Wall Street Journal: "White House Readying Sanctions Plan Against Chinese Firms for Cybertheft"


WASHINGTON—The White House is preparing a menu of sanctions against Chinese state-owned enterprises and private companies that officials believe benefited from the cybertheft of U.S. corporate secrets, several people familiar with the matter said.

[ by Damian Paletta and Bob Davis | August 31, 2015 | WSJ ]

The White House hasn’t decided definitively to impose the sanctions, but the process is far along and involves advanced planning from multiple federal agencies, the people said.

They said officials expect to target about five companies, though that number could change. If sanctions are ultimately imposed, it could affect the ability of those firms to access U.S. financial markets and trade with American companies, and could even hamper the ability of their executives to travel to the United States.

The Obama administration has struggled in recent years to respond to the rising threat of cyberattacks against the federal government and American companies. Many of these attacks have been linked to Chinese hackers, U.S. officials and security experts allege, and the administration for months has debated how to react.

Sanctions would represent a notable escalation of the government response. The alleged Chinese actions present a particular diplomatic challenge because they can be widely damaging but are flatly denied by Beijing, and because it can be difficult to pinpoint which companies have benefited from particular hacking incidents.

Zhu Haiquan, a spokesman for the Chinese Embassy in Washington, said the Chinese government “firmly opposes and combats all forms of cyberattacks in accordance with law.”

“The Chinese side calls for all parties to seek a common solution through enhanced dialogue and cooperation,” he said. “Groundless speculation, hyping up or accusation is not helpful to solve the problem nor conducive to any party’s interests. As major Internet countries, both China and the U.S. share significant interests in cybersecurity. This should be a source of cooperation rather than confrontation for the two countries.”

The White House moves were first reported Monday by The Washington Post.

Any initial round of sanctions is likely to target only a handful of companies rather than a broad swath of the Chinese economy.

“Overall what we’re likely to see is something that is a shot across the bow, leaving ammunition to actually shoot down large chunks of Chinese industry if there isn’t a favorable response,” said Robert Knake, former director of cybersecurity policy at the White House’s National Security Council and now a senior fellow at the Council on Foreign Relations.

A senior administration official said the White House “is pursuing a comprehensive strategy” to fight cybertheft, including “diplomatic engagement, trade policy tools, law enforcement mechanisms and imposing sanctions on individuals or entities that engage in certain significant, malicious cyber-enabled activities.”

He wouldn’t disclose which companies or countries are being targeted, but multiple people familiar with the deliberations said the focus now is largely on China.

Hackers have stolen corporate secrets from numerous U.S. companies, including agricultural firms, defense contractors and technology companies. Business leaders complain that these thefts will create major competitiveness and trade problems for American firms if left unchecked.

“We have deep concerns about Chinese behavior in the area of economic espionage,” said Myron Brilliant, an executive vice president at the U.S. Chamber of Commerce. “The issue needs to be a high-level priority [for both governments]. They need to take concerted efforts to make sure such efforts are curtailed.”

A federal grand jury in 2014 indicted five Chinese military officials for allegedly stealing U.S. corporate secrets from firms including Westinghouse Electric and Alcoa Inc. The charges included identity theft and computer fraud. The indictments were seen as one of the U.S. government’s most aggressive public steps to combat Chinese cyberattacks to date, though the indicted officials haven’t faced trial.

Deciding how tough to make any sanctions “presents a difficult dilemma for the U.S. government,” said David Dollar, formerly the Treasury Department’s top representative in Beijing. “To really have teeth, they’ll have to sanction major companies. But that could lead to retaliation on the Chinese side.”

President Barack Obama will meet with Chinese President Xi Jinping in Washington in September on a range of issues, and the possibility of looming sanctions could affect those talks.

“It seems unlikely the U.S. government will make a decision before the meeting,” said Mr. Dollar, who is now a scholar at the Brookings Institution. Media attention to possible sanctions “may be creating an environment where they can negotiate some rules on cyberspace,” he added.

Several business and cybersecurity experts said that if the government does impose sanctions on Chinese companies, Beijing could respond with its own sanctions or other moves against U.S. firms.

“The one thing about the Chinese is that they always retaliate,” said Bill Reinsch, president of the National Foreign Trade Council. “Part of the puzzle is already to be prepared for that.”

Mr. Reinsch, a member of the U.S.-China Economic and Security Review Commission, which monitors the economic and security relationship between the two countries, added, “They’re good at figuring out what will cause pain and political pressure here.”

—William Mauldin contributed to this article.

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