It’s Not China We Need to Worry About — it’s the US

Padlock and chain on a laptop keyboard. Concept of internet security

I went for a walk with my wife round the local neighbourhood at lunchtime today. It was a toasty 27 degrees out, and I needed a boost of vitamin D.

It’s school holidays over here, so there were kids everywhere by the local park. The park has a big, shallow wading pool in it. And kids flock to it with their mums and dad and friends when the thermometer gets over 20 degrees.

I had a craving for an ice cream, so I said to my wife, ‘C’mon lets grab a sherbet cone from Mr. Whippy.’

First, she had no idea what a ‘sherbet cone’ was. That was my first disappointment. My second disappointment was this ice cream van wasn’t Mr Whippy; it was Joe’s Ice Cream. It only got worse from there…

A valuable lesson learnt

Joe didn’t have any sherbet. But there also wasn’t any ‘teeth’ or a ‘flake’ in sight. I begrudgingly ordered up a plain old soft serve ice cream and sulked for a while.

In my sulky disdain for British ice cream vans, I noticed a couple of kids with their parents nearby. One of them had a double ice cream with sprinkles. The other, smaller kid had a single one coated in chocolate.

The smaller kid was moaning that he didn’t want his anymore because it was melting and messy. He was crying that he wanted the double one with sprinkles that was bigger and wasn’t melting.

His mum said to him (and I paraphrase), ‘You got to choose and that’s what you got. Your brother got to choose as well. It’s not his fault you don’t want yours anymore.’

Good lesson on display here,’ I said to my wife. ‘This kid is quickly learning that you’ve got to live with the choices you make. And if it turns out to be not what you wanted, well you’ve just got to live with it.’

I then said to her, ‘Reminds me of China and Australia a bit.’ To which she looked at me funny and said, ‘You’re weird.’

Well, that is true, but it really did remind me of the relationship between China and Australia.

Who’s afraid of the Big Bad Dragon?

In my eyes, Australia is the kid who made a horrible mistake. They should have gone with the better option from the get-go.

Instead they thought they were smart and ended up with…chocolate on their face.

The option they should have gone with is the sale of AusGrid. Instead they’ve said no, ‘national security’ and put an abrupt halt to it. The problem is they don’t realise what a mistake this is.

The Aussie government doesn’t realise that this single non-event sets a tone for future deals that might never come. In fact I’d go so far to say the Aussie government has Sino-phobia (irrational fear of Chinese people).

China’s getting it pretty rough at the moment. In the last two weeks they’ve been denied major foreign investment by both the UK and Australia on the grounds of ‘national security’.

In the UK it was the construction of a huge nuclear power plant. In Australia, it’s the AusGrid decision.

Funnily enough, these are both energy related investments. And both governments have said no for the same reason, ‘national security’.

How dangerous are the Chinese though? Testing trade and investment relations on the ground of national security is basically saying, ‘We don’t trust you.’

Last week, Daily Reckoning editor Greg Canavan wrote:

We don’t know what the government’s concerns are. But if they’re about hacking, or strategic use of the asset against Australia, they might be a little paranoid.’

I think Greg’s spot on when he says Australia is paranoid. In fact, I can’t remember a time when Greg hasn’t been spot on. If his Crisis & Opportunity portfolio is anything to go by, anything Greg says we should take for gospel.

But if the Aussie government’s paranoia is about hacking and cyber-attacks, then we should cut all ties with the US. And we should get pretty cosy with China.

The Aussie government puts blind faith in the US. And if there’s one country we shouldn’t trust it’s not China, it’s our supposed ally, the US.

‘A threat actor that surpasses anything known’

The world’s most advanced cyber army is known as ‘The Equation Group’.

Kaspersky Labs describe Equation Group as:

A threat actor that surpasses anything known in terms of complexity and sophistication of techniques, and that has been active for almost two decades.’

In their assessment of Equation Group Kaspersky go nearly as far as, but don’t actually call out Equation Group as US sponsored. But in cyber security circles it’s widely recognised that Equation Group is the by-product of the NSA.

Kaspersky notes:

The group is unique almost in every aspect of their activities: they use tools that are very complicated and expensive to develop, in order to infect victims, retrieve data and hide activity in an outstandingly professional way, and utilize classic spying techniques to deliver malicious payloads to the victims.’

There are even strong links between Equation and the group that created the Stuxnet virus (widely recognised as the US). But Kaspersky also notes Equation, in these links act from ‘a position of superiority

Information about Equation points to their infiltration since 2001 into thousands, even tens of thousands of industries, including:

  • Government and diplomatic institutions
  • Telecoms
  • Aerospace
  • Energy
  • Nuclear research
  • Oil and gas
  • Military
  • Nanotechnology
  • Islamic activists and scholars
  • Mass media
  • Transportation
  • Financial institutions
  • Companies developing encryption technologies


If Equation does indeed prove to be US sponsored, then why the heck are we worried about the Chinese? If there’s any reason to be concerned about ‘national security’, then we should be worried about the US capabilities.

Instead, according to the Australian Trade and Investment Commission, ‘In particular, the United States remains Australia’s largest direct investor.

Australia has it all wrong. To move forward we need to embrace China. Ditch the dead weight that is the US. They’ve been good to us (or have they really?) but how can you trust the US over China? What rationale is there for that stance?

Blame it on national security all they want — it’s a poor excuse. If national security was the real reason then, how could we be so friendly with the US? For Australia to thrive the government needs to get over their Sino-phobia.

If they can, then the future for our country could be bright.


Sam Volkering,
For The Daily Reckoning

Editor’s Note: This article was originally published in Money Morning.

Sam Volkering
Sam is Editor for Money Morning and it's small-cap and technology analyst. He spends his time hunting down the most exciting stocks on the planets, whether they’re potential-packed volatile small-caps or tech firms transforming our future through cutting-edge technologies. You can find more of Sam’s work over at Australian Small-Cap Investigator, where he shares the best small-cap stocks he finds on the ASX, or at Revolutionary Tech Investor where he reveals the latest breakthrough tech investment he’s discovered.

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