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Why our lack of understanding on China may be the biggest risk

George V. Hulme | Aug. 26, 2014
While China's ability to wage cyber warfare is sure, the real risk to the U.S. may be its lack of understanding the eastern nation.

Companies such as GM, Audi, Volkswagen and others "are all now being investigated for fraud or malfeasance because of that [indictment] action," he said. "Essentially, the Chinese feel justified in their beliefs, based on the revelations of Snowden, that any American or foreign company is not to be trusted," he said.

Not that Chinese enterprises are to be trusted with intellectual property themselves, and Hagestad cited Nortel Networks Corporation as his case study. Following the beginning of a joint venture in 2001, members of Nortel's technical staff identified what they believed to be Nortel's technology appearing within Chinese markets in which Nortel did not compete. The team informed management, and was dismissed. "They were told not to worry about it. That they were too technical and that they didn't understand the businesses," Hagestad said.

Nine years after that joint venture the marketability and competitiveness of Nortel ceased to exist because Huawei had entered Nortel markets with Nortel intellectual property with pricing at levels Nortel couldn't compete with, Hagestad said.

There's little doubt that nation state-backed cybersecurity threats are only going to grow worse in the years ahead, according to Hagestad, so there should be little solace found in the fact that the U.S. and U.S.-based enterprises are probably not even China's top target.

According to Hagestad, China is most concerned about nations within its immediate geographic reach. The US is not the number one target, he said. The number one targets are actually Japan, Philippines, Vietnam, and Taiwan.

 

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