China Policy Monitor No. 1609

Related Categories: Cybersecurity and Cyberwarfare; Intelligence and Counterintelligence; Public Diplomacy and Information Operations; Science and Technology; Resource Security; Australia; China

U.S. DISRUPTS VAST PRC HACKING OPERATION
The FBI has disrupted a PRC hacking campaign known as Flax Typhoon targeting universities, government agencies, and other organizations. The hackers created a massive botnet by installing malicious software on over 200,000 consumer devices — including cameras, video recorders, and routers — which were used to steal sensitive information. "Make no mistake it's just one round in a much longer fight. The Chinese government will continue to target your organizations and our critical infrastructure, either directly or through proxies, and we'll work with our partners to identify their malicious activity, disrupt their hacking campaigns, and bring them to light," FBI Director Chris Wray has stated. (Associated Press, September 18, 2024)

FIJI CALLS IN AUSTRALIA TO THWART PRC HACKERS
In response to Fiji's request, Australia has sent cyber specialists to assist the South Pacific nation after PRC hackers infiltrated the Secretariat of the Pacific Islands Forum (PIF). The "extensive" security breach gathered information on the Secretariat's communications with member nations. Australian cyber experts have been called in following at least half a dozen ransomware attacks this year on Pacific Island states including in Vanuatu, Tonga, and Papua New Guinea. Palau, which has diplomatic ties with Taiwan, accused China of conducting a massive cyber attack on its government networks. "I can confirm that there was indeed a cybersecurity incident here this year," said Baron Waqa, Secretary General of the PIF. (Australian Broadcasting Corp., September 12, 2024)

U.S. TO BAN CHINESE SOFTWARE, HARDWARE IN VEHICLES
The U.S. Commerce Department is considering prohibiting Chinese software and hardware in connected and autonomous vehicles due to national security concerns about data collection by Chinese companies on U.S. drivers and infrastructure, as well as the potential foreign manipulation of vehicles connected to the internet and navigation systems. The proposed regulation would ban the import and sale of vehicles from China with certain communications or automated driving systems. "Imagine the most catastrophic outcome theoretically if you had a couple million cars on the road and the software were disabled," outlines Commerce Secretary Gina Raimondo. The prohibitions in question would include vehicles with Bluetooth, satellite and wireless features that could operate without a driver behind the wheel. The software prohibitions will take effect for the 2027 model and the ban on hardware will take effect for the 2030 models. (Reuters, September 21, 2024)

AS BIRTHS FALL AND THE ECONOMY SLOWS, DAIRY FARMS SWIM IN MILK
A combination of expanded dairy farming, falling birth rates, and weak consumption have left China with a surplus of unwanted milk. Milk production rose to 42 million tons in 2023, up from 30 million tons in 2017. Meanwhile, China's infant formula market shrank by 8.6% in volume and 10.7% in value, with further declines expected in 2025. In 2023, the country’s birth rate hit a record low 6.39 per 1000 people, down from 12.43 in 2017. Poor economic conditions have reduced milk consumption from 14.4 kg per capita in 2021 to 12.4 kg in 2022 and hurt demand for higher-priced dairy products like cheese, cream, and butter. In the first eight months of 2024, China's dairy imports dropped by 13% to 1.75 million metric tons, with milk powder — the top dairy import — down 21% to 620,000 tons. (Reuters, September 20, 2024)

CHINA FINES PWC $62 MILLION FOR AUDITING EVERGRANDE
The China Securities Regulatory Commission (CSRC) has imposed a record fine of 441 million yuan ($62 million) on PwC's auditing unit due to its role in the audit of troubled property developer China Evergrande Group. The Ministry of Finance issued a six-month business suspension and an additional fine of 116 million yuan ($16 million) for auditing failures in 2018. The investigation revealed that PwC Zhong Tian LLP facilitated Evergrande's fraudulent activities while auditing the real estate company in 2019 and 2020. The CSRC criticized PwC for "harming investors' interests" and "seriously undermining the principles of law and good faith." (CNN, September 13, 2024)