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Cyber espionage and the new Cold War of US-China relations

The members of China’s military charged over cyber espionage by the US will never see American justice, but the case does break new ground in a fractious US-China relationship increasingly characterised…

The stoush between China and the US over spying is becoming toxic. Shutterstock

The members of China’s military charged over cyber espionage by the US will never see American justice, but the case does break new ground in a fractious US-China relationship increasingly characterised by mutual accusations of foul play. What does this mean for relations between the US and China? Might other countries follow this precedent with their own legal actions?

The US and China have been wrangling over this issue for years. Congressional committees complain about theft of US intellectual property by Chinese firms like Huawei and portray them as proxies of the Chinese government.

Post-Snowden, China has retaliated by drawing attention to leaked documents suggesting the US National Security Agency regularly hacks Chinese networks.

The White House indicates that “cyber issues” are central to Sino-American relations, although this is a relationship so soured that two recent authors describe the effects of “cyber” on bilateral relations as “toxic” and “poisonous”.

In February 2013, cyber security company Mandiant traced many alleged Chinese activities to a Shanghai industrial estate and specifically to People’s Liberation Army (PLA) Unit 61398 located there.

Mandiant claimed the unit was responsible for commercial cyber espionage against US interests, an accusation Beijing firmly rejected. The Obama administration hoped this “naming and shaming” tactic might force new Chinese President Xi to rein in the PLA or at least get them to be less brazen in their operations.

This message did not reach the PLA. After a brief lull, Unit 61398 was back in operation and five of its officials feature in the new indictments, charged with stealing proprietary information from American companies engaged with state-owned Chinese businesses. The stark accusation is: these individuals are part of a state-led conspiracy to steal intellectual property from American companies with whom China has legitimate business. This material includes internal email exchanges and “trade secrets related to technical specifications for nuclear plant designs”.

The real reason for America’s anger

What infuriates the US is not the use of computer networks for secret espionage ― after the Edward Snowden spying revelations it can no longer deny the extensive nature of its own national intelligence activities ― but what it sees as the subversion of the rules of free enterprise. This spat is about commercial espionage and specifically US enterprise not ceding strategic advantage to Chinese competitors. The US wants a level commercial “playing field” and it perceives Chinese actions as inimical to that.

China has denied the charges as “made-up” and reasserted it does not engage in such activities. The US says it will issue further indictments against individuals suspected of conducting commercial cyber espionage. Given US prosecutors know the chance of prosecuting PLA officials in person is effectively nil, what function do these indictments serve and what happens next to US-China relations?

Sending a message

The indictments may be symbolic because they will not result in prosecutions, but this does not mean they are meaningless. They put pressure on Beijing to be seen doing something constructive, rather than making generic denials of illegal activity. They also signal that China must do so or risk as-yet unspecified consequences. This is perhaps not such an empty threat given the details of the indictments also communicate strongly to the Chinese that US intelligence has good operational knowledge of the PLA’s networks and even individual officials.

Will this spark similar legal moves by others? US allies like the UK and Australia have their own complaints about Chinese cyber espionage but they might prefer the US takes the diplomatic flak rather than commence their own rather less muscular legal challenges. Alternatively, the US might pressure them to do just that, to communicate to China that the international community is just as concerned about Chinese actions as they are.

How China responds is critical, not because it is necessarily at fault, but because in the diplomatic game Beijing must react to an escalatory gambit like this. Will it respond in kind, or might it switch to the sort of diplomatic tit-for-tat that characterised the Cold War?

If China decides, for example, to indict Keith Alexander, the former NSA director implicated in cyber operations against China, it will look petty and bereft of ideas. If history is any guide, however, we can expect China to claim the moral high ground while continuing much as before, which will enrage the Americans.

Each side accuses the other of avoiding constructive dialogue but neither has found a way of saving face so that such engagement might take place. This latest move makes it even less likely that the two sides can sit down together and China has already suspended a US-China internet working group, indicating a further chill in bilateral relations. The US and China need this mutual relationship to work but this latest development shows again how hard they both find it to manage. Your move, Mr President.