China, Russia exploiting high-tech in ‘hybrid warfare’ costs up to $100B per year in Canada: report

Hostile military and intelligence forces are targeting Canada in a new “sophisticated, multifaceted” type of warfare using a range of tools from criminal gangs to cyber-hackers to high-tech companies such as Huawei and China Telecom, the author of a newly released national security report alleges.

The report, by Clairvoyance Cyber Corp., which provides consulting services for CSIS and the RCMP, was completed in 2019 for Public Safety Canada, and warns that state-sponsored cybercrime could be costing Canada an estimated $100 billion per year. According to the report, nations including China and Russia are conducting cyber and human espionage that targets individuals, institutions and corporations in Canada.

But these attacks — which aim to control Canada’s political discourse and collect trade secrets from corporations and personal data from individuals — will increase as 5G networks and densely populated “smart cities” grow.

“Hostile intelligence services and militaries will continue to exploit, interfere with and influence Canadian interests domestically and abroad, using cyber as part of a broader hybrid warfare campaign,” the report says.

“And vendors such as Huawei with the support of state intelligence services will be in a better position to wield foreign control, interference and influence over critical Canadian infrastructure.”

The report was obtained through access to information requests by the Institute for Investigative Journalism, and shared with Global News.

In an interview, Clairvoyance CEO Dave McMahon, the report’s author, said 5G-connected smart cities intertwined with emerging technologies such as artificial intelligence and quantum computing will become battlefields in a new type of military conflict. In this competition for state supremacy — which will stop just short of armed conflict but could include violence — city dwellers interconnected through mobile technologies will provide the most “target-rich” environment for spying ever, McMahon says.

And China’s strategy particularly, which includes activities by Chinese tech companies, will attempt to control Canadians through disinformation, media manipulation, psychological warfare and legal warfare, according to McMahon.

To explain this new high-tech battlefield, McMahon cited the section of his report that says “civilization’s likely future dependence on 5G, and the potential use for military applications, make it a prime candidate for political influence.”

But while many people think of cybercrime as the domain of computers and software, McMahon says China and Russia “have no compunction” against using organized crime supported by high-tech networks to target citizens in foreign lands.

“There are a number of open-source reports which point to the United Front Work Department of the Central Committee of the Chinese Communist Party using criminal gangs to interfere, influence and intimidate Canadians,” McMahon said. “Similarly, Russia is known to weaponize information and blend military, intelligence, industry and organized crime towards national objectives.”

These attacks on Canadian soil will increasingly be facilitated through mobile apps that service users across national boundaries, the report says, and allow spies to covertly “enumerate vast quantities of targets” and track people “on mobile devices.”

McMahon’s report points to Huawei and China Telecom as corporations that have allegedly been connected to Chinese intelligence and military operations in Canada.

In one case, “China Telecom, a state-owned telecommunications entity, has systematically diverted Canadian Internet traffic … through its own network to facilitate espionage and targeting,” the report says.

And in another case, “soon after Huawei CFO Meng Wanzhou was arrested in Canada, increased advanced persistent threat (cyber-attack) activity was seen involving Huawei devices within some of Canadian critical infrastructure and businesses,” the report says.

China Telecom hasn’t yet responded to Global News questions sent to its Canadian offices in Markham. Huawei Canada was provided details of McMahon’s report but declined comment. Huawei Canada has previously insisted it has not been involved in any espionage in Canada and will not violate any Canadian laws.

China’s embassy in Ottawa also did not respond to questions and information from Global News regarding McMahon’s report.

Earlier in June, the embassy countered allegations made by Hong Kong Canadians who testified in a parliamentary committee that China is running a “global system of control, surveillance, and influence over the (Chinese) diaspora.”

“We have never conducted and will never conduct any interference or infiltration against another country,” the embassy responded. “This is not in our genes.”

McMahon said the upshot of his report is that Canada must have strategies that combine efforts from Canadian industries and governments in order to protect citizens, industry and institutes in a 5G world.

And “buying critical technology from a large Chinese or Russian company, is no less or more trustworthy than purchasing it directly from the government,” he said.

While the Trudeau government has not made a decision on whether to allow Huawei technology into Canada’s 5G network — and allies including the United States and Australia have explicitly barred Huawei — McMahon says Canadian telecoms have already started constructing 5G systems without Huawei technology.

Huawei Canada didn’t respond to questions on whether it still seeks a role in Canada’s 5G or future mobile technology systems.

McMahon, a former Canadian military and federal government employee, who also provides consulting services for Canada’s cyber-intelligence agency CSE, said Huawei is among the group of industrial giants that figure prominently in the Chinese Communist Party’s highest global strategies, including Xi Jinping’s so-called Belt and Road infrastructure plan.

Given Huawei’s centrality to China’s plans, McMahon says he was alarmed with statements attributed to Huawei founder Ren Zhengfei and another company executive following the late 2018 arrest and detention of Ren’s daughter Meng Wanzhou, who is a Huawei executive.

After Meng’s arrest, Ren reportedly ordered staff at the company’s research centre in eastern China to “surge forward, killing as you go, to blaze us a trail of blood,” in Canada, McMahon said. And in February, McMahon said, a Huawei executive and former Chinese army engineer closely linked to the Communist Party, told staff at a Huawei campus in Wuhan that “the company has entered a state of war,” with Canada.

“This language is unprecedented for a C-Level executive and was in direct response to the extradition hearing of Huawei’s chief financial officer,” McMahon said. “Canadian industry coincidently saw an inflection in cyberattacks by China, while citizens witnessed the detention of two Canadians, in what most people are calling hostage diplomacy. Together, this is an alarming pattern of behaviour for a country aspiring to become a global power.”

—With files from Jared Dodds and Michael Wrobel, Concordia University’s Institute for Investigative Journalism