ICBC/ransomware: China’s cyber security industry moves out of the shadows

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A ransomware attack on the financial services arm of China’s biggest bank ICBC has disrupted the US Treasury market. The incident could deliver a jolt to China’s sleepy cyber security industry.

The attack was carried out using ransomware software developed by LockBit, the group behind attacks on targets including the Royal Mail and the City of London. The attacks paralyse computer systems until a payment is made. 

Ransom payments are not the only cost. These attacks breach client records, giving hackers access to confidential information and transaction history. Costs of remediation and reputational damage can be high. The average cost of a ransomware attack was $5.1mn this year, according to IBM. That was up 13 per cent from a year ago.

There is a real risk that the adoption of generative artificial intelligence will increase the pace, scale and effectiveness of cyber attacks. The production of convincingly personalised emails will make phishing attacks more dangerous.

Time, then, for China’s cyber-security technology industry to play a more prominent role. It has long been overshadowed by the country’s focus on growing its homemade chips and AI sectors. Shares of Chinese software group Kingsoft Corporation are up 17 per cent in the past year but still trade at 37 times forward earnings. That is around half the levels of two years ago. Peer Neusoft is down a tenth.

But as tech rivalry with the US grows, Chinese groups now have a strong incentive to develop local solutions. Tech giants including Baidu, Huawei and Tencent have been working on expanding in this area. The trio ranks in the top 10 for related patent holdings globally this year.

The global cyber security market size is forecast to grow to more than $500bn by 2030. That is double the spending of last year. The expected annual growth rate of a fifth for China significantly outpaces the global average. Higher spending should start soon.