Bloomberg News

U.S. Undersecretary to Discuss Hacking With Chinese Officials

April 06, 2013

U.S. Undersecretary of State Robert Hormats said he will discuss cybersecurity with his Chinese counterparts during his visit to the Asian nation, describing the issue as “troublesome.”

“We need to have a serious dialogue,” Hormats told reporters yesterday in the southern Chinese province of Hainan where he is attending the Boao Forum for Asia. “It is a problem that needs to be addressed.”

U.S. intelligence agencies and security firms such as Mandiant Corp. have traced attacks on American corporate networks to China, pushing the issue to the top of President Barack Obama’s agenda. He told Chinese President Xi Jinping in a telephone conversation last month that cybersecurity would be a key part of talks between the two nations while U.S. Treasury Secretary Jacob. J. Lew raised the issue with Xi on March 19 during a visit to Beijing.

“It’s a serious problem that requires serious cooperation between our two countries at very high levels,” Hormats said. Cybersecurity “weakens confidence among Americans, particularly in the business community, and our relationship, and it causes mistrust,” he said.

He declined to name the Chinese officials he will be meeting during his visit or what proposals he will put forward to address the problem, which he said is getting worse. Hormats, who is undersecretary of state for economic growth, is in China from April 5-10 to attend the Boao Forum and an Internet industry forum, according to a schedule published on the website of the U.S. State Department.

‘Extremely Negative’

China has said it opposes hacking and that it is a victim of cyber attacks. Premier Li Keqiang said last month at his first press briefing after taking office that the U.S. should stop making “groundless accusations.”

Charlene Barshefsky, who served as U.S. trade representative from 1997 to 2001, said cyber attacks against American companies allegedly emanating from China have had an “extremely negative” effect on relations between the world’s two biggest economies.

“I think this is perhaps the most significant economic issue between the U.S. and China at the current time,” Barshefsky said in an interview while attending the Boao Forum. “It has extremely negative spillover effects, particularly with the development of strategic trust, so I do think that the U.S. and China have to come to an agreement on the proper bounds of cyber activity.”

Cyber attacks moved past terrorism to take the top place in the U.S. intelligence community’s annual list of global threats, according to a report presented to the Senate intelligence committee last month.

Data Theft

In an annual survey by the American Chamber of Commerce in China released last month, more than a quarter of respondents said they had been the victim of data theft and 72 percent said enforcement of intellectual property rights was either ineffective or totally ineffective, up from 59 percent in 2012.

Barshefsky, a senior international partner at Washington law firm Wilmer Cutler Pickering Hale, said she would encourage companies to be “exceptionally skeptical” about the protection of intellectual property rights in China and to hold “very key” elements outside the country. She said she would encourage companies to segregate employees and what information they have access to.

The threat from cyber attacks is leading to mistrust and could undermine confidence in China and the U.S. to foster collaboration around technology and energy, Myron Brilliant, senior vice president for international affairs at the Washington-based U.S. Chamber of Commerce, said in an interview at the Boao Forum yesterday.

“Ultimately it’s up to the Chinese government at the central level to say this is a priority issue for them and to crack down on cyber theft,” he said.

To contact Bloomberg News staff for this story: Liza Lin in Shanghai at llin15@bloomberg.net; Stephen Engle in Beijing at sengle1@bloomberg.net

To contact the editor responsible for this story: John Liu at jliu42@bloomberg.net


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