Report: Chinese Cyber Espionage ‘Single Greatest Threat to U.S. Technology’

A report published on Thursday by the Foundation for Defense of Democracies warns Chinese cyberespionage is the “single greatest threat to U.S. technology,” siphoning over $300 billion per year from the U.S. economy.

“China is engaged in wide-ranging cyber intrusions and network exploitations causing massive damage to U.S. and other foreign firms annually. By advantaging Chinese enterprises at the expense of competitors from the United States and its allies and partners, these attacks cumulatively degrade U.S. national security,” said the report.

The Foundation attributed up to 80 percent of cross-border intellectual property theft worldwide, and over 90 percent of economic cyberespionage in the United States, to Chinese hackers. This rampant theft has allowed China’s state-run firms to steal what they need to erase the competitive advantages of pioneering American companies and “erode the United States’ long-term position as a world leader in innovation and competitiveness,” including leadership in technology with military applications.

The report also describes China using cyberespionage as an instrument of “economic coercion,” citing the example of “significant cyber attacks from China” last year against the Lotte Group, the South Korean conglomerate that agreed to host America’s THAAD anti-missile system on its property. The Chinese government also ceased e-commerce cooperation with Lotte and shut down almost all of its retail locations in China on flimsy pretexts.

China’s economic and cyber attacks on South Korea over THAAD deployment chopped 0.4 percent from South Korea’s GDP according to an estimate cited in the report, “providing a lesson to other countries that China can use coercive and cyber-enabled economic measures to shape their foreign policy.”

Corporate threat manager Priscilla Moriuchi gave Newsweek another example of how China uses cyber espionage against foreign interests, saying, “After a company makes overtures to China, about a joint venture or investment, you would see hackers targeting the server or executive to see what they thought of the meeting.”

According to the FBI, China maintains a force of over 30,000 military hackers supported by 150,000 private-sector experts tasked with stealing American military secrets and technological information. China’s military hackers generally take the lead on offensive cyber operations, then loop in “voluntary civilian participants who can conduct network operations after being mobilized and organized.”

Homeland Security Secretary Kirstjen Nielsen said on Wednesday that her agency faces cyber threats on the scale of the September 11 terrorist attack.

“DHS was founded fifteen years ago to prevent another 9/11. I believe an attack of that magnitude is now more likely to reach us online than on an airplane. Our digital lives are in danger like never before,” said Nielsen, citing interference with America’s computerized election systems and the possibility of terrorist drone attacks against civilian crowds as especially troubling threats.

Nielsen wants Congress to elevate the cybersecurity division of Homeland Security to an agency on the level of U.S. Customs and Border Protect to face threats “at the highest levels since the Cold War.”

“The pace of innovation, our hyperconnectivity and our digital dependence have opened cracks in our defenses, creating new opportunities and new vectors through which these nefarious actors can strike us. The result is a world where threats are more numerous, more widely distributed, highly networked, increasingly adaptive, and incredibly difficult to root out,” she warned.

The threat extends to America’s allies as well. Reuters reported on Wednesday that German intelligence is worried about “cyber bombs,” malicious code planted in companies by bad actors like China and Russia to be activated at a crucial moment in the future.

The Germans are also worried that China is making big investments in key German high-tech firms to “buy information for its own technical progress, or to gain a position in specific areas that will make it impossible for others to continue developments there.”

As the Foundation for the Defense of Democracies report noted, China is adept at using cyberespionage to grease the wheels of such economic strategies, calling on its hackers to weaken corporate takeover targets, spy on their business decisions, and steal their technology outright.