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US labels 5 Chinese cyberspies

Charges intensify dispute

– The Justice Department on Monday accused five members of the Chinese military of conducting economic cyber-espionage against American companies, marking the first time the United States has leveled such criminal charges against a foreign country.

Industries targeted by the alleged cyberspying ranged from nuclear to steel to solar energy, officials said. The hacking by a military unit in Shanghai, they said, was conducted for no other reason than to give a competitive advantage to Chinese companies, including state-owned enterprises.

“Success in the international marketplace should be based solely on a company's ability to innovate and compete, not on a sponsor government's ability to spy and steal business secrets,” Attorney General Eric Holder said at a news conference.

Holder said the Obama administration “will not tolerate actions by any nation that seeks to illegally sabotage American companies and undermine the integrity of fair competition in the operation of the free market.”

In response, China's Foreign Ministry charged Monday that the U.S. government “fabricated facts” in the indictment, which it said “seriously violates basic norms of international relations and damages Sino-U.S. cooperation and mutual trust.”

Foreign Ministry Spokesman Qin Gang denied in a statement that Chinese government, military and “associated personnel” have ever engaged in “the theft of trade secrets through cyber means.” Qin called the U.S. accusations “purely fictitious, extremely absurd.”

Contrary to U.S. claims, “China is the victim of U.S. theft and cyber-surveillance,” Qin said.

The indictment against members of the People's Liberation Army follows vows by senior administration officials to hold other nations to account for computer theft of intellectual property from American industry.

China is widely seen as the nation that has been most aggressive in waging cyber-espionage against the United States.

Holder said a federal grand jury in Pittsburgh returned an indictment against five members of a Chinese military unit in a Shanghai building, accusing them of conspiring together and with others to hack into the computers of six US. entities.

Victimized by the cyberspying were Westinghouse Electric Co., Alcoa, Allegheny Technologies Inc., United States Steel, the United Steel Workers Union and SolarWorld, officials said. Alcoa is the largest aluminum company in the United States, and U.S. Steel is the nation's largest steel company.

The indictment alleges that in some cases, the hackers stole trade secrets that would have been particularly beneficial to Chinese companies. For example, it alleges that an Oregon producer of solar panel technology, SolarWorld, was rapidly losing market share to Chinese competitors who were systematically pricing exports well below production costs.

At the same time, defendant Wen stole thousands of files containing cost and pricing information from the company, the indictment says.

It also alleges that while Westinghouse Electric, a Pennsylvania nuclear power plant manufacturer, was negotiating with a Chinese company over the construction of four power plants in China, defendant Sun stole confidential design specifications for pipes, pipe supports and pipe routing for those plants – information that would enable any competitor looking to build a similar plant to save on research and development costs.

Each of the defendants was charged with 31 counts for alleged offenses between 2006 and 2014. If convicted, they would face decades in prison.

However, they are at large in China, U.S. officials acknowledged, and there is virtually no chance that the Chinese government would turn them over to U.S. authorities.

Estimates of the economic costs to the United States of commercial cyberespionage range from $24 billion to $120 billion annually. China is by far the country that engages in the most such activity against the United States, according to a U.S. national intelligence estimate.

The United States and China agreed last year to begin holding regular, high-level talks on cybersecurity and commercial espionage. But whenever U.S. officials raise the issue of economic spying, the Chinese are not receptive, administration officials said.

Though Washington takes pains to distinguish between foreign intelligence gathering and spying to help a country's own industries gain an economic advantage, officials say that is a distinction without a difference to the Chinese.

The leaks from former National Security Agency contractor Edward Snowden beginning last June have only complicated the talks. Beijing has pointed to disclosures by Snowden of vast NSA surveillance activities – including spying on Chinese companies – to assert that the United States is the greater aggressor in the area.

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