Just over two years ago the head of MI5, Jonathan Evans, wrote to about 300 British firms warning them to be wary of Chinese hackers trying to monitor their systems or break into them remotely via the internet: Rolls-Royce, the jet engine maker, and Royal Dutch Shell had both fallen victim to computer intrusions. It was only part of an ongoing strategy of "information warfare" that China's government – through its People's Liberation Army (PLA) – is carrying out across the world.
The latest targets in a scheme appear to be companies in Silicon Valley, where companies including Google and Adobe, which makes hugely popular Flash software (used for the vast majority of video online, such as the BBC's iPlayer and YouTube), have discovered intrusions into the computers where they store their "source code" – the millions of lines of programming, readable by humans, that comprise their software. Those are, effectively, their crown jewels: if they fall into rivals' hands, the programs can be copied, altered, or produced for free under another name.
For America's hi-tech firms, the idea that their source code falls into Chinese hands is the worst nightmare: intellectual property protection is notoriously poor in China, and the code could be rewritten into a piece of Chinese software – or even sold on the world market to compete with the original.
What makes it most worrying is that the hackers have the sanction of Beijing (though it always denies any link). A briefing paper produced in October by the US military security firm Northrop Grumman for the US-China Economic and Security Commission looked in detail at Beijing's strategy, including a roundup of hacking from China over the past 10 years.
Its summary was bleak, predicting a world of "information warfare" via the internet, using a strategy it dubbed "integrated network electronic warfare": "The PLA is training and equipping its force to use a variety of [internet warfare] tools for intelligence gathering and to establish information dominance over its adversaries during a conflict. PLA campaign doctrine identifies the early establishment of information dominance over an enemy as one of the highest operational priorities in a conflict; Inew appears designed to support this objective."
Such warfare is carried out by expert hackers with a range of skills: some will know how to hack into web servers, while others are skilled at finding previously undiscovered weaknesses – known as "zero-day vulnerabilities" – in commercial software. Standard antivirus and warning systems simply won't detect their use, meaning that computers can be compromised without warning.
Northrop Grumman did not think it was lone hackers with a grudge against the west, either: "The depth of resources necessary to sustain the scope of computer network exploitation targeting the US and many countries around the world coupled with the extremely focused targeting of defence engineering data, US military operational information, and China-related policy information is beyond the capabilities or profile of virtually all organised cybercriminal enterprises and is difficult at best without some type of state sponsorship."
In other words: though China might deny it, Beijing is behind the intrusions – such as Titan Rain, the name the Pentagon has given to a series of attacks since 2003 on groups such as Lockheed Martin, Nasa and the Sandia National Laboratories. Or the attempts to "phish" members of the UK parliament in autumn 2005.
What makes it obvious that these are state-sponsored attacks, as Northrop Grumman notes, is that the information being targeted is not credit card or bank account details but engineering, source code, and detail about military preparedness and networks.
According to the US Air Force, by 2007 the Chinese had "exfiltrated" (copied back to their own computers) at least 10 to 20 terabytes of data from US government networks. Since then the number will only have grown. One terabyte is 1,000 gigabytes – the average home computer now holds half a terabyte.
"Chinese espionage in the United States, which now comprises the single greatest threat to US technology, according to US counterintelligence officials, is straining the US capacity to respond," the report notes.
"This illicit activity both from traditional techniques and computer-based activity are possibly contributing to China's military modernisation and its acquisition of new technical capabilities."
In short, the report notes, "Chinese industrial espionage" is providing a source of new technology without investing time or money for research.
The present problem is the "reactive" nature of internet security. It is not an inherently secure network, having been set up by academics to swap information. But if Google's withdrawal of censorship (and possibly itself) from China has one effect, it may be to make more firms realise China's hackers are not to be ignored.
• This article was amended on Thursday 14 January 2010. We previously said the average home computer now holds half a gigabyte. This has been corrected.
