US to use sanctions, indictments over China hacking, economic espionage

A Chinese and US flag at a booth during the first China International Import Expo in Shanghai, on Nov 6, 2018.
A Chinese and US flag at a booth during the first China International Import Expo in Shanghai, on Nov 6, 2018.PHOTO: AFP

WASHINGTON (WASHINGTON POST) - The Trump administration is preparing a series of actions this week to call out Beijing for what it says are China's continued efforts to steal America's trade secrets and advanced technologies and compromise sensitive government and corporate computers, according to US officials.

Multiple government agencies are expected to condemn China, citing a documented campaign of economic espionage and the alleged violation of a landmark 2015 pact to refrain from hacking for commercial gain.

In perhaps the most significant move, the Justice Department is expected to announce the indictments of multiple hackers suspected of working for a Chinese intelligence service and participating in a long-running espionage campaign that targeted US networks.

Along with that, the administration is planning to declassify intelligence relating to the breaches, which date to 2014, and to sanction some of those believed responsible, according to people familiar with the plans.

Other actions are expected, but officials declined to discuss them.

Taken together, the announcements represent a major broadside against China over its mounting aggression against the West and its attempts to displace the United States as the world's leader in technology, officials said.

They are part of an intensifying government-wide approach to confronting China and would come as the two countries have reached a momentary detente in their trade war.

The White House and the Justice Department declined to comment. Officials at the Chinese Embassy in Washington did not immediately respond to requests for comment.

The administration's planned show of force reflects the limits of a ceasefire agreed upon by President Trump and Chinese President Xi Jinping on the sidelines of the Group of 20 summit in Buenos Aires earlier this month, as well as Mr Trump's efforts to blend his national security and trade objectives.

"The tariff war is a bit of a sideshow to the broader geopolitical competition that is almost inevitably going to heat up," said Dr Ely Ratner, executive vice-president of the Centre for a New American Security, a think tank.

"There is essentially no overlap between Xi's vision for China's rise and what the US would consider an acceptable outcome for Asia."

The expected disclosures this week would buttress the government's contention that China has flouted assertions it would heed international rules and counter Beijing's insistence that it does not conduct illegal hacking or engage in illicit transfers of cutting edge technology.

"Transparency is essential, as is allowing both China and the rest of the world to understand what China is or is not doing," said Dr Elizabeth Economy, director of Asia studies at the Council on Foreign Relations.

"Otherwise we live in a fog of insinuation... People don't really understand the depth or breadth of the Chinese government's actions, so this will be an important statement by the administration. This is long overdue."

Mr Xi has scrapped China's traditional deference on the global stage for an assertive stance intended to extend Chinese influence beyond the Asia-Pacific region and into Africa and Latin America.

The Trump administration wants to dismantle China's state-led economic model, fearing that its heavily subsidised economic giants - armed with stolen or coerced American technology - give Chinese firms an unfair advantage in global markets.

US officials have publicly labelled China an economic predator that seeks advanced American technology.

In March, US Trade Representative Robert Lighthizer issued a report accusing China of mounting a comprehensive effort to vacuum up US technology through coercive joint venture licensing rules, corporate acquisitions and cyber theft.

Last month, on the eve of the Xi-Trump meeting in Buenos Aires, Mr Lighthizer said that despite repeated US complaints and tariffs on more than US$250 billion (S$ 343.64 billion) in Chinese imports, "China fundamentally has not altered its acts, policies and practices related to technology transfer, intellectual property and innovation, and indeed appears to have taken further unreasonable actions in recent months."

The Trump administration's new actions against China come in the wake of Canada's Dec 1 arrest on a US warrant of a senior executive for a major Chinese telecom equipment-maker, Huawei Technologies.

The executive, Meng Wanzhou, was accused of fraud and violating US sanctions against Iran, and US authorities are seeking her extradition.

The arrest, which sent stocks plunging last week, took place on the same day as Mr Trump's meeting with Mr Xi and was not coordinated with the White House.

Though national security adviser John Bolton was given advance notice, Mr Trump, in fact, did not learn about it until after his dinner with the Chinese President, administration officials have said.

Administration officials have made clear in recent weeks that even if a deal had been struck at the G-20 summit, that would not deter them from pursuing other actions against China in the national security realm.

The coming indictments are the latest salvo in a major Justice Department initiative launched last month to combat Chinese commercial spying.

Since September, federal prosecutors have brought charges in three intellectual property theft cases involving Chinese hackers and spies and one involving alleged economic espionage by a Chinese state-owned company.

The forthcoming indictments involve hackers whom US authorities have connected to the Ministry of State Security, China's intelligence and security agency, which has in recent years greatly increased its cyber intrusions into US targets as China's military has dialled back its activities.

In September 2015, Mr Xi came to Washington and, standing in the Rose Garden alongside President Barack Obama, pledged that his country would not seek to steal trade secrets and intellectual property from US companies to help Chinese industry.

And although the military curtailed its commercial hacking in 2016, Beijing's cyber spies - in particular those affiliated with the MSS - have stepped into the breach, government and industry officials said.

They have filched trade secrets related to semiconductors and jet engines and aircraft carriers.

Their targets align with emerging industries that are of strategic interest to Beijing, whose Made in China 2025 initiative aims to make the country the world leader in high-tech manufacturing.

The 2015 pledge came after news broke that the United States was set to slap sanctions on China for economic espionage and followed the 2014 indictments of five PLA officers accused of hacking major steel manufacturers to purloin trade secrets on behalf of Chinese state-owned enterprises.

In a November speech, Mr Peter Navarro, one of the president's closest trade advisers, was scathing about Mr Xi's broken promise.

"Yeah, well, that lasted about six months, and now the US government will tell you unequivocally that those hacks are back up, they're serious, and they're coming to get us," he said at the Centre for Strategic and International Studies.

In one campaign dating to 2014, which private sector analysts dubbed Operation Cloud Hopper, the Chinese hacked several companies that provide cyber security services to government agencies and major companies, analysts said. The government was concerned that the Chinese could use their access for espionage.

The indictments expected this week will target these Ministry of State Security hackers, also known as APT10, said individuals familiar with the matter. The Wall Street Journal first reported the pending indictments, which had been expected for weeks.

The administration's complaints about China extend well beyond commercial misdeeds.

In an October speech, Vice-President Pence laid out a broad indictment of Chinese ambitions ranging from "Big Brother" surveillance of its citizens to a military buildup aimed at evicting the US navy from the western Pacific.

Mr Trump and Mr Pence also have accused China of interfering in the midterm elections, though they have yet to outline their evidence.

Even as the United States and China prepare for fresh talks aimed at resolving their trade conflict by March 1, the President is pushing ahead to confront Beijing on other fronts.

The administration is scrutinising more closely proposed Chinese investments in the US and drafting regulations for some of the most sweeping limits on technology exports since the end of the Cold War.