(The following draws extensively from an online text titled "The Record of X on the Rise of the Chinese Hacker", supplemented from other sources.)
In the last two posts, I have mentioned two galvanizing events for the Red Hacker movement: Violence against ethnic Chinese in Indonesia; and the NATO bombing of the Chinese embassy in Belgrade.
Two months after the bombing of the embassy in Belgrade, the government of Taiwan announced a 'Two States' policy, which undermined the long-held idea that China and Taiwan were a single country suffering a temporary disunion. Seasoned by the 1998 action against Indonesia and the May 1999 action against the United States, the Red Hacker apparatus was ready to turn and defend the honor of the motherland on the battlefield of Taiwan's networks.
They attacked the website of the Executive Yuan of Taiwan, as well as many other websites, deploying newly developed tools like Glacier (冰河, a trojan horse) for the first time, and NetSpy (a tool for uploading and downloading files from a server, apparently).
In 2000, the number of internet cafes mushroomed, and the hacker spectrum broadened. The old Black Hackers were still around, but the ready availability of technology led to a large number of careless, headstrong and unskilled teenagers pursuing the black hacker path. These "script kiddies" were nicknamed the Little Blacks (小黑黑) by an influential female hacker of the time named Wollf.
Alongside the Black and Red hackers, there also arose Blue Hackers (篮客, lán kè), who were relatively unconcerned with cheap tricks and politics, and intensely passionate about computer security.
In 2001, after the South China Sea collision incident, a small American hacker group called PoizonBOx defaced at least a hundred Chinese websites, and reportedly 80,000 Chinese hackers returned fire beginning on May 4. Most of these were unskilled script kiddies, so the damage done did not reflect their large numbers, and some considered the action to be a farce. As far as I can tell, 100-600 websites were vandalized, and the White House website suffered a DOS attack that blocked access from May 4 to May 8.
In the years between 2000 and 2002, Chinese hackers created and released the Code Red, Code Blue and nimda computer worms. But many also undertook a serious discussion of the ethical dimensions of hacking, and of hacking culture. They began to discover and publish their own findings on network and software vulnerabilities, which have been picked up by international security research organizations.