US Files First Charges on Hacking Infuriating China

U.S. Attorney General Eric Holder announces indictments against Chinese military hackers on cyber-espionage as David Hickton, U.S. attorney for Western District of Pennsylvania listens. A Pennsylvania grand jury has indicted five Chinese military hackers for economic espionage and other offenses directed at the U.S. nuclear power, metals and solar products industries. (Photo by Alex Wong/Getty Images)

US Files First Charges on Hacking, Infuriating China

The U.S. has charged five members of a Chinese military unit with hacking U.S. companies for trade secrets, infuriating Beijing, which suspended cooperation on cyber issues.

WASHINGTON -- The United States on Monday charged five members of a shadowy Chinese military unit for allegedly hacking U.S. companies for trade secrets, infuriating Beijing, which suspended cooperation on cyber issues.

Hacking has long been a major sticking point in relations between the world's two largest economies, but Washington's move marked a major escalation in the dispute.

In the first-ever prosecution of state actors over cyber-espionage, a federal grand jury indicted the five on charges that they broke into U.S. computers to benefit Chinese state-owned companies, leading to job losses in the United States in steel, solar and other industries.

Attorney General Eric Holder called on China to hand over the five men for trial in the steel city of Pittsburgh and said the United States would use "all the means that are available to us" should Beijing refuse.

President Barack Obama's administration "will not tolerate actions by any nation that seek to illegally sabotage American companies and undermine the integrity of fair competition," Holder told reporters.

"This case should serve as a wake-up call to the seriousness of the ongoing cyber threat," Holder said.

The grand jury indicted each of the five --Wang Dong, Sun Kailiang, Wen Xinyu, Huang Zhenyu and Gu Chunhui -- on 31 counts, which each carry penalties of up to 15 years in prison.

Prosecutors said that the five officers belonged to Unit 61398 of the People's Liberation Army. A report last year by security firm Mandiant said that the unit had thousands of workers operating out of a nondescript 12-story building on the outskirts of Shanghai where they pilfer intellectual property and government secrets.

China Calls Charges 'Absurd'

China swiftly responded, calling the U.S. indictment "ungrounded and absurd" and saying it "grossly violates the basic norms governing international relations and jeopardizes China-U.S. cooperation and mutual trust."

"Given the lack of sincerity on the part of the U.S. to solve issues related to cyber security through dialogue and cooperation, China has decided to suspend activities of the China-U.S. Cyber Working Group," foreign ministry spokesman Qin Gang said in a statement.

The working group was set up last year during a visit to Beijing by U.S. Secretary of State John Kerry as a way to talk through rising tensions on cyber-security. The group met in July in Washington.

Obama has directly raised hacking concerns with Chinese President Xi Jinping, making it a major priority despite the wide range of issues confronting the two powers, from North Korea to climate change to Beijing's tensions with its neighbors.

China has in the past accused the United States of hypocrisy as Washington conducts sweeping surveillance around the world.

Leaks by former government contractor Edward Snowden have alleged widespread U.S. snooping in China, including surveillance of telecom giant Huawei, whose own attempts to penetrate the U.S. market have been blocked by lawmakers' concerns on national security.

The United States has invested heavily in cyber-warfare, with the Pentagon setting up a dedicated command, and is widely suspected to have worked with Israel to infect Iran's nuclear program.

Holder insisted that the U.S. activities were different, saying that all nations gathered intelligence but that China was "using intelligence tools to gain commercial advantage."

Loss of US Jobs

U.S. officials said they investigated the unit for several years and believed that the hacking had contributed to substantial job and profit losses in the United States.

Hackers stole secret designs from Westinghouse, the U.S. nuclear plant giant owned by Japan's Toshiba (IW 1000/57), just as it was negotiating with a Chinese state-owned company, said John Carlin, the assistant attorney general for national security.

Carlin said hackers also stole pricing information from the computers of company SolarWorld to help Chinese competitors in the solar energy sector, in which China has invested heavily.

"It is not conduct that most responsible nations within the global economic community would tolerate," Carlin said.

The indictment said that victims also included industry titans Alcoa (IW 500/53) and U.S. Steel (IW 500/62), as well as the United Steelworkers labor union.

Officials declined to put a financial cost on the hacking. A report led by former U.S. officials estimated last year that cyber espionage -- overwhelmingly by China -- was costing the U.S. economy more than $300 billion each year, equivalent to what the United States sells each year to Asia.

Copyright Agence France-Presse, 2014

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