn from other people’s success and failure, gain and loss, yet you can ignore the cases outside China.
20. Don’t employ the rules of the gang to solve business conflicts.
21. Don’t take care of every single thing personally under the precondition of controlling the overall situation.
22. Leave yourself a route to retreat, in case you are deserted or betrayed by friends and allies.

 This is a really fascinating find that has been, as of late, circulating wildly in the Chinese blogosphere for particularly obvious reasons. For one thing, it sums up in 22 points pretty much what the mentality is towards money is in China, how it relates to power, and what dangers come with having it. We can see from this list the degree to which China's economic model could be described as Social Darwinist and Leninist; there is a sense of survival of the fittest combined with a Leninist model of purging those who are unpopular or unfit for the regime.

Suffice to say, both of those traits are well encoded into this list. We can see that bribery is not a problem, only being caught is. We can also see that, in the last point, there is an overwhelming sense of paranoia that you are in this alone and that the only person you can fundamentally trust in the end is your own self. This is particularly worrisome, because when combined with #2 (that you should never trust a contract) the Chinese are indicating that they do not have a remarkable amount of faith in the western concepts of legal obligation.

As far as this list goes, it seems quite clear that China is a society very different from the world it is interacting with (particularly since #19 says that this is true, and that any cases outside of China do not apply inside China). What we are looking at here is both a list into the Chinese economic psyche, but as a consequence also the political psyche. If an economic environment cannot have faith on an impartial judicial system and legislative system to both mediate conflicts and design regulations that are enforced, this style of thinking is likely to persist.

Yet the problem with a legal society...is that those with power have to also submit themselves to the law. Will this happen in China in the next decade? I would say it is doubtful...

China Curbs Property Speculators, Boosts Consumption

Dec. 10 (Bloomberg) -- China scrapped a tax break on property sales and extended subsidies for auto and home appliance purchases, seeking to cool speculation while sustaining a recovery in the world’s third-largest economy.

The State Council will re-impose a sales tax on homes sold within five years after cutting the period to two years in January, the cabinet said in a statement yesterday. The government will scale back some tax breaks for car buyers, while continuing to fund vehicle purchases in rural areas.

China’s property prices rose in November at the fastest pace in 16 months, a government survey showed today, reinforcing concern that record lending and a $586 billion stimulus package may lead to asset bubbles. The benchmark Shanghai Composite Index closed 0.5 percent higher as households-goods makers and some auto stocks gained. Property companies fell.

 There is a legitimate concern here that credit from the Chinese stimulus package may have fueled some incredible bubbles that are getting close to a bursting scenario. China has recently been suffering from cases of overcapacity in everything from steel to car production, and with every province vying to get its bigger share of the stimulus, a lot of bubbles have emerged in the property markets as well. There is little doubt that China is going into a property bubble right now, primarily fueled by the injection of so many funds into construction and the industries behind them, and while China has always been able to make the case that "there is eventual demand" given its huge rural population, the bubble may be growing too fast for reality to catch up. Putting these sales taxes back on the property markets will probably help to curb this, but the chances of it eliminating it are less than likely.

Boosting consumption is, of course, China's #2 goal now for as long as the tail of the fiscal crisis is considered to be where we currently are. The export market, accounting for over half of China's GDP, is now beginning to normalize with its domestic consumption due to helpful tax breaks on items such as automobiles. There is some speculation that a great many of these car purchases could be by local provincial governments, eager to make consumption appear high in their areas and get more funding, but reports from reputable China economy experts in the Wall Street Journal have recently cast doubt on such a wild scenario.

Read the full article here.