Double-edged Sword: Australia Economic Partnerships Under Attack from China

During a visit in mid-September, China’s Foreign Minister Wang Yi urged Australia to become “a bridge between east and west.” He was Down Under to discuss progress on the free trade agreement between Australia and China that seems likely by the end of the year. His comment referred to furthering the trade relationship between the two countries, but he might as well have been referring to hackers who hope to use the deepening alliance to steal information.

The Australian Financial Times (AFR) did an in-depth article with FireEye regarding Chinese attacks against Australian businesses, and this blog provides additional context.

Australia has experienced unprecedented trade growth with China over the last decade, which has created a double-edged sword. As Australian businesses partner with Chinese firms, Chinese-based threat actors increasingly launch sophisticated and targeted network attacks to obtain confidential information from Australian businesses. In the U.S. and Europe, Chinese attacks on government and private industry have become a routine in local newspapers.  Australia, it seems, is the next target.

 The Numbers

First, let’s review the state of Australian and Chinese economic interdependence.  Averaging an annual 9.10% GDP growth rate over the last two decades, China’s unparalleled economic expansion has protected Australia from theworst of the global financial crisis effects. Exports to China have increased tenfold, from $8.3b USD in 2001 to $90b USD in 2013[i], with the most prominent commodities being iron ore and natural gas. Much of these resources originate in Australia, which puts China’s government under significant pressure to meet the skyrocketing demand for them. Despite the ever-increasing co-dependence Australia and China share as regional partners, Chinese authorities are likely supporting greater levels of monitoring and intelligence gathering from the Australian economy – often conducted through Chinese State-Owned Enterprises (SOEs) with domestic relationships in Australia.

SOE direct investment into Australia grew to 84% of all foreign investment inflows from China in 2014, primarily directed into the Australian mining and resource sector; demonstrating a further signal for control as China seeks to capture a level of certainty in catering for its future internal growth. We suspect this to be government-commissioned cyber threat actors targeting Australian firms with a specific agenda: to gain advantage and control of assets both in physical infrastructure and intellectual property.

Figure 1. Chinese Direct Investment into Australia by industry

The Impacts

How have these partnerships impacted Australian networks?  Mandiant has observed the strategic operations of Chinese threat actors target companies involved in key economic sectors, including data theft from an Australian firm.  Chinese Advanced Persistent Threats (APTs) are likely interested in compromising Australian mining and natural resources firms, especially after spikes in commodity prices. The upward trend in APT attacks from China is also aimed toward the third parties in the mining and natural resources ecosystems. Mandiant believes a significant increase in China-based APT intrusions focused on law firms that hold confidential mergers and acquisitions information and sensitive intellectual property. It is no coincidence these third-party firms are often found lacking in network protections. The investigation also found that, at the time of compromise, the majority of victim firms were in direct negotiations with Chinese enterprises, highlighting attempts by the Chinese government to gain advantage in targeted areas.

Due to its endemic pollution problems, clean energy has evolved into a critical industry for China. The country has now engaged a plan to develop Strategic Emerging Industries (SEIs) to address this. Australian intellectual property and R&D have become prime data, and has taken a major position in Chinese APT campaigns. Again, it is the third parties like law firms that are coming under attack.

Furthermore, to reduce China’s reliance on Australian iron ore exports, Beijing has initiated a plan to develop an efficient, high-end steel production vertical through strategic acquisitions in Australia and intervening to prevent unfavorable alliances.  For example, the SOE Chinalco bought into Australian mining companies to presumablyprevent a merger that would have disadvantaged their interests. Clearly, the confidential business information of Australian export partners to China is becoming increasingly sought after.

Mandiant found that the majority of compromised firms had either current negotiation with Chinese enterprises or previous business engagements with Chinese enterprises. These attacks will persist as trade and investment grows, though they will do so at the cost of confidential Australian business information such as R&D and intellectual property. As large Australian mining and resources firms themselves may partner with the Australian Signals Directorate for security, the focus of the threat actors shifts to associated parties with access to sensitive data, who may not be pursuing partnerships with the Australian Signals Directorate.  This calls for greater awareness and protection against the increasingly determined and advanced attacks launched.

The Bottom Line

Although this blog focuses on acts against large Australian mining and resources sectors, Mandiant has observed these APT actors often focusing their attention on other sectors such as defence, telecommunications, agriculture, political organizations, high technology, transportation, and aerospace, among others. But the broader lesson and message—drawing from U.S. and European experience with Chinese attacks—is that no one is or will be exempt.  For all Australian businesses and governments, it’s time to fortify defences for a new era of cyber security.

 Source: fireeye.com