Exposing China's vast underground economy
90,000 people work on the dark side of the Net
Analysis A new academic study has set out to illuminate for the first time the size and structure of the Chinese online underground, and found it affected nearly a quarter of the country’s internet users last year and cost the economy over 5 billion yuan (£500m).
Investigating China’s Online Underground Economy  was put together by researchers at California University’s Institute on Global Conflict and Co-operation to highlight the scale and sophistication of China’s cyber black market and to aid global collaboration efforts against hi-tech crime.
The report claims that in 2011 the online underground involved over 90,000 participants, costing the local economy 5.36 billion yuan (£536m), making victims of 110m internet users (roughly 22 per cent) and affecting 1.1m web sites (20 per cent).
To calculate these figures, the report used stats provided by the major local security vendors, court room documents detailing high profile cases and messages from the underground markets themselves which were relatively easy to track down on certain public web platforms.
It focuses on four main interdependent value chains – the stealing of ‘real assets’ such as banking information; ‘network virtual assets’ such as virtual currency; taking advantage of hacked resources such as botnets, with the intent of making money; selling ‘black hat’ tools, techniques and training to others.
As elsewhere, real assets are mainly stolen by phishing and Trojans. Once those tools do their work, the assets are either sold on the underground market or profited from by being used directly to carry out ID fraud.
Network virtual asset theft, on the other hand, is an increasingly attractive draw for criminals because current consumer laws in China still don’t adequately cover this area, the report said.
Botnets are rented, as in other underground economies, to launch spam rums, DDoS attacks, click fraud and other scams. Smartphones are an increasingly popular attack target.
Black hat operators, meanwhile, discover the vulnerabilities, write the malware or build the attack tools and sell them into the other three value chains along with their own labour in the form of training or physically launching attacks.
All of which paints the picture of a highly developed, completely online, underground cyber crime world not too dissimilar from those which we know already operate across other geographies.
A very Chinese approach to cyber crime
However, the researchers found some differences in the Chinese approach – individual participants were much more prone to use public web platforms to conduct their communications:
In major western countries, the online underground economy typically uses Internet Relay Chat (IRC) protocols to build black market advertising and communication channels. However, due to the uniqueness of the usage behaviour of Chinese internet users, the Chinese online underground economy employs different channels for advertising and communication, such as web forums and QQ chatting groups.
In the online underground economy, there are different social roles and value chains, and participants always hope that their own published supply and demand information will be visible to other participants, enabling a deal to be made on favourable terms for more substantial returns. Thus, internet miscreants often choose simple and convenient ways to build the underground market, relying on jargon to increase concealment on a best effort basis.
Many of the bad actors in this world use Baidu’s PostBar (Tieba) web forum platform and Tencent’s QQ chat service, escaping detection by using a variety of slang, the report claimed.
The researchers said they painstakingly searched through 84 such terms – including “horse” (ma, 马), “channel traders” (baoxiao shang, 包销商) and “material washing” (xi liao, 洗料) – and found 129 post bars dedicated to the underground market.
Baidu PostBar has been claimed to be the largest Chinese web forum on the internet. It provides a keyword-based forum organisation, as well as a loose and convenient login and post mechanism. As a result it has attracted a large number of participants to the online underground economy. Certain slang terms are used as keywords to build underground black markets, such as “material” (liao, 料) post bar. Normal internet users who are not aware of the terminology of the online underground economy will not access this hidden post bar simply due to their ignorance
Baidu responded to The Reg with the following lengthy statement stressing that it’s difficult for the firm to effectively monitor and track the slang used by cyber criminals on such a popular service.
With close to five million active discussion areas ("bars") on Baidu PostBar, naturally it would be challenging to monitor and control this kind of activity completely, especially when, as this report's authors point out, criminals use a patois or thieves cant that is difficult to parse. As a responsible provider of electronic bulletin board services, by law Baidu reminds PostBar users that they may only publish information in compliance with laws and regulations, and we provide a set of channels for complaints and fulfill with alacrity our obligation to remove any illegal postings that are reported or that we discover.
We're grateful to the authors of this report for helping to identify some of the ways that PostBar might be abused for criminal purposes. Baidu is committed to maintaining a clean and healthy internet environment and welcomes the cooperation of governmental and law enforcement agencies, users, the media, and independent researchers in those efforts.
Even more underground black markets are built on Tencent QQ chat groups, which participants can search for and apply to join, the report said. After searching for 84 jargon keywords, the researchers found a whopping 2,738 groups dedicated to underground markets.
At the time of writing Tencent had not responded to several requests to explain its position, although the firm is certainly not short on resources to address the problems identified in the report. Revenue for the first half of 2012 stood at 10.53 billion yuan (£1bn) up 56 per cent from the same time last year, while profits were over 3.9bn yuan (£390m).
Police urged to step up
However, the report's authors were keen to prove that Chinese police can have a genuine impact on the criminality swamping these platforms if they use the right tactics.
For example, the number of online underground posts, participants and threads stayed virtually the same from 2008-9, despite increasing sharply in every other year – a result of the passing of a new criminal law amendment and a police crack down on underground markets in ‘08, the report claimed.
Using court records, the researchers also searched for specific offenders online and found, in some cases, they had been active on QQ and Baidu for years before they were caught, revealing “critical tracing clues” including payment bank account numbers, which could have been investigated by police at the time.
We have grounds to believe that monitoring underground markets can help to identify, track and prevent a portion of on-going cybercrime activities, and can also provide critical evidence for criminal investigations.
Therefore, cybercrime emergency response teams and law enforcement agencies should continuously track and monitor the underground.
The report, however, stops short of investigating the more “high-tier aspects” of the underground economy such as trading of zero-day vulnerabilities or advanced persistent threat tools which it said are “likely to occur in even more hidden and secure communication channels between small groups with mutual trust”.
It warned that participation in such markets is growing rapidly and that monitoring and investigation efforts must be stepped up, alongside more stringent laws to guard the personal information of citizens.
Security experts from the region contacted by El Reg seemed to be in agreement that the police are well aware of the kind of activity described in the report.
However, despite launching numerous clampdowns on illegal online behaviour, it’s difficult to get an idea of what specifically is being targeted and with what success.
Any stats released by the authorities usually bundle traditional types of cyber crime in with other illegal activities like peddling pornography, running gambling sites, or, worst of all in the Party’s eyes, engaging in socially and politically disruptive behaviour.
Kenny Lee, principal for investigative response at Verizon Business APAC, argued that although more cyber crime co-operation between Chinese police and their international counterparts would be welcome, more legislation and regulation as recommended by the report is not necessarily the answer.
“Every country needs to adapt to the new realities of the internet economy. The technological innovations are changing at such a fast pace that by the time a law has been passed, those rules may no longer match its original intention,” he told The Reg.
“Law enforcement is already aware of these underground markets, just as they were aware of the physical ‘underground’ markets. It’s what law enforcement chooses to do with that information that makes the most impact on cybercriminals.”
Roy Ko, centre manager for the Hong Kong CERT, argued that the monitoring of public forums like PostBar and even messaging services like QQ is technically feasible, but said the difficult part comes when trying to track down the physical individuals behind the posts.
Although the Chinese government has forced a real-name registration policy on all Twitter-like weibos, the same is not true as yet of QQ and other similar services.
The government plainly realises there is a problem and recently released a lengthy information security action plan , although it remains to be seen how that is implemented. It’s fairly safe to assume that as the online economy generates an ever greater proportion of GDP in China, the authorities will devote the resources necessary to really tackle the problem. ®