Guest Post: Google’s Mysterious Threat To Pull Out Of China - Is A Covert War Brewing Between The U.S. And China?

Tyler Durden's picture

Submitted by the Firecracker Report

In an extremely intriguing
development today Google threatened to close down its China operations
after unearthing a highly sophisticated attack aimed at accessing gmail
accounts of Chinese human-rights activists. According to Google the
attacks originated in China and included accounts of U.S. and E.U.
based activists. Google made the announcement today in its blog-post
titled "A New Approach to China".
In mid-December, we detected a highly sophisticated and targeted attack
on our corporate infrastructure originating from China that resulted in
the theft of intellectual property from Google. This attack was not
just on Google. As part of our investigation we have discovered that at
least twenty other large companies from a wide range of
businesses--including the Internet, finance, technology, media and
chemical sectors--have been similarly targeted. We are currently in the
process of notifying those companies, and we are also working with the
relevant U.S. authorities.
By labeling these
attacks as "highly sophisticated" Google is essentially pointing a
finger at the Chinese government/intelligence agencies. That the cyber
attack has been elevated to a U.S. national security threat level, is
evidenced by the State Department's involvement, and a statement by
Secretary Hillary Clinton in which she asked Beijing to respond to Google's allegations. A report in the Telegraph offered further details:
The State department said that Mrs Clinton had met with executives from Google and Microsoft, as well as with Cisco Systems, which provides much of China's internet infrastructure, to discuss how to stop countries from "stifling" access to information.

Most interestingly, the Telegraph went on to point out that:

Next week the US is to launch a new technology policy to help citizens in other countries to gain access to an uncensored internet.
Returning to Google's announcement, Google's blog outlined the reasons why Google has decided to potentially pull out of China completely:
We have taken the unusual step of sharing information about these attacks with a broad audience not just because of the security and human rights implications of what we have unearthed, but also because this information goes to the heart of a much bigger global debate about freedom of speech.
We launched in January 2006 in the belief that the benefits of increased access to information for people in China and a more open Internet outweighed our discomfort in agreeing to censor some results. At the time we made clear that "we will carefully monitor conditions in China.
These attacks and the surveillance they have uncovered--combined with
the attempts over the past year to further limit free speech on the
web--have led us to conclude that we should review the feasibility of
our business operations in China. We have decided we are no longer willing to continue censoring our results on, and so over the next few weeks we will be discussing with the Chinese government the basis on which we could operate an unfiltered search engine within the law, if at all. We recognize that this may well mean having to shut down, and potentially our offices in China.
We do not doubt the veracity of Google's claims. Cyber
warfare is the covert game nations play, and these attacks are nothing
new. Several U.S. military and scientific institutions such as NASA -
with far more sensitive national security information have been the target of hacking from China. In November 2008, a bipartisan U.S. Commission to analyze economic and national security relationship with China concluded
that, "China has stepped up its capacity to penetrate U.S. computer
networks to extract sensitive government and private information".

However, what we question is the following:

  1. Why is Google threatening to
    close operations at this juncture - i.e. four years after they entered
    China knowing full well that they will have to censor information to
    comply with Chinese government regulations. In 2006, Google seemed to
    completely disregard the human rights and freedom of speech
    considerations arguing that "the benefits of providing increased access
    to information to Chinese citizens outweighed the discomfort of
    censorship". Then why the sudden about face and embracing of altruistic
    values such as "freedom of speech" now?
  2. If the U.S. Government has not stopped doing business with China, despite its Communist status, countless cyber attacks, stealing of state secrets, human rights abuses and lack of freedom of speech and democracy, then why the about face by Google?
  3. The link between the Chinese Government's (implied involvement but not explicitly stated by Google) hacking of gmail servers to extract dissident information and Google closing its entire
    operation in China (search engine and cell phones running on Android)
    is tenuous and illogical at best. While the attacks are no doubt
    serious, we wonder if they are serious "enough" for a company like
    Google to forsake the world's largest internet subscriber market.
  4. So far Google has not had much
    success in China's internet search market having captured only 1/3
    market share. Its chief competitor controls the remaining 2/3. In addition by pulling out of China Google does not stand to lose too much, as pointed out by Bloomberg: "A pullout would deprive Google of an estimated $600 million in annual revenue [out of total revenues of $24 billion, thus a very small percentage] and may help domestic Baidu extend its lead in the world’s largest online market. “There’s no other competitor, so if Google pulls out, Baidu is left by itself,” said Erwin Sanft, an analyst at BNP Paribas SA in Hong Kong". Now Google has to have factored in the scenario that the Chinese government calls its bluff and asks them to "leave".
  5. It is highly unlikely that the Chinese government will acquiesce to allowing Google to operate an unfiltered search engine, especially when Baidu,
    a domestic Chinese player (that the government can control), holds a
    2/3 market share. In the current shaky economic scenario the Chinese
    government will try its level best to keep a lid on citizen's
    dissent. To do this it has unfortunately resorted to severe censorship
    of the Internet banning services such as facebook, twitter and youtube.
    Even so, the Chinese government is not illogical in this endeavor - it
    is well aware of covert campaigns launched by the U.S. government via facebook
    and twitter in Iran to help overthrow the Iranian government. China is
    not about to let the U.S. push the same fate on its own government.
So in our opinion, what all this
posturing boils down to, is the fact that a new and dangerous war-front
has opened up - one between the U.S. and China. Currently the war is
economic, political and covert in nature. The U.S. government knows
that the nations fiscal situation is abysmal and that China holds the
trump card over its fate by being its largest creditor. In addition
faced with rampant joblessness, a weakened U.S. consumer is more
dependent that ever, on cheap goods manufactured in China. While cheap Chinese
imports allow the Fed to keep a lid on domestic inflation, they do
not alleviate rampant U.S. unemployment. Protectionist pressures are
growing on a desperate U.S. government struggling to fix the
unemployment situation. This tussle has led to the imposition of trade
sanctions against Chinese companies on non-strategic sectors like
certain steel and tire imports.
To top this situation neo-con hawks in the U.S. government and military accustomed
to the nation being the world's sole super power, fear the rapid rise
of China. They fear the global domination of a Communist nation and
this in turn has led to naval and airspace incursions into Chinese
territory by the U.S. military, as well as the geo-political
blockages by the U.S. to severe Chinese access to the world's mineral
and oil resources. The current crisis in the Middle East an oil rich
region is a direct result of this strategy.
As the economic situation
deteriorates, these tensions are only going to escalate. While the U.S.
government is not going to start a military excursion with China
anytime soon, strategy hawks know that one way to slow the rise of
China and reduce its grip on America's economic collar is to create a
suitable diversion for the Chinese government. The U.S. intelligence
apparatus, which has several decades of experience staging coups and
overthrowing democratically elected governments across the world, is now staging a similar policy with China.
China's non-democratic set-up and autocratic communist party rule is its Achilles
heel in its rise as the world's leading economy. With China's economy
deeply intertwined with declining U.S. consumption, huge swaths of its
population who are employed in manufacturing and related sectors stand
to lose their jobs. Couple this with the fact that there exists a
complete lack of democracy, freedom and human rights in China. The
Chinese government knows that young unemployed people, especially those
whose rights have been suppressed, always make a deadly cocktail. It
wants to avoid setting off this bomb at any cost. The Chinese
government has unfortunately responded to this threat by clamping down
on information provided via the internet.
And this is the loophole the U.S. government is now trying to exploit
in its pursuit to weaken China. This explains the recent "freedom of
speech" campaign launched by the U.S. to "educate" the Chinese people
to revolt against their own government. Barack Obama fired the first
salvo when he visited China last year where he told a town hall
gathering that he was "a big supporter of non-censorship". He went on
to state that "These freedoms of expression, and worship, of access to
information and political participation - we believe they are universal
rights. They should be available to all people, including ethnic and
religious minorities, whether they are in the United States, China or
any nation." Now the State Department along with Google (whose CEO Eric
Schmidt is a huge supporter of Obama) have joined the "freedom of
speech" chorus, which will only grow louder in the coming days.
We would like to point out to
our reader that we do not support China's autocratic suppression of its
people's freedoms. What we are merely trying to point out here is that
there a deeper strategic (and frankly on some level inherently evil)
rather than altruistic motive behind Google and President Obama's
"freedom of speech and democracy" lecturing. If China is truly to try
to become a global power it needs to willingly unleash democratic
forces within its borders. The Chinese government would be safer doing
this on their own terms rather than have their hand forced by American
propaganda (at which point widespread civil unrest in China is a
given). The Chinese people would do well to pay attention.

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MeTarzanUjane's picture

Another China investment pays off big!

Baidu Wins on Google Exit (BIDU)

Baidu. Inc. (NASDAQ:BIDU) is soaring this morning after yesterday’s announcement that Google Inc. (NASDAQ: GOOG) is pulling out of China. This would effectively leave Baidu with more than just the lion share of online web search and advertising revenues in China. Baidu closed at $386.49 yesterday, but shares are up 14.6% at $443.00 on over 300,000 shares as of 8:07 AM EST. The stocks 52-week range is $105.00 to $443.25. Average volume is 1.8+ million shares, but that should be blown through rather quick. The open interest is not 10,000 in any strikes fr JAN10 CALLS yet, but the open interest is over 1,000 in each strike from $390 to $500…. Stay tuned.

"The Chinese people would do well to pay attention."

Yes Mr. Durden. A nation that is only a few hundred years old needs to skool a nation that is thousands of years old... They better listen or else.

Stevm30's picture

Sorry bud - the Chinese "nation" is only 60 years old.  Hence "listen up youngster"

MeTarzanUjane's picture

PRC, a power structure, borrows heavily from 5000 years of lessons learned. In you effort to dispute you have overlooked the obvious youngsters.

Anonymous's picture

Both China and the USA are net importers of energy. Neither can sustain "super-power," by definition, too long.

Anonymous's picture

HAHAHA. Hilarious. The wise Asiatic mind, cool and calculating, capable of prioritizing long term victory over the fickle, decadent, independent minded western degenerates.

Anonymous's picture

Actually the Chinese Communist Party during the cultural revolution destroyed and nearly wiped out all 5000 years of history as the evil regime wanted to suppress traditional culture which is based on morals and harmony between heaven and earth. The CCP is strongly atheist and has murdered 80million people in 60 years and the count is still rising. We are taught Hitler was bad yet with figures like these I think you have over looked the obvious. Go to this website and it is all documented plus more.

spekulatn's picture

Yes Mr. Durden. A nation that is only a few hundred years old needs to skool a nation that is thousands of years old... They better listen or else.

What part of "gues post" didn't you understand? 


MeTarzanUjane's picture

"We're all Tyler Durden".


WaterWings's picture

Except for HAWK! Tinfoil alert! Guess what they're trying to sneak through...

Read carefully Section -2 Functions,  of this Executive Order and you will clearly see how inclusive these functions can be....... especially Item e which has language sufficiently broad and loose that a Tank Battalion could be driven through it.


(e) other matters of mutual interest pertaining to National Guard, homeland defense, and civil support activities.

They should just summarize and say General Welfare like the Federalists.

Miles Kendig's picture

Don't forget interstate commerce.  Back on topic.  

The "right" thing usually must find a commercial conveyance..... Plus the current powers that be need to rebuild their "Human Rights" creds.  Tibet will continue to get flushed for the big bucks, but Google can make the splash over "net neutrality".  Looks like the administration is hoping that at least some of the walk n knock army returns....

order6102's picture

What age has to do with it? If you apply your logic we all should listen to coalacanth - world oldest fish! 

caconhma's picture

China is a communist country with Asian mentality. It is very foolish to underestimate their survival capabilities.

All these discussions about a possible civil unrest in China are just wishful thinking on part of the western media and politicians. They have passed their last survival test with flying colors.

Just look at their neighbour North Korea.

As for Iran, it is a totally different story. Their leaders are just incompetent religious zealots incapable of running a modern country.

Ned Zeppelin's picture

Is it me or is Baidu just Dubai spelled sort of inside out?

Having stolen all the source code they need and generally making Google feel unwelcome, the Chinese government issued a statement today: " Please do not let door hit you on the  a** as you leave."  Do they care? Not a whit. Puh-leze.  


Anonymous's picture

"The Chinese people would do well to pay attention. "

That supposed to be ironic or something?

pros's picture

I regret to say I see no other ways out of the present situation:

massive terror attack...all-out war..."we're not paying these (foreign) bad guys, and we're nationalizing your 401K's, pension funds because of national emergency"

forget inflation

Anonymous's picture

"Give us the Tang pronto, or we'll nuke Toronto."

Rainman's picture

The smoke the Chinese smell is from the fire of populist pleas for American economic protectionist policies.

Unlike the USA, they study history. So they get nervous.

Not to worry, though. Nobody is biting the lender's hand.....until/unless he one day says no. 

Doc's picture

Let me get this story straight:

Google and some other big American companies get hacked, Google threatens to pull out of China, thus the US government is trying to foment a coup d'etat in China through the CIA?

Am I the only one scratching my head on this one?

MeTarzanUjane's picture

The claim is a sophisticated hack ORIGINATED in China.

This means it came from Israel.

Are we suppose to believe the organization in charge of the "sophisticated hack" left a trail right back to the origin? Come on...

APC's picture

The attack comes from china, so it can't be the chinese.  Hell, it came from china.  So it must be the Israelis.


Bit of a stretch, no?

deadhead's picture

Just yet another reason to be bearish long term.

Anonymous's picture

There is more to that. Liberty/ democracy/ no censorship / do no evil etc. is only one part of the issue. Google has become an super efficient aggregate human and society profiler, the data it mines is priceless for anybody with at least some brains. China does not want Google to know everything about Chinese society, people, economy etc. As simple as that. Therefore, the fate of Yahoo in China is also pretty obvious.

Anonymous's picture


Anonymous's picture

This is a funny story, we invented the internet ad all of our truly sensitive information is already on Darpanet 2.0. A cyber security friend told me thatthese intrusions are akin to someone looking in the store window wth no ability to steal the goods.

We steal far more stuff from these guys than anyone else steals from us.

This is our economic Haiphong Harbour incident. Obama must check China's development and raise our employment at home. What better way than to start to close the door on the Chicoms.

What are they going to do,demand their money back. The Fed has already monetized that much currency in one year. We will let them choke on our dollars, cut off their export markets, and watch 200 million Chinese go jobless. We get some inflation with full employment and the Chinese get a revolution.

We did this in a milder form to Japan 20 years ago, and they are still spinning.

This is a win win for us. Check mate.

faustian bargain's picture

riiight. that is a funny story.

Anonymous's picture

Pot-Kettle-Black. The NSA reads and monitors (as in hacks) everything. The US media self-censors all the time. Numerous topics are taboo. Info apparatchiks in the US of A censor blogs all the time.

I just had a post deleted from my local newspaper's site. Why? Because I posted links - to Bloomberg and business week about the potential for the gov to grab the 401k's and IRAs

MsCreant's picture

Wow. I'd keep reposting. Maybe I'll try it with my paper and see what happens.

Gwynplaine's picture
Gwynplaine (not verified) Jan 14, 2010 11:25 AM

You may have something there.  I noticed yesterday that CBS Marketwatch posted a new comments policy.  The initial cover story was that readers were getting off topic, so new regulations had to be imposed.  Then, when you read a little further, they also are going to regulate comments that push a certain political agenda.  What does that mean?  Will goldbugs' comments now be removed on the basis of extremism?

Still, I'm a little skeptical of the claim that the CIA is conducting a covert campaign against Beijing.  We need their money to fund our deficit this year.  Also, how did the author come by this information?  Did the counterintelligence branch of the CIA actually admit to this off-the-record?  I doubt it. 

Something underhanded is going on, but I don't think anyone knows exactly what.

Instant Karma's picture

This cyber warfare stuff is scary. Makes one wonder whether one's digital money will be secure. Or electricity. Back in a to get more silver, guns, and a generator.

delacroix's picture

small 900 watt generator (chinese) $99 5hours on 1.1 gallons, get 1 while they're cheap. 9mm hi-point semi-auto pistol $160

delacroix's picture

small 900 watt generator (chinese) $99 5hours on 1.1 gallons, get 1 while they're cheap. 9mm hi-point semi-auto pistol $160

Gordon_Gekko's picture

"to discuss how to stop countries from "stifling" access to information."

Well, I'm sure the US does no such thing.

order6102's picture

it does, except you don't get put in jail for writing this, unlike in China where you can get killed just for putting line like this on internet!

Anonymous's picture

you obviously cannot read Chinese

ShiftCTRL's picture

Random thoughts/questions:

Was Google tipped off to get the $%*! out?

Is the U.S. planing a war against China to kill the debt, or is China planing a war against U.S. because it knows it isn't getting paid back?

"Next week the US is to launch a new technology policy to help citizens in other countries to gain access to an uncensored internet." -- What does this mean for Bidu? Doesn't sound too good.

order6102's picture

thats got to be one of the most crappy article on ZH... let me get it right Google is part of the US Govt? China doesn't kill 2M tibetans? War between China and Free World is unavoidable. One way or another. Over-polluted, over-crowded - China doesn't have any choice, but to grow. They took over Tibet, they took over Inner-mongolia, they took over Uighuria. If it was not for India - they wanted to take over Ladkh and Sikim, if it was not for US - they wanted to take over Taiwan. Its beast, and it has to be killed. Free Tibet!

Anonymous's picture

Man, you are so brain washed. One day you may die in middle east desert searching for WMD. Good luck.

Lungimaster's picture


US companies have large stakes in Chinese internet infrastructure. Google benefits from the launch of new technology without having presence in China. Hence US gov shows interest. It does NOT mean Google is part of US govt.

However, you take the argument too far (-1 on that). Every nation/company/individual is ambitious for growth to some extent. China is probably being too blatant at it. Doesn't imply that it needs to be killed. [Disclosure: I am from India and IMO Tibet should be free, and China should be democratic.]

Jay's picture

Thanks for the story. I have the same thoughts regarding point 1. Pulling out of China certainly won't make them less vulnerable to attacks. It seems like they're mixing two problems here. They should have made two separate blogs to avoid confusion.


I would like to know how Google found out that certain gmail customers are human rights activists. The fact that Google knows or could find that out makes me uncomfortable. Even going after that type of information seems like a privacy violation.

Instant Karma's picture

Maybe its all deception....fake enemies and fake wars and fake markets.

Make love not war.

All we are saying is give peace a chance.


GOOG is over-priced. Look at the chart, the swing trade is over.

Anonymous's picture

"it was not for US - they wanted to take over Taiwan". Silly me,and I thought Taiwan is part of China. Do they speak Tagalo,or Russian in Taiwan?

order6102's picture

Dude.. you need to go read a bit more. Taiwan is independent county... at least as of today... If you follow your logic US and Australia should be same country, as they speak some form of English? Or even better, Mexico and Spain? Why not... 

carbonmutant's picture


The Chinese are reading the same thing ahmadinejad did. As the Germans so succinctly put it, "there's an empty suit in the White House".
My guess is that Hu Jintao was not impressed by what he saw in November. Obama's attempts to lecture to the Chinese on monetary policy would have been viewed as an insult if they thought he knew what he was talking about. As it was they just laughed at Geithner.
But Copenhagen told the whole story. Hu Jintao refused to sit in the same room with him during the negotiations.
The US is only useful to the Chinese as long as we are buying Chinese products. If we aren't buying they have no reason to listen to our Bulls**t.
And at this point it appears as though the US is being viewed as a chicken to be plucked. Unfortunately for the current administration the prior administration was better equipped to deal with issues of this magnitude.

“As the economic situation deteriorates, these tensions are only going to escalate.”


Miles Kendig's picture

"there's an empty suit in the White House".

ROFLMAO. There hasn't been a self directed President of the United States for years.  Many years.  The only difference between this administration and the previous one is how the crumbs are directed.  Look at pictures of Hank Paulson after his visits to China back in '07 & '08 and you'll realize he got laughed out of the room as well.  Hank was just smart enough not to make the meeting exposed to public eyes.

Anonymous's picture

>>by order6102. You remind of GMAT test whereby they give you an essay,and then ask you questions about it. And from what you are inferring from the article,it shows that your reading comprehension are lacking. I am surprised that you are even registered in this sight. The article has nothing to do with the Chinese policy,or killing or human rights. Simply put,the article questions the sincerity of Google's claim. And you know what?the same questions I had this morning,and whether this is poltically motivated knowing how Google came to the political front in the latest election. I can't recall any other company that was so much highlited during an election year,as Google . And please remind me of one if I am mistaken...

order6102's picture

 I am surprised that you are even registered in this sight. 


Clearly you have to post as "Anonymous", so you can't. But i understand, memory of GMAT test and un-ability to register without parents/guardian sign off.. You will grow, and it will be fine. Don't worry, my friend :) 

CONners's picture

How about some uncensored access to a "free" market instead of the Peoples Republic of Wall Street market?

Anonymous's picture

Fuck china. Google stands for integrity.