China Stealing U.S. Computer Data, Says Commission

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China, meanwhile, steadfastly denies engaging in any cyber-espionage or attempting to use cyberspace for military advantage. China's Xinhua News Agency quoted Foreign Ministry spokesman Qin Gang on Nov. 21 as calling the commission's report "unworthy of rebuttal." Qin said the commission "always sees China through distorted color spectacles, and intentionally creates obstacles for China-U.S. cooperation" by "smearing China deliberately and misleading the general public."

China Needs Natural Resources, Too

While the Chinese government had no immediate response to a BusinessWeek request for comment, Wang Baodong, a spokesman for the Chinese Embassy in Washington, had earlier said about the magazine's stories: "China will never do anything to harm the sovereignty or security of other countries. The Chinese government has never employed, nor will it employ, so-called civilian hackers in collecting information or intelligence of other countries."

The U.S. commission predicted that China's cyber-activities "quite possibly will be exacerbated by China's growing need for natural resources to support its population and economy that it cannot obtain domestically. The United States should watch these trends closely and act to protect its interests."

Specifically, the commission urged Congress to spend more money to protect the nation's critical computer systems, and to monitor intrusions from abroad. It also recommends that Congress "assess the security and integrity of the supply chain for computer equipment" used in government and contractor networks, and spend more to buy "from trustworthy sources."

Another worry: the global supply chain for telecommunications items and electronic components manufactured in China. "At least in theory, this equipment is vulnerable to tampering by Chinese security services, such as implanting malicious code that could be remotely activated on command and place U.S. systems or the data they contain at risk of destruction or manipulation," the report said. It cited the Oct. 13 Dangerous Fakes BusinessWeek cover story that described how hazardous counterfeits are ending up in U.S. military planes and other weapon systems. The commission pointed to a recent incident in which hundreds of counterfeit routers made in China were discovered in active use throughout the Defense Dept.

Epstein is a correspondent in BusinessWeek's Washington bureau.