Security experts urge caution over Ottawa-China partnership

A Chinese state-owned development group is setting up shop at Ottawa's innovation hub, and some security experts are expressing concern about the possbility of intellectual property theft amid widespread cases of cyberstealing in the U.S. linked to China.

Local innovation hub headquarters to host Chinese investment team

Some are concerned a Chinese company at Bayview Yards would be a danger to Canada. 5:36

A Chinese state-owned development group is setting up shop at Ottawa's innovation hub, and some security experts are expressing concern about the possibility of intellectual property theft amid widespread cases of cyber stealing in the U.S. linked to China.

Invest Ottawa helps local entrepreneurs get their ideas off the ground, with the overall aim of attracting new businesses — and jobs — to the city.

Primarily funded by the City of Ottawa, Invest Ottawa also receives funds from the Ontario and federal governments, as well as through corporate sponsorships and service fees. Ottawa Mayor Jim Watson serves as co-chair of Invest Ottawa's board of directors.

For years,it has been developing a relationship with China's Silicon Valley, Zhongguancan Science Park, according to Invest Ottawa CEO Bruce Lazenby.

The massive park employs 1.3 million people and houses more than 20,000 companies.

Small team from China setting up in Ottawa in next few weeks

In 2010, Zangguancan set up a development group, ZDG, which announced last year that it was setting up in Silicon Valley, Ottawa and Finland.

A small team from China will be moving into Invest Ottawa's headquarters on Aberdeen Street in Little Italy within the next few weeks, said Lazenby.

Bruce Lazenby, CEO of Invest Ottawa, says working in business with anyone anywhere presents risk, not just with China. (CBC)

Once Invest Ottawa's new hub is built at the Bayview Yards site, ZDG will move in there as well.

So far, Invest Ottawa's selection committee has presented about 15 Canadian companies to ZDG, and two or three of them are being looked at "very seriously," Lazenby said.

If ZDG decides to move forward with any of them, the group could help them finish up or market their products, and even establish offices at the Beijing-area science park, Lazenby said, adding that ZDG has about $10 million set aside to invest in local companies.

"We're going to walk before we run, and see if it works. But of the $10 million that they've put up on the table so far, that's $10 million out of their $1.5 billion investment fund. So if this goes well and Ottawa companies and Canadian companies take advantage of it, there's a lot more financing out there to be had. And that's one thing that Canadian companies are desperate for, is equity capital," Lazenby said.

Former top Nortel security adviser urges caution

But a former top security adviser at failed Nortel, Brian Shields, said any companies who want to work with China "ought to be really worried."

Last year, Shields alleged that one Chinese company spent years hacking into Nortel's system and stole information.

In a Skype interview last week, Shields said it could happen again.

"We're talking about new products, new ideas, new technology. You've got a lot of brilliant minds there [at Invest Ottawa], and what a great way to tap into that resource and usurp whatever might be of value to you … and your interests back home," Shields said.

"There are many ways to skin a cat, so to speak, and if the old way that they're doing it is creating lots of heat for them, which is what's going on now … then you find other ways of trying to get the information."

That heat, most recently, has come in the United States in the form of last week's Mandiant report, accusing a secret Chinese military unit in Shanghai of years of cyberattacks against more than 140 U.S. companies.

In response, the Obama administration last week announced a new diplomatic push to discourage intellectual property theft abroad.

Invest Ottawa CEO 'reasonably satisfied' with ZDG

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Lazenby said that in business, "there has to be risk if there's ever going to be reward," and that conducting business with anyone anywhere presents risk, not just with China.

"I think at this point we believe that we've got a good partner, we're reasonably satisfied that this is not espionage at any level — of course if it was we wouldn't know," he said.

"But that's where we count on our other partners. That's where we count on the RCMP and CSIS and others to be aware of who's coming into Canada," he said.

But a former assistant director of intelligence at the Canadian Security Intelligence Service, Ray Boisvert, urges caution when working with state-owned enterprises from countries like China and Russia.

While it's important to invest in knowledge and ideas, he said it more often means dealing with emerging markets that don't always operate the way North American markets do.

"We need the investment … we need to get into those emerging markets, especially in places like China, but we know that by wading into that area of the world, it's full of potential jeopardy," Boisvert said. "… Do so with eyes wide open and be aware that there are predators. They do not play by the same rules."

"I think it's a bit of a setup in a way, which is one that leaves me, as a … former intelligence practitioner, a little bit uncomfortable," said Boisvert.

Small business president pleased with new partnership

Siva Kumar, the CEO of Secure City Solutions, a small local company with offices at Invest Ottawa and in Kanata, said he's happy about the new partnership.

"It's a great idea, it's one of their very good ideas," Kumar said. "I think it will be very positive in Ottawa."

Asked whether he might be worried about his company's secrets being stolen, Kumar said any startup has to be careful about protecting its intellectual property, no matter with whom or where they do business.

"It's very tough to go and ask money from a venture capital [firm by] cold calling. You've got to build trust, relationships, and so on and so forth," Kumar said. "With them being in the same building, I think it's a very smart move. So the small startup gets exposed to them and they also get exposed to startups."