Via Bloomie today:
In 2015, Amazon.com Inc. began quietly evaluating a startup called Elemental Technologies, a potential acquisition to help with a major expansion of its streaming video service, known today as Amazon Prime Video. Based in Portland, Ore., Elemental made software for compressing massive video files and formatting them for different devices. Its technology had helped stream the Olympic Games online, communicate with the International Space Station, and funnel drone footage to the Central Intelligence Agency. Elemental’s national security contracts weren’t the main reason for the proposed acquisition, but they fit nicely with Amazon’s government businesses, such as the highly secure cloud that Amazon Web Services (AWS) was building for the CIA.
To help with due diligence, AWS, which was overseeing the prospective acquisition, hired a third-party company to scrutinize Elemental’s security, according to one person familiar with the process. The first pass uncovered troubling issues, prompting AWS to take a closer look at Elemental’s main product: the expensive servers that customers installed in their networks to handle the video compression. These servers were assembled for Elemental by Super Micro Computer Inc., a San Jose-based company (commonly known as Supermicro) that’s also one of the world’s biggest suppliers of server motherboards, the fiberglass-mounted clusters of chips and capacitors that act as the neurons of data centers large and small. In late spring of 2015, Elemental’s staff boxed up several servers and sent them to Ontario, Canada, for the third-party security company to test, the person says.
Nested on the servers’ motherboards, the testers found a tiny microchip, not much bigger than a grain of rice, that wasn’t part of the boards’ original design. Amazon reported the discovery to U.S. authorities, sending a shudder through the intelligence community. Elemental’s servers could be found in Department of Defense data centers, the CIA’s drone operations, and the onboard networks of Navy warships. And Elemental was just one of hundreds of Supermicro customers.
During the ensuing top-secret probe, which remains open more than three years later, investigators determined that the chips allowed the attackers to create a stealth doorway into any network that included the altered machines. Multiple people familiar with the matter say investigators found that the chips had been inserted at factories run by manufacturing subcontractors in China.
This attack was something graver than the software-based incidents the world has grown accustomed to seeing. Hardware hacks are more difficult to pull off and potentially more devastating, promising the kind of long-term, stealth access that spy agencies are willing to invest millions of dollars and many years to get.
…The chips had been inserted during the manufacturing process, two officials say, by operatives from a unit of the People’s Liberation Army. In Supermicro, China’s spies appear to have found a perfect conduit for what U.S. officials now describe as the most significant supply chain attack known to have been carried out against American companies.
The whole article is a must read and a precautionary tale about Chinese Communist Party ‘sharp power’. Get ready for more as the Sino/US Cold War ramps up all around us. More broadside came from VP Pence, via the FT:
Mike Pence, the US vice-president, has accused China of trying to sway the outcome of the midterm elections through propaganda and influence operations, in a hard-hitting speech that took Beijing to task for allegedly trying to hurt voters’ perception of Donald Trump.
Speaking a week after Mr Trump accused China of election meddling, Mr Pence said Beijing was even more aggressive than Russia in interfering in US democracy.
“Beijing has mobilised covert actors, front groups and propaganda outlets to shift Americans’ perception of Chinese policies,” Mr Pence said on Thursday in a speech at the Hudson Institute. “As a senior career member of our intelligence community recently told me, what the Russians are doing pales in comparison to what China is doing across this country.”
Mr Pence said the Trump administration was taking a more assertive stance towards China to counter its activities on everything from trade and economics to foreign policy and maritime disputes in the South China Sea.
At home, The Greens of Tasmania also find themselves at the point of social fallout from Chinese Communist Party ‘sharp power’, via The Guardian today:
Debate over alleged Chinese government interference in a Tasmanian local council race has divided the Greens, with the state party leader accused of “racist dog-whistling”.
An Australian Young Greens leader has called for the resignation of the party’s Tasmanian leader, Cassy O’Connor, after she linked the alleged interference to a Australian-Chinese Hobart City council candidate.
O’Connor, who has been a vocal critical of the Hodgman government’s relationship with the Chinese government, had warned last month there was a “growing body of extremely credible evidence” the Chinese Communist party was seeking to influence the council race.
O’Connor used a speech to parliament to draw attention to a candidate, Yongbei Tang, who is Chinese-Australian and was the editor of a newspaper that ran an article saying Australia was a country dominated by white people and urging Chinese-Australians to vote for Tang.
The Young Greens’ national co-convenor, Mark Clayton, accused O’Connor of “straight up racist dog-whistling” and called on her to resign.
“WTF are you doing in the Greens, the rest of us are fighting against racism and here you are standing side-by-side with Hanson,” he wrote in a tweet.
Clayton added that he supported O’Connor’s criticism of China’s human rights abuses but took issue “where you accuse Chinese-Australians in our communities as part of a grand conspiracy”.
“Students enrolling having a say in their city is an idea that we should be championing,” he said.
O’Connor stood by her comments, saying the accusations of racism were “false” and “a slur” and that her concerns were “backed by evidence”.
“These accusations (of racism) give succour to a totalitarian regime that’s oppressing around 14 M Uyghurs & Kazakhs, spies on its citizens wherever they live & runs influence ops in sovereign democracies like (Tasmania),” she wrote in a tweet.
Concerns in some quarters about Chinese foreign investment and potential political interference in Tasmania have grown in recent years.
The debate intensified last month after the Mercury newspaper reported that Tang had attended the Chinese People’s Political Consultative Congress last year.
The following day the Mercury reported that the paper headed by Tang had called on Chinese-Australians to back her in a bid to “put a nail in Tasmania’s politics”.
In her speech to parliament, O’Connor said Tang had “published extremely concerning statements” as editor of the Tasmanian Chinese News Network.
“The article in Chinese News Tasmania notes that ‘Australia is a society dominated by white people’ and called on Chinese people living in Tasmania to back Ms Tang’s election,” O’Connor said.
Clearly, questions around the influence of Chinese Communist Party “sharp power” are going to intensify not diminish. We need a better way to handle them than the reflexive use of the ‘racism versus multiculturalism’ false binary.
What are our next steps, then? Can we sail on oblivious towards an ever greater economic integration with China as our great power protector makes the shift towards strategic rivalry?
It is true that choosing one side over the other is not in the national interest. But to ignore the rising possibility that that choice will be thrust upon us would be downright reckless. Trump will pass but the great power contest won’t. As evidence think of Obama’s “pivot to Asia”, the TPP and marines in Darwin. Imagine as well if Bernie Sanders were now US president. Exactly the same conflict would be unfolding only he would be more obviously friendly to the US alliance network. When the Democrats win the White House again that’s what will happen.
We need to make a shift now so that as the struggle intensifies, we are as prepared as we can be. That does not mean choosing sides. That means seeking economic balance, political durability and strategic clarity. At the moment we have only made a start on the latter two and have done almost nothing on the former.
Where are our vulnerabilities?
In our strategic outlook we need a complete overhaul of our soft and hard power objectives. We should seek to promote democratic alliances wherever possible. Engage with ASEAN, India, Japan, Korea and European Union heavily. Governance in the Pacific is now central to everything that we do. It must be woven into a watertight strategic alliance in our favour before it is done against. This does not mean getting into an open contest with Beijing. But it does mean doing it anyway.
Australia needs to prepare a national defense strategy that is both integrated with the US but can also operate without it if need be. A nuclear debate is hard to avoid for both sustained power projection and continental defence.
It’s the economy where the hardest battle looms. Here the Chinese state already has a very strong foothold. If Beijing has any sense it will keep throwing easy dough our way. We should take it within reason and use it to hedge our bets. Blocking the sale of strategic assets is only the most obvious place to start. Thankfully the Chinese government has shut down the housing trade so we’re off the hook there. But the real battle is to shift the national growth engine from urbanisation industries to tradeables. The former is a pure figment of utopian globalisation, reliant upon exporting citizenship and importing capital, both of which now represent emerging national security threats.
We need to cut immigration sharply to shift away from building houses and roads and work instead towards a productive economy powered by exports and import competers, including especially manufacturing. Re-industrialising Australia is hardly something that will come easy. Industry policy can be used to promote it. More important is that we focus on our competitiveness instead of the easy debt-driven growth triggered by mass immigration. Then industry will grow again anyway. Critical is the breaking of the east coast gas cartel. Industry will die without that. Other reforms like changes to negative gearing are an excellent way to deflate house prices and lower the currency.
Cutting immigration also comes with the upside that it implicitly limits the channels of influence coming from Beijing. We should not use discriminatory immigration policy. That way lies disaster. Once any one ethnicity is singled out, all are at risk and Australia’s internal stability will destabilise. It is simply anathema to modern Australia and the values of humanism that underpin what makes Australia worth fighting for. We just halve the intake.
There is no need to resort to resource nationalism or other martial policies. These are wartime in nature and should be eschewed. But we we may need to take US competition into account on things like LNG.
The political battle might be just as hard to win. The obvious measures of combating bribery and the influence of Chinese-sympathetic money is underway. A good start has been made on pushing back via the foreign influence bills but more is needed. We need a federal ICAC. We need to ban political donations and introduce public funding for political parties.
More difficult is we need a new form of leadership. One that recognises the paradigm shift and throws out happy notions of a liberalising China, as well as a self-sacrificing liberal overlord in the US. China is a burgeoning dictatorship. The US is an angry superpower riven by class structures severely exacerbated by the nature of Chinese catch-up growth. Australia is “tip of the spear” for both and that position should be leveraged to find compromise wherever possible but do so with the full preparedness for failure.
The US versus China is now the defining struggle of our time. We need to recognise it openly without endorsing it. Yet Labor is still kneeling at the alter of the Asian Century doctrine in thrall to dated Keatingism. The Coalition is the lapdog of corporations such that it will agree to pretty much anything that they want in thrall to dated Howardism. Both operate under vestigial open border’s rubrics that will further entrench a Chinese economic dependence now clearly running directly contrary to our strategic interests.
