One day during last year’s presidential campaign, FBI agents notified Barack Obama’s campaign that its computers had been hacked. Later, they told McCain’s campaign the same thing. 

Both attacks almost certainly originated in China.

These were not isolated incidents. China, or free-agent hackers on their payrolls, has penetrated computer systems of the State Department, US nuclear weapons labs and defense contractors.

It has stolen files on political dissidents from members of Congress, disrupted e-mail servers used by the Secretary of Defense and launched a spyware attack on electronic devices used by the Commerce Secretary during a visit to Beijing.

Last April, then-National Counterintelligence Executive Joel Brenner famously reported that the Chinese had penetrated “certain of our electricity grids” with malicious code that could be activated at a later date, perhaps bringing it down altogether. 

Officials can’t know exactly what has been stolen or how badly US systems have been exposed, but they do know why China has become an aggressive cyber threat.

“This is the way they plan to thwart US (military) supremacy in a potential conflict,” Robert Knake, a Council on Foreign Relations fellow told the Washington Post. “They believe they can deter us through cyber warfare.”

Chinese officials scoff at the accusations. “Allegations that China is behind cyber attacks against the US are irresponsible,” said Wang Baodong, a Chinese Embassy spokesperson.

“Since the US serves as the hub of the international information highway, attacking the US in cyberspace equals attacking one’s own cyberspace assets. . . . What’s the logic?” Wang added.

Amid the furor, US cyber policy expert James Lewis said it best, “I’m not going to get upset about China spying on us, because we spy on them. The only thing I’m going to get upset about is if we don’t do better.”

Swiss pharmaceutical giant Novartis announced last week that it will invest $1 billion into an R&D facility in Shanghai, China.

China’s remarkable economic growth is driving the decision, according to Chief Executive Daniel Vasella.

Company strategists predict China could vault into the top 3 national markets for the company’s products as soon as 2014.

The prediction is based on Novartis’ astounding 30% growth in revenues from China in each of the last several years.

That trend is likely to accelerate now that Chinese officials have decided to overhaul the nation’s health care system, most notably by rebuilding moribund facilities in rural areas and expanding health insurance to 90% of China’s citizens by 2011.

Novartis’ investment will be spread over 5 years. It will boost the headcount in the company’s Shanghai R&D facility from 160 to 1,000, making it more or less equal in size to the company’s A-number one research shop in Cambridge, Massachusetts. The  company’s HQ in Basel remains the largest facility overall.

“I think it will be a signal of China’s rising importance in the pharmaceutical industry,” Vasella told the Wall Street Journal during a recent sojourn to Beijing. “You have to ask yourself, where do you need to be down the road, and clearly it is here.”

Vasella added that his decision was made possible because of the newfound plethora of scientific talent in China. He brushed off concerns about the country’s notoriously lax protections of intellectual property.

Novartis’ move into China is at least the third by a large pharmaceutical company in recent years. Roche opened a research lab there in 2004, and a clinical trial center in 2007.  In 2006, AZ opened a research center in Shanghai. It is building another one in Zhangjiang.

Tian Lihua had just clocked in for work at a textile mill outside Jilin when she became nauseated, then dizzy. Moments later she passed out. In the next few days 1,200 of her co-workers developed medical issues ranging from seizures to shortness of breath and transient paralysis.

“When I came to, I could hear the doctors talking,” she told the New York Times last month. “They said I had a reaction to unknown substances.”

Tian and her colleagues believe those “unknown substances” had wafted downwind from the Jilin Connell Chemical Plant which makes aniline, a notoriously toxic chemical used to produce rubber, dyes,  polyurethane and herbicides.

Local hospitals began seeing befallen workers immediately after the plant opened this spring. On a bad day, so many workers showed up that the hospital was forced to put 2 in each bed.

The State Administration of Work Safety initially stated on its Web site that the cause was a “chemical leak,” but hours later the statement was pulled down.

Now, local health officials as well as those dispatched from Beijing contend the entire event is due to mass hysteria….psychological reactions on a massive scale to a presumed chemical exposure.

The officials have admonished the workers to “get a hold of their emotions” and get back to work, say afflicted individuals and their loved ones.

 “How could a psychological illness cause so much pain and misery?” asked 29 year-old Zhang Fusheng, who appeared to a Times reporter to be short of breath despite being hooked up to an oxygen mask. “My only wish is to get better so I can go back to work and take care of my family.”

The Ministry of Health in Beijing refused to release details of its investigation, but local officials insist they found no evidence of a toxic exposure.

The plant is partially owned by local government officials. Its president is Song Zhiping, who is also a representative to China’s legislative body, the National People’s Congress.

Chinese officials have announced that beginning on July 1, all computers sold there must include government-designed software that blocks pornography.

OK fine, but a few Internet savants smelled a rat and set out to test the so-called Green Dam-Youth Escort software.

Their conclusion: Green Dam also censors religious and anti-government Web sites, disables programs after people input certain words, monitors personal communications, and tracks the Internet explorations of Chinese citizens, according to the Wall Street Journal’s Gordon Krovitz.

China is in effect asking computer makers to help block access to information and punish citizens if they visit unsavory sites or express themselves freely online.

Green Dam, dubbed derisively by its own citizens as the “Great Firewall of China,” has also been found to close computer applications without warning and create serious security problems.

So far Dell, HP, Apple and Lenovo—whose biggest shareholder is China’s government—have tread lightly around the subject, allowing their trade associations to gently press the matter with Beijing.

But now, US Trade Representative Ron Kirk and Commerce Secretary Gary Locke have begun quietly pressuring China to shelve the program altogether. They claim the program may violate commitments that China made to the World Trade Organization.

In letters to 2 Chinese ministries yesterday, the US officials said, “China is putting companies at an untenable position by requiring them, with virtually no public notice, to pre-install software that appears to have broad-based censorship implications and network security issues.”

The letters encouraged China to seek ways to promote parental control without restricting freedom to roam the Internet, freedom of expression and the free flow of information, according to the Washington Post.

As part of its crackdown on free speech following last week’s rigged elections, Iran’s government is exerting unprecedented control over the country’s Internet communications. And to do that, it’s using products supplied by European companies.

Based on interviews with technology experts inside and outside Iran, the Wall Street Journal reported yesterday that those pesky mullahs are carrying out deep packet inspection on a massive scale.

In addition to blocking or slowing Internet communication, deep packet inspection gathers information about users and can be used to alter the content of the communication itself—changing a “yes” to a “no,” for example—which may be more disruptive than shutting off Internet communication altogether.

The nefarious capabilities are there for the mullahs to use, courtesy of a JV between the German multinational, Siemens, and Nokia, a Finnish mobile phone provider.

According to spokesperson Ben Roome, the company installed a “monitoring center” within the Iran’s government-run telecom monopoly as part of a larger gig that included the installation of mobile-phone networks.

“If you sell networks, you also, intrinsically, sell the capability to intercept any communication that runs over them,” Roome told the Journal.

The Iranian government had briefly experimented with the Big Brother-like equipment in the run-up to last week’s travesty, but few people fully understood the system’s capabilities until its powers were unleashed in the face of escalating street protests.

Deep packet inspection involves the deconstruction and subsequent reconstitution of Internet data including email, Internet phone calls, and images and messages sent via social-networking sites like Twitter and Facebook.

It could explain why the mullahs allowed Iran’s Internet to function rather than shutting it down altogether, and why it has been running at glacial speed since things started getting out of hand.

Iran is “now drilling into what the population is trying to say,” Marshal8e6 director of technical strategy Bradley Anstis told the Journal. “This looks like a step beyond what any other country is doing, including China.”

In the run-up to the Summer Olympics, Chinese officials pressed mines and factories near Beijing to shutter or move elsewhere in an effort to assure the event would be held under blue skies.

Now, as China rushes to invest nearly $600 billion of stimulus money and shake off a rare economic slowdown caused by the Great Economic Crisis, its skies seem destined to turn smoggy once again. 

The Ministry of Environmental Protection has begun fast tracking hoards of industrial projects, almost completely trampling environmental reviews in the process.

In one 3-day period late last year for example, it green lighted 93 new projects worth $38 billion.

“This is the moment to decide whether we want to keep the old growth model or change it,” Ma Jun told the New York Times. “This new round of development might generate more pollution for the future,” understated the director of China’s Institute of Public and Environmental Affairs.

China’s brief industrial slump actually helped the country close in on environmental targets it had set years ago. Data from the second half of last year showed that China was on target to increase energy efficiency by 20% and to cut water and air pollution by 10% compared with 2005 levels

Meanwhile, the central government’s environmental movement, such as it is, remains plagued by bureaucracy, conflicts of interest and worse.

Take the strange case of Pan Yue. Pan had been the number 2 guy in China’s environment ministry and was by far the most outspoken green supporter within the Communist Party. For years he had led a rare public campaign against polluters and supported rigorous environmental inspections.

This angered provincial officials, state-owned companies and his current boss who eventually sidelined him, shook down his top aides and harassed his wife, according to people who confided in secrecy with the Times.

For the record, Pan chalked up his lower profile to an illness, and records show he had indeed been hospitalized for a time.

It’s not the first time Chinese party officials have wound up in the hospital after falling out of favor.

Last year, officials working for the Dalai Lama in India asked cybercrime experts to come have a look at their computers, which they suspected had been infected by malware.

Yessiree concluded the specialists, but that was just the tip of the iceberg.

The cybersleuths uncovered a global electronic spying operation that had infiltrated 1,295 computers and ripped off documents from government and private offices in 103 countries.

Computers in several embassies, foreign ministries and the Dalai Lama’s Tibetan exile centers in several countries were hit. US government systems were not violated, so far as is known.

According to a report released by Greg Walton and colleagues at the University of Toronto, the spy system, dubbed GhostNet, was controlled by computers based largely in China.

GhostNet remains operational, invading a dozen new computers per week, according to the report.

Its malware can activate video- and audio-recording functions in infected computers, so the thieves can see and hear what’s going on in the room housing the infected hardware. 

And GhostNet has impacted world events, at least a bit. For example, shortly after the Dalai Lama’s office sent an email invitation to a foreign diplomat, the Chinese government called the diplomat to discourage the visit.

Yet the researchers cautioned against concluding China’s government was directly responsible for the shenanigans.

“We’re careful about (ascribing blame), knowing the nuance of what happens in subterranean realms,” Ronald Deibert told the New York Times.

“This could well be the CIA or the Russians. It’s a murky realm we’re lifting the lid on,” added the associate professor of political science at the University of Toronto.

Meanwhile, a spokesman from the Chinese Consulate in New York scoffed at insinuations his government was involved. “These are old stories and they are nonsense,” Wenqi Gao told the Times. “The Chinese government is opposed to and strictly forbids cybercrime.”

Iran’s president Mahmoud Ahmadinejad hasn’t been quite so cocky lately.

He knows a lot of his countrymen don’t like him and now, just 4 months from a national election, a strong challenger for his job has popped up.

Muhammad Khatami, the soft spoken reformist cleric and former 2-term president of Iran has thrown his turban into the ring!

Back in 1997, Khatami’s election was thought to herald a departure from the hard-core ideologues who’d ruled the roost ever since the Revolution.

But Khatami couldn’t reign in the fractious reformists that swept into power with him, the movement was eaten alive by an entrenched conservative bloc, and next thing you know, Ahmadinejad –exasperatingly flaky, populist rants and all—was the new game in town.

But that’s old news. Nowadays, oil prices have fallen through the floor and Iran’s economy has followed suit. Plus that nasty inflationary spiral’s got the middle class up in arms and those cockamamie crackdowns on dissent are just so yesterday for the secularized citizens of the nation.

It’s gotten to a point where Ahmadinejad might not even get the fist bump from Ayatollah Ali Khamenei, Iran’s spiritual leader, OKing him to seek a second term.

Meanwhile the centrifuges-are-a-spinnin’, so the Big O can’t just sit on his hands until the election plays out.

“The Iranian nation is ready for talks, but in a fair atmosphere with mutual respect,” Ahmadinejad informed a crowd during celebrations commemorating 30 years of the Revolution.

He knew Obama was dialed in.

Later in the speech, the man said Iran was a superpower with nuclear and rocket technology to boot. Oy vey!

Days before the Big O’s special envoy Richard Holbrooke was scheduled to visit Islamabad, a Pakistani court released Abdul Qadeer Khan from house arrest.

He’d been living that way since 2004 after confessing to being top dog in the world’s largest nuclear black market.

Khan’s not going to be invited to many cocktail partys in the West, which reviles him as the man who sold nuclear technology to Iran, Libya and North Korea. But Pakistanis revere the man. After all, he built their bomb. 

The Pakistani press had been skewering President Asif Ali Zardari for cozying up to the US, so most viewed Khan’s release as politically motivated.

Fans and paparazzi mobbed the visibly elated Khan as he strode forth, not the least bit contrite and feigning disinterest in what the West might think about his release.

“Are they happy with our God? Are they happy with our prophet? Are they happy with our leaders? Never, so why should we bother what they say about us?” he told the New York Times.

Many Washington officials think Khan can reactivate his nuclear network, since it was never completely dismantled.

Why just awhile ago, computers seized from that network were found to contain 3 different designs for a nuclear bomb including one from China and 2 from Pakistan’s own nuclear blueprints.

“He’s still a proliferation threat,” State Department Robert Wood told the Times. “We’re very troubled by this.”

“The key question,” a Bush administration official said last year, “is whether he gave (those) designs to the Iranians.”

Of the 3 pirated designs, one was particularly compact and efficient; the sort that could be delivered by a Shahab-3 missile anywhere Iran aimed it within a 2,000 mile radius.

The director of China’s central leading group on rural work has outlined an approach to manage growing unrest precipitated by a sharp economic downturn that has left 26 million migrant workers jobless.

“If mass incidents happen,” said Chen Xiwen “all officials must go to the front line and try to persuade people face-to-face. They cannot…push police to the front lines. The police cannot be deployed unless there are truly unfortunate situations where people are beating, attacking, robbing or burning.”

And officials should punish the instigators, learn from the conflict and figure out how to improve what they do, he added.

In that order, we assume.

Right now 15% of China’s 130 million migrant workers are unemployed and 6 million more will enter the pool this year, according to the Ministry of Agriculture.

China’s ranks of migrant workers have exploded in the past 20 years, as farmers are increasingly forced to rely on supplemental income, which can account for up to 60% of their total take.

“There is a saying in the countryside that to feed the mouth depends on farming but pocket money comes from outside,” Xu Yong told the Washington Post.

But “that road is blocked this year,” said the director of the Center for Chinese Rural Studies at Central China Normal University.

So at a recent conference with the state-owned press, Chen offered more than just crisis management tips. He urged local officials to solve land disputes, resettlement issues and environmental problems for example, lest they spawn demonstrations.

So will the protests increase? Xu couldn’t say for sure. “During the Spring Festival, most migrant workers went home and had a rest,” he said.

“After this, they will hunt for jobs. If they can’t find any jobs but stay in the cities, it will be easy to generate conflict and instability.”

“April and May will be the most serious time,” Xu said.