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 China immediately denied the charges, saying in a strongly worded
Foreign Ministry statement the U.S. grand jury indictment was "made
up" and would damage trust between the two nations.
Officials in Washington have argued for years that cyber espionage
is a top national security concern. The indictment was the first
criminal hacking charge that the United States has filed against
specific foreign officials, and follows a steady increase in public
criticism and private confrontation, including at a summit last year
between U.S. President Barack Obama and Chinese President Xi
Jinping.
"When a foreign nation uses military or intelligence resources and
tools against an American executive or corporation to obtain trade
secrets or sensitive business information for the benefit of its
state-owned companies, we must say, 'Enough is enough,'" U.S.
Attorney General Eric Holder said at a news conference.
Federal prosecutors said the suspects targeted companies including
Alcoa Inc, Allegheny Technologies Inc, United States Steel Corp,
Toshiba Corp unit Westinghouse Electric Co, the U.S. subsidiaries of
SolarWorld AG, and a steel workers' union.
Officials declined to estimate the size of the losses to the
companies, but said they were "significant." The victims had all
filed unfair trade claims against their Chinese rivals, helping
Washington draw a link between the alleged hacking activity and its
impact on international business.
According to the indictment, Chinese state-owned companies "hired"
Unit 61398 of the People's Liberation Army "to provide information
technology services" including assembling a database of corporate
intelligence. The Chinese companies were not named.
The Shanghai-based Unit 61398 was identified last year by
cybersecurity firm Mandiant as the source of a large number of
espionage operations. All five defendants worked with 61398,
according to the indictment.
"The administration is trying to make this clear it's a trade issue,
not a cold war with China," said Jim Lewis of the Center for
Strategic and International Studies, who has served as a U.S.
representative in hacking negotiations with China.
The Chinese Foreign Ministry statement said it would suspend the
activities of a Sino-U.S. working group on cyber issues, which
American officials believe refers to a joint effort established in
April 2013 involving State Department expert Chris Painter and China
Foreign Ministry official Dai Bing.
That was set up as a spinoff from the U.S.-China Strategic and
International Dialogue, but produced little tangible progress even
before leaks by former National Security Administration contractor
Edward Snowden leaks gave China grounds for accusing the NSA of
infiltrating Chinese companies as well as government offices.
U.S. officials have maintained that they do not steal secrets to
give an advantage to U.S. companies, but in China, Lewis said, the
line between military and business prowess is unclear.
Unit 61398 has hundreds of active spies and is just one of dozens of
such bodies in China, said Jen Weedon, an analyst at Mandiant, now
owned by global network security company FireEye Inc. She said the
group is not among the most sophisticated.
The specific accusation is less important than the demonstration
that the United States is committed to stepping up its fight in
multiple ways, Weedon said.
"There's a paradigm shift with regards to other ways countries try
to hold each other accountable," she said.
U.S.-CHINA TIES
The cyber spying charges come amid growing tensions between
Washington and Beijing over China's increased assertiveness in
maritime disputes with its neighbors.
Days after Obama ended an Asia-Pacific tour in late April, China
deployed an oil drilling rig 150 miles off the coast of Vietnam, in
a part of the South China Sea claimed by itself and Hanoi. That
sparked deadly anti-China riots in central Vietnam last week and
raised questions among U.S. allies in the region over whether
Obama's long-promised strategic "pivot" toward Asia is more than
talk.
A tougher stand against Chinese cyber crime targeting U.S. interests
could help counter criticism that Washington has responded too
passively to Beijing's geopolitical challenges. U.S. officials have
long complained about Chinese cyber spying but have taken few
concrete actions to punish those suspected of being behind it.
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Washington announced the charges as new claims emerged last week
about the scope of overseas spying by the United States. Documents
leaked by Snowden showed the agency intercepted and modified
equipment made by Cisco Systems Inc that was headed overseas.
Cisco responded by asking Obama to curtail U.S. surveillance
programs, underscoring the vulnerability of multinationals to a
whipsaw of competing government interests.
Douglas Paal of the Carnegie Endowment for International Peace think
tank said the hacking charges will add to the list of grievances
that have been accumulating between China and the United States. "It
will give Beijing a chance to remind the U.S. that its own spying is
a bigger problem."
He added, "We have a plethora of vulnerable firms, including Cisco,
Intel, IBM and others. Targeted retaliation is likely intended to
split and weaken American support for the administrations action."
Skeptics said U.S. authorities would not be able to arrest those
indicted because Beijing would not hand them over. Still, the move
would prevent the individuals from traveling to the United States or
other countries that have an extradition agreement with the United
States.
"It won't slow China down," said Eric Johnson, dean of the business
school at Vanderbilt University and an expert on cyber security
issues.
But the step could prompt China to rethink the position that
industrial secrets are fair game, analysts said.
"At some point, they are going to start dealing seriously with this
problem, unless they want to hurt relations," said Dmitri
Alperovitch, co-founder of security firm CrowdStrike.
SPEAR PHISHING
In an indictment filed in the Western District of Pennsylvania,
prosecutors said the officers hacked into computers starting in
2006, often by infecting machines with tainted "spear phishing"
emails to employees that purport to be from colleagues.
Prosecutors alleged that one hacker, for example, stole cost and
pricing information in 2012 from an Oregon-based solar panel
production unit of SolarWorld. The company was losing market share
at the time to Chinese competitors who were systematically pricing
exports below production costs, according to the indictment.
Another officer is accused of stealing technical and design
specifications about pipes for nuclear plants from Westinghouse
Electric as the company was negotiating with a Chinese company to
build four power plants in China, prosecutors said.
American businesses have long urged the government to act against
cyber espionage from abroad, particularly by China.
Alcoa spokeswoman Monica Orbe said: "To our knowledge, no material
information was compromised."
U.S. Steel declined to comment, while SolarWorld CEO Frank Asbeck
said the company supported the U.S. investigation.
(Reporting by Jim Finkle in Boston, Joseph Menn in San Francisco and
Aruna Viswanatha in Washington; Additional reporting by Susan
Heavey, Mark Hosenball, Matt Spetalnick and David Brunnstrom;
Editing by Bernadette Baum, Tiffany Wu and Eric Walsh)
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