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US Tech Firms Weigh Benefits, Costs of Business With China

Chinese President Xi Jinping speaks Tuesday, Sept. 22, 2015, at a banquet in Seattle. Xi was in Seattle on his way to Washington, D.C., for a White House state dinner on Friday.
Chinese President Xi Jinping speaks Tuesday, Sept. 22, 2015, at a banquet in Seattle. Xi was in Seattle on his way to Washington, D.C., for a White House state dinner on Friday.

When China’s President Xi Jinping meets today with President Barack Obama in Washington to begin several days of high-level discussions, cybersecurity and corporate data theft are expected to be among the most contentious issues addressed.

Tensions between the U.S. and China have been on the rise over hacking allegations for more than a year, with U.S. officials blaming China for a series of massive, high-profile data breaches, such as occurred at the Office of Personnel and Management earlier this year.

Beijing has repeatedly denied any involvement with the hacking attacks, responding in turn that it has been the victim of data theft from hackers in the U.S.

Speaking Tuesday in Seattle, Xi promised closer cooperation with Washington on cybersecurity matters.

“Commercial cybertheft and hacking against government networks are crimes that must be punished in accordance with the law and relevant international treaties,” Xi said at a banquet with U.S. business leaders. “The Chinese government will not ... engage in commercial theft or encourage or support such attempts by anyone.”

His comments, however, came at the same time as the release of a report specifically tying elements of China’s People’s Liberation Army to a series of hacks and data thefts that targeted governments in Southeast Asia.

The report, “Project CameraShy,” was published by ThreatConnect, a cyberintelligence firm based outside Washington. The report’s authors traced a pattern of cyberattacks across the region to the southern Chinese city of Kunming, and specifically Ge Xing, a member of the PLA living in Kunming and associated with its cyberoperations.


Even without that report, many analysts have said that Beijing has a long way to go before U.S. officials will consider them a trusted partner in the cybersphere.

Perhaps sensing that, before coming to the U.S., Xi wrote in a Wall Street Journal op-ed of his government’s commitment to building greater trust and cooperation between the two nations in both the public and private spheres.

“Together, China and the United States account for one-third of the world economy, one-fourth of the global population and one-fifth of global trade,” Xi wrote. “If two big countries like ours do not cooperate with each other, just imagine what will happen to the world.”

While in Seattle, Xi met with the leaders of Facebook, Amazon, Apple, IBM and other tech industry giants who told him of the many challenges of doing business with China, such as the mandatory sharing of proprietary technology and limits on free expression online.

“China is certainly not a friendly nation,” said Kevin Newmeyer, a fellow at the National Cybersecurity Institute at the Washington center of Excelsior College.

“If you’re looking at a market of more than a billion people, that’s one place you definitely want to look. The reason these companies are interested in China is the sheer size of its market. The challenge for many U.S. companies working in China is it’s a controlled market. Are the Chinese going to steal or reverse-engineer your technology? That’s a real possibility.”

The Obama administration reportedly has backed off plans to sanction certain Chinese individuals or firms for the cybertheft of sensitive corporate data and intellectual property, at least for the moment. But Newmeyer said that if U.S. officials don’t see any lessening of Chinese hacking, those sanction plans may come back.

“What you’re trying to deter is future behavior,” Newmeyer told VOA. “It’s the classic deterrence theory going back to the Cold War: We have nukes and they have nukes, and that deters each other from using them. We’re trying to find ways to do cyberdeterrence using different tools, such as economics.”

China has long controlled how foreign-owned tech companies can operate within China, as well as tightly censoring what can be said online. Newmeyer said that suggests that the Chinese view “cybersecurity” in a very different light than those in the West do.

“If you look at cybersecurity in the West, you’re talking about threats to networks, data breaches, those kinds of things,” he said. “But the Chinese, in their public declarations, often speak of a concept called 'information security.' They’re looking more at the content of what is said, rather than the security of data.

“It’s not a free ride. China is a big market. You can make money, but you can also lose the house if you’re not careful.”

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    Doug Bernard

    Doug Bernard covers cyber-issues for VOA, focusing on Internet privacy, security and censorship circumvention. Previously he edited VOA’s “Digital Frontiers” blog, produced the “Daily Download” webcast and hosted “Talk to America”, for which he won the International Presenter of the Year award from the Association for International Broadcasting. He began his career at Michigan Public Radio, and has contributed to "The New York Times," the "Christian Science Monitor," SPIN and NPR, among others. You can follow him @dfrontiers.