Hacker Nation: China's Cyber Assault

A decade before Operation Aurora—China's recent hacking spree of at least thirty-four Western companies—the Chinese government attempted to seize American computer code the old-fashioned, imperial way: by edict.

The vehicle was an obscure government entity known as the State Encryption Management Commission. Its directive was that all Western encryption products in China—i.e., software, DVDs, laptops—must be registered, inspected, scrutinized, possibly downloaded, and, if necessary, confiscated. The target was Microsoft's source code, suspected to contain a Trojan horse for U.S. intelligence. Rather than comply, Microsoft forged a rare coalition between the Japanese and American chambers of commerce in Beijing and forcefully lobbied the powerful Ministry of Information Industry, which chose to pretend the whole thing had been a sort of misunderstanding. The State Encryption Management Commission wrote a barely translatable retraction and exited the stage.

If Microsoft had left China when the Chinese government first acted, it would have dramatically threatened the creation of the world's first Big Brother Internet. But the Western business community thought the Chinese were starting to get the picture: Modern commerce depends on free-flowing communication, secure encryption, and networks free from hackers. Western companies thought the win-win was so clear, in fact, that they did not press their momentary advantage or use the leverage they had as the force not only building but also bankrolling the Web in China. In any event, the Encryption Commission actually got what it wanted a few years later as Microsoft ultimately revealed its source code to Chinese officials, under what the company claims were controlled conditions.

A decade later, Google, apparently exhausted by Chinese government censorship, harassment, and the Gmail break-ins and network attacks of Operation Aurora, recently moved its Chinese search engine Web sites to Hong Kong servers and has made it clear that it will fully abandon the Chinese market if government pressure continues.