China says it's not behind Google email hacking

  Eyewitness NewsBEIJING -- China denied it supports hacking activities and said it is part of global efforts to combat computer security threats Thursday, a day after Google disclosed some of its email users suffered hacking attacks that orginated within the country.

Google disclosed Wednesday that personal Gmail accounts of several hundred people, including senior U.S. government officials, military personnel and political activists, had been breached.

Google traced the origin of the attacks to Jinan, China, the home city of a military vocational school whose computers were linked to an assault 17 months ago on Google's systems.

China is firmly opposed to activities that sabotage Internet and computer security, including hacking, Foreign Ministry spokesman Hong Lei told reporters Thursday.

Hong said hacking was a global problem and Chinese networks had also been targeted by hackers, but he gave no specifics. He said China was working to crack down on the problem, but he didn't respond when asked whether it would investigate this specific incident.

"Allegations that the Chinese government supports hacking activities are completely unfounded and made with ulterior motives," Hong said.

Google said all of the hacking victims have been notified and their accounts have been secured.

This time around, the hackers appeared to rely on tactics commonly used to fool people into believing they are dealing with someone they know or a company that they trust. Once these "phishing" expeditions get the information needed to break into an email account, the access can be used to send messages that dupe other victims.

China's Ministry of Industry and Information Technology, which has a hand in regulating the Internet, referred questions about the allegations to another regulatory agency, the State Council Information Office, which asked that questions be faxed and then did not respond.

The latest attacks aren't believed to be tied to the more sophisticated assault last year. That intrusion targeted the Google's own security systems and triggered a high-profile battle with China's Communist government over online censorship.

The tensions escalated amid reports that the Chinese government had at least an indirect hand in the hacking attacks, a possibility that Google didn't rule out.

The previous break-in prompted Google to move its Chinese-language search engine off the mainland so it wouldn't have to censor content that the government didn't want the general public to see. The search engine is now based in Hong Kong, which isn't subject to Beijing's censorship rules.

China's official Xinhua News Agency blasted Google in an unsigned commentary on Thursday saying the company "provided no solid proof" to support its claims that the hack attacks originated in China.

Xinhua said Google's compaints had "become obstacles for enhancing global trust between stakeholders in cyberspace."

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Google tries to replace wallets with smartphones

North America First Data President Ed Labry speaks during a news conference, Thursday, May 26, 2011, in New York. Google wants the smartphone to be the wallet of the future, a container for digital credit cards, coupons, receipts and loyalty cards that can be "tapped" to terminals in stores. (AP Photo / AP Photo/Mary Altaffer)

  By PETER SVENSSONNEW YORK -- Google Inc. is trying to nudge consumers and merchants into a world where the smartphone has replaced the wallet as the container for credit cards, coupons and receipts.

In Google's vision detailed Thursday, shoppers will touch their phone screen to select a card, then tap the phone to a credit-card reader in a store or restaurant. Google would make money by selling coupons and advertising that come along with the experience.

It's a goal shared by others. The Internet search and advertising company faces tough competition from cellphone companies, payment card issuer Visa Inc., eBay Inc.'s PayPal payment service and others. All of them want to play the central role of tying together phones, retailers and banks into a new payment system.

This isn't Google's first attempt at electronic payments. The company, based in Mountain View, Calif., introduced an online payment service called "Checkout" five years ago. It hasn't posed a serious threat to PayPal.

Google views its digital wallet as a way to sell advertising at a pivotal moment: when shoppers are in stores, ready to spend money and even more receptive to coupons and other discount offers.

Nick Holland, an analyst at Yankee Group, said that although all parties stand to benefit from Google's system, Google itself has the most to gain. That's because the Google Wallet would allow the company to "own" the market for advertising that's tied to the user's location.

Google said it's launching a Google Wallet trial in San Francisco and New York in cooperation with Visa rival MasterCard and Citibank. It will open up the system to consumers later in the summer. It then plans to expand across the country.

There has been talk of smart payment systems for years, and Google faces the same hurdles that have stifled previous trials.

One is that Google Wallet will initially work on only one smartphone, the Google Nexus S 4G carried by Sprint Nextel Corp.

Several smartphone makers, including Research In Motion Ltd., maker of the BlackBerry, are ready to bring out more phones with chips for so-called Near-Field Communications, or NFC, but it's uncertain if they'll work with Google's system.

Another hurdle is getting retailers to invest in terminals that can talk to the phones. Google Wallet will connect only to MasterCard PayPass terminals. There are more than 135,000 of those in U.S. stores and restaurants, but that's only a small fraction of the total number.

Google's carrot is that retailers will be able to put loyalty cards and coupons in the Wallet, helping them track and engage with their customers. Partners in the trial include Macy's, RadioShack, Subway, Toys R Us, Duane Reade and Walgreens.

Yet another problem: Google needs to get cellphone companies on board. Its partner Sprint is the country's third-largest. AT&T Inc., Verizon Wireless and T-Mobile USA, the rest of the four biggest national carriers, have formed their own consortium to create a wallet that will compete with Google's.

The final obstacle is persuading consumers to take the leap.

Phones might one day offer slightly faster checkouts, but the benefit would be small. Google calls Wallet a "single-tap solution," but in a demonstration at Thursday at Google's New York office, a Google executive had to tap his phone twice to a terminal provided by retail partner American Eagle Outfitters Inc., then sign on the screen to get a purchase of a pair of denim shorts through.

Osama Bedier, Google's vice president of payments, said it was up to the retailer to decide if the shopper has to sign on the screen.

"Consumers and businesses don't have a compelling need for changes in payment methods," a recent study by the Federal Reserve said. It nevertheless concluded that there are substantial benefits to reap for everyone involved if mobile payments become a reality.

One of the potential benefits is increased security compared to cards with magnetic stripes, which can be copied surreptitiously.

The Wallet will initially work with a MasterCard from Citigroup Inc. and with a prepaid debit card issued by Google, but the intent is to let the wallet accept any card.

"This is about creating a compelling model and asking folks to join," Bedier said.

Banks and payment processors such as MasterCard and Visa like the idea of mobile payments, but have their own designs on the space. Visa already has announced plans for its own wallet.

MasterCard is collaborating with Google but is working on its own projects.

"Today's announcement is another early salvo in what will be a long and hard-fought battle to change consumers' payment behavior and, as a potential result, the makeup of the payments landscape," said Forrester Research analyst Charles Golvin.

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