Google Inc. Chairman Eric Schmidt’s opinion that China is the world’s No. 1 hacker is shared by many in Silicon Valley. What has the business world buzzing is that he publicly called out that country’s Communist leaders in an upcoming book.
In “The New Digital Age,” to be published in April, Schmidt and co-author Jared Cohen, a former State Department official who now heads the think tank Google Ideas, say China is the “most sophisticated and prolific” cyberthief threatening foreign companies. They also call China the “world’s most active and enthusiastic filterer of information.” And they say cyberattacks by China’s state-associated firms are economically damaging to America.
China, which tightly controls Internet speech in the name of promoting a “harmonious” society, denies engaging in cyber-espionage. But Western companies and the U.S. government say otherwise.
Schmidt is the highest-profile Silicon Valley tech executive to publicly take China to task over censorship and cyberattacks. It’s a move that could further damage his company’s prospects in the world’s largest Internet market, some experts say. But it could also signal the beginning of a push-back by U.S. executives against what they see as China’s cyberthefts and censorship.
“You hear this kind of thing in private” among executives, said Rebecca MacKinnon, senior fellow at the New America Foundation and an expert on global Internet policy. “But it’s rare to hear this on the record, in writing.”
Schmidt was Google’s chief executive in 2010 when the Mountain View, Calif., Internet giant challenged Communist leaders by halting the practice of self-censoring searches in China. Instead, Google rerouted traffic through its site in Hong Kong, where mainland China’s censorship rules do not apply.
As a result, Google’s share of China’s Internet search market has plunged from about 35.9 percent at its peak at the end of 2009 to 15.2 percent in the fourth quarter of 2012, while local rival Baidu claimed 78.6 percent, according to Beijing-based research firm Analysys International. Google’s free Gmail service is continuously disrupted, and its Web-based word processor, spreadsheet, presentation and data storage services have been blocked in China. Likewise, Google’s YouTube video site is blocked. In September, Google shut down its China music download service and three months later its China-based shopping search business.
In China, Schmidt’s book is apt to be read as a broadside from Google rather than just the judgment of the authors, said Anna Han, a Santa Clara University business law professor who advises U.S. companies operating in China.
Because Google has effectively pulled out of China, Schmidt is freer to criticize its government than are executives of other U.S. companies with operations there, who would fear retaliation, said Eva Galperin of the San Francisco-based Electronic Frontier Foundation.
BGC Partners analyst Colin Gillis, though, said Google still has an important stake in China.
“Things could get worse,” he said. The “Android (operating system) could be banned. Some of their other services could be shut down.”
In their book, Schmidt and Cohen recount Google’s decision to stop censoring searches in China after a sophisticated cyberattack on the company’s intellectual property in late 2009, an assault it believes was directed by the Chinese government or its agents.
Google is not the only prominent U.S. company to complain of attack by hackers in China. The New York Times, Washington Post, Wall Street Journal and Bloomberg News recently reported they were victims of Chinese cyberattacks.
Schmidt and Cohen express concern not only about the Chinese government but also about Chinese technology giants, such as Huawei, which last fall was deemed a security risk by the U.S. House Intelligence Committee because its telecommunications equipment could be used for spying.
Schmidt and Cohen say that because of close ties between large Chinese companies and China’s government, the growing global might of the technology giants enhances the influence of their government. Where Huawei gains market share, they write, the “influence and reach” of China’s government grows.
Schmidt’s concerns are echoed by many in the tech industry, MacKinnon said.
In December, for example, TechAmerica, TechNet, the Internet Association and other tech groups joined the Obama administration in opposing a treaty supported by China and other developing countries that could have given governments more control of the Internet.
“We are starting to see companies kind of take more of a stand than they might have (in the past) and maybe Schmidt is out in front,” MacKinnon said.
Ed Black, CEO of the Computer & Communications Industry Association, said Schmidt is well qualified to criticize China.
“He has been exposed so much to what China is doing and understands the significance of China that not to talk about it would be out of place,” he said.
Black, too, has spoken out, testifying twice before Congress. As a result, his organization has been targeted by hackers he believes are based in China.
“We came under massive assault,” Black said.