Indian mobile advertising firm InMobi said on Wednesday it is partnering APUS, a Chinese start-up that customizes Android software, in an alliance that InMobi expects will help it reach 500 million new users in China and other countries by 2016.
InMobi competes with Google and Facebook in the $100 billion global mobile advertising market, and is one of the few Indian start-ups to make a profit. It already reaches 1.4 billion devices and turned profitable in the three months to December.
With the partnership, APUS will earn revenues through advertisements on its apps that run on InMobi’s platform. InMobi will help APUS boost its user base and share in India’s booming smartphone market.
InMobi’s deal with the Chinese company comes on the heels of media reports that Googleplans to re-enter China, making it crucial for the Indian company to secure its base there.Google largely pulled its services out of China five years ago, after refusing to self-censor search results.
APUS’s flagship product lets users of the Android operating system customize their smartphone home screens. The Chinese firm aims to acquire more than 80 million users in India by 2016, the companies said in a joint statement.
InMobi is also betting heavily on its new mobile advertising product, Miip, that takes curated lists of products to customers based on their personalities and choices.
InMobi, currently estimated to be worth around $2.5 billion, was set up in 2007 and is backed by the likes of SoftBank and early Google backer Sherpalo Ventures.
Its founder and chief executive Naveen Tewari told Reuters that more than 65 percent of his company’s business will come from Miip, which will bring in about $1 billion in revenues over the next couple of years.
Clients for Miip include Amazon.com Inc in India and Spotify.
(Reporting by Nivedita Bhattacharjee; Editing by Muralikumar Anantharaman)
China’s manufacturing sector this month suffered its biggest shrinkage in six and a half years, the latest sign of malaise in the powerhouse economy.
A closely watched independent survey, the Caixin China General Manufacturing Purchasing Managers’ Index, dropped to 47.1 in the first three weeks of August, down from 47.8 in July, sending domestic markets reeling as much as 5.6 per cent in the course of the day.
The Shanghai Composite closed down 4.3 per cent, while the Shenzhen B share index ended the day down 3.8 per cent.
The number suggests a slump in China’s crucial manufacturing sector is accelerating. A reading above 50 indicates expansion in the sector, while a reading below 50 indicates contraction.
As they struggle with the worst domestic slowdown since the global financial crisis and the fallout from a bursting equity bubble, China’s leaders have said they want to shift the country’s economic model to one driven more by consumption and services, rather than manufacturing and infrastructure investment.
But as growth in investment and manufacturing has slowed to its weakest level in more than a decade, there are growing signs that consumption is struggling to take up the slack.
This year sales of smartphones in China, the world’s biggest market, have started to fall for the first time, according to research groups IDC and Gartner.
Meanwhile, car sales fell 3.4 per cent in June against the year before, the first decline since early 2013, according to wholesale figures compiled by the China Association of Automobile Manufacturers.
In another sign of weak consumer demand, retail sales grew by almost their slowest pace in a decade last month, although they were still up 10.5 per cent from the same month a year earlier.
The biggest slowdown has been in China’s enormous manufacturing and construction industries, once engines of an economy that is now the world’s largest in purchasing power terms and the second-largest in nominal terms.
The slowdown has hammered prices of the many global commodities bought by China, and many analysts expect prices to fall further as the Chinese slowdown continues.
“Real GDP growth is probably slipping under 7 per cent in the second half of 2015,” said Bill Adams, international economist at PNC Financial Services Group. “At the margin, this [PMI reading provides] additional evidence of China’s weakening economy . . . China is one more force for weak global inflation in late 2015 and 2016.”
Most of the sub-indices in the General Manufacturing PMI have weakened this month, with output, new orders, new export orders and employment all deteriorating.
The government’s top priority is finding jobs for more than 10m labour market entrants a year and even as the Chinese economy has slowed in the past year, employment has held up relatively well.
But some indicators show the job market is weakening, adding pressure on Beijing to do more to stimulate growth.
Some analysts believe the government will soon act to put a floor under the broader economy, as it has done with the equity market.
“Today’s weaker than expected PMI will add to mounting concerns over Chinese growth,” said Julian Evans-Pritchard, China economist at Capital Economics. “Nonetheless, we continue to believe that sentiment is currently overly downbeat and that policy support will limit the downside risk to economic activity over the course of the next couple of quarters.”
Latest method of ‘GPS spoofing’ drastically lowers the cost involved and potentially puts technology in hands of any criminal
By James Griffiths
South China Morning Post
The team used open source software to spoof GPS signals, tricking drones, smartphones and even smart cars about their location. Photo: AFP
Using US$300 worth of equipment, Chinese security researchers say they can take control of drones or smart cars by sending fake GPS readings, steering them to any destination they choose.
Such “GPS spoofing” has been used before but the latest method drastically lowers the cost involved and potentially puts the technology in the hands of any criminal.
Huang Lin and Yang Qing, of antivirus firm Qihoo 360, described their technique at the Def Con hacking conference in Las Vegas. Huang said her team used existing tools and open source software to create the device that could spoof GPS signals, tricking smartphones, drones or even smart cars about their location.
Cybersecurity researchers have long warned of the potential vulnerabilities of the Global Positioning System. In 2011, a US military surveillance drone flying near the Afghanistan-Iran border was captured by Iranian forces after they sent it a fake GPS signal forcing it to land. In 2013, researchers at the University of Texas sent a US$80 million yacht off-course by using spoofed GPS signals.
But the cost of building a device to communicate with satellites and receivers prevented the technology from becoming widespread. The Qihoo team said previously available tools cost upwards of US$5,000, while their method costs only a few hundred. “This is a very low-cost way [to build a GPS spoofer],” Huang said during her address to the forum. “This method increases the risk for GPS devices.”
Huang and Yang could not demonstrate the hack during the talk for legal reasons, but in a talk they showed how they told a car it was in the middle of a lake.
“If you use GPS to drive a car it can change you to a different location … [or direct the victim] to go down a cliff,” Huang said. “Whatever they want you to do. It is very dangerous.”
She also explained how GPS spoofing could be used to get around potential restrictions on where drones could fly.
Many cities prohibit drones from certain areas, with the drone using GPS to establish whether it has entered a restricted area.
By spoofing the signal, the team was able to convince a drone made by Shenzhen-based DJI Technologies it was in Hawaii and flew it through a restricted area in Beijing.
Huang said device manufacturers should introduce new software to better detect GPS spoofing, while GPS satellites should also be able to defend against such attacks.
Entrepreneur Lei Jun’s smartphone startup used social networking to win over Chinese, but can he repeat overseas?
Founder, Chairman and CEO of Xiaomi Global, Lei Jin (L) and Vice President, Hugo Barra gesture during the launch of Xiaomi’s Mi4i smart phone and Mi Band in New Delhi on April 23, 2015
By Eva Dou
The Wall Street Journal
NEW DELHI—When Xiaomi Corp. launched a new smartphone here in April, there was an air of chaos. Employees were still stuffing gift bags that morning, and a few staffers from Beijing headquarters, pressed for time, arrived on tourist rather than business visas.
After Xiaomi Chief Executive Officer Lei Jun stepped onstage, his first time speaking publicly in English, he veered off script. His odd phrasing went viral in online videos of him repeatedly asking the crowd, “Are you OK?”
No matter. The Chinese smartphone seller’s online offering of 40,000 phones sold out in 15 seconds. Hundreds lined up outside the launch venue, including 17-year-old Raghav Goyal, who drove seven hours to attend and said the Xiaomi phone was a much better value than its big-name rivals.
“Apple is gone!” he shouted after the unveiling. “Apple and Samsung are gone!”
That is the kind of zealotry Mr. Lei, 45, is counting on to replicate overseas his success in China, where he has used an unusual mix of social-network marketing, fan-appreciation festivals and his own tech-star status to become No. 2 in smartphone-market share after Apple Inc.
Little known in the West and just 5 years old, closely held Xiaomi (pronounced sh-YEOW-mee) is in ways still a disorganized startup. But it is also among the world’s fastest-growing smartphone companies and most valuable startups, with a valuation of $46 billion by some estimates.
Selling full-featured phones at near cost, it has come to battle Apple and Samsung Electronics Co. for the No. 1 spot in China. It dented SamsungSSNHZ0.00%’s China market share badly in 2014, one factor forcing the South Korean company to post a sharp profit drop and to rethink its strategy.
Xiaomi’s high-end 64 GB Mi Note Pro smartphone costs 2,999 yuan ($489) in China, compared with 6,088 yuan for a 64GB Apple iPhone 6 and 5,288 yuan for a 32GB SamsungSSNHZ0.00%Galaxy S6.
But Mr. Lei has bigger, global ambitions, of which his push into India is part: to create the first Chinese consumer brand that is cool abroad. China, he says, is no longer about cheap manufacturing and copycats. “Xiaomi’s mission,” he says, “is to change the world’s view of Chinese products.”
Mr. Lei’s mission echoes that of South Korean concerns a generation earlier. Companies like SamsungSSNHZ0.00%used low-price me-too gadgets to build global brands and grab market share from Japanese electronics makers, who had done the same still earlier to American companies.
In seeking to turn his brand into one the world recognizes, Mr. Lei wants to build on the Xiaomi name’s remarkable rise in China. Xiaomi sold its first smartphone in mid-2011. In the 2015 first quarter it had 13.7% of the Chinese market, just behind Apple’s 14.7%, according to IDC. Xiaomi says its sales more than doubled last year to 61 million smartphones and it expects to sell up to 100 million this year.
A brand called ‘Mi’
Xiaomi’s phones, branded “Mi” for English versions, have yet to demonstrate that Mr. Lei’s business model in China—where Xiaomi doesn’t advertise much and sells mostly online—will translate abroad. It doesn’t disclose sales outside China; IDC estimates about 8.6% of its 2014 smartphone shipments were abroad.
Mr. Lei has had to alter his approach in India, where most consumers buy in physical stores, by striking a deal with brick-and-mortar retail channels. Xiaomi expects to enter Brazil this year, but Mr. Lei says it will be cautious about entering other countries after concluding it needs time to grow in markets it already sells in, including Singapore and several other Southeast Asian countries. Xiaomi says it doesn’t have immediate plans to sell phones in the U.S.
Xiaomi faces new low-cost competition at home, where it is also selling more phones through physical retailers that charge higher prices. And it lacks the patent portfolios that big rivals use to fend off lawsuits. Sweden’s Ericssonhas sued Xiaomi in India, claiming Xiaomi’s phones infringe on its wireless patents. Xiaomi declines to comment on the case. Ericsson says it sued “as a last resort” when Xiaomi didn’t respond to attempts to discuss licensing.
Mr. Lei, at Xiaomi’s fifth-anniversary news conference this spring, spoke of the expectations on his company to perform. “Sometimes when I think about it,” he said, “I can’t breathe.”
Xiaomi, like many tech companies, pays contract manufacturers to build its products. Its lineup includes television sets, routers and smart wristbands that it designs itself, and it has invested in startups that make everything from air purifiers and smart light bulbs to a GoProGPRO-like action camera and Segway-brand scooters.
Attendees line up at a Xiaomi smartphone launch event in April in India, Xiaomi’s biggest export market. Photo: Kuni Takahashi/Bloomberg News
Phones are its biggest sellers. It designs them with specifications similar to those of Apple’s iPhones, Samsung’s Galaxy line and other models. In product launches, it compares features of its new smartphone with the iPhone’s, then announces the price—half the iPhone’s or less. Its latest model, the Mi Note Pro, is encased in glossy white glass and is about a millimeter thinner than an iPhone 6 Plus.
It sells the majority of its phones online, where prices don’t need to include a profit margin for retailers. It sells them at near cost, Xiaomi executives say.
Mr. Lei’s goal is to get customers eventually to buy Internet services that are more profitable than Xiaomi’s smartphones, such as games, apps, videos, financial services and advertisements in its content.
“In the smartphone world, there is no one comparable” with its business model, says Aditya Awasthi, research head at LexInnova, a Houston tech-consulting firm. “It’s a new-age smartphone company.”
Born a schoolteachers’s son in central China’s Hubei province, Mr. Lei found inspiration to be an entrepreneur after reading about Apple co-founder Steve Jobs. At Hubei’s Wuhan University, which gave students only four hours a week on computers, he says he sneaked extra time and carried a paper dummy keyboard to practice. After college, he founded a software startup with classmates.
“We did very average,” he says, “and that was a big blow to me.”
In 1992, he joined a software firm, Kingsoft Corp., becoming chief executive in five years. Kingsoft missed the early rise of China’s Internet industry, he says, and he resigned in 2007 after its initial public offering. He rejoined Kingsoft as chairman in 2011; he is still chairman and its largest shareholder.
“He reflected a lot on himself, on Kingsoft, and why we missed the big trends in Internet,” says Hongjiang Zhang, Kingsoft’s CEO. “He’s someone who really wants to do something that has huge impact.”
‘A pig can fly’
Mr. Lei says he learned that seizing the right opportunity was as important as hard work. “Even a pig can fly if it stands at the center of a whirlwind,” he says.
After several years in semiretirement, “one day I woke up and thought, ‘I’m already 40 and I’ve achieved nothing,” he says. “I had a dream when I was young to found a global, first-rate company.”
In April 2010, he founded Xiaomi with Bin Lin, a former Google Inc.and Microsoft Corp.MSFTexecutive. The name means “millet,” a Chinese staple that is nutritious but inexpensive. While consumers in China at the time could buy expensive foreign smartphones or cheap Chinese knockoffs, there was a void between that Mr. Lei decided to target.
“He told me he’d sell over the Internet, engage users actively,” says Hans Tung, an early Xiaomi investor and GGV Capital managing partner, of Mr. Lei’s January 2010 pitch. “We both believed e-commerce and mobile Internet would be the big trend.”
Mr. Lei offered stock to woo veteran engineers and executives from Silicon Valley companies, early investors say. He invested his own money and attracted funds from concerns such as Qualcomm Inc.QCOM venture-capital arm. “It all added up to something very different from the scores of other OEMs I had met in China,” says Jeff Lorbeck, senior vice president of Qualcomm China, referring to gadget makers.
At first, Xiaomi made software, its own smartphone user interface that ran on Google’s Android operating system, tapping “crowdsourcing” to get online enthusiasts to help develop it. Xiaomi’s engineers then designed phone hardware, and it signed up some of the same contract manufacturers Apple used.
Xiaomi introduced its phone in August 2011, with Mr. Lei trumpeting that it had a faster processor than Apple’s iPhone 4 and Samsung’s Galaxy S2. Its price was 1,999 yuan, under half that of a 16GB iPhone 4 in China. Apple and Samsung declined to comment for this article.
Xiaomi had a ready customer base: It had attracted more than half a million users to its online forum, it says, and marketed directly to them.
Mr. Lei built a following on Weibo,China’s Twitter equivalent. He and staff interacted with customers on message boards. In 2012, with its second model, sales exceeded seven million smartphones.
Xiaomi introduced just a few models a year, keeping down engineering expenses. It upgraded its flagship phone’s quality each year, combating initial complaints that its devices felt cheap, sometimes touting that key components matched those in the iPhone and came from the same suppliers.
Big market-share gains came after it introduced a lower-cost smartphone line, the Redmi, in 2013. The phones cost less than comparable devices from Samsung and helped Xiaomi become China’s top smartphone vendor in the second quarter of 2014, surpassing Samsung, according to IDC. Dong Han, 29, a Beijing resident, bought a Redmi Note last year because he says it was a good bargain compared with other brands. “Xiaomi provides value for money,” he says.
Xiaomi expanded to selling TV sets in 2013 and a tablet in 2014, while adding other peripheral products. It invested in dozens of Chinese startups, including one that bought the Segway brand in April. It says it has over 8,000 employees.
Xiaomi doesn’t disclose financial details but says it is profitable. People familiar with its operations say it makes healthy profit margins on peripheral products such as batteries and headphones that help make up for thin phone margins.
Mr. Lei fosters a startup style. He appears at launches in a black T-shirt and jeans. Headquarters has an open floor plan and an office dog. Some desks are covered in stuffed animals, often rabbits in Chinese army hats—Xiaomi’s mascot.
“We do a lot of things opposite from Kingsoft,” says Wang Chuan, Xiaomi’s TV head. “Kingsoft had lots of structure. We have no structure.”
Employees frequently cite Xiaomi’s egalitarian management structure, in which even junior employees meet with vice presidents and each department has high autonomy. “The flat management is one of the great things about Xiaomi,” says one former employee. “Everything operates on trust.”
Xiaomi hopes to use its smartphones, like the new Mi 4i pictured here, to expand market share abroad.Photo: PICHI CHUANG/REUTERS
“But,” this person adds, “as Xiaomi gets bigger, you can’t just manage based on trust.”
Some analysts predict Xiaomi’s China sales will level off this year, with competition from others imitating its model. The giant Lenovo Group Ltd.LNVGY-1.84%and Huawei Technologies Co. have started units to make smartphones aimed at young savvy users, selling and marketing online as Xiaomi does.
Lenovo CEO Yang Yuanqing says Xiaomi’s business model is no longer unique. “It’s just an online model,” he says. “Now everyone knows how to do that.” A Huawei spokesman says it doesn’t comment on competitors.
Mr. Lei also must show Internet services can be a major profit driver. He says he expects Internet-services revenue to triple to $1 billion this year—about 6% of Xiaomi’s projected $16 billion total revenue.
“They’ve created this image of themselves as an Internet company,” says Chris DeAngelis, a Beijing-based consultant at Alliance Development Group, a tech advisory firm. “And they’re not. They’re a hardware company.”
Outside China, Xiaomi depends more on retailers and logistics companies than at home. And Mr. Lei has less star power to help build a fan base.
In India, where Xiaomi started selling phones in mid-2014 and which the company says is its largest foreign market, it faces large, established local competitors such as Micromax Informatics Ltd. Xiaomi distributes in the country to an online retailer, to a telecom operator that sells the phones in its stores, and to a brick-and-mortar retailer. But its products aren’t in most phone stores.
One was Gaurav Anand, 31, a New Delhi businessman who said Xiaomi’s phone was a much better value than Samsung’s or Apple’s. The Xiaomi Mi 4i costs 12,999 rupees (about $200) versus 53,400 rupees for a 16 GB iPhone 6 in India. “I’ll never buy another brand,” he said.
Founder, Chairman and CEO of Xiaomi Global, Lei Jin (L) and Vice President, Hugo Barra gesture during the launch of Xiaomi’s Mi4i smart phone and Mi Band in New Delhi on April 23, 2015
BEIJING (AFP) – Leading Chinesesmartphone makerXiaomi has launched an online accessory store in the United States and major European countries as it expands into lucrative Western markets.Xiaomi launched mi.com in France, Britain and Germany on Tuesday, it said in a statement.
The store went online in the United States on Monday, it added.
Xiaomi, which was only founded in 2010 by entrepreneur Lei Jun, has excelled in China’s cut-throat smartphone market by delivering high-performance products at low prices.
In just five years, the Chinese firm has become the world’s number three smartphone vendor, behind only Apple and South Korea’s Samsung, with rapid growth in emerging countries.
Now the launch of mi.com marks the brand’s move into established Western markets.
A company spokeswoman told AFP on Tuesday that the site is restricted to accessories.
Products on offer include a $14.99 fitness band compared with $99.99 for the mid-range tracker from San Francisco-based Jawbone, $79.99 headphones and battery cells as cheap as $9.99, according to the website.
Shipments are currently limited to the four countries, the company said.
However, Xiaomi has signalled its intention to offer more products to consumers in the US and Europe.
It has enjoyed huge success in its home market of China, and in the first quarter of 2015 held a 13.7 percent market share — behind only US rival Apple.
Consumers have snapped up its products which often undercut foreign rivals. Xiaomi’s high-end Mi 4 with 64 GB of memory lists for $410, less than half the $998 Chinese retail price of a comparable Apple iPhone 6. Its Redmi 2 budget model is only $115.
It was the top smartphone company in China during 2014, claiming sales of more than 61 million smartphones, up 227 percent from 2013.
Xiaomi has launched products outside mainland China in Hong Kong and Taiwan, as well as southeast Asia, but has yet to expand its footprint into developed countries.
Hugo Barra, vice president of Xiaomi Global, said in the statement he was “truly excited to bring a selection of our best-selling accessories” to consumers in the West.
He added: “We look forward to bringing more Mi products over time to the US and Europe.”
While China’s economy slows and labor becomes more expensive, Vietnam is becoming to go-to place for manufacturing, making cars for Ford(F – Get Report) and Toyota Motor(TM – Get Report) . Offshore capital is expanding now into high-value, high-tech assembly. Hanoi is working on rules to bring in more of it.
Chinese officials, worried about pollution and dependence on foreign capital, are promoting private domestic investment and consumer spending instead.
There’s now significant foreign investment in tech in Vietnam. PC processor icon Intel’s(INTC – Get Report) has operated a $1 billion test and assembly plant in Ho Chi Minh City since 2010. Vietnam’s largest foreign investor, Samsung Electronics(SSNLF) , has made an $11 billion investment in production there. Apple(AAPL – Get Report) contractor Hon Hai Precision(HNHPF) makes smartphone parts in Vietnam, as well.
Hon Hai Precision Industry Co
China’s government says Chinese economic growth fell to 7.4% in 2014, a 24-year low, partly on a modest 8.3% increase in industrial production, down from 9.7% a year earlier. The Chinese economy will grow 7.1% this year, the World Bank forecasts.
China still wildly outranks Vietnam in terms of total foreign direct investment. Its economy of $10.4 trillion, compared to Vietnam’s of about $170 billion, had pulled in foreign direct investment of $119.6 billion last year. But that’s up less than 2% over 2013.
Officials in Beijing are drafting a new foreign direct investment law to offer offshore projects more equal treatment alongside domestic peers. The law might scrap case-by-case reviews of foreign projects and let them into China with fewer restrictions, the country’s state-run media say.
But rising wages and land prices over the past five years have frustrated foreign investors looking to cut costs in China, while skittish consumer demand challenges companies trying to sell their products for long-term profit despite a massive Chinese population.
Vietnam’s foreign direct investment rose 60% year over year in the fourth quarter of 2014, to about $8 billion over those three months, the country’s statistics office says.
BEIJING — China’s economy, the world’s second largest, grew 7.4 percent last year, its slowest expansion in nearly a quarter century. Forecasters expect growth to wane further in the next several years as China emphasizes consumption over polluting heavy industry and manufacturing, which suffer from overinvestment and overcapacity. The IMF predicts growth of 6.3 percent in 2016, a dramatic shift from double digit rates in previous years that is creating winners and losers.
Industries that profited from China’s building boom are being battered by the ruling Communist Party’s effort to reduce reliance on investment and nurture more sustainable growth based on domestic consumption. Developers are losing access to credit and building permissions. Suppliers of steel, copper, cement and other building materials have seen orders dry up. That has wiped out jobs in construction and real estate sales and sent shockwaves abroad, hitting countries as far away as Australia and Brazil that export iron ore and other commodities. One developer, Kaisa Group, just missed a $23 million interest payment on a bond abroad, alarming investors. Export-driven manufacturing industries that employ millions of people have been hurt by weak global demand. As explosive growth in auto sales cools, China’s domestic brands are losing market share to global rivals and their state-owned manufacturing partners. Sales of cognac, Swiss watches, designer clothing and other luxury goods have been hurt by a ruling party campaign to rein in corruption and official extravagance. So has revenue at upscale restaurants and Macau casinos.
Big winners straddle the worlds of technology, private business and consumer brands — areas communist leaders want to promote as new sources of growth. E-commerce giant Alibaba Group’s revenue rose 54 percent in the quarter that ended in September. Revenue for rival JD.com jumped 61 percent. Milk producer Modern Dairy Ltd.’s revenue rose 86 percent in the six months ending in June. Novice entrepreneurs in some areas are benefiting from rule changes meant to make it easier to set up barber shops, restaurants and other small businesses. Energy-intensive industries including trucking benefit from the slump in global crude prices. E-commerce has produced unusual winners, including fledgling smartphone maker Xiaomi, which used Internet-based sales and marketing to slash costs and passed Samsung last year to become China’s No. 1 brand by number of handsets sold. A stock market boom has brought a surge of revenue and profit to brokerages and finance firms.
— COAST vs HINTERLAND
The slowdown is squeezing China’s prosperous east cities but inland the impact is even bigger. Regions that relied on coal mining, steel and other businesses tied to heavy industry and investment are struggling. Growth rates in areas such as Heilongjiang province in the northeast have fallen close to zero. Local authorities in coal country in China’s north have orders to nurture clean energy and other new industries but their efforts are slow to gain traction. Even prosperous areas have suffered: In the southeastern provinces of Guangdong and Zhejiang, home to export-driven producers of furniture, clothing and toys, weak foreign demand has forced hundreds of small factories to close.
— STATE INDUSTRY
Government-owned companies in oil, steel, banking, telecoms and other industries still enjoy monopolies and other privileges, but the ruling party’s plans, if carried out, will force them to compete. State companies still would be guaranteed control of an array of industries but the party says “market forces” will play a bigger role in allocating credit and other resources. In banking, regulators are gradually shifting the state-owned industry, which until now served to subsidize government companies, toward a market-oriented model with more lending to private business. State-owned steel and aluminum mills are under pressure to make their operations cleaner and more efficient. Oil giant Sinopec Ltd. is looking at ways to use its thousands of filling stations to sell groceries and other goods.
China Economic Growth Is Slowest in Decades
By Mark Magnier, Ian Talley and Lingling Wei
The Wall Street Journal
BEIJING—China’s economic growth slowed to 7.4% in 2014, downshifting to a level not seen in a quarter century and firmly marking the end of a high-growth heyday that buoyed global demand for everything from iron ore to designer handbags.
The slipping momentum in China, which reported economic growth of 7.7% in 2013, has reverberated around the world, sending prices for commodities tumbling and weakening an already soft global economy.
China’s economy grew 7.3% in the fourth quarter from a year earlier, the National Bureau of Statistics said, buttressed by targeted moves to ease borrowing. But it continued to face a housing glut, soaring debt and overcapacity in many industries, factors likely to erode growth in 2015.
Beijing had said it expected “about” 7.5% growth in 2014. The chief of the statistics bureau said Tuesday the rate was within that range.
Chinese stocks rose on the news, a day after their largest one-day drop in more than six years following a crackdown on margin trading.
While 7% growth would be the envy of most economies, Beijing says at least this level is needed to create enough jobs for China’s huge population. The Communist Party sees social stability as an essential component in maintaining its grip on power.
The results follow decades of growth that has hovered around 10%, one of the broadest, most rapid economic ascents in history that helped raise Chinese living standards and propel global growth and trade to new heights. Slipping economic momentum in China has had far-flung implications, squeezing Australian government budgets and Chilean copper mines that grew increasingly dependent on China’s ascent.
The slowdown comes at a vulnerable time for the world economy. The eurozone is at risk of a third recession in six years. Abenomics policies have failed to lift Japan out of stagnation.
And output in many major emerging markets—that provided most of the impetus for global growth over the past decade—is slowing faster than expected. The U.S. economy remains the one global bright spot, but it will struggle to make up for growing weakness elsewhere.
Economists see the slowdown of 2014 as the prelude to an extended deceleration of growth. The often bullish International Monetary Fund on Monday forecast 6.8% growth for China in 2015, a number below the 7.0% target economists expect Beijing to set.
“The housing slowdown is more serious than we thought earlier,” said IMF chief economist Olivier Blanchard in an interview.
Others are even more downbeat. Oxford Economics predicts 6.5% and says it expects this year will be the last time China’s growth exceeds 6%.
Leaders since mid-2014 have emphasized a “new normal” of slower growth. As the government tries to manage expectations, Premier Li Keqiang signaled Monday the economy would continue to face downward pressure this year.
How China addresses the slowdown matters to the leadership’s goal of restructuring the economy so it is powered by domestic consumption and service industries. Reliance on real estate, construction and smokestack industries has reached its limits, as evidenced by rising debt and polluted skies over much of the country.
Now President Xi Jinping and other leaders find themselves with constricted options to shore up the economy as they seek to avoid the missteps of large economic stimulus after the 2008 global financial crisis. Then, the leadership opened the credit taps to cushion a falloff in foreign demand and investment.
Now, the problems are at home, and many are hangovers from the earlier binge, as are a plethora of white-elephant projects, such as nearly empty malls, ghost cities and bridges to nowhere.
“This time around, they’re not giving money away,” said ING economist Tim Condon. “They don’t want to do that again.”
“Sure, they’d like to regain economic momentum,” said Royal Bank of Scotland economist Louis Kuijs. “But at the moment I don’t think anyone expects that.”
It is getting harder for the government to target credit to specific sectors, such as agriculture, and transportation, as banks balk at adding more nonperforming loans and borrowers hesitate.
LD Forge, a maker of forged valve components in Wenzhou, is among the companies that say its customers face cash-flow problems. “We are facing quite a lot of delays in payment,” said Yu Mingliang, the company’s vice president of business development. “We ended up suing one company.”
Even if it wants to ramp up spending, Beijing is bumping up against tapped-out local governments. That is partly by design: Much of what’s ailing the economy now is the result of rampant local-government borrowing via vehicles created for the purpose with little oversight. New policies have been aimed at reining in such loans.
As Beijing tries to speed up investments in airports and other infrastructure projects, these policies could leave the municipalities and provinces unable to find funds to see the plans through.
Funding constraints have already forced some cities to slow down big-ticket investments. In Wuhan, an industrial city in central China, the city government has halted construction of a bridge across the Yangtze River since last year due to insufficient funds, according to local officials familiar with the matter. The bridge, with a planned investment of about 8 billion yuan, could help ease local traffic congestion. Press officials in the city government didn’t respond to a request for comment.
An aggressive anticorruption campaign, which the government deems essential to maintaining the Communist Party’s grip on power, is also dragging down spending and, some analysts say, impeding government decision-making. Lu Ting, a China economist at Bank of America Corp., has estimated the austerity push has pared between 0.6 and 1.5 percentage points of growth from China’s GDP.
The World Bank has already downgraded its outlook for the global economy. In a report released last week it estimated the world economy would grow 3% this year, compared with the 3.4% projection it made last June. It said a slowdown in business investment in China alone could shave 0.3% to 0.5% from global economic output.
Speaking to an investor conference last week, General Motors Co. President Dan Ammann called China “the major engine of growth” for the global auto industry for the past decade and a half.
He said the auto maker still sees big opportunity in lower-profile cities in China, but “we’re no longer in an environment where you can just build something and expect to sell it.”
In recent months, as growth in China’s residential real estate has slowed, United Technologies Corp. has said it is coping thanks to stronger orders for government infrastructure and large commercial projects, like an order for 103 elevators and escalators for a new tower in the northern city of Tianjin.
Meanwhile, its Otis Elevator business has also been trying to boost the percentage of service contracts it maintains for elevators already installed in China, which can provide steady earnings even when construction growth slows.
The global effects of China’s slowdown have hit unevenly, with the World Bank projecting that emerging markets, whose economies rely more heavily on trade with China, will be hit the hardest. The World Bank estimates economic output in Brazil will expand just 1% in 2015, down from a June forecast of 2.7%.
Commodities importers, on the other hand, might receive some secondhand benefits as the price of imported shipments decline. The U.S. could be among these beneficiaries. The World Bank raised its estimate of U.S. economic growth to 3.2% from 3.0%.
Should growth decline precipitously in coming months, economists say Beijing has a number of options, including deeper interest rate cuts, faster spending on infrastructure projects and sequential reductions in the capital that banks must hold on reserve with the central bank. The risk, however, is that if pursued too aggressively such measures could worsen overcapacity and pile up more debt.
“If things start to deteriorate rapidly, they might have to shift their policy approach,” said Julian Evans-Pritchard, an economist with research firm Capital Economics. “But if it doesn’t, I don’t expect much change in policy.”
—John Stoll, Ted Mann, Bob Davis and Lilian Lin contributed to this article
Every age of parenthood — and parenthood at every age — yields some discouraging metric, some new rating system on which parents can be judged and found wanting. We endlessly jury family dinner rituals, day care and nannies, parents’ readiness to follow schedules, or to ignore the rules and follow their child’s directives. Whatever you are doing is probably wrong. Yes, you, yes, right now. Put down that cellphone and listen to me.
In a study published Monday in the journal Pediatrics, researchers observed diners in Boston-area fast food restaurants, looking at the new family configuration of adult, child and mobile device. The researchers were trained in anthropological observation techniques, looking in detail at what went on between children and the adults taking care of them (the researchers had no way of knowing if they were parents), with a focus on the adults’ use of devices like smartphones and tablets.
The object was to observe, and to find out what kinds of questions we should be asking about these new digital devices as they relate to parenting. Not surprisingly, most used some kind of mobile device, either continuously or intermittently or at the end of the meal. Of the 55 groups observed in the study, only 15 had no device in play.
“We definitely noted more engagement where there wasn’t a device available,” said Dr. Jenny Radesky, the lead author and a fellow in developmental-behavioral pediatrics at Boston Medical Center. Adults who were typing and swiping were more fully focused on their screens than those who were making phone calls. The ones paying most attention to their children were, of course, not doing any of those things.
Children can feel hurt by this lack of attention, said Catherine Steiner-Adair, a clinical and consulting psychologist, who interviewed 1,000 children, along with many parents, teachers and young adults, about the role of screens in children’s lives in researching her book, “The Big Disconnect: Protecting Childhood and Family Relationships in the Digital Age.”
“Children of all ages — 2, 15, 18, 22 — used the same phrases to talk about how hard it is for them to get their parents’ attention when they need it: sad, angry, mad, frustrated,” she said. They were complaining that their parents were focused on screens, she continued, “like a child’s chorus of all ages, talking about this new sibling rivalry, only it’s not a new member of the family — it’s a new screen, it’s a device.”
And evidence from screens that have been with us a lot longer — television screens — raise concerns about the impact on language and development. In a 2009 study in which researchers had children wear recording devices, each hour of audible background television was associated with a decrease of 500 to 1,000 adult words spoken per day.
Are some parents more attentive, and others more distracted, regardless of the particular distraction? Was it different for those of us who remember holding our young children at bay so we could finish reading (or writing) a chapter in a book?
“A really important question, are these devices just a marker for different parenting strategies and/or different satisfactions, different styles — or is the device itself impacting those interactions?” Dr. Radesky said.
My guess is that the answer is probably all of the above. Tending young children is hard work and (dare I admit) sometimes boring. Any distraction literally right at hand, from the righteousness of urgent work emails to the mindlessness of the games that I used to yell at my own children for playing, is at least occasionally tempting.
Dr. Steiner-Adair noted that children old enough to know the word “hypocrite” were always ready to apply it to parents who made rules about children’s screen use (no texting at the table!) but disregarded those rules themselves. We are all highly susceptible to the idea that our own messages or imperatives or contacts are singularly urgent.
“We as parents have to be much more mindful about how our own wiring is interacting with technology in those moments when our children need us,” Dr. Steiner-Adair said. “We have to think about how we check in with ourselves about the importance of getting one more email done — these are very tricky moments because they happen all the time.” On her blog, she suggests eight times of day when parents might pay special attention, from driving time and school pick-up to bed and bath.
Dr. Radesky pointed out that while some adults observed in the Boston study were completely absorbed in devices, many used them intermittently, balancing electronics with engagement with children. “As a mother of two young children, I understand how important it is to take a break sometimes, to be connected with work and with friends,” she said.
Kathy Hirsh-Pasek, a professor of psychology at Temple University and an author of “Einstein Never Used Flashcards,” has studied use of e-books and other electronics by parents and children and said the lesson of all the studies is that what really matters is the back-and-forth relationship.
“Look for something that’s active, engaging, meaningful and interactive,” she said. “The bad news and the good news is, you can’t outsource learning to an app, but the good news is there’s really room for us, two minutes of time, five minutes of time, look into our children’s eyes, have the conversation.”
US and UK spy agencies piggyback on commercial data
Details can include age, location and sexual orientation
Documents also reveal targeted tools against individual phones
By James Ball
GCHQ documents use Angry Birds – reportedly downloaded more than 1.7bn times – as a case study for app data collection.
The National Security Agency and its UK counterpart GCHQ have been developing capabilities to take advantage of “leaky” smartphone apps, such as the wildly popular Angry Birds game, that transmit users’ private information across the internet, according to top secret documents.
The data pouring onto communication networks from the new generation of iPhone and Android apps ranges from phone model and screen size to personal details such as age, gender and location. Some apps, the documents state, can share users’ most sensitive information such as sexual orientation – and one app recorded in the material even sends specific sexual preferences such as whether or not the user may be a swinger.
Many smartphone owners will be unaware of the full extent this information is being shared across the internet, and even the most sophisticated would be unlikely to realise that all of it is available for the spy agencies to collect.
Dozens of classified documents, provided to the Guardian by whistleblower Edward Snowden and reported in partnership with the New York Times and ProPublica, detail the NSA and GCHQ efforts to piggyback on this commercial data collection for their own purposes.
Scooping up information the apps are sending about their users allows the agencies to collect large quantities of mobile phone data from their existing mass surveillance tools – such as cable taps, or from international mobile networks – rather than solely from hacking into individual mobile handsets.
Exploiting phone information and location is a high-priority effort for the intelligence agencies, as terrorists and other intelligence targets make substantial use of phones in planning and carrying out their activities, for example by using phones as triggering devices in conflict zones. The NSA has cumulatively spent more than $1bn in its phone targeting efforts.
The disclosures also reveal how much the shift towards smartphone browsing could benefit spy agencies’ collection efforts.
One slide from a May 2010 NSA presentation on getting data from smartphones – breathlessly titled “Golden Nugget!” – sets out the agency’s “perfect scenario”: “Target uploading photo to a social media site taken with a mobile device. What can we get?”
The question is answered in the notes to the slide: from that event alone, the agency said it could obtain a “possible image”, email selector, phone, buddy lists, and “a host of other social working data as well as location”.
In practice, most major social media sites, such as Facebook and Twitter, strip photos of identifying location metadata (known as EXIF data) before publication. However, depending on when this is done during upload, such data may still, briefly, be available for collection by the agencies as it travels across the networks.
Depending on what profile information a user had supplied, the documents suggested, the agency would be able to collect almost every key detail of a user’s life: including home country, current location (through geolocation), age, gender, zip code, martial status – options included “single”, “married”, “divorced”, “swinger” and more – income, ethnicity, sexual orientation, education level, and number of children.
The agencies also made use of their mobile interception capabilities to collect location information in bulk, from Google and other mapping apps. One basic effort by GCHQ and the NSA was to build a database geolocating every mobile phone mast in the world – meaning that just by taking tower ID from a handset, location information could be gleaned.
A more sophisticated effort, though, relied on intercepting Google Maps queries made on smartphones, and using them to collect large volumes of location information.
So successful was this effort that one 2008 document noted that “[i]t effectively means that anyone using Google Maps on a smartphone is working in support of a GCHQ system.”
The information generated by each app is chosen by its developers, or by the company that delivers an app’s adverts. The documents do not detail whether the agencies actually collect the potentially sensitive details some apps are capable of storing or transmitting, but any such information would likely qualify as content, rather than metadata.
Data collected from smartphone apps is subject to the same laws and minimisation procedures as all other NSA activity – procedures that the US president, Barack Obama, suggested may be subject to reform in a speech 10 days ago. But the president focused largely on the NSA’s collection of the metadata from US phone calls and made no mention in his address of the large amounts of data the agency collects from smartphone apps.
The latest disclosures could also add to mounting public concern about how the technology sector collects and uses information, especially for those outside the US, who enjoy fewer privacy protections than Americans. A January poll for the Washington Post showed 69% of US adults were already concerned about how tech companies such as Google used and stored their information.
The documents do not make it clear how much of the information that can be taken from apps is routinely collected, stored or searched, nor how many users may be affected. The NSA says it does not target Americans and its capabilities are deployed only against “valid foreign intelligence targets”.
The documents do set out in great detail exactly how much information can be collected from widely popular apps. One document held on GCHQ’s internal Wikipedia-style guide for staff details what can be collected from different apps. Though it uses Android apps for most of its examples, it suggests much of the same data could be taken from equivalent apps on iPhone or other platforms.
The GCHQ documents set out examples of what information can be extracted from different ad platforms, using perhaps the most popular mobile phone game of all time, Angry Birds – which has reportedly been downloaded more than 1.7bn times – as a case study.
From some app platforms, relatively limited, but identifying, information such as exact handset model, the unique ID of the handset, software version, and similar details are all that are transmitted.
Other apps choose to transmit much more data, meaning the agency could potentially net far more. One mobile ad platform, Millennial Media, appeared to offer particularly rich information. Millennial Media’s website states it has partnered with Rovio on a special edition of Angry Birds; with Farmville maker Zynga; with Call of Duty developer Activision, and many other major franchises.
Rovio, the maker of Angry Birds, said it had no knowledge of any NSA or GCHQ programs looking to extract data from its apps users.
“Rovio doesn’t have any previous knowledge of this matter, and have not been aware of such activity in 3rd party advertising networks,” said Saara Bergström, Rovio’s VP of marketing and communications. “Nor do we have any involvement with the organizations you mentioned [NSA and GCHQ].”
Millennial Media did not respond to a request for comment.
In December, the Washington Post reported on how the NSA could make use of advertising tracking files generated through normal internet browsing – known as cookies – from Google and others to get information on potential targets.
However, the richer personal data available to many apps, coupled with real-time geolocation, and the uniquely identifying handset information many apps transmit give the agencies a far richer data source than conventional web-tracking cookies.
“They are gathered in bulk, and are currently our single largest type of events,” the document stated.
The ability to obtain targeted intelligence by hacking individual handsets has been well documented, both through several years of hacker conferences and previous NSA disclosures in Der Spiegel, and both the NSA and GCHQ have extensive tools ready to deploy against iPhone, Android and other phone platforms.
GCHQ’s targeted tools against individual smartphones are named after characters in the TV series The Smurfs. An ability to make the phone’s microphone ‘hot’, to listen in to conversations, is named “Nosey Smurf”. High-precision geolocation is called “Tracker Smurf”, power management – an ability to stealthily activate an a phone that is apparently turned off – is “Dreamy Smurf”, while the spyware’s self-hiding capabilities are codenamed “Paranoid Smurf”.
Those capability names are set out in a much broader 2010 presentation that sheds light on spy agencies’ aspirations for mobile phone interception, and that less-documented mass-collection abilities.
The cover sheet of the document sets out the team’s aspirations:
Another slide details weak spots in where data flows from mobile phone network providers to the wider internet, where the agency attempts to intercept communications. These are locations either within a particular network, or international roaming exchanges (known as GRXs), where data from travellers roaming outside their home country is routed.
These are particularly useful to the agency as data is often only weakly encrypted on such networks, and includes extra information such as handset ID or mobile number – much stronger target identifiers than usual IP addresses or similar information left behind when PCs and laptops browse the internet.
The NSA said its phone interception techniques are only used against valid targets, and are subject to stringent legal safeguards.
“The communications of people who are not valid foreign intelligence targets are not of interest to the National Security Agency,” said a spokeswoman in a statement.
“Any implication that NSA’s foreign intelligence collection is focused on the smartphone or social media communications of everyday Americans is not true. Moreover, NSA does not profile everyday Americans as it carries out its foreign intelligence mission. We collect only those communications that we are authorized by law to collect for valid foreign intelligence and counterintelligence purposes – regardless of the technical means used by the targets.
“Because some data of US persons may at times be incidentally collected in NSA’s lawful foreign intelligence mission, privacy protections for US persons exist across the entire process concerning the use, handling, retention, and dissemination of data. In addition, NSA actively works to remove extraneous data, to include that of innocent foreign citizens, as early as possible in the process.
“Continuous and selective publication of specific techniques and tools lawfully used by NSA to pursue legitimate foreign intelligence targets is detrimental to the security of the United States and our allies – and places at risk those we are sworn to protect.”
The NSA declined to respond to a series of queries on how routinely capabilities against apps were deployed, or on the specific minimisation procedures used to prevent US citizens’ information being stored through such measures.
GCHQ declined to comment on any of its specific programs, but stressed all of its activities were proportional and complied with UK law.
“It is a longstanding policy that we do not comment on intelligence matters,” said a spokesman.
“Furthermore, all of GCHQ’s work is carried out in accordance with a strict legal and policy framework that ensures that our activities are authorised, necessary and proportionate, and that there is rigorous oversight, including from the Secretary of State, the Interception and Intelligence Services Commissioners and the Parliamentary Intelligence and Security Committee. All our operational processes rigorously support this position.”
• A separate disclosure on Wednesday, published by Glenn Greenwald and NBC News, gave examples of how GCHQ was making use of its cable-tapping capabilities to monitor YouTube and social media traffic in real-time.
GCHQ’s cable-tapping and internet buffering capabilities , codenamed Tempora, were disclosed by the Guardian in June, but the new documents published by NBC from a GCHQ presentation titled “Psychology: A New Kind of SIGDEV” set out a program codenamed Squeaky Dolphin which gave the British spies “broad real-time monitoring” of “YouTube Video Views”, “URLs ‘Liked’ on Facebook” and “Blogspot/Blogger Visits”.
A further slide noted that “passive” – a term for large-scale surveillance through cable intercepts – give the agency “scalability”.
The means of interception mean GCHQ and NSA could obtain data without any knowledge or co-operation from the technology companies. Spokespeople for the NSA and GCHQ told NBC all programs were carried out in accordance with US and UK law.
When a smartphone user opens Angry Birds, the popular game application, and starts slinging birds at chortling green pigs, spies may be lurking in the background to snatch data revealing the player’s location, age, sex and other personal information, according to secret British intelligence documents.
In their globe-spanning surveillance for terrorism suspects and other targets, the National Security Agency and its British counterpart have been trying to exploit a basic byproduct of modern telecommunications: With each new generation of mobile phone technology, ever greater amounts of personal data pour onto networks where spies can pick it up.
According to dozens of previously undisclosed classified documents, among the most valuable of those unintended intelligence tools are so-called leaky apps that spew everything from users’ smartphone identification codes to where they have been that day.
The N.S.A. and Britain’s Government Communications Headquarters were working together on how to collect and store data from dozens of smartphone apps by 2007, according to the documents, provided by Edward J. Snowden, the former N.S.A. contractor. Since then, the agencies have traded recipes for grabbing location and planning data when a target uses Google Maps, and for vacuuming up address books, buddy lists, phone logs and the geographic data embedded in photos when someone sends a post to the mobile versions of Facebook, Flickr, LinkedIn, Twitter and other services.
The eavesdroppers’ pursuit of mobile networks has been outlined in earlier reports, but the secret documents, shared by The New York Times, The Guardian and ProPublica, offer far more details of their ambitions for smartphones and the apps that run on them. The efforts were part of an initiative called “the mobile surge,” according to a 2011 British document, an analogy to the troop surges in Iraq and Afghanistan. One N.S.A. analyst’s enthusiasm was evident in the breathless title — “Golden Nugget!” — given to one slide for a top-secret 2010 talk describing iPhones and Android phones as rich resources, one document notes.
The scale and the specifics of the data haul are not clear. The documents show that the N.S.A. and the British agency routinely obtain information from certain apps, particularly some of those introduced earliest to cellphones. With some newer apps, including Angry Birds, the agencies have a similar capability, the documents show, but they do not make explicit whether the spies have put that into practice. Some personal data, developed in profiles by advertising companies, could be particularly sensitive: A secret 2012 British intelligence document says that spies can scrub smartphone apps that contain details like a user’s “political alignment” and sexual orientation.
President Obama announced new restrictions this month to better protect the privacy of ordinary Americans and foreigners from government surveillance, including limits on how the N.S.A. can view “metadata” of Americans’ phone calls — the routing information, time stamps and other data associated with calls. But he did not address the avalanche of information that the intelligence agencies get from leaky apps and other smartphone functions.
And while he expressed concern about advertising companies that collect information on people to send tailored ads to their mobile phones, he offered no hint that American spies routinely seize that data. Nothing in the secret reports indicates that the companies cooperate with the spy agencies to share the information; the topic is not addressed.
The agencies have long been intercepting earlier generations of cellphone traffic like text messages and metadata from nearly every segment of the mobile network — and, more recently, computer traffic running on Internet pipelines. Because those same networks carry the rush of data from leaky apps, the agencies have a ready-made way to collect and store this new resource. The documents do not address how many users might be affected, whether they include Americans, or how often, with so much information collected automatically, analysts would see personal data.
“N.S.A. does not profile everyday Americans as it carries out its foreign intelligence mission,” the agency said in a written response to questions about the program. “Because some data of U.S. persons may at times be incidentally collected in N.S.A.’s lawful foreign intelligence mission, privacy protections for U.S. persons exist across the entire process.” Similar protections, the agency said, are in place for “innocent foreign citizens.”
The British spy agency declined to comment on any specific program, but said all its activities complied with British law.
Two top-secret flow charts produced by the British agency in 2012 show incoming streams of information skimmed from smartphone traffic by the Americans and the British. The streams are divided into “traditional telephony” — metadata — and others marked “social apps,” “geo apps,” “http linking,” webmail, MMS and traffic associated with mobile ads, among others. (MMS refers to the mobile system for sending pictures and other multimedia, and http is the protocol for linking to websites.)
In charts showing how information flows from smartphones into the agency’s computers, analysts included questions to be answered by the data, including “Where was my target when they did this?” and “Where is my target going?”
As the program accelerated, the N.S.A. nearly quadrupled its budget in a single year, to $767 million in 2007 from $204 million, according to a top-secret Canadian analysis written around the same time.
Even sophisticated users are often unaware of how smartphones offer a unique opportunity for one-stop shopping for information about them. “By having these devices in our pockets and using them more and more,” said Philippe Langlois, who has studied the vulnerabilities of mobile phone networks and is the founder of the Paris-based company Priority One Security, “you’re somehow becoming a sensor for the world intelligence community.”
Smartphones almost seem to make things too easy. Functioning as phones — making calls and sending texts — and as computers — surfing the web and sending emails — they generate and also rely on data. One secret report shows that just by updating Android software, a user sent more than 500 lines of data about the phone’s history and use onto the network.
Such information helps mobile ad companies, for example, create detailed profiles of people based on how they use their mobile device, where they travel, what apps and websites they open, and other factors. Advertising firms might triangulate web shopping data and browsing history to guess whether someone is wealthy or has children, for example.
The N.S.A. and the British agency busily scoop up this data, mining it for new information and comparing it with their lists of intelligence targets.
One secret 2010 British document suggests that the agencies collect such a huge volume of “cookies” — the digital traces left on a mobile device or a computer when a target visits a website — that classified computers were having trouble storing it all.
“They are gathered in bulk, and are currently our single largest type of events,” the document says.
The two agencies displayed a particular interest in Google Maps, which is accurate to within a few yards or better in some locations. Intelligence agencies collect so much data from the app that “you’ll be able to clone Google’s database” of global searches for directions, according to a top-secret N.S.A. report from 2007.
“It effectively means that anyone using Google Maps on a smartphone is working in support of a G.C.H.Q. system,” a secret 2008 report by the British agency says.
(In December, The Washington Post, citing the Snowden documents, reported that the N.S.A. was using metadata to track cellphone locations outside the United States and was using ad cookies to connect Internet addresses with physical locations.)
In another example, a secret 20-page British report dated 2012 includes the computer code needed for plucking the profiles generated when Android users play Angry Birds. The app was created by Rovio Entertainment, of Finland, and has been downloaded more than a billion times, the company has said.
Rovio drew public criticism in 2012 when researchers claimed that the app was tracking users’ locations and gathering other data and passing it to mobile ad companies. In a statement on its website, Rovio says that it may collect its users’ personal data, but that it abides by some restrictions. For example, the statement says, “Rovio does not knowingly collect personal information from children under 13 years of age.”
The secret report noted that the profiles vary depending on which of the ad companies — which include Burstly and Google’s ad services, two of the largest online advertising businesses — compiles them. Most profiles contain a string of characters that identifies the phone, along with basic data on the user like age, sex and location. One profile notes whether the user is currently listening to music or making a call, and another has an entry for household income.
Google declined to comment for this article, and Burstly did not respond to multiple requests for comment. Saara Bergstrom, a Rovio spokeswoman, said that the company had no knowledge of the intelligence programs. “Nor do we have any involvement with the organizations you mentioned,” Ms. Bergstrom said, referring to the N.S.A. and the British spy agency.
Another ad company creates far more intrusive profiles that the agencies can retrieve, the report says. The apps that generate those profiles are not identified, but the company is named as Millennial Media, which has its headquarters in Baltimore.
In securities filings, Millennial documented how it began working with Rovio in 2011 to embed ad services in Angry Birds apps running on iPhones, Android phones and other devices.
According to the report, the Millennial profiles contain much of the same information as the others, but several categories listed as “optional,” including ethnicity, marital status and sexual orientation, suggest that much wider sweeps of personal data may take place.
Millennial Media declined to comment for this article.
Possible categories for marital status, the secret report says, include single, married, divorced, engaged and “swinger”; those for sexual orientation are straight, gay, bisexual and “not sure.” It is unclear whether the “not sure” category exists because so many phone apps are used by children, or because insufficient data may be available.
There is no explanation of precisely how the ad company defined the categories, whether users volunteered the information, or whether the company inferred it by other means. Nor is there any discussion of why all that information would be useful for marketing — or intelligence.
The agencies have had occasional success — at least by their own reckoning — when they start with something closer to a traditional investigative tip or lead. The spies say that tracking smartphone traffic helped break up a bomb plot by Al Qaeda in Germany in 2007, and the N.S.A. bragged that to crack the plot, it wove together mobile data with emails, log-ins and web traffic. Similarly, mining smartphone data helped lead to arrests of members of a drug cartel hit squad for the 2010 murder of an employee of an American Consulate in Mexico.
But the data, whose volume is soaring as mobile devices have begun to dominate the technological landscape, is a crushing amount of information for the spies to sift through. As smartphone data builds up in N.S.A. and British databases, the agencies sometimes seem a bit at a loss on what to do with it all, the documents show. A few isolated experiments provide hints as to how unwieldy it can be.
In 2009, the American and British spy agencies each undertook a brute-force analysis of a tiny sliver of their cellphone databases. Crunching just one month of N.S.A. cellphone data, a secret report said, required 120 computers and turned up 8,615,650 “actors” — apparently callers of interest. A similar run using three months of British data came up with 24,760,289 actors.
“Not necessarily straightforward,” the report said of the analysis. The agencies’ extensive computer operations had trouble sorting through the slice of data. Analysts were “dealing with immaturity,” the report said, encountering computer memory and processing problems. The report made no mention of anything suspicious in the enormous lumps of data.