Pentagon fears listening posts from China - Washington Times
As they say this is just the tip of the iceberg, counterfeit Cisco Switches and other devices, have been found with non standard chip sets in them. Everything I have heard is that they all lead back to China. There is some belife that it started with an issue dealing with IPv4, which is used all over the world, and has been for years, over 60% of IPv4 addresses are held by the US in one form or another. IPv6 was developed to make sure enough addresses were available to handle the growth in IT systems. China was the last real entrant to the IP world, and quickly standardized on IPv6 addressable products. But since most of the world had IPv4 legacy products, and most are in the US, backwards compatibility was needed. Let me state that the US has had a number of deadlines for all US Government systems to be IPv6, but so far have missed them all.
Now is where the fun starts, IPv6 has a better security system that IPv4, and the backward compatibility dealt with this is some interesting ways. So the major vendor of product chips supporting IPv6, with compatibility backwards to IPv4 was the Chinese. So it appears that a major security vulnerability exists or can be made to exist in this chip set.
The first reports of the vulnerability I think showed up in US Air Force equipment, in Cisco labeled equipment that turned out to be counterfeit. Some tell me that it was so bad at one time that more chip sets with vulnerabilities are being made in China than not.
There are both classified and un-classified reports floating around the internet, from FBI briefings to the IT industry.