Ah yes. The tin foil hat comment, standard fare for uninformed slobs like
you who read nothing but cereal boxes. A few years from now, you'll be
bitching about invasion of privacy when you can't fly or renew your driver's
license without having your eyes scanned using software built here, tested
in China, and then implemented here.

===========================
China's All-Seeing Eye

With the help of U.S. defense contractors, China is building the prototype
for a high-tech police state. It is ready for export.

Thirty years ago, the city of Shenzhen didn't exist. Back in those days, it
was a string of small fishing villages and collectively run rice paddies, a
place of rutted dirt roads and traditional temples. That was before the
Communist Party chose it - thanks to its location close to Hong Kong's
port - to be China's first "special economic zone," one of only four areas
where capitalism would be permitted on a trial basis. The theory behind the
experiment was that the "real" China would keep its socialist soul intact
while profiting from the private-sector jobs and industrial development
created in Shenzhen. The result was a city of pure commerce, undiluted by
history or rooted culture - the crack cocaine of capitalism. It was a force
so addictive to investors that the Shenzhen experiment quickly expanded,
swallowing not just the surrounding Pearl River Delta, which now houses
roughly 100,000 factories, but much of the rest of the country as well.
Today, Shenzhen is a city of 12.4 million people, and there is a good chance
that at least half of everything you own was made here: iPods, laptops,
sneakers, flatscreen TVs, cellphones, jeans, maybe your desk chair, possibly
your car and almost certainly your printer. Hundreds of luxury condominiums
tower over the city; many are more than 40 stories high, topped with
three-story penthouses. Newer neighborhoods like Keji Yuan are packed with
ostentatiously modern corporate campuses and decadent shopping malls. Rem
Koolhaas, Prada's favorite architect, is building a stock exchange in
Shenzhen that looks like it floats - a design intended, he says, to "suggest
and illustrate the process of the market." A still-under-construction
superlight subway will soon connect it all at high speed; every car has
multiple TV screens broadcasting over a Wi-Fi network. At night, the entire
city lights up like a pimped-out Hummer, with each five-star hotel and
office tower competing over who can put on the best light show.

Many of the big American players have set up shop in Shenzhen, but they look
singularly unimpressive next to their Chinese competitors. The research
complex for China's telecom giant Huawei, for instance, is so large that it
has its own highway exit, while its workers ride home on their own bus line.
Pressed up against Shenzhen's disco shopping centers, Wal-Mart superstores -
of which there are nine in the city - look like dreary corner stores. (China
almost seems to be mocking us: "You call that a superstore?") McDonald's and
KFC appear every few blocks, but they seem almost retro next to the Real
Kung Fu fast-food chain, whose mascot is a stylized Bruce Lee.

American commentators like CNN's Jack Cafferty dismiss the Chinese as "the
same bunch of goons and thugs they've been for the last 50 years." But
nobody told the people of Shenzhen, who are busily putting on a
24-hour-a-day show called "America" - a pirated version of the original,
only with flashier design, higher profits and less complaining. This has not
happened by accident. China today, epitomized by Shenzhen's transition from
mud to megacity in 30 years, represents a new way to organize society.
Sometimes called "market Stalinism," it is a potent hybrid of the most
powerful political tools of authoritarian communism - central planning,
merciless repression, constant surveillance - harnessed to advance the goals
of global capitalism.

Now, as China prepares to showcase its economic advances during the upcoming
Olympics in Beijing, Shenzhen is once again serving as a laboratory, a
testing ground for the next phase of this vast social experiment. Over the
past two years, some 200,000 surveillance cameras have been installed
throughout the city. Many are in public spaces, disguised as lampposts. The
closed-circuit TV cameras will soon be connected to a single, nationwide
network, an all-seeing system that will be capable of tracking and
identifying anyone who comes within its range - a project driven in part by
U.S. technology and investment. Over the next three years, Chinese security
executives predict they will install as many as 2 million CCTVs in Shenzhen,
which would make it the most watched city in the world. (Security-crazy
London boasts only half a million surveillance cameras.)

The security cameras are just one part of a much broader high-tech
surveillance and censorship program known in China as "Golden Shield." The
end goal is to use the latest people-tracking technology - thoughtfully
supplied by American giants like IBM, Honeywell and General Electric - to
create an airtight consumer cocoon: a place where Visa cards, Adidas
sneakers, China Mobile cellphones, McDonald's Happy Meals, Tsingtao beer and
UPS delivery (to name just a few of the official sponsors of the Beijing
Olympics) can be enjoyed under the unblinking eye of the state, without the
threat of democracy breaking out. With political unrest on the rise across
China, the government hopes to use the surveillance shield to identify and
counteract dissent before it explodes into a mass movement like the one that
grabbed the world's attention at Tiananmen Square.

Remember how we've always been told that free markets and free people go
hand in hand? That was a lie. It turns out that the most efficient delivery
system for capitalism is actually a communist-style police state, fortressed
with American "homeland security" technologies, pumped up with "war on
terror" rhetoric. And the global corporations currently earning superprofits
from this social experiment are unlikely to be content if the lucrative new
market remains confined to cities such as Shenzhen. Like everything else
assembled in China with American parts, Police State 2.0 is ready for export
to a neighborhood near you.

Zhang Yi points to an empty bracket on the dashboard of his black Honda. "It
used to hold my GPS, but I leave it at home now," he says. "It's the crime -
they are too easy to steal." He quickly adds, "Since the surveillance
cameras came in, we have seen a very dramatic decrease in crime in
Shenzhen."

After driving for an hour past hundreds of factory gates and industrial
parks, we pull up to a salmon-color building that Zhang partly owns. This is
the headquarters of FSAN: CCTV System. Zhang, a prototypical Shenzhen yuppie
in a royal-blue button-down shirt and black-rimmed glasses, apologizes for
the mess. Inside, every inch of space is lined with cardboard boxes filled
with electronics parts and finished products.

Zhang opened the factory two and a half years ago, and his investment has
already paid off tenfold. That kind of growth isn't unusual in the field he
has chosen: Zhang's factory makes digital surveillance cameras, turning out
400,000 a year. Half of the cameras are shipped overseas, destined to peer
from building ledges in London, Manhattan and Dubai as part of the global
boom in "homeland security." The other half stays in China, many right here
in Shenzhen and in neighboring Guangzhou, another megacity of 12 million
people. China's market for surveillance cameras enjoyed revenues of $4.1
billion last year, a jump of 24 percent from 2006.

Zhang escorts me to the assembly line, where rows of young workers, most of
them women, are bent over semiconductors, circuit boards, tiny cables and
bulbs. At the end of each line is "quality control," which consists of
plugging the camera into a monitor and making sure that it records. We enter
a showroom where Zhang and his colleagues meet with clients. The walls are
lined with dozens of camera models: domes of all sizes, specializing in day
and night, wet and dry, camouflaged to look like lights, camouflaged to look
like smoke detectors, explosion-proof, the size of a soccer ball, the size
of a ring box.

The workers at FSAN don't just make surveillance cameras; they are
constantly watched by them. While they work, the silent eyes of rotating
lenses capture their every move. When they leave work and board buses, they
are filmed again. When they walk to their dormitories, the streets are lined
with what look like newly installed streetlamps, their white poles curving
toward the sidewalk with black domes at the ends. Inside the domes are
high-resolution cameras, the same kind the workers produce at FSAN. Some
blocks have three or four, one every few yards. One Shenzhen-based company,
China Security & Surveillance Technology, has developed software to enable
the cameras to alert police when an unusual number of people begin to gather
at any given location.

In 2006, the Chinese government mandated that all Internet cafes (as well as
restaurants and other "entertainment" venues) install video cameras with
direct feeds to their local police stations. Part of a wider surveillance
project known as "Safe Cities," the effort now encompasses 660
municipalities in China. It is the most ambitious new government program in
the Pearl River Delta, and supplying it is one of the fastest-growing new
markets in Shenzhen.

But the cameras that Zhang manufactures are only part of the massive
experiment in population control that is under way here. "The big picture,"
Zhang tells me in his office at the factory, "is integration." That means
linking cameras with other forms of surveillance: the Internet, phones,
facial-recognition software and GPS monitoring.

This is how this Golden Shield will work: Chinese citizens will be watched
around the clock through networked CCTV cameras and remote monitoring of
computers. They will be listened to on their phone calls, monitored by
digital voice-recognition technologies. Their Internet access will be
aggressively limited through the country's notorious system of online
controls known as the "Great Firewall." Their movements will be tracked
through national ID cards with scannable computer chips and photos that are
instantly uploaded to police databases and linked to their holder's personal
data. This is the most important element of all: linking all these tools
together in a massive, searchable database of names, photos, residency
information, work history and biometric data. When Golden Shield is
finished, there will be a photo in those databases for every person in
China: 1.3 billion faces.

Shenzhen is the place where the shield has received its most extensive
fortifications - the place where all the spy toys are being hooked together
and tested to see what they can do. "The central government eventually wants
to have city-by-city surveillance, so they could just sit and monitor one
city and its surveillance system as a whole," Zhang says. "It's all part of
that bigger project. Once the tests are done and it's proven, they will be
spreading from the big province to the cities, even to the rural farmland."

In fact, the rollout of the high-tech shield is already well under way.

When the Tibetan capital of Lhasa was set alight in March, the world caught
a glimpse of the rage that lies just under the surface in many parts of
China. And though the Lhasa riots stood out for their ethnic focus and their
intensity, protests across China are often shockingly militant. In July
2006, workers at a factory near Shenzhen expressed their displeasure over
paltry pay by overturning cars, smashing computers and opening fire
hydrants. In March of last year, when bus fares went up in the rural town of
Zhushan, 20,000 people took to the streets and five police vehicles were
torched. Indeed, China has seen levels of political unrest in recent years
unknown since 1989, the year student protests were crushed with tanks in
Tiananmen Square. In 2005, by the government's own measure, there were at
least 87,000 "mass incidents" - governmentspeak for large-scale protests or
riots.

This increased unrest - a process aided by access to cellphones and the
Internet - represents more than a security problem for the leaders in
Beijing. It threatens their whole model of command-and-control capitalism.
China's rapid economic growth has relied on the ability of its rulers to
raze villages and move mountains to make way for the latest factory towns
and shopping malls. If the people living on those mountains use blogs and
text messaging to launch a mountain-people's-rights uprising with each new
project, and if they link up with similar uprisings in other parts of the
country, China's dizzying expansion could grind to a halt.

At the same time, the success of China's ravenous development creates its
own challenges. Every rural village that is successfully razed to make way
for a new project creates more displaced people who join the ranks of the
roughly 130 million migrants roaming the country looking for work. By 2025,
it is projected that this "floating" population will swell to more than 350
million. Many will end up in cities like Shenzhen, which is already home to
7 million migrant laborers.

But while China's cities need these displaced laborers to work in factories
and on construction sites, they are unwilling to offer them the same
benefits as permanent residents: highly subsidized education and health
care, as well as other public services. While migrants can live for decades
in big cities like Shenzhen and Guangzhou, their residency remains fixed to
the rural community where they were born, a fact encoded on their national
ID cards. As one young migrant in Guangzhou put it to me, "The local people
want to make money from migrant workers, but they don't want to give them
rights. But why are the local people so rich? Because of the migrant
workers!"

With its militant protests and mobile population, China confronts a
fundamental challenge. How can it maintain a system based on two
dramatically unequal categories of people: the winners, who get the condos
and cars, and the losers, who do the heavy labor and are denied those
benefits? More urgently, how can it do this when information technology
threatens to link the losers together into a movement so large it could
easily overwhelm the country's elites?

The answer is Golden Shield. When Tibet erupted in protests recently, the
surveillance system was thrown into its first live test, with every
supposedly liberating tool of the Information Age - cellphones, satellite
television, the Internet - transformed into a method of repression and
control. As soon as the protests gathered steam, China reinforced its Great
Firewall, blocking its citizens from accessing dozens of foreign news
outlets. In some parts of Tibet, Internet access was shut down altogether.
Many people trying to phone friends and family found that their calls were
blocked, and cellphones in Lhasa were blitzed with text messages from the
police: "Severely battle any creation or any spreading of rumors that would
upset or frighten people or cause social disorder or illegal criminal
behavior that could damage social stability."

During the first week of protests, foreign journalists who tried to get into
Tibet were systematically turned back. But that didn't mean that there were
no cameras inside the besieged areas. Since early last year, activists in
Lhasa have been reporting on the proliferation of black-domed cameras that
look like streetlights - just like the ones I saw coming off the assembly
line in Shenzhen. Tibetan monks complain that cameras - activated by motion
sensors - have invaded their monasteries and prayer rooms.

During the Lhasa riots, police on the scene augmented the footage from the
CCTVs with their own video cameras, choosing to film - rather than stop -
the violence, which left 19 dead. The police then quickly cut together the
surveillance shots that made the Tibetans look most vicious - beating
Chinese bystanders, torching shops, ripping metal sheeting off banks - and
created a kind of copumentary: Tibetans Gone Wild. These weren't the
celestial beings in flowing robes the Beastie Boys and Richard Gere had told
us about. They were angry young men, wielding sticks and long knives. They
looked ugly, brutal, tribal. On Chinese state TV, this footage played around
the clock.

The police also used the surveillance footage to extract mug shots of the
demonstrators and rioters. Photos of the 21 "most wanted" Tibetans, many
taken from that distinctive "streetlamp" view of the domed cameras, were
immediately circulated to all of China's major news portals, which
obediently posted them to help out with the manhunt. The Internet became the
most powerful police tool. Within days, several of the men on the posters
were in custody, along with hundreds of others.

The flare-up in Tibet, weeks before the Olympic torch began its global
journey, has been described repeatedly in the international press as a
"nightmare" for Beijing. Several foreign leaders have pledged to boycott the
opening ceremonies of the games, the press has hosted an orgy of
China-bashing, and the torch became a magnet for protesters, with anti-China
banners dropped from the Eiffel Tower and the Golden Gate Bridge. But inside
China, the Tibet debacle may actually have been a boon to the party,
strengthening its grip on power. Despite its citizens having unprecedented
access to information technology (there are as many Internet users in China
as there are in the U.S.), the party demonstrated that it could still
control what they hear and see. And what they saw on their TVs and computer
screens were violent Tibetans, out to kill their Chinese neighbors, while
police showed admirable restraint. Tibetan solidarity groups say 140 people
were killed in the crackdown that followed the protests, but without
pictures taken by journalists, it is as if those subsequent deaths didn't
happen.

Chinese viewers also saw a world unsympathetic to the Chinese victims of
Tibetan violence, so hostile to their country that it used a national
tragedy to try to rob them of their hard-won Olympic glory. These
nationalist sentiments freed up Beijing to go on a full-fledged witch hunt.
In the name of fighting a war on terror, security forces rounded up
thousands of Tibetan activists and supporters. The end result is that when
the games begin, much of the Tibetan movement will be safely behind bars -
along with scores of Chinese journalists, bloggers and human-rights
defenders who have also been trapped in the government's high-tech web.

Police State 2.0 might not look good from the outside, but on the inside, it
appears to have passed its first major test.

In Guangzhou, an hour and a half by train from Shenzhen, Yao Ruoguang is
preparing for a major test of his own. "It's called the 10-million-faces
test," he tells me.

Yao is managing director of Pixel Solutions, a Chinese company that
specializes in producing the new high-tech national ID cards, as well as
selling facial-recognition software to businesses and government agencies.
The test, the first phase of which is only weeks away, is being staged by
the Ministry of Public Security in Beijing. The idea is to measure the
effectiveness of face-recognition software in identifying police suspects.
Participants will be given a series of photos, taken in a variety of
situations. Their task will be to match the images to other photos of the
same people in the government's massive database. Several biometrics
companies, including Yao's, have been invited to compete. "We have to be
able to match a face in a 10 million database in one second," Yao tells me.
"We are preparing for that now."

The companies that score well will be first in line for lucrative government
contracts to integrate face-recognition software into Golden Shield, using
it to check for ID fraud and to discover the identities of suspects caught
on surveillance cameras. Yao says the technology is almost there: "It will
happen next year."

When I meet Yao at his corporate headquarters, he is feeling confident about
how his company will perform in the test. His secret weapon is that he will
be using facial-recognition software purchased from L-1 Identity Solutions,
a major U.S. defense contractor that produces passports and biometric
security systems for the U.S. government.

To show how well it works, Yao demonstrates on himself. Using a camera
attached to his laptop, he snaps a picture of his own face, round and boyish
for its 54 years. Then he uploads it onto the company's proprietary Website,
built with L-1 software. With the cursor, he marks his own eyes with two
green plus signs, helping the system to measure the distance between his
features, a distinctive aspect of our faces that does not change with
disguises or even surgery. The first step is to "capture the image," Yao
explains. Next is "finding the face."

He presses APPLY, telling the program to match the new face with photos of
the same person in the company's database of 600,000 faces. Instantly,
multiple photos of Yao appear, including one taken 19 years earlier - proof
that the technology can "find a face" even when the face has changed
significantly with time. "

It took 1.1 milliseconds!" Yao exclaims. "Yeah, that's me!"

In nearby cubicles, teams of Yao's programmers and engineers take each
other's pictures, mark their eyes with green plus signs and test the speed
of their search engines. "Everyone is preparing for the test," Yao explains.
"If we pass, if we come out number one, we are guaranteed a market in
China."

Every couple of minutes Yao's phone beeps. Sometimes it's a work message,
but most of the time it's a text from his credit-card company, informing him
that his daughter, who lives in Australia, has just made another charge.
"Every time the text message comes, I know my daughter is spending money!"
He shrugs: "She likes designers."

Like many other security executives I interviewed in China, Yao denies that
a primary use of the technology he is selling is to hunt down political
activists. "Ninety-five percent," he insists, "is just for regular safety."
He has, he admits, been visited by government spies, whom he describes as
"the internal-security people." They came with grainy pictures, shot from
far away or through keyhole cameras, of "some protesters, some dissidents."
They wanted to know if Yao's facial-recognition software could help identify
the people in the photos. Yao was sorry to disappoint them. "Honestly, the
technology so far still can't meet their needs," he says. "The photos that
they show us were just too blurry." That is rapidly changing, of course,
thanks to the spread of high-resolution CCTVs. Yet Yao insists that the
government's goal is not repression: "If you're a [political] organizer,
they want to know your motive," he says. "So they take the picture, give the
photo, so at least they can find out who that person is."

Until recently, Yao's photography empire was focused on consumers - taking
class photos at schools, launching a Chinese knockoff of Flickr (the
original is often blocked by the Great Firewall), turning photos of chubby
two-year-olds into fridge magnets and lampshades. He still maintains those
businesses, which means that half of the offices at Pixel Solutions look
like they have just hosted a kid's birthday party. The other half looks like
an ominous customs office, the walls lined with posters of terrorists in the
cross hairs: FACE MATCH, FACE PASS, FACE WATCH. When Beijing started sinking
more and more of the national budget into surveillance technologies, Yao saw
an opportunity that would make all his previous ventures look small. Between
more powerful computers, higher-resolution cameras and a global obsession
with crime and terrorism, he figured that face recognition "should be the
next dot-com."

Not a computer scientist himself - he studied English literature in school -
Yao began researching corporate leaders in the field. He learned that face
recognition is highly controversial, with a track record of making wrong
IDs. A few companies, however, were scoring much higher in controlled tests
in the U.S. One of them was a company soon to be renamed L-1 Identity
Solutions. Based in Connecticut, L-1 was created two years ago out of the
mergers and buyouts of half a dozen major players in the biometrics field,
all of which specialized in the science of identifying people through
distinct physical traits: fingerprints, irises, face geometry. The mergers
made L-1 a one-stop shop for biometrics. Thanks to board members like former
CIA director George Tenet, the company rapidly became a homeland-security
heavy hitter. L-1 projects its annual revenues will hit $1 billion by 2011,
much of it from U.S. government contracts.

In 2006, Yao tells me, "I made the first phone call and sent the first
e-mail." For a flat fee of $20,000, he gained access to the company's
proprietary software, allowing him to "build a lot of development software
based on L-1's technology." Since then, L-1's partnership with Yao has gone
far beyond that token investment. Yao says it isn't really his own company
that is competing in the upcoming 10-million-faces test being staged by the
Chinese government: "We'll be involved on behalf of L-1 in China." Yao adds
that he communicates regularly with L1 and has visited the company's
research headquarters in New Jersey. ("Out the window you can see the Statue
of Liberty. It's such a historic place.") L1 is watching his test
preparations with great interest, Yao says. "It seemed that they were more
excited than us when we tell them the results."

L-1's enthusiasm is hardly surprising: If Yao impresses the Ministry of
Public Security with the company's ability to identify criminals, L-1 will
have cracked the largest potential market for biometrics in the world. But
here's the catch: As proud as Yao is to be L-1's Chinese licensee, L-1
appears to be distinctly less proud of its association with Yao. On its
Website and in its reports to investors, L-1 boasts of contracts and
negotiations with governments from Panama and Saudi Arabia to Mexico and
Turkey. China, however, is conspicuously absent. And though CEO Bob LaPenta
makes reference to "some large international opportunities," not once does
he mention Pixel Solutions in Guangzhou.

After leaving a message with the company inquiring about L-1's involvement
in China's homeland-security market, I get a call back from Doni Fordyce,
vice president of corporate communications. She has consulted Joseph Atick,
the company's head of research. "We have nothing in China," she tells me.
"Nothing, absolutely nothing. We are uninvolved. We really don't have any
relationships at all."

I tell Fordyce about Yao, the 10-million test, the money he paid for the
software license. She'll call me right back. When she does, 20 minutes
later, it is with this news: "Absolutely, we've sold testing SDKs [software
development kits] to Pixel Solutions and to others [in China] that may be
entering a test." Yao's use of the technology, she said, is "within his
license" purchased from L-1.

The company's reticence to publicize its activities in China could have
something to do with the fact that the relationship between Yao and L-1 may
well be illegal under U.S. law. After the Chinese government sent tanks into
Tiananmen Square in 1989, Congress passed legislation barring U.S. companies
from selling any products in China that have to do with "crime control or
detection instruments or equipment." That means not only guns but everything
from police batons and handcuffs to ink and powder for taking fingerprints,
and software for storing them. Interestingly, one of the "detection
instruments" that prompted the legislation was the surveillance camera.
Beijing had installed several clunky cameras around Tiananmen Square,
originally meant to monitor traffic flows. Those lenses were ultimately used
to identify and arrest key pro-democracy dissidents.

"The intent of that act," a congressional staff member with considerable
China experience tells me, "was to keep U.S. companies out of the business
of helping the Chinese police conduct their business, which might ultimately
end up as it did in 1989 in the suppression of human rights and democracy in
China."

Pixel's application of L-1 facial-recognition software seems to fly in the
face of the ban's intent. By his own admission, Yao is already getting
visits from Chinese state spies anxious to use facial recognition to
identify dissidents. And as part of the 10-million-faces test, Yao has been
working intimately with Chinese national-security forces, syncing L-1's
software to their vast database, a process that took a week of intensive
work in Beijing. During that time, Yao says, he was on the phone "every day"
with L-1, getting its help adapting the technology. "Because we are
representing them," he says. "We took the test on their behalf."

In other words, this controversial U.S. "crime control" technology has
already found its way into the hands of the Chinese police. Moreover, Yao's
goal, stated to me several times, is to use the software to land lucrative
contracts with police agencies to integrate facial recognition into the
newly built system of omnipresent surveillance cameras and high-tech
national ID cards. As part of any contract he gets, Yao says, he will "pay
L-1 a certain percentage of our sales."

When I put the L-1 scenario to the Commerce Department's Bureau of Industry
and Security - the division charged with enforcing the post-Tiananmen export
controls - a representative says that software kits are subject to the
sanctions if "they are exported from the U.S. or are the foreign direct
product of a U.S.-origin item." Based on both criteria, the software kit
sold to Yao seems to fall within the ban.

When I ask Doni Fordyce at L-1 about the embargo, she tells me, "I don't
know anything about that." Asked whether she would like to find out about it
and call me back, she replies, "I really don't want to comment, so there is
no comment." Then she hangs up.

You have probably never heard of L-1, but there is every chance that it has
heard of you. Few companies have collected as much sensitive information
about U.S. citizens and visitors to America as L-1: It boasts a database of
60 million records, and it "captures" more than a million new fingerprints
every year. Here is a small sample of what the company does: produces
passports and passport cards for American citizens; takes finger scans of
visitors to the U.S. under the Department of Homeland Security's massive
U.S.-Visit program; equips U.S. soldiers in Iraq and Afghanistan with
"mobile iris and multimodal devices" so they can collect biometric data in
the field; maintains the State Department's "largest facial-recognition
database system"; and produces driver's licenses in Illinois, Montana and
North Carolina. In addition, L-1 has an even more secretive intelligence
unit called SpecTal. Asked by a Wall Street analyst to discuss, in
"extremely general" terms, what the division was doing with contracts worth
roughly $100 million, the company's CEO would only say, "Stay tuned."

It is L-1's deep integration with multiple U.S. government agencies that
makes its dealings in China so interesting: It isn't just L-1 that is
potentially helping the Chinese police to nab political dissidents, it's
U.S. taxpayers. The technology that Yao purchased for just a few thousand
dollars is the result of Defense Department research grants and contracts
going as far back as 1994, when a young academic named Joseph Atick (the
research director Fordyce consulted on L-1's China dealings) taught a
computer at Rockefeller University to recognize his face.

Yao, for his part, knows all about the U.S. export controls on police
equipment to China. He tells me that L-1's electronic fingerprinting tools
are "banned from entering China" due to U.S. concerns that they will be used
to "catch the political criminals, you know, the dissidents, more easily."
He thinks he and L-1 have found a legal loophole, however. While
fingerprinting technology appears on the Commerce Department's list of
banned products, there is no explicit mention of "face prints" - likely
because the idea was still in the realm of science fiction when the
Tiananmen Square massacre took place. As far as Yao is concerned, that
omission means that L-1 can legally supply its facial-recognition software
for use by the Chinese government.

Whatever the legality of L-1's participation in Chinese surveillance, it is
clear that U.S. companies are determined to break into the homeland-security
market in China, which represents their biggest growth potential since 9/11.
According to the congressional staff member, American companies and their
lobbyists are applying "enormous pressure to open the floodgates."

The crackdown in Tibet has set off a wave of righteous rallies and boycott
calls. But it sidesteps the uncomfortable fact that much of China's powerful
surveillance state is already being built with U.S. and European technology.
In February 2006, a congressional subcommittee held a hearing on "The
Internet in China: A Tool for Freedom or Suppression?" Called on the carpet
were Google (for building a special Chinese search engine that blocked
sensitive material), Cisco (for supplying hardware for China's Great
Firewall), Microsoft (for taking down political blogs at the behest of
Beijing) and Yahoo (for complying with requests to hand over e-mail-account
information that led to the arrest and imprisonment of a high-profile
Chinese journalist, as well as a dissident who had criticized corrupt
officials in online discussion groups). The issue came up again during the
recent Tibet uproar when it was discovered that both MSN and Yahoo had
briefly put up the mug shots of the "most wanted" Tibetan protesters on
their Chinese news portals.

In all of these cases, U.S. multinationals have offered the same defense:
Cooperating with draconian demands to turn in customers and censor material
is, unfortunately, the price of doing business in China. Some, like Google,
have argued that despite having to limit access to the Internet, they are
contributing to an overall increase of freedom in China. It's a story that
glosses over the much larger scandal of what is actually taking place:
Western investors stampeding into the country, possibly in violation of the
law, with the sole purpose of helping the Communist Party spend billions of
dollars building Police State 2.0. This isn't an unfortunate cost of doing
business in China: It's the goal of doing business in China. "Come help us
spy!" the Chinese government has said to the world. And the world's leading
technology companies are eagerly answering the call.

As The New York Times recently reported, aiding and abetting Beijing has
become an investment boom for U.S. companies. Honeywell is working with
Chinese police to "set up an elaborate computer monitoring system to analyze
feeds from indoor and outdoor cameras in one of Beijing's most populated
districts." General Electric is providing Beijing police with a security
system that controls "thousands of video cameras simultaneously, and
automatically alerts them to suspicious or fast-moving objects, like people
running." IBM, meanwhile, is installing its "Smart Surveillance System" in
the capital, another system for linking video cameras and scanning for
trouble, while United Technologies is in Guangzhou, helping to customize a
"2,000-camera network in a single large neighborhood, the first step toward
a citywide network of 250,000 cameras to be installed before the Asian Games
in 2010." By next year, the Chinese internal-security market will be worth
an estimated $33 billion - around the same amount Congress has allocated for
reconstructing Iraq.

"We're at the start of a massive boom in Chinese security spending,"
according to Graham Summers, a market analyst who publishes an investor
newsletter in Baltimore. "And just as we need to be aware of how to profit
from the growth in China's commodity consumption, we need to be aware of
companies that will profit from 'security consumption.' . . . There's big
money to be made."

While U.S. companies are eager to break into China's rapidly expanding
market, every Chinese security firm I come across in the Pearl River Delta
is hatching some kind of plan to break into the U.S. market. No one,
however, is quite as eager as Aebell Electrical Technology, one of China's
top 10 security companies. Aebell has a contract to help secure the Olympic
swimming stadium in Beijing and has installed more than 10,000 cameras in
and around Guangzhou. Business has been growing by 100 percent a year. When
I meet the company's fidgety general manager, Zheng Sun Man, the first thing
he tells me is "We are going public at the end of this year. On the Nasdaq."
It also becomes clear why he has chosen to speak with a foreign reporter:
"Help, help, help!" he begs me. "Help us promote our products!"

Zheng, an MBA from one of China's top schools, proudly shows me the business
card of the New York investment bank that is handling Aebell's IPO, as well
as a newly printed English-language brochure showing off the company's
security cameras. Its pages are filled with American iconography, including
businessmen exchanging wads of dollar bills and several photos of the New
York skyline that prominently feature the World Trade Center. In the hall at
company headquarters is a poster of two interlocking hearts: one depicting
the American flag, the other the Aebell logo.

I ask Zheng whether China's surveillance boom has anything to do with the
rise in strikes and demonstrations in recent years. Zheng's deputy, a
23-year veteran of the Chinese military wearing a black Mao suit, responds
as if I had launched a direct attack on the Communist Party itself. "If you
walk out of this building, you will be under surveillance in five to six
different ways," he says, staring at me hard. He lets the implication of his
words linger in the air like an unspoken threat. "If you are a law-abiding
citizen, you shouldn't be afraid," he finally adds. "The criminals are the
only ones who should be afraid."

One of the first people to sound the alarm on China's upgraded police state
was a British researcher named Greg Walton. In 2000, Walton was commissioned
by the respected human-rights organization Rights & Democracy to investigate
the ways in which Chinese security forces were harnessing the tools of the
Information Age to curtail free speech and monitor political activists. The
paper he produced was called "China's Golden Shield: Corporations and the
Development of Surveillance Technology in the People's Republic of China."
It exposed how big-name tech companies like Nortel and Cisco were helping
the Chinese government to construct "a gigantic online database with an
all-encompassing surveillance network - incorporating speech and face
recognition, closed-circuit television, smart cards, credit records and
Internet surveillance technologies."

When the paper was complete, Walton met with the institute's staff to
strategize about how to release his explosive findings. "We thought this
information was going to shock the world," he recalls. In the midst of their
discussions, a colleague barged in and announced that a plane had hit the
Twin Towers. The meeting continued, but they knew the context of their work
had changed forever.

Walton's paper did have an impact, but not the one he had hoped. The
revelation that China was constructing a gigantic digital database capable
of watching its citizens on the streets and online, listening to their phone
calls and tracking their consumer purchases sparked neither shock nor
outrage. Instead, Walton says, the paper was "mined for ideas" by the U.S.
government, as well as by private companies hoping to grab a piece of the
suddenly booming market in spy tools. For Walton, the most chilling moment
came when the Defense Department tried to launch a system called Total
Information Awareness to build what it called a "virtual, centralized grand
database" that would create constantly updated electronic dossiers on every
citizen, drawing on banking, credit-card, library and phone records, as well
as footage from surveillance cameras. "It was clearly similar to what we
were condemning China for," Walton says. Among those aggressively vying to
be part of this new security boom was Joseph Atick, now an executive at L-1.
The name he chose for his plan to integrate facial-recognition software into
a vast security network was uncomfortably close to the surveillance system
being constructed in China: "Operation Noble Shield."

Empowered by the Patriot Act, many of the big dreams hatched by men like
Atick have already been put into practice at home. New York, Chicago and
Washington, D.C., are all experimenting with linking surveillance cameras
into a single citywide network. Police use of surveillance cameras at
peaceful demonstrations is now routine, and the images collected can be
mined for "face prints," then cross-checked with ever-expanding photo
databases. Although Total Information Awareness was scrapped after the plans
became public, large pieces of the project continue, with private
data-mining companies collecting unprecedented amounts of information about
everything from Web browsing to car rentals, and selling it to the
government.

Such efforts have provided China's rulers with something even more valuable
than surveillance technology from Western democracies: the ability to claim
that they are just like us. Liu Zhengrong, a senior official dealing with
China's Internet policy, has defended Golden Shield and other repressive
measures by invoking the Patriot Act and the FBI's massive e-mail-mining
operations. "It is clear that any country's legal authorities closely
monitor the spread of illegal information," he said. "We have noted that the
U.S. is doing a good job on this front." Lin Jiang Huai, the head of China
Information Security Technology, credits America for giving him the idea to
sell biometric IDs and other surveillance tools to the Chinese police. "Bush
helped me get my vision," he has said. Similarly, when challenged on the
fact that dome cameras are appearing three to a block in Shenzhen and
Guangzhou, Chinese companies respond that their model is not the East German
Stasi but modern-day London.

Human-rights activists are quick to point out that while the tools are the
same, the political contexts are radically different. China has a government
that uses its high-tech web to imprison and torture peaceful protesters,
Tibetan monks and independent-minded journalists. Yet even here, the lines
are getting awfully blurry. The U.S. currently has more people behind bars
than China, despite a population less than a quarter of its size. And Sharon
Hom, executive director of the advocacy group Human Rights in China, says
that when she talks about China's horrific human-rights record at
international gatherings, "There are two words that I hear in response again
and again: Guantánamo Bay."

The Fourth Amendment prohibition against illegal search and seizure made it
into the U.S. Constitution precisely because its drafters understood that
the power to snoop is addictive. Even if we happen to trust in the good
intentions of the snoopers, the nature of any government can change
rapidly - which is why the Constitution places limits on the tools available
to any regime. But the drafters could never have imagined the commercial
pressures at play today. The global homeland-security business is now worth
an estimated $200 billion - more than Hollywood and the music industry
combined. Any sector of that size inevitably takes on its own momentum. New
markets must be found - which, in the Big Brother business, means an endless
procession of new enemies and new emergencies: crime, immigration,
terrorism.

In Shenzhen one night, I have dinner with a U.S. business consultant named
Stephen Herrington. Before he started lecturing at Chinese business schools,
teaching students concepts like brand management, Herrington was a
military-intelligence officer, ascending to the rank of lieutenant colonel.
What he is seeing in the Pearl River Delta, he tells me, is scaring the hell
out of him - and not for what it means to China.

"I can guarantee you that there are people in the Bush administration who
are studying the use of surveillance technologies being developed here and
have at least skeletal plans to implement them at home," he says. "We can
already see it in New York with CCTV cameras. Once you have the cameras in
place, you have the infrastructure for a powerful tracking system. I'm
worried about what this will mean if the U.S. government goes totalitarian
and starts employing these technologies more than they are already. I'm
worried about the threat this poses to American democracy."

Herrington pauses. "George W. Bush," he adds, "would do what they are doing
here in a heartbeat if he could."

China-bashing never fails to soothe the Western conscience - here is a large
and powerful country that, when it comes to human rights and democracy, is
so much worse than Bush's America. But during my time in Shenzhen, China's
youngest and most modern city, I often have the feeling that I am witnessing
not some rogue police state but a global middle ground, the place where more
and more countries are converging. China is becoming more like us in very
visible ways (Starbucks, Hooters, cellphones that are cooler than ours), and
we are becoming more like China in less visible ones (torture, warrantless
wiretapping, indefinite detention, though not nearly on the Chinese scale).

What is most disconcerting about China's surveillance state is how familiar
it all feels. When I check into the Sheraton in Shenzhen, for instance, it
looks like any other high-end hotel chain - only the lobby is a little more
modern and the cheerful clerk doesn't just check my passport but takes a
scan of it.

"Are you making a copy?" I ask.

"No, no," he responds helpfully. "We're just sending a copy to the police."

Up in my room, the Website that pops up on my laptop looks like every other
Net portal at a hotel - only it won't let me access human-rights and labor
Websites that I know are working fine. The TV gets CNN International - only
with strange edits and obviously censored blackouts. My cellphone picks up a
strong signal for the China Mobile network. A few months earlier, in Davos,
Switzerland, the CEO of China Mobile bragged to a crowd of communications
executives that "we not only know who you are, we also know where you are."
Asked about customer privacy, he replied that his company only gives "this
kind of data to government authorities" - pretty much the same answer I got
from the clerk at the front desk.

When I leave China, I feel a powerful relief: I have escaped. I am home
safe. But the feeling starts to fade as soon as I get to the customs line at
JFK, watching hundreds of visitors line up to have their pictures taken and
fingers scanned. In the terminal, someone hands me a brochure for "Fly
Clear." All I need to do is have my fingerprints and irises scanned, and I
can get a Clear card with a biometric chip that will let me sail through
security. Later, I look it up: The company providing the technology is L-1.