WHITE HOUSE READYING SANCTIONS AGAINST CHINESE FIRMS FOR CYBERTHEFT

Wall Street Journal on August 31, 2015, reported that 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. Excerpts below:

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.

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.

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.

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.

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.

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.

Comment: Chinese theft of corporate secrets from US companies has been going on for years. The American sanction plan is limited but is hopefully a beginning that could result in extensive sanctions if the Chinese thefts continue. The West (not only the United States) needs a forward strategy in dealing with the growing geostrategic threat of China.

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