Cyber spying? China points finger at US

Rising rivalry: A four-part series on US-China tensions

The recent flare-up in tensions in the Pacific has raised new doubts about America and China’s ability to peacefully coexist as both set their sights on Asia’s booming potential.

On a range of issues — from territorial claims to business practices, economic policies to the environment — the two countries’ struggle to find common ground is all but certain to dominate the headlines for years to come.

Staff writer Julian Pecquet visited China for 10 days in October at the invitation of the China-United States Exchange Foundation, a Hong Kong-based nonprofit that funds visits by lawmakers, journalists and others. He found that Beijing’s suspicions about the great power across the Pacific mirrored those in Washington, DC.

SHANGHAI — Congress is doubling down on its criticism of alleged Chinese cyber attacks despite recent revelations that the U.S. is engaged in massive spying of its own.

The tough line enjoys rare bipartisan support in divided Washington, culminating in congressional pressure on U.S. companies to shun business with Chinese telecommunications firms. The accusations have infuriated China, which counters that the U.S. is overstating Beijing’s role and unfairly punishing Chinese companies.

“If you think about what China is doing in cyber espionage, it will curl everyone’s toes,” House Intelligence Committee Chairman Mike Rogers (R-Mich.) said at a defense symposium in Alabama this summer. “It is the greatest national security threat we face that we are not prepared for.”

The former FBI agent has taken the lead on cybersecurity and introduced legislation with his panel’s top Democrat, Rep. Dutch Ruppersberger (Md.), which would allow the federal government to share classified information to help private U.S. companies protect themselves. They maintain that revelations of massive U.S. spying by former National Security Agency contractor Edward Snowden aren’t comparable to Chinese theft of private-sector trade secrets.

Chinese sources say economic espionage will only increase as economic exchanges between the U.S. and China grow, but that Beijing isn’t to blame.

“You don’t have the evidence that it is instigated and organized by the Chinese government,” said a senior researcher at the Shanghai Institutes for International Studies, a think-tank that advises the Chinese government. “We should not equate incidents with the Chinese government’s intentional organizational.”

The source accused U.S. business groups of fear-mongering. He said the Chinese are the “victims” of cyber-espionage rather than its instigators.

“Cybersecurity is security with a high content of size and technology. Americans are much, much ahead of China,” he said. “This institute is always being attacked by American espionage.”

The White House has stepped up its criticism despite its reluctance to confront China, which has the world’s second-largest economy. President Obama made cybersecurity a priority when he met in June with Chinese leader Xi Jinping for an unprecedented two-day meeting in Sunnylands, Calif..

“The issue of cybersecurity and the need for rules and common approaches to cybersecurity are going to be increasingly important as part of bilateral relationships and multilateral relationships,” Obama said at the time. “It’s critical, as two of the largest economies and military powers in the world, that China and the United States arrive at a firm understanding of how we work together on these issues.”

The rhetoric from Congress has been more hawkish.

Rogers and Ruppersberger unveiled a report last year accusing Chinese telecommunications giant Huawei of being a potential threat to U.S. national security and private information such as medical and financial records. The report urged the federal government to block acquisitions and mergers involving Huawei and called on U.S. network providers not to do business with the company.

The report said Huawei has helped the Chinese military modernize its telecommunications and raised concerns with company founder and president Ren Zhengfei, a retired major of the People’s Liberation Army. It also accused the 26-year-old privately held company of being opaque about its corporate structure.

The congressional speculation, Huawei’s top spokesman retorts, amounts to little more than “sinophobia.”

“The main reason we would put the challenges we face in the U.S. down to is trade protectionism,” said Vice President Scott Sykes, the company’s Shenzhen-based head of international media affairs. “I think that’s the main, No. 1 reason. You could add on to that geopolitics: The fact is there’s a strong anti-China rhetoric coming from Washington right now.”

China skeptics acknowledge that the report did not reveal any specific security violations by Huawei.

“The report itself … is incredibly thin on any real concrete claims about Huawei,” said Adam Segal, a senior fellow for China Studies at the Council on Foreign Relations who specializes in cyberconflict and cybersecurity. “Much of the criticism of Huawei you could have made about any telecom company — they have global supply chains, they’re susceptible to bribery, someone could insert malware somewhere along the line.”

Sykes said it would make no sense for the $35 billion company with a clean record in 140 countries to put its business in jeopardy to help the Chinese government. He said Huawei’s competitors also use many Chinese-made components and that everyone is vulnerable to hacking.

“If we get a call from Beijing, we will refuse,” Sykes said. “So you could ask me, ‘Why?’ Well the reason is, that would be corporate suicide. We would lose 70 percent of our business [from outside China] like that, overnight.”

Despite its rhetorical push back, the company isn’t challenging U.S. restrictions.

“If Huawei gets in the middle of U.S.-China relations … it’s not worth it,” Ren told journalists in a rare interview in France last month. “Therefore, we have decided to exit the U.S. market, and not stay in the middle.”

Huawei however says it will continue selling cell phones and pursue other activities in the U.S. that haven’t attracted as much concern from lawmakers and regulators.

Bill Plummer, a U.S.-based spokesman for the company, said Snowden’s revelations have created momentum for telecom companies to work together on standards and third-party verification. Great Britain is already monitoring Huawei’s equipment and software in exchange for letting the company operate in the United Kingdom.

“In the wake of the Snowden revelations,” he said, “there’s a universal deficit of trust in information.”

But Segal said there’s little appetite for letting Huawei gain a bigger footprint in the U.S. He said the intelligence community has too many concerns — even if they can’t be shared publicly.

“I don’t think it is tit-for-tat,” he said. “Here I just have to rely on people that I know in the intelligence community that they have their reasons. It’s not particularly satisfactory — even for me — but that’s just what I consistently hear.”

Timeline

1978: Chinese leader Deng Xiao Ping picks Shenzhen, just north of Hong Kong, as test site for capitalist reforms

1987: Huawei founded in Shenzhen by ex-military officer Ren Zhengfei as an employee-owned private sales agent for Hong Kong technology

1990: Huawei builds its first own product

1997: First overseas contract, with Hutchison telecom firm in Hong Kong

2001: First U.S. operations

2005: Overseas revenue tops Chinese revenue for first time

2006: Huawei invents SingleRAN technology that eliminates telephonic operators’ need to rebuild network with every new generation of wireless technology; sold to 140 operators around the world

October, 2012: House intelligence panel releases report recommending U.S. government, phone carriers not do business with Huawei

Nov. 25, 2013: Company founder Ren Zhengfei says he plans to “exit” the U.S. market, citing government suspicions