US indicts China's PLA hackers: Productive, or desperate?

The Obama administration, clearly frustrated at the extent of Chinese industrial espionage, has indicted five military officers for stealing trade secrets. Does this step make sense?

After years of private and not-so-private complaints about the scale of Chinese government espionage against American companies, the Obama administration decided words were not enough. Today it released indictments of five People's Liberation Army officers for a long-running conspiracy that targeted an array of US companies.

Will the indictments accomplish much? It's hard to see how. Extradition from China is out of the question, and Chinese retaliation against US business interests in the country is possible. (Direct investment in China by American companies rose 7 percent, to $3.5 billion, last year.) The US government's intention appears to be to shame China into changing its ways, though it's not clear why these indictments will accomplish more than the shaming efforts the US has made to date.

A cornerstone of the Chinese government's race to help its companies, particularly government-linked ones, catch up to foreign peers has been to steal manufacturing and other secrets. That's something the country sees as crucial for its prosperity and development. Could a US government wrist slap really change that view?

Nevertheless, it's an unprecedented step and as with most unprecedented things, could prove to have surprising consequences.  

The reality of Chinese espionage against US business interests has long been known and acknowledged. The National Counterintelligence Executive's 2011 report on economic espionage singled out China as the most persistent country in stealing US trade and defense data, noting that of seven cases brought under the US Economic Espionage Act in 2010, six were linked to the People's Republic. Russia came in as the No. 2 source for economic espionage.

One thing that appears to have changed, if the indictments released today are to be believed, is that US counterintelligence efforts against attempted data thefts have improved. The 2011 report cited suspicions that the Chinese government was behind an "onslaught" of attempted hacks from IP addresses in China but "the [intelligence community] has not been able to attribute may of these private sector data breaches to a state sponsor."

The report concluded:

The IC [intelligence community] anticipates that China and Russia will remain aggressive and capable collectors of sensitive US economic information and technologies, particularly in cyberspace. Both will almost certainly continue to deploy significant resources and a wide array of tactics to acquire this information from US sources, motivated by the desire to achieve economic, strategic, and military parity with the United States.

Now, the US is signaling it has far more solid information. The FBI press release on the indictments reads:

From 2006-2014, defendants Wang Dong, Sun Kailiang, Wen Xinyu, Huang Zhenyu, and Gu Chunhui, who were officers in Unit 61398 of the Third Department of the Chinese People’s Liberation Army, were allegedly involved in a hacking conspiracy that targeted Westinghouse Electric Co.; U.S. subsidiaries of SolarWorld AG; United States Steel Corp.; Allegheny Technologies Inc.; the United Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied Industrial and Service Workers International Union; and Alcoa, Inc.

By making the indictments the US is also tacitly acknowledging it has developed better tools for monitoring electronic espionage by China. For instance in the wanted poster for Sun Kailaing, the FBI writes (emphasis mine): "Sun, who held the rank of captain during the early stages of the investigation, was observed both sending malicious e-mails and controlling victim computers." 

The US charges today were dismissed as the height of hypocrisy from the usual corners, and by China itself. The US says it doesn't spy to steal trade secrets and pass them on to its companies, and none of the stolen NSA documents that Edward Snowden has filtered through Glenn Greenwald and others have contradicted that assertion. But that's a distinction without a difference for many, particularly since the US has used snooping to gain advantage in government-to-government trade talks, which could at least indirectly help US companies.

Perhaps the greatest utility for Obama in today's indictments is in the arena of domestic politics – a rebuke to members of Congress that say he's a do-nothing leader too timid to take on countries like China. Of course, the Obama administration presents it differently. Attorney General Eric Holder went so far as to say the indictments were a "groundbreaking step" toward ending corporate espionage.

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.’

This 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. This case should serve as a wake-up call to the seriousness of the ongoing cyberthreat. These criminal charges represent a groundbreaking step forward in addressing that threat.

The indictment makes clear that state actors who engage in economic espionage, even over the Internet from faraway offices in Shanghai, will be exposed for their criminal conduct and sought for apprehension and prosecution in an American court of law.

Mr. Holder's take on the matter is likely to prove wildly optimistic. Time will tell.