Cybersecurity breach in China leads to defense spending

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September 13, 2012 —China's concerns over the safety of its power infrastructure will result in astronomical security spending over the next decade, according to the latest report by international business analysts GlobalData.

The new paper says that China's cybersecurity market will expand remarkably in the coming years, from a valuation of $1.8 billion in 2011 to $50 billion by 2020, representing a dramatic compound annual growth rate (CAGR) increase of 44.7 percent.

The study describes the country's cybersecurity market as an anomaly, due to the scale of expenditure when compared with that of other regions — Europe and North America combined are predicted to spend a comparatively modest $16 billion during the same period.

China has a strained relationship with a number of nations in relation to cyber security, with the U.S. in particular often accusing Chinese hackers of attempting to breach their power systems, although this has never been confirmed by Chinese government. Such accusations may have fostered an environment of mistrust in which the Chinese authorities expect retaliatory cyber-attacks on their own power infrastructure.

However, for a country experiencing rapid urbanization and undertaking smart grid construction on a vast geographical scale, the cost of protecting all available access points will be huge. The smart grid building phase is expected to be complete by 2015, at which point tens of thousands of homes will be securely connected at an approximate cost of $1,000 per household.

The Stuxnet computer worm, discovered in 2010, was a major example of the vulnerability of power grids to malicious cyber-attack. The worm focused on five Iran-based organizations and was believed by many to be a deliberate attempt to disrupt the Iranian nuclear power program.

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