[House Hearing, 113 Congress]
[From the U.S. Government Publishing Office]
CHINESE HACKING: IMPACT ON HUMAN RIGHTS AND COMMERCIAL RULE OF LAW
CONGRESSIONAL-EXECUTIVE COMMISSION ON CHINA
ONE HUNDRED THIRTEENTH CONGRESS
JUNE 25, 2013
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CONGRESSIONAL-EXECUTIVE COMMISSION ON CHINA
LEGISLATIVE BRANCH COMMISSIONERS
SHERROD BROWN, Ohio, Chairman CHRIS SMITH, New Jersey,
MAX BAUCUS, Montana Cochairman
CARL LEVIN, Michigan FRANK WOLF, Virginia
DIANNE FEINSTEIN, California MARK MEADOWS, North Carolina
JEFF MERKLEY, Oregon ROBERT PITTENGER, North Carolina
TIM WALZ, Minnesota
MARCY KAPTUR, Ohio
MICHAEL HONDA, California
EXECUTIVE BRANCH COMMISSIONERS
SETH D. HARRIS, Department of Labor
FRANCISCO J. SANCHEZ, Department of Commerce
NISHA DESAI BISWAL, U.S. Agency for International Development
Lawrence T. Liu, Staff Director
Paul B. Protic, Deputy Staff Director
C O N T E N T S
Opening Statement of Hon. Sherrod Brown, a U.S. Senator from
Ohio; Chairman, Congressional-Executive Commission on China.... 1
Smith, Hon. Christopher H., a U.S. Representative from New
Jersey; Cochairman, Congressional-Executive Commission on China 3
Levin, Hon. Carl, a U.S. Senator from Michigan; Member,
Congressional-Executive Commission on China.................... 5
Pittenger, Hon. Robert, a U.S. Representative from North
Carolina; Member, Congressional-Executive Commission on China.. 6
Meadows, Hon. Mark, a U.S. Representative from North Carolina;
Member, Congressional-Executive Commission on China............ 1
Gorton, Hon. Slade, former U.S. Senator from Washington State;
Member, Commission on the Theft of American Intellectual
Mulvenon, James, Vice-President, Intelligence Division, Director,
Center for Intelligence Research and Analysis, Defense Group,
Wen, Yunchao (Online Alias ``Bei Feng''), Independent Journalist
and Blogger, Visiting Scholar, Institute for the Study of Human
Rights, Columbia University.................................... 19
Greve, Louisa, Vice President for Asia, Middle East, and North
Africa, and Global Programs, National Endowment for Democracy.. 21
Gorton, Hon. Slade............................................... 28
Mulvenon, James.................................................. 29
Wen, Yunchao..................................................... 38
Greve, Louisa.................................................... 49
Brown, Hon. Sherrod.............................................. 52
Smith, Hon. Christopher H........................................ 53
CHINESE HACKING: IMPACT ON HUMAN RIGHTS AND COMMERCIAL RULE OF LAW
TUESDAY, JUNE 25, 2013
Commission on China,
The hearing was convened, pursuant to notice, at 2:41 p.m.,
in room 538, Dirksen Senate Office Building, Senator Sherrod
Brown, Chairman, presiding.
Also present: Senator Carl Levin; Senator Jeff Merkley;
Representative Christopher Smith; Representative Robert
Pittenger; and Representative Mark Meadows.
OPENING STATEMENT OF HON. SHERROD BROWN, A U.S. SENATOR FROM
OHIO; CHAIRMAN, CONGRESSIONAL-EXECUTIVE COMMISSION ON CHINA
Chairman Brown. The hearing will come to order. Thank you
very much, Senator Gorton, for joining us, Cochairman
Congressman Smith, and Senator Levin. I appreciate your being
here, and especially your work on these issues and your
legislation, which I know you will be talking about to hold
China accountable for cyber theft. I thank the staff again for
its tireless efforts and the work that they do on human rights
and rule of law in this Commission. Congressman Smith and I
have cochaired this Commission for a number of years now and
appreciate the good working relationship there and with staff.
We know--and Senator Gorton and I just spoke about this--
how the public is not paying a lot of attention, and we here
are not paying enough attention either, with the exception of
Senator Levin and a few others, to the serious threat that
China poses in terms of cyber attacks and how that threatens
U.S.-China relations in some ways, so much so that President
Obama raised the issue during his recent summit with Chinese
President Xi Jinping. It will be a key topic, we know, at the
U.S.-China Strategic and Economic Dialogue to be held in
Washington in a few weeks.
Today's hearing will focus on the aspects of cyber that
fall within the Commission's mandate, notably the impact on the
rule of law and on human rights. Recent headlines have revived
the debate over the appropriate balance between security and
freedom, but we cannot overlook the enormous impact that cyber
attacks from China have had, and continue to have, on American
jobs and American companies. They seriously call into question
the Chinese commitment to the rule of law.
We are talking about massive theft of valuable technology,
commercial secrets from American companies. General Alexander,
Director of the NSA, calls it the greatest transfer of wealth
in history. The scale and scope are staggering.
The Commission on the Theft of American Intellectual
Property, which is represented here today by former colleague
Senator Gorton, released a comprehensive report identifying the
People's Republic of China as the world's biggest violator of
intellectual property [IP] rights.
It estimates that China accounts for 50 to 80 percent of
the IP theft in the United States and around the globe. It
found that IP theft, including from China, costs the U.S.
economy hundreds of billions of dollars a year and literally
millions of jobs, dragging down our GDP and undermining our
ability to innovate and to prosper.
The IP Commission noted that a 2011 study by the U.S.
International Trade Commission estimated that if China's IP
protection improved to a level comparable to ours it would add
2.1 million jobs to our economy, yet, the IP Commission
acknowledges this figure underestimated the real cost to jobs
in this country.
The victims of IP theft include companies in my home State
of Ohio, in Michigan, and in New Jersey. Those affected are
hardworking Americans trying to make an honest living and
trying to spur innovation, only to see their products, their
services, and their technology stolen and handed over to state-
owned enterprises and other businesses in China.
With a growing prevalence of computer networks in America's
heavily wired economy, cyber attacks represent an increasingly
growing threat alongside more traditional forms of intellectual
property theft. China simply does not play by the same rules as
we do. The Chinese Government denies these attacks, even though
there is mounting evidence of Chinese state involvement.
This evidence includes a February 2013 report by the cyber
security firm Mandiant that linked attacks on 141 companies,
including 115 based in the United States, to a unit of the
People's Liberation Army, working from a building in Shanghai.
The increase of attacks has coincided with the Chinese
Government's push for indigenous innovation and development of
key industries, creating an environment where it is perfectly
acceptable to cheat and steal your way to the top.
As we have seen in the last few years, it is not only
American companies that are the targets, it is media and it is
human rights organizations, something particularly important to
Congressman Smith and me.
Journalists writing about corruption in China find their
computer systems hacked and their passwords stolen.
For human rights organizations and activists, dealing with
hacking attacks from China is almost a daily fact of life.
We cannot sit idly by. That is why I support a
comprehensive, common sense, bipartisan approach to hold China
I urge Congress and this administration to do everything it
can to combat unfair trading practices, including another
topic, the important bipartisan Currency Exchange Rate
Oversight Reform Act of 2013, which passed the Senate two years
ago and has not yet gone to the House. We hope to reschedule it
for a vote soon. I commend Senator Levin for his recent
proposed legislation to hold China accountable for cyber theft.
I will turn it over to Cochairman Smith. I have a vote at
2:45, as does Carl, but I think we will be able to keep this
STATEMENT OF HON. CHRISTOPHER SMITH, A U.S. REPRESENTATIVE FROM
NEW JERSEY; COCHAIRMAN, CONGRESSIONAL-EXECUTIVE COMMISSION ON
Representative Smith. Thank you very much, Chairman Brown.
Thank you for calling this extraordinarily important hearing.
In December 2006, and then again in March 2007, my Human
Rights Subcommittee, the committee that I chaired, as well as
the personal computers in my office, that of my chief of staff
and myself, were attacked by a virus that, in the U.S. House
Information Resource Office's words, ``intended to take control
of our computers.''
At that time the IT professionals cleaned the computers and
informed my staff that the attacks seemed to come from the
People's Republic of China. They said it came through, or from,
a Chinese IP address. The attackers hacked into files related
to China. They contain legislative proposals directly related
to Beijing, including a major bill that I was in the process of
authoring called the Global Online Freedom Act.
Also hacked were emails with human rights groups regarding
strategy, information on hearings that I intended to chair on
China, and the names of Chinese dissidents. While this
absolutely does not prove that Beijing was behind the attack,
it raises very serious concerns that it was. Certainly Chinese
agents have not only attempted to target me or my offices, but
many other Members of the House and Senate have also been the
victim of that kind of attack.
Cyber attacks on Congress are only a small, but not
insignificant, part of a much larger pattern of attacks that
have targeted the executive branch, the Pentagon, and American
How do we know this? In recent months we have seen in-depth
reports come out detailing this massive intrusion into our
cyberspace and massive theft of our cyber data. Chinese agents
have stolen our designs for helicopters, ships, fighter jets,
and several missile defense systems.
They have stolen our innovative technologies, from solar
panel designs to biotech research. These thefts appear to have
paid off for China. In recent years, the Chinese Government has
made tremendous jumps in its military capabilities, while
boosting the competitiveness of China's ``national champions.''
While cyber thefts have existed for years, increasingly we
can prove that many of these outrageous thefts deemed ``the
greatest transfer of wealth in history'' originate in the
People's Republic of China, and these attacks are not random.
We now know with some certainty that some thefts are being
organized by the Chinese Government agencies.
As we learn about the sources of these attacks and we are
learning about their motivations, talented Chinese Internet
users are working day and night to infiltrate our networks and
to steal secrets. Chinese actions are part of the larger
coordinated state-sanctioned effort to increase China's
competitiveness militarily as well as commercially.
Today we will hear about how the commercial rule of law
system in China allows these types of attacks to occur and how
these attacks disadvantage American businesses, innovators,
contractors, and government agencies. We will hear about the
size and scope of the attacks and we will hear how the U.S.
Government remains largely unprepared for many of these
We will also, however, hear about another side of this
important topic, one that is often overlooked during recent
discussions about China's cyber attacks. The Chinese Government
is not only targeting American businesses and military
organizations, but it is also targeting ordinary Chinese
citizens seeking to advance their most fundamental freedoms.
Chinese hackers do not simply look beyond their borders to
steal secrets. As we will hear today, Chinese citizens,
including those advocating freedom and rights, free speech, and
food safety, are also targeted by state-sponsored hackers.
These courageous citizens are also monitored, their private
information stolen. The brave pastors seeking to organize a
service, the father seeking to raise awareness about toxic
foods, the wife of an imprisoned activist, the mother who was
made to undergo a forced abortion, all of these citizens
realize that in any instance the government may, and probably
is, watching. China, of course, also targets those outside of
China who similarly wish and promote human rights and political
Today we know the system of surveillance and theft occurs.
We know that China is organizing these cyber attacks, or at the
very least is complicit in their existence. The question we
must ask ourselves is why. Clearly China's rise as a military
power requires technology. China's economy will no doubt
benefit from the latest innovations from abroad.
But why is China so obsessed, so concerned about its
domestic citizenry, especially those who advocate peacefully
for legal and political reforms? Why is China so worried about
international NGOs [non-governmental organizations] that seek
to highlight official abuses and wrongful imprisonments?
Why is China so reluctant to provide a fair regulatory
environment in China where commercial laws and regulations will
eventually protect all businesses, domestic and foreign,
seeking to provide the best services for these Chinese
These may be difficult questions, but thankfully today we
are fortunate to have four guests, four witnesses who are well
versed on these issues. They are expert on how China is
monitoring our cyber actions and how China is attacking targets
I do want to point out that I will have to leave, but I
will read their testimonies. I am chairing a hearing at 3
o'clock over on the House side on the attack and the slaughter
of Christians in Syria. It begins at 3 o'clock so I will have
to leave, but I want to convey to our witnesses my sincere
gratitude for your testimonies. I look forward to reading them
and for the insight you provide.
I yield back, and yield to Senator Levin.
STATEMENT OF HON. CARL LEVIN, A U.S. SENATOR FROM MICHIGAN;
MEMBER, CONGRESSIONAL-EXECUTIVE COMMISSION ON CHINA
Senator Levin. Thank you very much, Congressman Smith.
First of all, I want to thank you and Senator Brown for
organizing this very important hearing on Chinese hacking and
its impact on human rights and on commercial rule of law.
The hearing is timely. It is timely for many reasons. There
have been many recent reports and indisputable evidence of
large-scale cyber intrusions by the Government of China on a
vast number of private, government, and nonprofit entities for
the purpose of stealing valuable intellectual property or
proprietary information. This is in addition to what is also
well known, that China hacks the accounts of human rights
activists in order to suppress human rights in China.
American companies invest hundreds of billions of dollars
every year in research and development. That innovation results
from those investments. The innovation drives investments and
drives, in turn, the growth of American companies and the U.S.
Unfortunately, our companies are having their intellectual
property stolen and it is stolen right out from underneath them
through cyberspace. Such theft threatens to undermine America's
Both U.S. Government and private reports point to China as
by far the worst offender. As far back as 2011, the National
Counter Intelligence Executive said in its annual report to
Congress that ``Chinese actors are the world's most active and
persistent perpetrators of economic espionage.''
This May, the U.S. Trade Representative stated in its
Special 301 report that ``obtaining effective enforcement of
IPR in China remains a central challenge, as it has been for
many years.'' The report continued that ``this situation has
been made worse by cyber theft, as information suggests that
actors located in China have been engaged in sophisticated,
targeted efforts to steal intellectual property from U.S.
Today we will be hearing from Senator Slade Gorton, an old
friend of mine, who is on the Commission on the Theft of
American Intellectual Property. That report is just further
powerful evidence of what the problem is. So, it is long
overdue that we equip the American Government with the tools
that it needs to fight back.
I recently introduced Senate bill 884, the Detect Cyber
Theft Act, with Senators McCain, Rockefeller, and Coburn. S.
884 requires the Director of National Intelligence to produce a
report that includes a watchlist, and a priority watchlist, of
foreign countries that engage in economic or industrial
espionage against the United States in cyberspace.
The bill also requires the President--and this is the
action forcing mechanism and the remedy--if he determines that
such action is warranted for the enforcement of intellectual
property rights or to protect the Department of Defense supply
chain, to block imports of goods in three categories: First,
goods made with U.S. technology or proprietary information
stolen in cyberspace; second, goods made by companies that
engage in or benefit from such theft; and third, goods produced
by state-owned enterprises in countries designated as the worst
This is a powerful remedy. It is hitting countries that
engage in cyber theft in the pocketbook and it is time that we
fight back to protect American businesses and American
innovation. We have to call out those who are responsible for
cyber theft and empower the President to hit the thieves where
it hurts most, in their wallets.
Dennis Blair, former Director of National Intelligence and
Co-Chair of the IP Commission report said recently, ``Jaw-
boning alone won't work. Something has to change China's
calculus.'' Well, we think our bill will do exactly that.
Blocking imports of products that either incorporate
intellectual property stolen from U.S. companies or are from
companies otherwise that benefit from cyber theft will send the
message that we have had enough.
If foreign governments like the Chinese Government want to
continue to deny their involvement in cyber theft despite the
overwhelming proof that is one thing. We cannot stop Chinese
denials. But we are not without remedies. We can prevent the
companies that benefit from the theft, including state-owned
companies, from getting away with it.
Maybe once they understand that complicity will cost them
access to the U.S. market, they are going to press their
governments to end it. We have sent our bill to the
administration. We await word from the White House and from the
Hopefully the word will be one of support. We have stood by
for far too long while our intellectual property and
proprietary information is plundered in cyberspace and used to
undercut the very companies that developed it. In other words,
it is time to act.
I want to thank everybody who is a part of the effort to
stop cyber theft for their efforts, many of whom are going to
be testifying here today. Again, I want to thank our commission
and our staff for all the great work that they are doing on
Thank you. I have to leave for a vote too, so I will yield
to whoever is next in line.
STATEMENT OF HON. ROBERT PITTENGER, A U.S. REPRESENTATIVE FROM
NORTH CAROLINA; MEMBER, CONGRESSIONAL-EXECUTIVE COMMISSION ON
Representative Pittenger. Thank you, Senator Levin. It is a
privilege to serve with you on this important commission. I am
Congressman Robert Pittenger. I am a new commissioner on this
important effort. I do want to thank Chairman Brown and
Cochairman Smith for leading this commission.
The issue of human rights and the rule of law in China have
been of great importance to me my entire adult life. These are
issues I have been dedicated to since I graduated from college
and spent 10 years in service with Campus Crusade for Christ.
Chinese hacking is hurting the attempts by the people of
China to advance their own human rights. Dedicated heroes are
being subjected to relentless cyber attacks as they try to use
the Internet to break the silence on continued persecutions of
Allowing for freedom of expression via the Internet will be
critical to advancing human rights in China. This will only
happen if the cyber attacks cease to exist. Ironically, in
light of the reported issues related to corruption within
China, individuals who are people of faith provide the best
resources and assets for the continuation and the strength of
the Chinese economy.
Cyber attacks by the Chinese Government have a significant
impact, both here at home as well as on the citizens of China.
American businesses have been affected by these cyber attacks
to the tune of hundreds of billions of dollars.
As the Chinese Government is propping up national
companies, it is doing so on the backs of American companies
playing by the rules. The Chinese Government is responsible for
50 to 80 percent of global theft of intellectual property,
hurting American businesses and costing American jobs.
The United States must remain committed to monitoring the
continued violation of the rule of law by the Chinese
Government, not just to protect American jobs but to help stand
with those committed to ending the persecution of Chinese
citizens for practicing their religious beliefs.
I yield to my fellow Congressman.
STATEMENT OF HON. MARK MEADOWS, A U.S. REPRESENTATIVE FROM
NORTH CAROLINA; MEMBER, CONGRESSIONAL-EXECUTIVE COMMISSION ON
Representative Meadows. Thank you, Mr. Pittenger. Thank you
both for coming today and for your willingness to testify. I
will keep this real brief so you can go ahead and share what
you have for us. Most of what I have come to know has already
been mentioned a number of times, but obviously in a global
economy what we have to look at is the rule of law and the
impacts that it has, either the respect for that or the lack of
respect in what it does.
So I have been fortunate enough to meet with a number of
different people, both from the Chinese Government and also
those that trade with our largest trading partner. In doing
that, I think coming to real grips with a substantive way to
address this problem is what we are all looking for. We cannot
tolerate what we would not stand in our own backyard, and we
have got to make sure that we address that, both from a policy
standpoint and from a legislative standpoint.
So with that I will yield to you, Mr. Gorton, and let you
start off. Thank you.
STATEMENT OF HON. SLADE GORTON, FORMER U.S. SENATOR FROM
WASHINGTON STATE; MEMBER, COMMISSION ON THE THEFT OF AMERICAN
Senator Gorton. Chairman Brown not only summarized the
report, but he summarized my opening statement which simply
adds to the fact that when I was on your side of the bench I
always wondered about people reading written statements that I
already had, whether they were implying that I was illiterate.
I will not insult you by any means in that fashion. I want to
make only two or three of the major points of this commission
report, which we have given copies to your staff and have more
if you wish it.
The first, is we have found ourselves sailing in uncharted
seas. There were no other former commissions that had looked
into this problem in the past. I think we did a good deal of
fairly original research to try to bring together both the
scope and the breadth of intellectual property theft around the
I think our conclusions are pretty cautious. We use a
figure of over $300 billion a year. Personally, I think it is
higher than that. That is what we could absolutely all be
totally comfortable with. Fifty to eighty percent of it coming
out of China is also a statement. We are quite confident, but
we hope this will lead to more study, particularly on your
part, of an important way in which our economy is being harmed.
One example is on page 12. A software company, that we will
not name, sold a single program in China for, say, roughly a
hundred bucks. When there was an update on it, they got 30
million calls. One to 30 million. This may be the single most
dramatic example we have but it is far from the only one.
So what we have done is to try to gather together the
nature of the problem, where it comes from, and set up policy
responses that the Congress and the administration can come up
with that, to a certain extent, cures it.
Senator Levin's bill is totally consistent with the
recommendations that we make here because he gets to the
central point, we will not really get command over this kind of
intellectual theft in China until we have created internal
incentives within China for abiding by rules with respect to
At this point it is free theft. There are no consequences
of doing so. The way to create that internal desire to do
something better is to punish Chinese businesses and our
government, which are making money out of doing it today.
We have a large number of recommendations, some for
Congress and some for the administration itself. Bluntly, I
would say that if you did every one of them we would have
started down the road but we would not have gotten all the way
down the road to an honest and straightforward relationship.
So on the very last page of the Commission report there are
three subjects that came up during our deliberations which are
not our formal recommendations but which are nevertheless ideas
that we think you ought to consider. Each of them, I can say,
is more radical than the formal recommendations of the
Commission itself. But one is to allow cyber counter-attacks on
the part of American interests that are hit by cyber attacks at
the present time, something prohibited by the law at the
A second one has to do with requiring the United Nations
World Health Organization to certify that when we give them
things they are not going to be immediately stolen from them.
Those two came from outside the Commission.
The third was one on which I testified before a different
Commission some time ago, and that is simply to say that every
year the Secretary of Commerce will determine the losses we
have talked about in here from all forms of intellectual
property theft and that we there, for the next year, impose a
tariff on all goods coming from China designed to produce 150
percent of that figure.
I do not think we would get very much money from that but I
think we would get action for the protection of our
intellectual properties. In fact, it would violate the WTO
[World Trade Organization] rules, but China cannot win a trade
war against the United States because of the huge amount of its
trade surplus with us. It will also create within China itself
a view that they ought to abide by the same rules that the rest
of the world abides by.
I will make only one final comment. When I look back on 18
years in this body I think the single vote I most regret is
permanent MFN [most-favored-nation status] for China. We gave
up an ability to affect their policies by doing so and I wish I
had that vote back over again.
Chairman Brown. Thank you, Senator Gorton, very much.
Thank you, Congressman Pittenger for being here,
Congressman Meadows, thank you. I know how, during the PNTR
[permanent normal trade relations] with China, I was in the
House and I remember working with the North Carolina delegation
Let me just properly introduce both, then Dr. Mulvenon, we
will turn to you. Senator Gorton served 18 years in the Senate,
a distinguished member of the Appropriations Committee when it
was a different sort of committee than now, I would
editorialize, and he was on the 9/11 Commission after leaving
the Senate. He is here representing the Commission on the Theft
of American Intellectual Property and has been a real leader on
the bipartisan initiative chaired by Governor Huntsman and
Admiral Blair. So, thank you for your testimony.
Dr. Mulvenon is vice president of Defense Group, Inc.'s
Intelligence Division, director of DGI's Center for
Intelligence Research and Analysis. He runs teams of nearly 40
cleared Chinese, Russian, Arabic, Pashto, Erdu, and Farsi
linguist-analysts performing open-source research for the U.S.
Government. Thank you for joining us. He is also the author of
``Chinese Industrial Espionage'' and knows this issue very
Dr. Mulvenon, thank you.
[The prepared statement of Senator Gorton appears in the
STATEMENT OF JAMES MULVENON, VICE PRESIDENT, INTELLIGENCE
DIVISION, DIRECTOR, CENTER FOR INTELLIGENCE RESEARCH AND
ANALYSIS, DEFENSE GROUP, INC.
Mr. Mulvenon. Thank you, sir. I would like to thank the
Commission and I would also like to thank its excellent staff
with whom I have worked for many years on some important and
tractable problems, particularly on this issue.
I bring a lot of perspectives to this issue, one being a
Chinese linguist. As you said, 20 years of building teams of
cleared linguist analysts doing open-source research for the
U.S. Government, particularly on cyber issues, as early as the
late 1990s, working on Chinese Internet censorship issues with
this commission, and then finally the perspective of being a
victim of these attacks given my own profile and my own
writings and trying to expel Chinese attackers from the
ramparts of my own corporate networks on a daily basis.
We talked a lot in the last six or nine months about
Chinese cyber espionage. I would say that it is a multi-faceted
issue and there is not a one-size-fits-all answer to it. I
would just like to highlight quickly five different areas of
cyber espionage which are different in form and require
slightly different strategies, and I think it is important for
us to not treat it as a monolith but to break it down into
The first category, frankly, is the traditional government/
military classified defense contractor espionage. We have very
few options in this case. Countries will always spy on one
another. We cannot legislate against espionage, we cannot
impose treaties against espionage, but it is important to note
that at least since 1996 I personally have watched Chinese
intelligence preparation of the battlefield with regard to a
Taiwan contingency, monitoring U.S. military asset movements,
getting into unclassified Pentagon networks to be able to get
into logistics databases, providing, now, strategic near real-
time intelligence to Chinese leaders about our dialogues with
them, stealing the talking points of our various meetings, and
frankly getting into a lot of classified defense contractor
companies, stealing critical classified technology about our
newest weapons systems and then using that information to fine
tune their own defensive systems and their offensive systems.
In each of those three cases, they have almost immediate
benefit from stealing that information, being able to
immediately operationalize it.
On the commercial espionage side it is a little bit more
complicated. On the one hand, we have what we call sensitive
business information. So you break into the sea suite of a
major Western oil company, you steal the dollar number of what
they are going to bid on a tract in the South China Sea, you
hand it to your national offshore oil company, they bid $100
over that and they win the bid. So there is an immediate
benefit. But the one that has been thorny to us, analytically
at least within the system, has been this issue of intellectual
One, a lot of companies do not self-report the intrusions
so we do not really have as much data as we would like,
particularly data that shows us intrusions that steal
intellectual property, that has been exfiltrated back to China,
that is then given to a national champion in that sector who
then is successfully able to reverse engineer it, who can then
productize it, marketize it, and then show a demonstrable,
quantifiable loss of U.S. company market share in China and
then when they compete with them globally.
There are actually very few cases where we have enough data
to make that change. It primarily is because there are not
really the guidelines for many of these companies to self-
report those problems.
The Securities and Exchange Commission has tightened up
some of their guidelines about reporting loss of shareholder
value, but many of the companies I deal with feel that they are
not properly indemnified from reporting that so in many ways
many of them are looking to Congress for legislation that will
provide them with the indemnification that they need to share
information with the government without antitrust problems, or
to even collude with one another and share intrusion data with
one another so they can engage in collective defense without
Now, we have begun to talk to the Chinese in a much more
serious fashion about these issues, particularly in the last
six months. I think the President at Sunnylands struck the
right top-level tone with President Xi by pointing out the
following fact, not to educate them about whether this is
happening, we are not going to insult their intelligence about
that, but to point out that the real strong pillar in favor of
cooperative Sino-U.S. relations, particularly past the PNTR
era, has been the business and trade community.
Yet, that is the community that you hear now the most
complaining about how they cannot make money in China, how the
Chinese Government has its thumb on the regulatory scale
favoring national champions, and how the rampant cyber
espionage is actually reducing their competitiveness and
stealing their core technologies.
And so to emphasize to President Xi as we are to senior
Chinese leaders that this fundamentally threatens the bilateral
trade relationship, which fundamentally threatens China's
overall economic development, which therefore threatens their
social stability, which is the number-one priority of the
That is the message that is getting through to the top
leadership and hopefully will incentivize them, along with a
whole range of other measures that we are contemplating--naming
and shaming, denied entities list, and all sorts of other
measures we have--against Chinese companies and universities
engaged in this behavior, that I think together could possibly
stem the tide on this behavior which is, frankly, draining the
American innovation economy.
[The prepared statement of Mr. Mulvenon appears in the
Chairman Brown. Thank you very much, Dr. Mulvenon. Those
companies you mentioned that are now complaining are the same
companies that really did the heavy lifting to push PNTR
through the U.S. Senate and the U.S. House of Representatives
and have sort of played this bangle a lot of ways. But more on
that later, perhaps.
Let me start with Dr. Mulvenon on this question. I spend a
lot of my time--my State makes more things, more products in
terms of net worth than any State but California and Texas,
States much larger, from aerospace, to autos, to food
processing, to chemicals, to all kinds of things, wind
turbines, solar panels. I spend a lot of time on shop floors.
What you notice is that in terms of innovation, product
innovation and process innovation so often take place on the
So when U.S. companies do the innovation in California, as
Apple brags about often, or in Ohio, or anywhere else, or North
Carolina, and then the production is done overseas,
automatically that innovation is happening on those shop floors
in terms of process and product both.
How did this theft work beyond that? Talk that through, how
that sort of exacerbates or enhances the opportunities these
companies have for that kind of intellectual property theft
when they do it from cyber attacks here, when they do it when
our companies are actually overseas, producing overseas, if you
would discuss that.
Mr. Mulvenon. I think first it is important to note why
this is happening. For the first 25 years of Chinese economic
modernization, in my view, China was content. We have all seen
the dramatic numbers, the covers of the magazines, everything
that emphasizes the tremendous gains that they have made.
But it was a very shallow modernization because there were
enclaves in China, we would send our components over there,
they would get reassembled and then re-exported out.
In roughly the early 2000s, the Chinese Government looked
at this issue and they said this is not the kind of deep
economic modernization we want. We do not really feel that it
is developing the national champions.
We are not innovating within China, we are simply
assembling other people's stuff and re-exporting it. So in
roughly the 2005-2006 time frame, they came up with this idea
of indigenous innovation that was mentioned earlier and they
put out a large number of state policies, the 2006-2020 Medium-
to Long-Range S&T Plan, and they tried to emphasize that this
was going to be a large-scale government effort, multi-billions
What they discovered, however, was state-driven R&D is an
oxymoron, akin to jumbo shrimp and military intelligence. That
is not how innovation happens and so they were failing in some
key sectors to be able to do that. The only place they could
turn, if they could not squeeze it out of the multinationals by
forcing them to build R&D labs in China, if they could not
squeeze the tech transfer out of the companies that were
competing for market share and being increasingly forced by
regulatory ministries who were partnered with those national
champion companies to squeeze that technology transfer out, the
remaining option that they had, frankly, was to steal it.
Unlike 20 years earlier where you would have had to
physically steal it from a plant, you would have had to smuggle
the blueprints out of the shop, you would have had to take the
part and run out the door with it, unfortunately our move
toward connectivity and putting all this information online
allowed them to steal that at great distances.
So that would not have been true in a pre-Internet era, but
unfortunately now many companies, for a lot of reasonable
reasons, have been putting all that information online and
unfortunately that made it all that much easier for people to
steal it from them, particularly China.
Chairman Brown. Thank you. That was very helpful.
Senator Gorton, talk about your experience and your report
and give us thoughts on, including Senator Levin's legislation,
what you think we should do in this body and in the House of
Senator Gorton. Well, Dr. Mulvenon put it quite correctly
when he said we are half-blind at least in determining how much
it really is and what is going on because lots of companies
either see no point in saying that they have been stolen from
or think that it would make it worse, or that they would lose
what markets they have in China.
So I would say one of the first things that you want to do
is to see to it that there is one department, one office in the
United States that is in charge of finding out the total scope
of the problem, all of the various elements that the doctor has
spoken about, so that you as the policymakers know how big the
As I say, we have given you a conservative estimate. I
think that estimate is low. But to a certain extent, I am just
guessing on that. We need to know what is going on and no one
is really in charge of this at the present time. But from the
point of view of the cure, the cure is, again, as I think
Senator Levin has at the heart of his bill, the cure is in
creating internal lobbyists in China for obeying the law.
There has got to be a group there that will say, ``We will
be better off if we follow a fair set of rules than we are
now.'' There is no one there who says that now because it
simply is not true. Stealing our intellectual property is very
largely risk free.
But tying up the U.S. market, which is so important to them
in one respect or another, will be very important in creating a
group in China that will say yes rather than simply smile and
nod their heads and go ahead down the same road.
This is not a new problem. We were concerned about this a
decade ago, and even more than a decade ago, but the Chinese
economy has changed, its desires have changed and it is
becoming worse, not better.
Chairman Brown. Senator Gorton, is Chinese cyber theft a
greater threat to our national security or to our economic
Senator Gorton. Well, I really will defer to Dr. Mulvenon
on that. It is a major threat to our national security. Even
the solutions that I have suggested and that Senator Levin has
suggested only indirectly get at that. How you value in dollars
the loss of intellectual property that is important to our
national defense is not easy to determine and the degree to
which you can punish them directly for that is hard to
But at one level, at least, that is the most important
challenge, the challenge to our national security. But the
challenge that may have cost us 2 million jobs or more is a
major challenge and something that we should be attempting to
cure right now.
Chairman Brown. Thank you.
Dr. Mulvenon, would you like to comment?
Mr. Mulvenon. I do not think you can dissemble the two.
They are inextricably linked. The Chinese see them as
inextricably linked and we should as well. In other words, any
decline in our economic security, any decline in our
technological competitiveness has an automatic implication for
a decline in our national security.
Similarly, a decline in our national security with respect
to the Chinese impacts our ability to enforce fairness on the
Chinese side with regard to economic competitiveness, so for me
they are pieces of a part.
The Chinese themselves write about their own comprehensive
national power in a way that does not even make the distinction
between the two, so again, talking to senior Chinese leaders
about their impact on economic development, they will
automatically see the connection to their own national security
and the defense of their own country, as we should as well.
So I do not think anything is to be gained by separating
the issues. In fact, I think we have a greater power to
influence them by connecting them together and not allowing
them to be treated separately.
Chairman Brown. Congressman Pittenger?
Representative Pittenger. Thank you, Mr. Chairman.
Dr. Mulvenon, as we look at the collaborative efforts among
government agencies to address cyber, how are we doing, with
DHS, the FBI, the U.S. Trade Representative and others? Are we
working well together? Is there anything we could do to improve
Mr. Mulvenon. Well, we have some very important and
difficult seams, if you will, in the system that continue to
bedevil the way we do things. In other countries that do not
have our particular legal and bureaucratic system frankly have
us at an advantage.
But the struggle between, for instance, domestic cyber
security under DHS and where that boundary line is between that
and foreign cyber security with respect to cyber at NSA,
continues to be a point of friction. I will tell you, I have
read multiple internal Chinese military sources in which they
talk about exploiting those seams, exploiting those
jurisdictional issues for their own advantage.
I will give you one example. As early as 1996, internal
Chinese military sources were talking about how they wanted to
delay or disrupt our logistics deployment to a Taiwan
contingency by disrupting the Pentagon's unclassified logistics
But they said quite pointedly that they would initiate that
attack from within the continental United States, knowing that
that would activate a different bureaucracy, namely the FBI,
and not the NSA and other people who would see it as a foreign
intelligence operation, and in that window of us frankly being
screwed up and not knowing what was going on, they would be
able to seize that strategic advantage. So I do not think we
are doing well on that front in particular, and I think even
our adversaries are well aware of it.
Representative Pittenger. Given that understanding, I am
not trying to get you out of your box in terms of your focus,
but how would you remedy that?
Mr. Mulvenon. Well, to be honest, at many levels it is an
indemnification issue because there are a lot of companies
around the world that believe that there is sovereignty in
In other words, that nations have boundaries and that those
boundaries can be protected. We alone have been arguing for
sort of an Internet freedom model that is sort of boundary-
For the Chinese, the Russians, the Iranians, all they talk
about is sovereignty. They are frankly more Westphalian than we
are in many of these issues with regard to cyberspace.
At the end of the day, we have to recognize that in fact
our best assets for defending the country on the cyber side are
the ones that are precluded from operating within the domestic
I realize that this may not be the best time to raise that
issue given the news of the day, but ultimately we want to have
our best capabilities in terms of defending the Nation and
those capabilities often reside with organizations within the
U.S. system that are not currently authorized to fully exercise
those within the United States. So the only way that is going
to get solved is to give people top cover at the Title 10,
Title 50 level that does not currently exist.
Representative Pittenger. Thank you.
Senator Gorton, thank you again for your tremendous
perception on this issue. You believe as I do in free and fair
markets, other realistic market leverages that we have
remaining today to try to stop the Chinese from the continued,
what we believe is cheating, and continued theft of
Senator Gorton. The leverage we have is our market, the
fact that we have purchased far more from Chinese sources than
they purchased for us. That is a tremendous leverage and in my
view it is the highest leverage we have. By threatening that
market in a straightforward fashion, we will at least get them
to begin to hear about what our concerns are and have to
respond to them.
Representative Pittenger. You said that American companies
do not want to be public as much in coming out that they have
been the recipient of cyber, what role still do they have in
Senator Gorton. Well, they have a tremendous role in
protecting themselves. But I think one of the reasons that many
of them are reluctant to talk publicly about it or to come to
the government about it is they do not think anything is going
to get done in any event. If we show the government that we are
serious about the question I think we will get more cooperation
from the private sector.
Representative Pittenger. Do you see a public/private
Senator Gorton. Of course it is. The fundamental defense of
the United States is a public responsibility.
Representative Pittenger. Yes. Sure.
Senator Gorton. But obviously every company wants to
protect its own intellectual property and its markets.
Representative Pittenger. Sure. Thank you.
Chairman Brown. Mr. Meadows? Thank you, Mr. Pittenger.
Representative Meadows. Thank you, Mr. Chairman. I can see,
Doctor, you wanted to go ahead and make a comment on that last
question, so go ahead.
Mr. Mulvenon. Well, I think, frankly, this body has an
important role to play because in the absence of strong
government intervention on this issue I am sure many of you
have seen the rise of certain companies that are now
advertising as part of their services that they themselves will
engage in aggressive defensive measures, shall we say, or even
hack back on behalf of companies in the absence of the
perception that the U.S. Government is going to do anything to
When I testified before the Huntsman-Blair Commission, we
had a lengthy discussion about some of the outdated features of
the 1986 Computer Fraud and Abuse Act and the fact that,
frankly, many companies right now are looking to Congress for
clarification, and frankly the Department of Justice, as to
where the legal boundaries are on this issue about hack back
and being able to aggressively go after your own intellectual
That act is 27 years old. I believe that many features of
it are outdated and have been rendered obsolete by technology,
and I think it really needs to be revisited. That was certainly
one of the most interesting debates we had in the Commission
hearing that I testified at.
Representative Meadows. So as we look at the Commission, I
think, Senator, your comments were that this will get us down
the road but it will not get us all the way. Again, I may be
paraphrasing there, but how far down the road does it get us? I
mean, is this a marathon of which we have gone one mile, are we
doing a half marathon? I need to realize how far down the road
we are going.
Senator Gorton. Well, I think it is a marathon at which we
are still at the starting line.
Representative Meadows. But you were talking about, if all
your recommendations are implemented.
Senator Gorton. I do not think I can quantify that, except
that I think it would be significant. It will be significant to
exactly the extent that we have begun to create, within China
itself, an interest group that is in favor of the protection of
intellectual property rights.
Representative Meadows. So how do we do that? How do we
create within China this interest or this respect for the rule
of law, because we see that in so many areas where there is not
that? So how do we do that?
Senator Gorton. By threatening the profitability of those
Chinese companies, both public and private, that sell large
amounts of their goods and products in the United States.
Representative Meadows. All right. So you used the word
``threat.'' I do not ever bluff, so let me ask you this. When
does threaten and when does consequences to actions--because
too many times we threaten without resolve. I guess what I am
Senator Gorton. Congressman, I agree with you. Do not
threaten unless you are willing to carry it out.
Representative Meadows. Exactly. So what you are saying is
to have real consequences that we are committed to, regardless
of the circumstances of implementing.
Senator Gorton. Yes.
Representative Meadows. All right.
Would you agree with that, Doctor?
Mr. Mulvenon. Well, first of all I would say, as a matter
of principle, China and the Chinese economy and the Chinese
Government will respect intellectual property when they have
their own intellectual property to defend.
Representative Meadows. I agree.
Mr. Mulvenon. I mean, one of the real dilemmas we have is I
know that talking about patent trolling is very popular these
Representative Meadows. Right.
Mr. Mulvenon. I see a tremendous upswing in patent trolling
in China. In other words, Chinese doing patents of things that
are registered with their own Patent and Trademark Office and
then attempting to sue or coerce American companies that are in
China by claiming that they have the Chinese patent for
something that clearly is one of our patents.
Now, the trends are going in the right direction, they are
just not going there quickly enough in terms of China's own
intellectual property development and therefore its own desire
In my view, on the cyber side in particular, what I have
been pushing for internally is a focus on identifying a
specific number of companies and, frankly, a number of civilian
universities, very large universities in China, that are known
to have been engaged in this activity, have been supplying
tools, have been supplying personnel, have been engaged in this
activity and putting them on the denied entities list from the
That will deny them visas to the United States, professors
will not get fellowships, graduate students will not be able to
get fellowships over here. There will be a constituency, as
Senator Gorton said, that all of a sudden is now feeling the
pain of actions that they are not profiting from and it will
create basically a constituency within China that will begin to
say, ``All right, this is no longer a consequence-free activity
for us anymore.''
Senator Gorton. I would just go on to say that I agree
almost totally. What bothers me about at least a part of that
statement is that when the Chinese have so much intellectual
property that they have more to defend then they have to
attack, we will have already lost the struggle.
Representative Meadows. It would be too late, yes. When
they become the consumer of their own products, it is game
over. So when we look at this--and let us go on a little bit
further if the Chairman will indulge--it used to be that
investing in China, American companies or foreign companies got
a better deal from a regulatory standpoint, from an incentives
My understanding is that that is no longer the case, that
those regulations are being beefed up. So the regulations that
companies fleeing from America to produce in a foreign country
are not as, I guess, lucrative anymore. Would you concur with
that, agree with that, or disagree?
Senator Gorton. I think maybe it is slightly too broad a
statement because I do not think every kind of company or every
kind of investment in China is exactly the same. Some may not
have much in the way of intellectual property, some obviously
still find it profitable to do business there. Many others have
found that it costs far more than it is worth.
Representative Meadows. Doctor?
Mr. Mulvenon. I would probably disagree with the
characterization that there was some sepia-toned better past
where we actually were successful making money in China. My
father did business in China for 20 years selling nuclear
radiation detectors and always felt the deck was stacked
We used to watch people who came to China believing in the
whole ``if everyone bought one shoe we would sell a half a
billion shoes'' kind of philosophy repeatedly getting used. But
I think the hope was always that the Chinese economy would
mature to the point where it became a more level playing field
and that there was more predictability in the regulatory
In fact, what we are finding now is that the regulatory
system is becoming even more predatory and more capricious as
they are trying to force this indigenous innovation. They are
no longer content to allow Western multinationals to have pride
of place, but instead are trying to replace them with these
national champions. That has created a very uneven playing
field and a lot of, frankly, unfair activity that is in
violation of their WTO commitments.
Representative Meadows. And my last question is, how big
does the problem need to get before there is a demand from the
American people to deal with it? We are estimating today a low
estimate of $300 billion that could be $400 or $500 billion in
terms of economic impact. How big does it have to get before
you see a concerted effort on all parts to come together and to
Senator Gorton. It is big enough right now, and the fact of
this hearing is an illustration of that fact.
Representative Meadows. All right. Thank you. I yield back.
Thank you, Mr. Chairman.
Chairman Brown. Thank you, Mr. Meadows.
I would even argue that a decade and a half ago, when some
of these issues were decided in the House and Senate, that the
public was kind of always a bit ahead of these two
I wanted to just--and then I will close for the next panel,
but I appreciate very much Mr. Pittenger and Mr. Meadows's
comments. I have watched this over from my House days during
PNTR and just watched the way that--American corporations and
the relationships in China.
At the time of the PNTR vote in the House of
Representatives, I remember a friend of mine that worked at
National Airport told me there were more corporate jets there
that week leading up to the vote than at any time in his
At that point I am not sure that our companies, our large
companies' interests in China matched up with our national
interests as a nation. I think perhaps it is more that way, but
just a note of caution.
As an increasing number of American companies come to the
government and say we need help here because of cyber attacks,
that we keep in mind--and we should be there for them--that it
is important that our national interests match these companies'
interests there, because I remember being lobbied by one
company in particular in my district who said this makes so
much sense to pass PNTR, and then two years later he moved a
lot of his production to China. He said I had to move because
all my competitors are there because of this new set of rules
through PNTR. That song was sung far too many times in North
Carolina, in Ohio, and across the country.
So thanks very much, Dr. Mulvenon, for your work, and
Senator Gorton, for your lifetime and continued work and
service for our country.
I would call up the next panel, beginning with Wen Yunchao,
known more commonly by his online alias, Bei Feng. He has
launched a series of online campaigns in support of human
rights and against Internet censorship. He was awarded the
French Republic's Human Rights Prize 2010 by the French
National Consultative Commission on Human Rights in recognition
of his efforts and contributions to promoting China's human
rights movement through social media. He is a graduate of
Harbin Institute of Technology and is currently a visiting
scholar at Columbia's Institute for the Study of Human Rights
in New York City.
Louisa Greve is vice president for Asia, Middle East and
North Africa, and Global Programs at the National Endowment for
Democracy, where she served as director for East Asia. She has
studied, worked, and traveled in Asia since 1980. She was a
member of the AEI/Armitage International Taiwan Policy Working
Group, the Council of Foreign Relations Term Member Roundtable
on U.S. National Security--New Threats in a Changing World. She
served as a member of the board of directors of Amnesty
International for five years and was a volunteer China and
Mongolian specialist from 1990 to 1999. She served two terms as
a member of the Virginia State Advisory Committee of the U.S.
Commission on Civil Rights. If the two of you would join us,
and thank you very much.
Cao Yaxue will translate for Mr. Wen. Mr. Wen, please
proceed. Thank you.
STATEMENT OF WEN YUNCHAO (ONLINE ALIAS ``BEI FENG''),
INDEPENDENT JOURNALIST AND BLOGGER, VISITING SCHOLAR, INSTITUTE
FOR THE STUDY OF HUMAN RIGHTS, COLUMBIA UNIVERSITY
Mr. Wen. Thank you, dear Senator Brown and Congressman
Pittenger and Congressman Meadows. My name is Wen Yunchao. I am
here to testify about the cyber attacks against me that
occurred over the last few years.
In September 2009, I discovered that my Gmail account was
set up for forwarding and that it would forward all my emails I
received to another email account not under my control. This
was the first time I realized that my email was attacked.
In February 2011, the so-called Jasmine Revolution broke in
China. It refers to anonymous online calls for mass gatherings
in public venues in major cities across China.
At the time I was working and living in Hong Kong. Starting
at that time, all my electronic communications, including
telephone and Internet products and services were under severe
On June 2, 2011, I discovered that rather sophisticated
hacking was being used against my Gmail account. That day I
received an email with the subject ``Li Chengpeng Invites You
to Participate in Voting.'' The email provided a disguised
link. On clicking it, a flash document opened up and the
account would authorize other users to visit. When I reported
this to Google, they responded that they were not even aware of
The content of the email had to do with well-known Chinese
author Li Chengpeng's campaign for election to the local
Congress of the People's Representatives and was sent two days
before the anniversary of the Tiananmen massacre on June 4. I
believe the hacking was politically motivated and most likely
an act of the government. I reported the hacking process and
published it on You Tube.
In June 2011, I was attending the U.N. Human Rights
Council's meeting in Geneva as part of the Internet Freedom
Fellows Program. I gave a speech to call for support for
Chinese citizens who have been persecuted because of the
Jasmine Revolution. On June 8, the day before the speech, I
received a text message warning.
After I gave the speech and before I left Geneva, my phone
began to receive a large volume of incoming calls. My phone was
attacked in such a manner between June and August 2011. At its
heaviest on July 31, I received 311 calls in one day. All the
calls hung up after the ring.
I did a statistic study of the calls between late July and
early August and I found that attackers had a very regular time
when they start working and when they went off work. It was not
a random person acting alone.
In July 2011, personal information of my wife, my son, and
other relatives were published online, including the numbers of
my wife and my son's Hong Kong/Macao travel permits. This is
not information average people can easily access unless they
are the police or authorities.
For about a year starting April 2011, unidentified persons
bombed me on Twitter with trash information. Using software
called Twin to filter the trash, I found the heaviest attack
took place on April 25, 2012; a staggering 590,000 spam posts
within 24 hours. Unidentified persons also posted viciously
defaming information about me online at the rate of over 10,000
times per day. As far as I know, the artist Ai Wei Wei has also
been similarly attacked.
Starting August 24, 2011, my Gmail account was spammed with
an astonishing number of messages. At its peak in mid-March
2012, that flow was as high as five gigabytes per hour. If this
were a personal attack it would take more than 20 users to
attack my account simultaneously to reach that kind of volume.
Therefore, I believe it was an organized attack.
The attackers also put my name in garbage messages to make
it harder for me to filter them. I reported the attacks to
Google through a third party. A Google official contacted me
subsequently and Google made specific efforts to deal with the
attack on me, but the results were not that great.
Around the same time, unidentified persons also published
hundreds of articles online to denigrate me and I believe it
was an organized campaign to destroy my personal reputation.
At 4 p.m. on May 28, 2012, attacks on Twitter and Gmail
stopped simultaneously. This also shows these were organized
Chairman Brown. Ms. Cao, if you can try to wrap up in the
next minute or two.
Mr. Wen. We are just about done. Yes. Thanks. From April
2009 to the present time I have received an untold number of
phishing emails and Trojan emails from the one email attack
system that I successfully broke into myself. I found 192
people who were the objects of attack and they included Chinese
dissidents, rights lawyers, and foreign journalists reporting
From the sources of the pack, I was able to identify, and
also from the Mandarin I heard in the background in the earlier
stage of the telephone harassment, I believe all the attacks
came from mainland China.
I hope that the U.S. Congress and the government will
recognize such cyber attacks against human rights defenders as
human rights persecution and impose sanctions and visa
restrictions on organizations, companies, and their employees
who engage in such malicious activities.
Chairman Brown. Thank you very much, Ms. Cao, and thank
you, Mr. Wen.
Ms. Greve, thank you for joining us.
STATEMENT OF LOUISA GREVE, VICE PRESIDENT FOR ASIA, MIDDLE
EAST, AND NORTH AFRICA, AND GLOBAL PROGRAMS, NATIONAL ENDOWMENT
Ms. Greve. Thank you so much. For Chinese, Tibetan, and
Uyghur human rights activists working from exile, cyber hacking
is a form of repression that reaches across state boundaries to
undermine their ability to exercise the fundamental political
freedoms they should be enjoying in democratic countries.
Being under sustained cyber attack means these groups are
not, in practice, able to routinely access free communications
media in the public square. The hackers' success in hampering
the ability of these groups to do their work normally results
from a combination of specific targeting and the use of up-to-
the-minute hacking skills.
Some examples. First, the activists have to contend with
real-time and preemptive interference with their
communications. Increasingly, hackers are no longer having the
misspelled emails we have all experienced; you know, when
somebody sends you something and they misspell their own name
it is a little bit of a give-away.
Now, the hackers are obtaining genuine emails and then
sending them on within a malicious email within hours, which
greatly increases their plausibility, especially when they are
related to an ongoing conversation, upcoming event, or
conference. I have an example from the Uyghur American
Association. There was at least one incident when a staff
member received an immediate reply from a colleague, which
turned out to be the work of a hacker.
Second, there is all-device harassment. Mr. Wen has talked
about the jamming of his telephone. This happened in 2011 in a
number of places. The World Uyghur Congress experienced, for a
full week, continuous jamming of the land lines in Munich of
the personal apartment and office telephone lines for a week.
During the same time, which was the sensitive political
anniversary of the July 5 riots in Urumchi, the Web site was
down and there was the massive spam attack, 15,000 emails in
Then the third example has to do with the innovation. There
is some innovation having to do with software for cyber
attacking. This was the first-ever documented attack against
Android devices. Now, this is getting to the Smartphones and
In fact, Kaspersky Lab, a research company, has issued a
report saying that in March they discovered the first-ever use
of spear-phishing email that attacked and succeeded in damaging
Android users' equipment. The vehicle for this attack did have
to do with the Uyghur, the World Uyghur Congress, having sent
an email to speakers who had attended a conference.
The sender of this copied text was purportedly a high-level
Tibetan activist. The malware that was attached extracted data
about the phone itself: the phone number, the OS version, the
phone model, and the contacts stored both on the phone and on
the sim card, and call logs, and their SMS messages, and their
Now, the frequency and sophistication of all these attacks
reveal a significant investment of resources. In fact,
activists note an upgrading of the resources devoted to this
campaign, including increased knowledge of the social networks
that they are trying to attack, language proficiency, and the
We should note another example, another piece of evidence
of the nature of the political targeting, the attacks always
surge before sensitive political anniversaries, June 4, July 5,
As we look at this kind of deliberate targeted hacking, why
is it such a potent tactic for impeding the work of human
rights activists? It is because of its numerous practical
effects. It silences activists' ability to communicate with the
wider public when their Web sites are down for weeks at a time
when they have something to say; it compromises the ability of
research groups to keep information confidential, which is
essential when doing human rights work and helping refugees.
It diverts the energies of the activists because they have
to deal with recovering from the cyber attacks and double-
checking all their communications to ensure their authenticity.
It raises the cost, the financial cost, by requiring expensive
back-up systems, very expensive technical assistance, and so
It undermines cooperation with the wider world.
International organizations, the journalists, the media experts
are also frustrated with these fake and malicious emails and
other hacking interference. Finally, hacking, frankly,
increases fear, again, even for those who are outside of China,
even for those living in free countries. This is a great
deterrent effect, making people afraid to be in touch with each
other, to have solidarity.
Again, while they are outside of China they do not want to
compromise their strategies, as Congressman Smith mentioned, or
their confidential information, and certainly in communicating
with people inside China, given the potential for harassment
and arrest. So this portfolio of effects, silencing critical
voices, undermining credibility, undermining trust, increasing
isolation, raising costs and inducing fear, this is the panoply
of tactics of repression perfected by authoritarian regimes and
it is now being globalized. It deserves our unqualified
Chairman Brown. Thank you very much, Ms. Greve.
Mr. Wen, first of all, thank you for your courage in
speaking out. I know that you are in New York, at least for a
while. I also know you have a wife and a son. If your speaking
out does endanger you in any way or expose you to any issues or
problems, please let us know and we will help you in any way we
can. I think that I can speak for all the members of this
commission, and institutionally, too, if you would keep us
informed about any potential retribution. So, thank you for
My question is, why didn't they just shut you down?
Mr. Wen. In 2011, I was awarded a human rights award in
France. Since then, I have not been able to return to China. I
was working and living in Hong Kong until recently. That is
why, today, I am able to sit here to tell you my story. Late
last year, they refused to renew my Hong Kong Exit-and-Entry
permit, so I could not stay in Hong Kong anymore. That is why I
came to New York.
Chairman Brown. Thank you.
Ms. Greve, thank you for particularly your last comments
about the draining resources, increasing costs, and instilling
fear. It seems that a number of U.S. companies are reluctant to
speak out because of fear of economic retribution that the
Chinese Government or state-owned enterprises or others could
levy against them.
Do human rights and civil society organizations, both
inside and outside China, feel--you talked about fear. Explore
that a little more, the fear they may feel in speaking out or
pointing fingers, or whatever they might want to do in
Ms. Greve. A number of groups report that it is very hard
to even do the basic documentation because victims and
witnesses are afraid to speak. This can be true before the
cyber age, but it is true in spades now, as James Mulvenon said
about stealing intellectual property.
Once you reveal information about yourself it becomes known
that you have spoken out and your family can suffer back home
in China. So there is an effect of fear. It silences individual
victims to speak up and it certainly makes it very hard for
journalists and human rights groups to provide the data and the
documentation so the world can know the extent of the problem.
Chairman Brown. So what do U.S. lawmakers do to help
protect these civil organizations, civil society organizations
and human rights groups and all?
Ms. Greve. I certainly believe that the work of the
National Endowment for Democracy, my organization which is
supported by an annual appropriation from the Congress, is one
lifeline. We give grants to human rights groups outside China
who are doing their best. Then they have money for server space
and the ability to travel to meet each other.
So some kind of offsetting of the financial cost is the
very least that can be done and that is certainly being done
through my organization. There are a number of programs that
the State Department has done to help human rights defenders,
and these are all worth doing even though they are at a very
Then certainly the voices of those in China who are still
in China and subject not only to harassment and impeding of
their normal work, but of course under the thumb of the
security apparatus of the state when they raise their voices,
it is very gratifying for them to hear Members of the Congress
echo their concerns and recognize the justice of their cause.
Chairman Brown. Does it always matter when--we sort of
sometimes walk this line of judging others, of speaking out--
does that sometimes jeopardize people whom we defend as
American elected officials speaking out individually in support
of a Chinese citizen? Does that cut both ways? Is that
something we should always do? Does that always help them?
Ms. Greve. It is a good idea to ask the individual or
advisors, but most of the time activists tell us that when they
are ready to stand up and be counted it can only help them to
have solidarity around the world based on universal values
Chairman Brown. All right. Thank you.
Representative Pittenger. Thank you, Mr. Chairman.
Mr. Feng, thank you for your testimony. I would like to
just get some idea of the penalties that are enforced against
the Chinese citizens in their efforts to expose human rights
and how they are targeted in China.
Mr. Wen. Internet hacking and cyber security is only one
problem they face. In real life, their security, their physical
security is an issue. They could be disappeared, their Internet
ability could be invaded and their telephones monitored, and so
on and so forth.
Representative Pittenger. Thank you.
Are these penalties pervasive throughout the country or are
they different in different provinces? Does it matter where in
Mr. Wen. The Internet attacks, the more prominent
dissidents and activists are suffering more. But emails, like
phishing, it is very common, very widespread. As for
disappearance and detention, there might be little difference.
In some provinces, like in Guangdong, it might be a little bit
better than elsewhere, but it is also very common.
Representative Pittenger. Thank you.
As it relates to religious freedoms and religious
practices, do you see that there is greater openness and
freedom in some provinces given than there are in others, and
does the official church--is it demanded in some provinces--is
the underground church able to live in greater freedom in some
areas than in other areas?
Mr. Wen. As far as I know, in the northeastern or the
greater northern area in China, religious persecution is very
serious. We all know, of course, about what's happening in
Xinjiang and Tibet. In the southern provinces, religious
persecution might be a little milder but it depends on what is
your standard. If your standard is universal values, the
persecution, even in what we consider the milder provinces, are
still very severe.
Representative Pittenger. Thank you for that.
Ms. Greve, thank you also for your testimony. As it relates
to these organizations, you said that you appreciated the
support from our government. I find myself in a predicament
sometimes when I am addressing, for example, the Chinese
Chamber that I have spoken to and others, and how direct I am.
I know Chairman Brown brought this up some, but I would like to
get a better feel how you could counsel me on addressing the
human rights issues and concerns that I could have the greatest
My challenge has been not to be overbearing, but to be real
and understanding. I have 25 years of experience in terms of
working with the underground church in that country and their
deep appreciation for what they have gone through. I want to be
as direct as I can without losing them in the discussion.
My argument has been that people of faith are the most
dependable, moral, ethical people, that they could be
constructive inside their own government, given all the reports
of pervasive problems with crime and other issues inside the
government. So I just think I would like a bit more input in
how you would help us as legislators bring better focus and
light to this issue that could put pressure on the Chinese
Ms. Greve. Even the work of this Commission proves that
there is extensive, detailed, undeniable documentation--the
annual report is just full--and yet merely the naming and
shaming, merely the exposure does not bring the facts always to
When there are face-to-face encounters, there is always an
opportunity. Sometimes people who are coming from China are not
aware or sometimes believe active government propaganda about
hostile forces outside China who want to needlessly smear the
good name of China. I think the calm repetition of facts has to
have a place in all of this.
I think the investment in the work of documentation has a
role, and there is also the question of the long term versus
the short term. You may not get an immediate response but you
have to stand for what is right for the long term. Maybe you
are planting seeds.
Representative Pittenger. Thank you so much.
Chairman Brown. Thank you.
Representative Meadows. Thank you, Mr. Chairman. The time
is late so I will be very brief, but I have one question as a
follow-up. I have been in a number of hearings where we have
heard about human rights abuses in China and as it continues.
Ms. Greve, if you could comment on this.
We understand when Congress takes an active role, when
under the guidance of the Chairman or others when we say we
will not tolerate human rights abuses it does not necessarily
change it, but those that are suffering suffer less when we
So is there a time coming where, instead of a threat, where
we truly mean what we say and that we will not tolerate the
human rights abuses that have become so really commonplace, is
what I understand. But when we highlight it, does it become,
indeed, less in China?
Ms. Greve. Numerous former prisoners report how important
it was that political leaders and the people in charge of their
detention institutions knew that other people were speaking up
on their behalf, improved treatment, health, and so on. And of
course the real hope has to come, as with the question of
commercial rule of law, an internal transformation in Chinese
society. This is where the long-term change will come.
The American institutions and love for liberty and
universal values cannot by itself change the situation on the
ground in China. It has to come from within China. I believe
the point should be to invest as much as possible in
strengthening those who have the right principles, who are in a
position to shape the institutions in the right direction and
to have the greatest, strongest friendship for those kinds of
people for the sake of the future of China.
Representative Meadows. And with that, I will yield back.
Let the message be one that we will not yield until this is
dealt with. So I yield back, and I thank the Chairman.
Chairman Brown. All right. Thank you very much, Mr.
Thank you all. The record will stay open for one week. If
any of the three panelists, Ms. Cao, Mr. Wen, Ms. Greve, would
have anything you would like to submit, and it is possible any
of us may have questions for you, written questions, if you
would answer those as quickly as possible. Thank you for
speaking out. Thanks for being here. Thank you.
The hearing is adjourned.
[Whereupon, at 4 p.m. the hearing was concluded.]
A P P E N D I X
Prepared Statement of Hon. Slade Gorton, a Former U.S. Senator From
june 25, 2013
Over the past year, I have served as a member on the Commission on
the Theft of American Intellectual Property. The Commission, co-chaired
by Governor Jon Huntsman, the former U.S. Ambassador to China, and
Admiral Dennis Blair, the former Director of National Intelligence, is
an independent and bipartisan initiative of leading Americans from the
private sector, public service in national security and foreign
affairs, academe, and politics. The three purposes of the Commission
are to: (1) document and assess the causes, scale, and other major
dimensions of international intellectual property theft as they affect
the United States; (2) document and assess the role of China in
international intellectual property theft; and (3) propose appropriate
U.S. policy responses that would mitigate ongoing and future damage and
obtain greater enforcement of intellectual property rights by China and
What we found during our research and due diligence was quite
alarming but not all that surprising. Our findings suggest that the
value of the total loss of American IP overseas to be over $300 billion
per year, comparable to the current annual level of U.S. exports to
Asia. Furthermore, we estimate that China is roughly 50-80 percent of
the problem. Most tangibly, one study suggests that if China had the
same level of IP protection as the U.S. or the U.K., there would be an
increase of 2.2 million new jobs within the United States. Intellectual
property rights are violated in a number of ways including violating
copyright and trademark protections, infringing on patents, and
stealing trade secrets. Trade secrets are stolen primarily through
cyber espionage, or through traditional industrial and economic
Cyber theft is one of the main avenues by which these ideas are
stolen. While hackers stealing trade secrets, money, and personal
information are a worldwide problem, quantitatively, China stands out
in regard to attacks for IP. A confluence of factors, from government
priorities to an underdeveloped legal system, causes China to be a
massive source of cyber-enabled IP theft. Much of this theft stems from
the undirected, uncoordinated actions of Chinese citizens and entities
who see within a permissive domestic legal environment an opportunity
to advance their own commercial interests. With rare penalties for
offenders and large profits to be gained, Chinese businesses thrive on
While our topic today is Chinese hackers and commercial rule of
law, it is important to remember that cyber espionage is only part of
the problem. The stories that most people hear or imagine when thinking
about IP theft, economic espionage, or trade-secret theft are the grist
of high-tech espionage thrillers. The mention of global IP thieves
often conjures up images of a foreign enemy based somewhere on the
other side of a vast ocean. State-sponsored efforts immediately leap to
mind--for example, Shanghai-based PLA Unit 61398, which has been
identified as the source of many recent cyber attacks. However,
while it is true that the rise of personal computing has added a new
dynamic to protecting intellectual property, it is important to
remember that nearly all IP loss, no matter how high-tech, still
requires a human component. Much of today's IP theft still utilizes
traditional economic espionage tactics. This is the apparent situation
in the recent NYU case, where a Chinese government institution bribed
researchers to disclose their valuable findings.
Industrial espionage is nothing new. It is a classic business
tactic used by less than reputable organizations to try and obtain a
competitor's secrets in order to gain an economic advantage in the
marketplace. So, while members of Congress continue to work on solving
the issue of cyber theft and Chinese hacking, we would encourage them
to consider expanding policy proposals beyond cyber theft to
international IP theft, generally.
Policy responses to the problem of IP theft must start with
defensive measures here at home, to protect what we have, but this is
not nearly enough. I believe that until there is a change in the
internal incentive structure within China, or until there exists in
China an interest group in favor of eliminating IP theft, we will
likely see little progress. This is perhaps the only road to long term
success. Purely defensive measures will likely just create better, more
Along with my testimony today, I am submitting a copy of the IP
Commission's report that was released May 22, 2013. The final chapters
lay out a series of policy recommendations, organized as short, medium,
and long-term recommendations. The recommendations vary and would
likely fall under the jurisdiction of a number of Congressional
committees including the Senate Banking and House Foreign Affairs
Committees. The short-term recommendations suggest changing the way the
U.S. government is internally organized to address IP theft and suggest
new tools to create incentives overseas. These include allowing for
targeted financial sanctions and quick response measures for seizing IP
infringing goods at the border. The medium-term solutions suggest,
among other things, amending the Economic Espionage Act and shifting
the diplomatic priorities of our overseas attaches. Our long term
solutions focus largely on continuing to work on establishing stronger
rule of law in China and other IP infringing countries. Additionally,
we offer a set of cyber recommendations that this commission will
likely find interesting given the topic of today.
It is our hope that this report will help to inform and strengthen
the policy changes that come from Congress and the Administration.
Prepared Statement of James C. Mulvenon
june 25, 2013
``Chinese Cyber Espionage''
Thank you, Mr. Chairman and the other members of the Congressional-
Executive Commission on China for the opportunity to take part in the
hearings you are holding today on the topic of ``Chinese Hacking:
Impact on Human Rights and Commercial Rule of Law.'' My remarks will
focus on Chinese cyber espionage.
Chinese cyber espionage has emerged as a top issue in Sino-US
relations, primarily because of concerns about theft of intellectual
property. As I discuss in Chapter 9 of my book, Chinese Industrial
Espionage, there are many different features of Chinese cyber activity
towards the United States and there is no ``one size fits all''
approach for all of them.
the scale of the problem
Cyber espionage is the latest and perhaps most devastating form of
Chinese espionage, striking at the heart of American military advantage
and technological competitiveness. Without mentioning China, General
Keith Alexander, NSA Director and Commander, USCYBERCOM, told an
audience at the Aspen Security Forum on 26 July 2012 that cyber
espionage represents the ``greatest transfer of wealth in history.''
Other government agencies are less circumspect about calling out
Beijing for its cyber theft.\1\ The Office of the National
Counterintelligence Executive's 2011 report Foreign Spies Stealing US
Economic Secrets in Cyberspace boldly asserts ``Chinese actors are the
world's most active and persistent perpetrators of economic
espionage.'' \2\ While the media began reporting rumors of large-scale
intrusions in 2005,\3\ U.S officials did not publicly acknowledge
exfiltrations of data until August 2006, when the Pentagon asserted
that hostile civilian cyber units operating inside China had launched
attacks against the NIPRNET and downloaded up to 20 terabytes of
data.\4\ In March 2007, then Vice-Chairman of the Joint Chiefs General
Cartwright told the US-China Economic and Security Review Commission
that China was engaged in cyber-reconnaissance, probing computer
networks of US agencies and corporations.\5\ This view was seconded in
the 2007 China Military Power Report, an annual Pentagon assessment
mandated by the National Defense Authorization Act, which claimed
``numerous computer networks around the world, including those owned by
the US government, were subject to intrusions that appear to have
originated within'' the People's Republic of China.\6\ Former White
House and DHS cyber official Paul Kurtz told Business Week that the
Chinese activity was ``espionage on a massive scale'' \7\ A 2009 study
by Northrup Grumman for the US-China Economic and Security Review
Commission concluded ``Chinese espionage in the United States now
comprises the single greatest threat to US technology . . . and has the
potential to erode the United States' long-term position as a world
leader in S&T [science and technology] innovation and
competitiveness.'' \8\ And the problem appeared to be getting worse
over time. Robert Jamison, the top cyber-security official at DHS, told
reporters at a March 2008 briefing, ``We're concerned that the
intrusions are more frequent, and they're more targeted, and they're
more sophisticated.'' \9\ After the Operation Aurora intrusions against
Google and other Silicon Valley companies in 2009 and 2010, officials
worried that China was escalating its intrusions. Whereas before the
activities were targeted at government and military networks,
threatening US military advantage and government policies, the new
intrusions went beyond state-on-state espionage to threaten American
technological competitiveness and economic prosperity.
Because the underlying evidence was classified, government and
military officials could not provide detailed evidence of these
allegations against the Chinese government and military, which
naturally led to scrutiny of the specific attribution to China. In his
confirmation testimony questions, current CYBERCOM Commander General
Alexander agreed that ``attribution can be very difficult.'' \10\
Former senior DHS cybersecurity official Greg Garcia told the New York
Times in March 2009 that ``attribution is a hall of mirrors.'' \11\
With respect to China, Amit Yoran, the first director of DHS's National
Cyber Security Division cautioned, ``I think it's a little bit naive to
suggest that everything that says it comes from China comes from
China.'' \12\ Yet other officials were more confident in the assessment
of Chinese responsibility. Then Director of the DNI National
Counterintelligence Executive, Joel Brenner, told the National Journal
Some [attacks], we have high confidence, are coming from
government-sponsored sites . . . The Chinese operate both
through government agencies, as we do, but they also operate
through sponsoring other organizations that are engaging in
this kind of international hacking, whether or not under
specific direction. It's a kind of cyber-militia . . . It's
coming in volumes that are just staggering.\13\
Other reports by non-governmental actors reach varying levels of
confidence in their determination of Chinese government
involvement.\14\ Given the technical challenges of attribution,
however, a more fruitful approach might be to first understand the
strategic context of Chinese cyber espionage, and then ask the question
``who benefits? '' from the activities attributed to Chinese actors,
specifically the possible means, motives and opportunities.
strategic context of chinese cyber espionage: china and cyber as an
overt tool of state power
As a rising power, Chinese national interests have logically
expanded with the growth in its economic, political, diplomatic and
military power. Yet its rise has occurred within a world system still
dominated by American unilateral authority. Because of these
imbalances, China has naturally sought to find asymmetrical advantages,
and cyberspace at first glance appears to be a dimension of national
power in which the United States is asymmetrically vulnerable because
of its greater dependence on information systems. Moreover, China seems
much more comfortable with cyber power as an legitimate, overt tool of
state power, especially compared with the United States, which still
treats cyber operations as a highly classified, compartmented
capability. What do we mean by overt? Countries like China and Russia
seems more comfortable with the overt use of cyber conflict, even by
non-state proxies acting on their behalf, as we saw in numerous Chinese
``patriotic hacker'' events in the late 1990s and the Russian cyber
conflicts in Estonia in 2007 and Georgia in 2008. When confronted with
their potential involvement in these incidents, both Beijing and Moscow
appeared to believe that the plausible deniability of the network was a
sufficient fig leaf to cover their barely veiled affiliations and
common cause with the attacks. By contrast, Washington does not even
have a vocabulary for discussing these capabilities in public, as seen
in the incoherence of official US comments about possible computer
network exploit activities against Milosevic during ALLIED FORCE and
the Stuxnet industrial control systems hack in 2011.
why cyber espionage?
Within the rubric of the Chinese government's view of cyber as a
tool of national power, it is clear that this new dimension offers
Beijing certain key strategic advantages, particularly with respect to
intelligence collection, technological competitiveness, intelligence
preparation of the battlefield, and strategic intelligence to
Intelligence Collection Advantages
Cyber espionage is now a favored mode of tradecraft for China,
principally because of its logistical advantages and the promise of
plausible deniability. On the first issue, Joel Brenner highlights the
relative ease of cyber versus other traditional forms of espionage:
``Cyber-networks are the new frontier of counterintelligence . . . If
you can steal information or disrupt an organization by attacking its
networks remotely, why go to the trouble of running a spy? '' \15\ Take
the case of Greg Dongfan Chung, discussed in Chapter 8, as an example.
Managing Chung required significant institutional resources, including
case officers, covert communications, money transfers, and travel
arrangements. In the end, Chung was caught, and his ``perp walk'' and
public trial proved to be an embarrassment to the Chinese government.
Now imagine a scenario in which the same volume of information can be
exfiltrated out of Boeing or Rockwell's computer networks in a single
evening via an exquisite computer network exploitation operation,
covered by the plausible deniability of network intrusions. Given the
choice between the two modes, it is only natural that intelligence
services would increasingly pick the less risky, cheaper, and faster
way of doing business.
Technological Competitiveness Advantages
After more than thirty years of serving as the world's assembly
point and export processing zone, the Beijing government has clearly
made the decision to transform Chinese economic development by
encouraging ``indigenous innovation.'' \16\ Since 2006, James McGregor
and others have highlighted ``Chinese policies and initiatives aimed at
building 'national champion' companies through subsidies and
preferential policies while using China's market power to appropriate
foreign technology, tweak it and create Chinese 'indigenous
innovations' that will come back at us globally.'' \17\ In the
information technology sector, McGregor notes ``Chinese government
mandate to replace core foreign technology in critical infrastructure--
such as chips, software and communications hardware--with Chinese
technology within a decade.'' Among the tools being actively used to
achieve these goals are:
A foreign-focused anti-monopoly law, mandatory technology
transfers, compulsory technology licensing, rigged Chinese
standards and testing rules, local content requirements,
mandates to reveal encryption codes, excessive disclosure for
scientific permits and technology patents, discriminatory
government procurement policies, and the continued failure to
adequately protect intellectual property rights.\18\
Missing from this excellent list, however, are traditional
technical espionage and technical cyber espionage, which many companies
believe are already eroding their technical advantage. The logic for
these latter approaches is clearly outlined by David Szady, former head
of the FBI's counterintelligence unit: ``If they can steal it and do it
in five years, why [take longer] to develop it? '' \19\ Rather than
destroying US competitiveness through ``cyberwar,'' former DNI
McConnell argues that Chinese entities ``are exploiting our systems for
information advantage--looking for the characteristics of a weapons
system by a defense contractor or academic research on plasma physics,
for example--not in order to destroy data and do damage.'' \20\
Examples of Chinese cyber espionage to obtain science and
technology can be divided into two broad categories: external and
insider. The 2011 NCIX report offers three illustrative examples of
insider cyber threats:
David Yen Lee, a chemist with Valspar Corporation,
used his access to internal computer networks between 2008 and
2009 to download approximately 160 secret formulas for paints
and coatings to removable storage media. He intended to parlay
this proprietary information to obtain a new job with Nippon
Paint in Shanghai, China. Lee was arrested in March 2009,
pleaded guilty to one count of theft of trade secrets, and was
sentenced in December 2010 to 15 months in prison.
Meng Hong, a DuPont research chemist, downloaded
proprietary information on organic light-emitting diodes (OLED)
in mid-2009 to his personal email account and thumb drive. He
intended to transfer this information to Peking University,
where he had accepted a faculty position, and sought Chinese
government funding to commercialize OLED research. Hong was
arrested in October 2009, pleaded guilty to one count of theft
of trade secrets, and was sentenced in October 2010 to 14
months in prison.
Xiangdong Yu (aka Mike Yu), a product engineer with
Ford Motor Company, copied approximately 4,000 For documents
onto an external hard drive to help obtain a job with a Chinese
automotive company. He was arrested in October 2009, pleaded
guilty to two counts of theft of trade secrets, and sentenced
in April 2011 to 70 months in prison.\21\
External cyber threats to scientific and industrial data, believed
to originate in China, have been well-documented in reports by outside
vendors. Some examples include:
In its Night Dragon report, McAfee documented
``coordinated covert and targeted cyberattacks have been
conducted against global oil, energy, and petrochemical
companies,'' ``targeting and harvesting sensitive competitive
proprietary operations and project-financing information with
regard to oil and gas field bids and operations.'' \22\
In his Shady Rat report, McAfee's Dmitry Alperovitch
identified 71 compromised organizations in one set of
intrusions, including 13 defense contractors, 13 information
technology companies, and 6 manufacturing companies.\23\
In January 2010, Google reported a ``highly
sophisticated and targeted attack on our corporate
infrastructure originating from China that resulted in the
theft of intellectual property,'' including source code.\24\
Google claimed that the intrusion also targeted ``at least
twenty other large companies from a wide range of businesses--
including the Internet, finance, technology, media and chemical
sectors,'' and was corroborated in separate admissions by
In its GhostNet report, researchers at Information
Warfare Monitor found 1,295 infected computers in 103
countries, including a range of political, diplomatic and
economic target organizations such as Deloitte and Touche's New
York office.\26\ The follow-on report, Shadows in the Cloud,
identified additional targets, including Honeywell.\27\
Each of these reported intrusions were traced to IP addresses in
China, and almost certainly represent only a fraction of the known
hacks, given the reluctance of companies to report data breaches.
Intelligence Preparation of the Battlefield (IPB)
It is also important to contextualize China's interest in cyber
espionage within Beijing's threat perceptions of potential scenarios
for military conflict. In the minds of the Chinese leadership, the
available evidence suggests that the most important political-military
challenges and the most likely flashpoints for Sino-US conflict involve
Taiwan or the South China Sea. Should the late 1990s, the PLA has been
hard at work bolstering the hedging options of the leadership,
developing advanced campaign doctrines, testing the concepts in
increasingly complex training and exercises, and integrating new
indigenous and imported weapons systems.
Yet cyber operations are also expected to play an important role in
these scenarios, necessitating intelligence preparation of the cyber
battlefield. At the strategic level, the writings of Chinese military
authors suggest that there are two main centers of gravity in a Taiwan
scenario, both of which can be attacked with computer network
operations in concert with other kinetic and non-kinetic capabilities.
The first of these is the will of the Taiwanese people, which they hope
to undermine through exercises, cyber attacks against critical
infrastructure, missile attacks, SOF operations, and other operations
that have a psyop focus. Based on assessments from the 1995-1996
exercises, as well as public opinion polling in Taiwan, China appears
to have concluded that the Taiwanese people do not have the stomach for
conflict and will therefore sue for peace after suffering only a small
amount of pain. The second center of gravity is the will and capability
of the United States to intervene decisively in a cross-strait
conflict. In a strategic sense, China has traditionally believed that
its ICBM inventory, which is capable of striking CONUS, will serve as a
deterrent to US intervention or at least a brake on escalation.\28\
Closer to its borders, the PLA has been engaged in an active
program of equipment modernization, purchasing niche ``counter-
intervention'' capabilities such as anti-ship ballistic missiles, long-
range cruise missiles and submarines to shape the operational calculus
of the American carrier strike group commander on station.\29\
According to the predictable cadre of ``true believers,'' both of the
centers of gravity identified above can be attacked using computer
network operations. In the first case, the Chinese IO community
believes that CNO will play a useful psychological role in undermining
the will of the Taiwanese people by attacking infrastructure and
economic vitality. In the second case, the Chinese IO community
envisions computer network attacks against unclassified NIPRNET and its
automated logistics systems as an effective way to deter or delay US
intervention into a military contingency and thereby permit Beijing to
achieve its political objectives with a minimum of fighting. In both
cases, China must conduct substantial computer network exploitation
(the military term for cyber espionage) for intelligence preparation of
this battlefield, and the alleged intrusion set into NIPRNET computer
systems would appear to fulfill this military requirement.
Why does the Chinese military believe that the deployment phase of
US military operations, particularly the use of the unclassified
NIPRNET for logistics deployments, is the primary focus of
vulnerability? Since DESERT STORM in the early 1990s, the PLA has
expended significant resources analyzing the operations of what it
often and euphemistically terms ``the high-tech enemy.'' \30\ When
Chinese strategists contemplate how to affect US deployments, they
confront the limitations of their current conventional force, which
does not have range sufficient to interdict US facilities or assets
beyond the Japanese home islands.\31\ Nuclear options, while
theoretically available, are nonetheless far too escalatory to be used
so early in the conflict.\32\ Theater missile systems, which are
possibly moving to a mixture of conventional and nuclear warheads,
could be used against Japan or Guam, but uncertainties about the nature
of a given warhead would likely generate responses similar to the
nuclear scenario.\33\ Instead, PLA analysts of US military operations
presciently concluded that the key vulnerability was the mechanics of
deployment itself. Specifically, Chinese authors highlight DoD's need
to use civilian backbone and unclassified computer networks (known as
the NIPRNET), which is a function of the requirements of global power
projection, as an ``Achilles Heel.'' There is also recognition of the
fact that operations in the Pacific are especially reliant on precisely
coordinated transportation, communications, and logistics networks,
given what PACOM calls the ``tyranny of distance'' \34\ in the theater.
PLA strategists believe that a disruptive computer network attack
against these systems or affiliated civilian systems could potentially
delay or degrade US force deployment to the region while allowing the
PRC to maintain a degree of plausible deniability.
The Chinese are right to highlight the NIPRNET as an attractive and
accessible target, unlike its classified counterparts. It is attractive
because it contains and transmits critical deployment information in
the all-important time-phased force deployment list (known as the
``tip-fiddle''), which is valuable for both intelligence-gathering
about US military operations but also a lucrative target for disruptive
attacks. In terms of accessibility, it was relatively easy to gather
data about the NIRPNET from open sources, at least before 9/11.
Moreover, the very nature of the system is the source of its
vulnerabilities, since the needs of global power project mandate that
it has to be unclassified and connected to the greater global network,
albeit through protected gateways.\35\
DoD's classified networks, on the other hand, are an attractive but
less accessible target for the Chinese. On the one hand, these networks
would be an intelligence gold mine, and is likely a priority computer
network exploit target. On the other hand, they are less attractive as
a computer network attack target, thanks to the difficulty of
penetrating its high defenses. Any overall Chinese military strategy
predicated on a high degree of success in penetrating these networks
during crisis or war is a high-risk venture, and increases the chances
of failure of the overall effort to an unacceptable level.
Chinese CNE or CNA operations against logistics networks could have
a detrimental impact on US logistics support to operations. PRC
computer network exploit activities directed against US military
logistics networks could reveal force deployment information, such as
the names of ships deployed, readiness status of various units, timing
and destination of deployments, and rendezvous schedules. This is
especially important for the Chinese in times of crisis, since the PRC
in peacetime utilizes US military web sites and newspapers as a
principal source for deployment information. An article in October 2001
in People's Daily, for example, explicitly cited US Navy web sites for
information about the origins, destination and purpose of two carrier
battle groups exercising in the South China Sea.\36\ Since the quantity
and quality of deployment information on open websites has been
dramatically reduced after 9/11, the intelligence benefits (necessity?)
of exploiting the NIPRNET have become even more paramount.\37\ Computer
network attack could also delay re-supply to the theater by
misdirecting stores, fuel, and munitions, corrupting or deleting
inventory files, and thereby hindering mission capability.
The advantages to this strategy are numerous: (1) it is available
to the PLA in the near-term; (2) it does not require the PLA to be able
to attack/invade Taiwan with air/sea assets; (3) it has a reasonable
level of deniability, provided that the attack is sophisticated enough
to prevent tracing; (4) it exploits perceived US casualty aversion,
over-attention to force protection, the tyranny of distance in the
Pacific, and US dependence on information systems; and (5) it could
achieve the desired operational and psychological effects: deterrence
of US response or degrading of deployments. Looking back over more than
ten years of China-origin intrusions into the very NIPRNET systems
identified by PLA analysts as a high-priority network attack target as
early as 1995, the logic of the intrusion sets becomes much clearer.
An additional motivation for cyber espionage is strategic
intelligence about the policies and intentions of civilian and military
officials as well as the internals of debates within the US government
and political parties:
1. In June 2006, the State Department was victimized by a
series of intrusions at its foreign posts and headquarters in
Washington. According to the Associated Press, ``hackers stole
sensitive information and passwords, and implanted `back doors'
in unclassified computers to allow them to return.'' Employees
told the AP that State's East Asian and Pacific Affairs Bureau
was particularly hard hit by the intrusion, suggesting that the
intruders had a special interest in Asia-related
information.\38\ Two reporters from Business Week relate the
story of what happened:
``The attack began in May, 2006, when an unwitting employee in the
State Dept.'s East Asia Pacific region clicked on an attachment in a
seemingly authentic e-mail. Malicious code was embedded in the Word
document, a congressional speech, and opened a Trojan ``back door'' for
the code's creators to peer inside the State Dept.'s innermost
networks. Soon, cyber security engineers began spotting more intrusions
in State Dept. computers across the globe. The malware took advantage
of previously unknown vulnerabilities in the Microsoft operating
system. Unable to develop a patch quickly enough, engineers watched
helplessly as streams of State Dept. data slipped through the back door
and into the Internet ether. Although they were unable to fix the
vulnerability, specialists came up with a temporary scheme to block
further infections. They also yanked connections to the Internet. One
member of the emergency team summoned to the scene recalls that each
time cyber security professionals thought they had eliminated the
source of a ``beacon'' reporting back to its master, another popped up.
He compared the effort to the arcade game Whack-A-Mole. The State Dept.
says it eradicated the infection, but only after sanitizing scores of
infected computers and servers and changing passwords.'' \39\
2. In 2007, intruders broke into the e-mail system for Defense
Secretary Robert Gates's office, and the Pentagon shut down
about 1,500 computers for more than a week while the attacks
continued. Officials told the Financial Times ``an internal
investigation has revealed that the incursion came from the
People's Liberation Army. One senior US official said the
Pentagon had pinpointed the exact origins of the attack.
Another person familiar with the event said there was a `very
high level of confidence . . . trending towards total
certainty' that the PLA was responsible.'' \40\
3. In the summer of 2008, the FBI informed both the Obama and
McCain presidential campaigns that their computer systems had
been infiltrated. Newsweek quoted an FBI agent as telling both
teams: ``You have a problem way bigger than what you understand
. . . You have been compromised, and a serious amount of files
have been loaded off your system.'' \41\ The Financial Times
later cited investigators ``had determined that the attacks
originated from China, but cautioned that they had not
ascertained whether they were government-sponsored, or just
unaffiliated hackers.'' \42\ In a cybersecurity policy speech
early in his Presidency, Obama referred to the incident: ``I
know how it feels to have privacy violated because it has
happened to me and the people around me. It's no secret that my
presidential campaign harnessed the Internet and technology to
transform our politics. What isn't widely known is that during
the general election hackers managed to penetrate our computer
systems. To all of you who donated to our campaign, I want you
to all rest assured, our fundraising website was untouched. So
your confidential personal and financial information was
protected. But between August and October, hackers gained
access to emails and a range of campaign files, from policy
position papers to travel plans. And we worked closely with the
CIA--with the FBI and the Secret Service and hired security
consultants to restore the security of our systems.'' \43\
These three sample cases show that Beijing clearly views cyber as a
collection modality for obtaining strategic intelligence at the highest
levels of the US Government.
chinese government denials
``The lady doth protest too much, methinks''--Shakespeare, Macbeth
In counterintelligence offices in Washington, one often sees the
following sign: ``Admit Nothing, Deny Everything, Make Vigorous
Counter-Accusations''. This philosophy is also a deeply held conviction
of the Chinese side when it comes to discussing their possible role in
cyber intrusions. First, they admit nothing and deny everything. When
asked about the China-origin intrusions into German Chancellor Angela
Merkel's office network, for example, ``the Chinese Embassy in Berlin
describing the accusation of state-controlled hacking as
``irresponsible speculation without a shred of evidence.'' \44\ Chinese
officials also point to Chinese laws as an ironclad defense of its own
lack of involvement. Reacting to accusations from that Chinese hackers
were responsible for the intrusions revealed by Google in January 2010,
Foreign Ministry spokeswoman Jiang Yu countered that ``Chinese law
proscribes any form of hacking activity.'' \45\ After the release of
the Office of the National Counterintelligence Executive's 2011
``Report to Congress on Foreign Economic Collection and Industrial
Espionage,'' Chinese officials denigrated the quality of the analysis,
asserting that ``identifying the attackers without carrying out a
comprehensive investigation and making inferences about the attackers
is both unprofessional and irresponsible.'' \46\ Then, the Chinese
government impugns the motives of the accusers, making its own counter-
accusations. In his response to questions about GhostNet, Foreign
Ministry spokesman Qin Gang accused foreigners of having a ``Cold War
The problem now is that some people abroad are keen to
fabricate the rumor of the so-called `Chinese cyber spy
network.' The allegation is utterly groundless...There is a
ghost called Cold War and a virus called China's threat theory
overseas. Some people, possessed by this ghost and infected
with this virus, fall ill from time to time. Their attempts of
using rumors to disgrace China will never succeed. We should
rightly expose these ghosts and viruses.\47\
Wang Baodong, a spokesman for the Chinese government at its embassy
in Washington, darkly hinted that ``anti-China forces'' are behind the
allegations.\48\ After the US-China Economic and Security Review
Commission's release of a Northrup-Grumman report on Chinese cyber
espionage, Qin Gang railed:
The report takes no regard of the true situation. It is full of
prejudice, and out of ulterior motive. We urge the so-called
commission not to see China through colored lens and not to do
things that interfere with China's internal affairs and
undermine China-US relations.\49\
Finally, the Chinese government describes itself as the victim of
cyber intrusions. After a detailed expose of Chinese cyber espionage
appeared in Business Week, Wang Baodong emailed the magazine's editors,
claiming that China is ``frequently intruded and attacked by hackers
from certain countries.'' \50\ When asked in early 2010 about Google's
complaint that it had been hacked from China, Foreign Ministry
spokesman Ma Zhaoxu said Chinese companies have also been hacked,
adding that China resolutely opposes the practice.\51\ Other officials
have cited the fact that most of the world's botnets are controlled
from servers in the United States, insinuating that Washington needed
to get its own cybersecurity in order before accusing other countries
of hacking. Finally, the Chinese government tries to paint itself as
the patron of global cybersecurity, in contrast to the ``militarized''
US approach to cyber: ``China is ready to build, together with other
countries, a peaceful, secure and open cyberspace order.'' \52\ While
Beijing's style of strategic communications is not limited to cyber
espionage, as seen in its rhetoric during crises (Belgrade Embassy
bombing in 1999, EP-3A hostage crisis in 2001, etc.), the reaction of
its officials has the unintended consequence of increasing suspicion.
how good are they? or does it matter?
Measuring Chinese cyber espionage capability also involves the
assessment of a group or country's ability to generate new attack tools
or exploits. Outside analysts, many of whom are programmers themselves,
tend to reify countries like Russia that abound with highly talented
programmers, and look down upon countries or individuals that simply
use off-the-shelf ``script kiddie'' tools or exploit known
vulnerabilities, preferring to admire more advanced cyber operators who
can discover their own ``zero-day'' vulnerabilities.\53\ Indeed,
analysts who have examined Chinese intrusions in detail often comment
on their relative lack of sophistication and especially their sloppy
tradecraft,\54\ leaving behind clear evidence of the intrusion and
sometimes even attribution-related information. For example, analysts
who examined possible Chinese intrusions into energy companies
concluded that Chinese hackers were ``incredibly sloppy,'' ``very
unsophisticated,'' ``made mistakes and left lots of evidence.'' \55\
Perhaps the Chinese cyber operators are so convinced of the plausible
deniability afforded by the current global network architecture that
they do not see the need to hide more effectively, or perhaps they
believe that their communications are secure because they are using
Chinese language. Both are true to some extent, especially the latter,
as many Chinese correctly perceive that their difficult language is
actually the country's first line of defense, its first layer of
cryptography, and there actually few foreigners with the skills or
bandwidth to penetrate the veil. Most important, however, the Chinese
probably perceive that they do not need to ``up their game'' because
their relatively primitive and sloppy efforts have thus far been wildly
successful and therefore see no need to change. In fact, one could
argue that China's cyber espionage successes to date are more a
function of the vulnerability of US systems than any inherent
capability on the Chinese side. As time passes, however, one would
expect Chinese capability to improve, particularly as information about
China-origin intrusions becomes more widespread and victims begin to
take concrete measures to protect themselves. This view is endorsed by
former counterintelligence chief Joel Brenner, who told the National
Journal in 2008 that Chinese hackers are ``very good and getting better
all the time.'' \56\
* * * * * * *
\1\ ``General Warns of Dramatic Increase of Cyber-Attacks on US
Firms,'' Los Angeles Times, 27 July 2012.
\2\ Office of the National Counterintelligence Executive, Foreign
Spies Stealing US Economic Secrets in Cyberspace: Report to Congress on
Foreign Economic Collection and Industrial Espionage, 2009-2011,
October 2011, http://www.dni.gov/reports/20111103_report_fecie.pdf
\3\ Tom Espiner, ``Chinese Hackers US Military Defenses,''
Silicon.com, November 2005; and Bradley Graham, ``Hackers Attack Via
Chinese Web Sites,'' The Washington Post, August 2005.
\4\ Dawn Onley, Dawn and Patience Wait, ``Red Storm Rising: DoD's
Efforts to Stave Off Nation- State Cyber Attacks Begin with China,''
Government Computer News, August 2006.
\5\ See General James E. Cartwright, in hearing, China's Military
Modernization and Its Impact on the United States and the Asia-Pacific,
US-China Economic and Security Review Commission, 110th Cong, 1st
Sess., March 29-30, 2007, p. 90, at www.uscc.gov/hearings/2007hearings/
\6\ Shane Harris, ``China's Cyber Militia,'' National Journal, 31
\7\ Brian Grow, Keith Epstein and Chi-Chu Tschang, ``The New E-
spionage Threat,'' Business Week, 21 April 2008, pp.32-41.
\8\ Bryan Krekel, Capability of the People's Republic of China to
Conduct Cyber Warfare and Computer Network Exploitation, published by
the US-China Economic and Security Review Commission, 9 October 2009.
\9\ Harris, ``China's Cyber Militia.''
\10\ ``Advance Questions for Lieutenant General Keith Alexander
USA, Nominee for Commander, United States Cyber Command,'' published by
Senate Armed Services Committee, accessed at: http://armed-
\11\ Shaun Waterman, ``Chinese Cyberspy Network Pervasive,''
Washington Times, 30 March 2009.
\12\ Harris ``China's Cyber Militia.''
\14\ For a range of views on the attribution issue, see Krekel,
Capability of the People's Republic of China to Conduct Cyber Warfare
and Computer Network Exploitation; McAfee Foundstone Professional
Services and McAfee LabsTM, Global Energy Cyberattacks:
`Night Dragon', 10 February 2011; Shishir Nagaraja and Ross Anderson,
``The Snooping Dragon: Social-Malware Surveillance of the Tibetan
Movement,'' UCAM-CL-TR-746, University of Cambridge Computer Laboratory
Technical Report 746, March 2009; Dmitri Alperovitch, Revealed:
Operation Shady RAT, McAfee, August 2011; and Information Warfare
Monitor, Tracking GhostNet: Investigating a Cyber Espionage Network,
Toronto: SecDev and Citizen Lab, 29 March 2009.
\15\ Harris, ``China's Cyber Militia.''
\16\ James McGregor, ``China's Drive for `Indigenous Innovation': A
Web of Industrial Policies,'' Washington, DC: US Chamber of Commerce,
\17\ James McGregor, ``Time to rethink US-China trade relations,''
Washington Post, 19 May 2010. See also McGregor, ``China's Drive for
`Indigenous Innovation.' ''
\19\ Nathan Thornburgh, ``The Invasion of the Chinese Cyberspies
(and the Man Who Tried to Stop Them),'' Time, 29 August 2005.
\20\ Nathan Gardels, ``China is Aiming at America's Soft
Underbelly: The Internet,'' The Christian Science Monitor, 5 February
2010, accessed at: http://www.csmonitor.com/Commentary/Global-
\21\ Office of the National Counterintelligence Executive, Foreign
Spies Stealing US Economic Secrets in Cyberspace.
\22\ McAfee, Night Dragon.
\23\ Alperovitch, Operation Shady RAT.
\26\ Information Warfare Monitor, Tracking GhostNet: Investigating
a Cyber Espionage Network, Toronto: SecDev and Citizen Lab, 29 March
2009, accessed at: http://www.scribd.com/doc/13731776/Tracking-
\27\ Information Warfare Monitor and Shadowserver, Shadows in the
Cloud: Investigating Cyber Espionage 2.0, Toronto: SecDec and Citizen
Lab, 6 April 2010, found at www.shadows-in-the-cloud.net
\28\ Office of the Secretary of Defense, Annual Report to Congress:
Military and Security Developments Involving the People's Republic of
China 2011, p.3.
\29\ Ibid., pp.2-4, 28-29.
\30\ Ibid., p.22.
\31\ Ibid., p.31.
\32\ Ibid., p.34.
\33\ Ibid., pp.29,78.
\34\ For a PACOM/J4 perspective on the issue, see http://
\35\ For an unclassified summary, see http://www.disa.mil/Services/
\36\ ``Whom, If Not China, Is US Aircraft Carriers' Moving onto
South China Sea Directed Against? '' Renmin Ribao, 24 August 2001.
\37\ The Department of Defense's revised web site administration
guidance, which can be found here (http://www.defenselink.mil/
amendments_and_corrections.html), specifically prohibits the following:
``18.104.22.168. Reference to unclassified information that would reveal
sensitive movements of military assets or the location of units,
installations, or personnel where uncertainty regarding location is an
element of a military plan or program.''
\38\ ``Computer Hackers Attack State Dept.,'' Associated Press, 12
\39\ Grow, Epstein and Tschang, ``The New E-spionage Threat.''
\40\ Sevastopluo, Demetri, ``Chinese Hacked into Pentagon,''
FT.com, 3 September 2007.
\41\ Evan Thomas, ``Center Stage,'' Newsweek, 6 November 2008;
David Byers, Tom Baldwin and Tim Reid, ``Obama computers 'hacked during
election campaign,' '' Times Online, 7 November 2008.
\42\ Financial Times, November 2008.
\43\ ``Remarks by the President on Securing our Nation's Cyber
Infrastructure,'' Office of the Press Secretary, The White House, 29
\44\ ``Merkel's China Visit Marred by Hacking Allegations,''
Spiegel Online International, 27 August 2007.
\45\ Helft, Miguel, and John Markoff, ``Google Alerted Activists of
Attacks,'' New York Times, 15 January 2010.
\46\ ``China Rebuts US Accusation of Hacker Attacks,'' China Daily,
31 October 2011.
\47\ ``China Denies Allegations on `Cyber Spy Network'.''
\48\ Grow, Epstein and Tschang, ``The New E-spionage Threat.''
\49\ Clayton, Mark, ``Google cyber attack: the evidence against
China,'' Christian Science Monitor, 13 January 2010.
\50\ Grow, Epstein and Tschang, ``The New E-spionage Threat.''
\51\ ``China Says Google, Foreign Firms Must Respect Laws,'' CIOL,
19 January 2010.
\52\ ``China Rebuts US Accusation of Hacker Attacks,'' China Daily,
31 October 2011.
\54\ Keizer, Gregg, ``Chinese Hackers Called Sloppy but
Persistent,'' Computerworld, 12 February 2011.
\56\ Harris, ``China's Cyber Militia.''
Prepared Statement of Hon. Sherrod Brown, a U.S. Senator From Ohio;
Chairman, Congressional-Executive Commission on China
June 25, 2013
I thank Cochairman Chris Smith, the other Commissioners, and our
esteemed panel for attending this important hearing.
I also thank the staff for their tireless efforts in supporting the
work of this bipartisan Commission and its important task of monitoring
human rights and rule of law developments in China.
Cyber attacks from China pose a serious threat to U.S.-China
So much so that President Obama raised the issue during his recent
summit with President Xi Jinping. It will be a key topic at the U.S.-
China Strategic and Economic Dialogue to be held in Washington in a few
Today's hearing will focus on the aspects of cyber that fall within
the Commission's mandate, namely the impact on the rule of law and
human rights in China.
While recent headlines have revived the debate over the appropriate
balance between security and freedom, we must not overlook the enormous
impact cyber attacks from China have had and continue to have on
American jobs and companies. Indeed, they seriously call into question
China's commitment to the rule of law.
We are talking about the massive theft of valuable technology and
commercial secrets from American companies--what General Keith
Alexander, director of the National Security Agency and head of U.S.
Cyber Command, calls the ``greatest transfer of wealth in history.''
The scale and scope is staggering. The Commission on the Theft of
American Intellectual Property, which is represented here today by our
former colleague Senator Slade Gorton, released a comprehensive, report
identifying China as the world's biggest violator of intellectual
It estimates that China accounts for some 50 to 80 percent of IP
theft in the United States and around the globe. It found that
international IP theft, including from China, costs the U.S. economy
hundreds of billions of dollars per year and millions of jobs, dragging
down our GDP and undermining our ability to innovate and prosper.
The IP Commission noted that a 2011 study by the U.S. International
Trade Commission estimated that if China's IP protection improved to a
level comparable to ours, it would add 2.1 million jobs to our economy.
Yet, the IP Commission acknowledged this figure underestimated the real
cost to American jobs.
The victims of IP theft include companies in my state of Ohio and
across the nation. Those affected are hard-working Americans trying to
make an honest living and trying to spur innovation, only to see their
products, services, and technology stolen and handed over to state-
owned enterprises and businesses in China.
And with the growing prevalence of computer networks and America's
heavily-wired economy, cyber attacks represent an increasingly growing
threat alongside more traditional forms of IP theft.
China simply doesn't play by the same rules as we do. The Chinese
government has denied these attacks, even though there is mounting
evidence of Chinese state involvement. This evidence includes a
February 2013 report by the cyber security firm Mandiant that linked
attacks on 141 companies, including 115 based in the United States, to
a unit of the People's Liberation Army working from a building in
Shanghai. The increase in attacks has coincided with the Chinese
government's push for indigenous innovation and development of key
industries, creating an environment where it's perfectly acceptable to
cheat and steal your way to the top.
And as we've seen in the last few years, it's not only American
companies that are the target of cyber attacks. It's also media and
human rights organizations. Journalists writing about corruption in
China find their computer systems hacked and passwords stolen. For
human rights organizations and activists, dealing with hacking attacks
from China is almost a daily fact of life.
We can't sit idly by while the Chinese government, either through
active measures or by turning a blind eye, continues to perpetuate
theft on a grand scale and to threaten the advance of human rights for
the Chinese people, Tibetans, Uyghurs, democracy advocates, religious
followers, and Falun Gong practitioners.
That's why I support a comprehensive, common sense, bipartisan
approach that utilizes every tool in our arsenal to hold China
accountable and to level the playing field. I urge Congress and this
Administration to do everything it can--from leveraging access to our
markets, trade negotiations, and WTO cases--to combat China's unfair
trading practices. That includes taking up the bipartisan Currency
Exchange Rate Oversight Reform Act of 2013 which I introduced earlier
And I commend Senator Levin for his recent proposed legislation to
hold China accountable for cyber theft. I look forward to hearing from
our witnesses on what more we can do to address this most pressing
Prepared Statement of Hon. Christopher H. Smith, a U.S. Representative
From New Jersey; Cochairman, Congressional-Executive Commission on
june 25, 2013
In December of 2006 and then again in March of 2007, my Human
Rights Subcommittee's computers were attacked by a virus that, in The
U.S. House Information Resources Office's words, ``intended to take
control of the computers.'' At that time, the IT professionals cleaned
the computers and informed my staff that the attacks seemed to come
from the People's Republic of China. They said it came through or from
a Chinese IP address. The attackers hacked into files related to China.
These contained legislative proposals directly related to Beijing,
including a major bill I authored, the Global Online Freedom Act. Also
hacked were e-mails with human rights groups regarding strategy,
information on hearings on China and the names of Chinese dissidents.
While this absolutely doesn't prove that Beijing was behind the attack,
it raises very serious concern that it was.
Certainly, Chinese agents have not only attempted to target me or
my offices. Cyber attacks on Congress are only a small, but not
insignificant, part of a much larger pattern of attacks that has
targeted the executive branch, the Pentagon, and American businesses.
How do we know this? In recent months, we have seen in-depth
reports come out detailing this massive intrusion into our cyber space
and massive theft of our cyber data. Chinese agents have stolen our
designs for helicopters, ships, fighter jets, and several missile
defense systems. They have stolen our innovative technologies, from
solar panel designs to biotech research. These thefts appear to have
paid off for China. In recent years, the Chinese government has made
tremendous jumps in its military capabilities, while boosting the
competitiveness of China's ``national champions.''
While cyber thefts have existed for years, increasingly, we can
prove that many of these outrageous thefts--deemed ``the greatest
transfer of wealth in history''--originate in the People's Republic of
China. And these attacks are not random. We now know, with some
certainty, that some thefts are being organized by Chinese government
As we learn about the source of these attacks, we are also learning
about the motivations. Talented Chinese Internet users are working day
and night to infiltrate our networks and to steal secrets. China's
actions are part of a larger and coordinated state-sanctioned effort to
increase China's competitiveness, militarily and commercially.
Today, we will hear more about how the commercial rule of law
system in China allows these types of attacks to occur and how these
attacks disadvantage American business, innovators, contractors, and
government agencies. We will hear about the size and scope of the
attacks. And, we will hear how the U.S. government remains unprepared
for far too many of these challenges.
We will, also, however, hear about another side of this important
topic--one often overlooked during the recent discussions about China's
cyber attacks. The Chinese government is not only targeting American
business and military organizations, but also targeting ordinary
Chinese citizens seeking to advance their most fundamental freedoms.
Chinese hackers do not simply look beyond their borders to steal
secrets. As we will hear today, Chinese citizens--including those
advocating for human rights, free speech and food safety--are also
targeted by state-sponsored hackers.
These courageous citizens are also monitored; their private
information stolen. The brave pastor seeking to organize a service, the
father seeking to raise awareness about toxic foods, the wife of an
imprisoned activist, the mother who is made to undergo a forced
abortion--all of these citizens realize that, in any instant, the
government may be watching. China, of course, also targets those
outside of China who similarly wish for human rights and political
Today, we know this system of surveillance and theft occurs. We
know that China is organizing these cyber attacks--or is, in the very
least, complicit to their existence.
The question we must ask ourselves is why? Clearly, China's rise as
a military power requires technology, and China's economy will, no
doubt, benefit from the latest innovations from abroad.
But, why is China so concerned about its domestic citizenry--
especially those who advocate peacefully for legal and political
reforms? Why is China so worried about international NGOs that seek to
highlight official abuses and wrongful imprisonments? Why is China so
reluctant to provide a fair regulatory environment in China, when
commercial laws and regulations will eventually protect all
businesses--domestic and foreign--seeking to provide the best services
for Chinese consumers?
These may be difficult questions. Thankfully, today we are
fortunate to have four guests who are well versed in these issues. They
are experts on how China is monitoring our cyber actions and how China
is attacking targets globally. I would like to thank them for their
participation here today, and I look forward to hearing their insights
on these critical issues.