Indian infotech sector is main focus of Chinese spying

BANGALORE: A few months ago, a major Bangalore-based infotech company lost out on a $8 million contract. The company was expecting a business delegation to visit India before signing the contract, but 15 days before the date set for the deal, the meeting was abruptly called off.

The same team went to China instead. When the Indian firm investigated the matter, it discovered a gaping hole in its security. The computers of several of its top executives had been compromised by Chinese hackers and privileged information leaked to a Chinese competitor, who walked away with the deal by quoting a lesser price.

Welcome to war of another kind - corporate espionage. Chinese companies are increasingly spying on the Indian IT industry, the only major business area where India leads the Chinese by several years. With many companies reportedly becoming victims of Chinese espionage, Indian intelligence officers are beginning to take a close, hard look at the influx of Chinese nationals into Bangalore, India’s IT hub.

The Chinese presence in the Bangalore-Mysore belt largely comprises students in Mysore University. Besides, there are several Chinese citizens who are training or working at Indian IT firms.

Intelligence officers are probing whether the sudden surge of Chinese interest in
Bangalore and Mysore is part of a larger game plan to steal India’s IT advantage through massive industrial espionage. The main aim, obviously, is to replicate Indian IT’s successes in mainland China, grab major contracts, and gain the upper hand in a hostile future competitive scenario.

Investigators are tight-lipped on the progress of their inquiry. But a source says they are looking at parallels between the presence of Chinese nationals in Karnataka and what has been reported about Chinese espionage in industrial complexes around the world.

Across Europe, Australia, and US, many espionage cases involving the Chinese have been reported at industrial clusters and cutting-edge firms. In most of these cases, investigations have revealed the key role played by Chinese students and workers in obtaining information for firms and institutions back home.

Recent instances of Chinese hacker attacks on major Indian IT companies only serve to illustrate the seriousness of the threat. The top brass of one IT firm were unnerved when they landed in China and discovered that their hosts knew everything about their plans. The Chinese knew what their proposed branch intended to do, what salaries would be offered to locals, the number of jobs on offer, et al. “The Indian officials were surprised and came back to carry out a security audit,” said the source. “They found that their computers had been compromised for a long time.”

Investigators suspect the Chinese are probably using their traditional network of students, workers, and tourists to extract sensitive information and gain access to any next-generation technology that Bangalore firms may be working on. “It may have started with Huawei Telecom, but today many Chinese firms have a presence in Bangalore,” said security analyst Rahul Bhonsle, an ex-army officer who, way back in 2000, wrote about the threat to the IT sector from China. “Some of them are definitely fronts for intelligence operations.”

Over the past two years, the government has rejected several of Huawei’s proposals, including a deal with MTNL, citing security concerns. In 2006, a high-powered government committee had recommended that no Chinese investment be allowed in critical sectors.

“In tomorrow’s asymmetric information warfare scenario, it [a critical presence in India’s IT sector] would give them a great advantage,” said Bhonsle. “Besides, it is possible for a sleeper to wreak havoc in, say, some banking software created by an Indian firm and deployed with an international banking major.”

Investigators are also beginning to look at a significant number of joint ventures, collaborations and other work relations being built up between Indian IT firms and Chinese companies. “Many of them could be just a cover for industrial espionage,” said a source involved in the investigation.

One prime area of concern is the memoranda of understanding (MoU) that Mysore University has signed with Chinese universities such as Wuhan and Huanghaui. The MoU are primarily meant as student exchange programmes and students do two years of study in Mysore University and obtain a BTech degree. The MoU of October 2007 has led to some 100 Chinese students coming to the university.