This weekend, The Financial Times reported (paid subscription required or free metered view) a significant finding, one that probably is not a surprise, but none the less should be of continued keen interest to product management, supply chain and IT functional support teams.  The FT article cites findings from the recently released 2013 China Climate Survey Report conducted by the American Chamber of Commerce in China.

The FT  headline is that a quarter of U.S. companies conducting business in China indicate that they have had trade secrets stolen or compromised through cyber related attacks on their China operations. The Chamber report cites 34 percent of respondents indicating material damage to China operations, a 12 percentage point increase from the previous annual survey. Once more, 14 percent indicated that these breaches caused material damage to global operations and a majority of these same respondents, 95 percent, indicate that this situation was unlikely to improve. More than 40 percent indicated that risk of a data breach is actually increasing. Almost half of all US companies surveyed indicated that intellectual property (IP) theft had damaged their operations.

The annual Chamber survey recorded a significant deterioration in perception of the investment environment in China, dropping from 43 percent a year ago, to 28 percent in the latest survey. Worries over corporate espionage were cited as a primary reason for the drop in confidence. Over one-third of respondents believe that industrial policies favor state-owned enterprises to the detriment of their own company.  De-facto technology transfer as a requirement for China market access was cited by 37 percent of respondents as an increasing requirement, a 10 percentage point increase from the prior year. This is a further indicator of concern related to IP protection.

These findings certainly echo the current public concerns now be openly expressed by many global governmental and legislative leaders regarding the increasing threats of cyber attacks. That included a recent trip to China from newly appointed U.S. Treasury Secretary, Jack Lew.

In response to questions raised by this survey, FT reports that:”… the Chinese foreign ministry described any accusation of Chinese cyber theft as “irresponsible” and urged US officials and companies not to politicize economic and trade issues and to stop hyping the issue of cyber security.”

Supply chain related technology and cloud services providers should take note of the survey finding that more China based companies are considering cloud computing options but the majority distrust China based providers because of data security concerns.

Readers can downloaded the full report at this web link.

Supply chain and IT professionals need to heed these growing concerns.  Insure that supply chain risk mitigation plans include special emphasis toward business and information policies for all owned operations within China. Emphasis should also be focused on information transfer and management practices that involve suppliers residing in the region.

China is both a vast growth market for goods and services and the global center of multiple industry manufacturing operations.  In the survey, the majority of the respondents continue to cite high profit margins in China. While those facts cannot be overlooked, attention to cyber security and IP protection should continue to be of a high priority.

Bob Ferrari