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Report: US Preparing Sanctions Over Alleged Chinese Cybertheft

August 31, 2015

by Victor Beattie

The Washington Post reported Sunday the Obama administration is preparing “unprecedented” economic sanctions against Chinese companies and individuals who benefit from the cybertheft of valuable U.S. trade secrets.

Such action would follow President Barack Obama’s executive order declaring such activities a “national emergency,” and precedes the state visit of Chinese President Xi Jinping.

The Post, quoting several administration officials, said the United States has not yet decided to issue the sanctions, which could involve asset freezes and blocking the financial transactions of those engaged in cyberattacks.

State visit

However, they said a final call is expected, perhaps in the next two weeks, about the time Xi arrives on his first state visit to Washington.

It said the timing of the sanctions to the visit indicates how frustrated U.S. officials have become over persistent cyberplundering.

The paper added that while China is not the only country that hacks computer networks for trade secrets, it is by far the most active.

The Post cited the Federal Bureau of Investigation (FBI), which said economic espionage cases surged 53 percent in the past year, and China accounted for most of that.

The Post said it is unclear how many firms or individuals will be targeted, though it cites one official who said the Chinese firms would be large and multinational.

Government hacked

It said the hacking last year into the U.S. government’s Office of Personnel Management (OPM) databases did not directly benefit Chinese industry, but its severity convinced officials that firm action was warranted.

In May 2014, U.S. authorities charged five Chinese military officers of the secretive hacking unit 61398 of gaining access into the networks of American nuclear, metal and solar firms to steal trade secrets.

In 2013, the U.S.-based internet security firm Mandiant accused Beijing of involvement in a sophisticated campaign of cyberattacks against American businesses, government and other critical infrastructure.

China has denied such allegations and insists it is the victim of cyber-attacks. In 2013, former National Security Agency (NSA) contractor Edward Snowden revealed a secret, global mass surveillance program by U.S. intelligence.

In April 2015, Obama issued an executive order launching the first-ever sanctions program to financially punish individuals and groups outside the United States who engage in malicious cyber-attacks.

No cyberwar

Ankit Panda, editor of the Asia-Pacific current events publication The Diplomat, said the U.S. is not declaring cyberwar on China.

"I think this is an attempt to moderate China’s behavior, to impose costs, to show China there will be costs for individuals and companies that are seen to be engaging in cyber-espionage and cybertheft," Panda said.

"I think Washington has charged the Chinese military of facilitating the theft of U.S. intellectual property for the advantage of Chinese firms and, I think, it’s trying to state here with this move of economic sanctions that this behavior will not be tolerated," Panda added.

But, the Post, quoting U.S. officials, said while sanctions alone will not change China’s behavior, if done in tandem with other diplomatic pressure, law enforcement, military and intelligence, it will start to impose costs.

But, it warned the risk includes Chinese retaliation.


Greg Austin, a China specialist at the Australian Center for Cyber Security, said such sanctions are warranted if Washington can prove Chinese individuals or entities gained a clear competitive advantage from the theft of U.S. trade secrets, but noted the difficulties of presenting proof.

"There are very few cases where this can be proven in the public domain," Austin said.

"It’s quite one thing to be able to prove where a company has clearly copied or stolen a design of a Gucci handbag. But it’s quite a different thing to prove conclusively that a company has stolen trade secrets simply by cyber-espionage when, in fact, there is a whole range of public domain information about patents, the detail of commercial activity, and business designs already in the public domain. ...," he said, adding, "It’s a very complex field."

He said there is no question Chinese intelligence and its global counterparts are scooping up commercial information by the terabyte, but he questions the rate at which that data can be converted into competitive advantage by Chinese commercial firms.

Austin added the Obama administration will need to find the right balance between targeting specific Chinese corporations and more inflammatory rhetoric about Chinese government complicity in commercial espionage.

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