On September 10 2015, Young Professionals in Foreign Policy NY hosted a talk on the history of Chinese cyber and economic espionage in the United States with Dr. Greg Austin, professorial fellow at the East-West Institute. Dr. Austin discussed the political and economic consequences that have resulted from economic and cyber espionage, and explored the challenges that both the Chinese and American governments are facing in confronting these practices. Dr. Austin skillfully took those in attendance on an exciting journey into a world that is normally hidden in clandestine activity, but whose activities are having a greater impact in society writ large. Dr. Austin’s talk challenged attendees to rethink the popular narrative on China’s espionage activities, and the United States’ approach to solving the problem.
Over the past several years, massive data breaches of credit card information from the companies Target and Home Depot, exfiltration of customer information from JP Morgan Chase and the U.S. Office of Personnel Management, and the revelations by former NSA contractor Edward Snowden, have exposed the global public to the sometimes ugly side of the digititzation. Simultaneously, these events demonstrated the enormous reach that individuals and governments have to infiltrate the lives of citizens, and the affairs of private businesses, and other governments.
Within the United States, no country has received more blame for pilfering information from private companies than the People’s Republic of China. Theft of intellectual property and government secrets via the internet first made its appearance as threat by the United States government more than ten years ago. However, as Dr. Austin noted, it was not until 2007 that the Office of the National Counterintelligence Executive (NCIX) came down on the Chinese hard, labeling this activity as a major threat to the United States’ National Security.
Since then, accusations and actions taken toward China have only increased. Between 2009 and 2011, the NCIX elevated China to the most persistent cyber collector of intelligence from the United States, “allud[ing] to an onslaught of China-related Cyber attacks against the country. In 2013 the United States issued unprecedented public demands on China to “take serious steps to investigate and put a stop to… targeted theft of confidential business information and proprietary technologies [from US companies] through cyber intrusions emanating from China on an unprecedented scale,” labeling this cyber espionage as “the greatest illicit transfer of wealth in human history.” In 2014 the United States indicted five officers from China’s People’s Liberation Army (PLA), claiming that the individuals stole trade secrets from Westinghouse. Even further, it is said that, next to environmental policy, no other issue dominated President Barak Obama’s recent State Visit with Chinese President Xi Jinping than the issue of cyber security.
Dr Austin posed the question, “Are things really as bad as the US intelligence community has claimed?” Is China's economic espionage a major threat to American corporations? Dr. Austin suggested, perhaps not. While it is undeniable that major U.S. corporations are being hacked, and that their information is being stolen, it is much harder to prove that Chinese Businesses are benefiting from the data being retrieved. Save for a handful of outlier cases (for example, where an American paint company had a formula stolen and replicated by a Chinese competitor), the number of cases where American firms have experience direct economic loss are few and far between.
As Dr. Austin noted, there are several reasons for this: While not an absolute barrier, the sheer amount of information involved, and the work needed to convert this information into actionable intelligence alone, is a huge challenge. Correctly locating and translating data and information within the corporate data farms is another big hurdle. Further, identifying actionable intelligence from the information or replicating itis another near-impossible task. Imagining that Chinese intelligence is able to do these sorts of operations with enough consistency, and with enough scale to have a measurable impact on the American economy is almost unfathomable.
In addition, there is a legal barrier that challenges the idea that U.S. corporations have been hurt by information theft. Dr. Austin noted that international treaties on the theft of intellectual property exist, to which both China and the United States are party. These treaties allow American companies to sue Chinese organizations for the theft of their intellectual property. More often than not, these suits result in out of court settlements, often with large payouts.
The reaction to Chinese cyber espionage has been at best a mixed bag. In his talk, Dr. Austin noted that American media outlets, politicians, and corporations have taken advantage of the current climate and started a “China bashing offensive” that may yield harm than good. One example Dr. Austin highlighted is the increasing rhetoric that China is a ‘cheater nation.’ By suggesting that all of the gains that Chinese companies have made over the past several years are due to their theft of intellectual property from American firms, the United States labels China---and by extension all of its citizens and companies-- as incapable of invention without theft. As Dr. Austin pointed out, not only is this untrue, but it also enrages Chinese citizens by insulting their abilities. This problem is exacerbated by media outlets, which have often been more than willing to trumpet these stories. But the rhetoric is counterproductive, complicating relations between the two countries. Further, Dr. Austin stated, such stories build outrage, prompting American citizens to demand punishment of Chinese actors—perhaps even without considering the U.S. intelligence community’s actions.
Despite all of the bad policy that has come out of the current environment, there are major accomplishments that have been generated as well. Dr. Austin highlighted three: These issues have proven the need for highly secure computing, and in turn have mobilized the U.S. technology industry around the need for greater cyber security. Major corporations, from Apple to Goldman Sachs, have all made dedicated pledges to protecting their information. The backlash against the Chinese government, whether warranted or not, has driven a wedge between Chinese leaders and their security agencies, helping to move political power away from the military. And finally, provided escalation can be prevented, the fact that crisis forces a resolution, means that because the problem has been recognized by all affected parties, suggesting that a solution will eventually be found.
Dr. Austin provided a insightful and interesting orientation for those learning about U.S-China relations in the cyber space and its impact on foreign policy, as well as a thoughtful discussion for those already familiar to explore the issue with a new lens, and through an extremely respected mind. Dr. Austin stressed that cyber security is an issue that is truly international, concluding that “the United States cannot expect security in cyberspace if it is not willing to produce equal cyber security in cyberspace [for everyone].”
Nicholas Brown is Associate Director of Communications for YPFP NY.