Donilon Says China Cyber Attacks Hurt Bid for Better Ties

China is waging a campaign of cyber espionage against U.S. companies that is threatening to derail President Barack Obama’s second-term effort to improve ties, National Security Adviser Thomas Donilon said.

The widespread theft of intellectual property and trade secrets through “cyber intrusions emanating from China at a very large scale” has become a point of contention with the Chinese government, Donilon said yesterday in a speech at the Asia Society in New York.

His comments marked the latest step in Obama administration efforts to curb attacks on corporate networks that U.S. intelligence agencies and security firms such as Mandiant Corp. have traced to China. He said it was time to hold China accountable for “a growing challenge” to economic relations.

Donilon, who helps shape U.S. foreign policy, said China needs to recognize the scope of the hacking issue, take steps to halt computer espionage and start a “constructive dialogue” with the U.S. on standards for conduct in cyberspace.

“We have worked hard to build a constructive bilateral relationship that allows us to engage forthrightly on priority issues,” he said in his prepared remarks. “The United States and China, the world’s two largest economies, both dependent on the Internet, must lead the way in addressing this problem.”

Donilon discussed cybersecurity as part of a broader address on the U.S. foreign policy shift toward Asia, a change in direction from the Middle East that was announced in the president’s first term. Donilon stressed that the shift wasn’t designed to rein in China, the world’s second-largest economy.

Protect Peace

China is itself a victim of hacking and firmly opposes cyber-attacks, Foreign Ministry spokeswoman Hua Chunying told a briefing in Beijing today. She said China will work with the international community, including the U.S., to “protect peace, safety, openness and cooperation in cyberspace.”

Rebalancing U.S. priorities toward the Pacific “does not mean containing China or seeking to dictate terms to Asia,” said Donilon. Obama has “engaged with China at an unprecedented pace, including twelve face-to-face meetings with Hu Jintao,” he said, referring to the departing Chinese leader.

Even with tensions over cybersecurity, Donilon said the time and energy devoted by the U.S. to China and its neighbors have already paid dividends. He cited Chinese cooperation last week on tougher United Nations Security Council sanctions against North Korea, which has ignored repeated calls to suspend its pursuit of nuclear weapons. China had the power to veto UN action against North Korea, its increasingly volatile ally.

Korean Peninsula

Tensions on the Korean peninsula are at the highest since at least 2010, when 50 South Koreans were killed in attacks by the North. Dictator Kim Jong Un’s regime has increased its bellicose rhetoric since the sanctions were tightened, threatening to launch a nuclear strike against South Korea and the U.S., which are conducting annual joint military drills.

“North Korea’s claims may be hyperbolic -- but as to the policy of the United States, there should be no doubt: We will draw upon the full range of our capabilities to protect against, and to respond to, the threat posed to us and to our allies by North Korea,” said Donilon.

Donilon cited Myanmar, which the administration still refers to as Burma, as a model of transition from repressive regime to burgeoning democracy. The emergence of Myanmar from isolation coincided with Obama’s first term in office.

Burma Experience

“I urge North Korea’s leaders to reflect on Burma’s experience,” he said. “While the work of reform is ongoing, Burma has already broken out of isolation and opened the door to a far better future for its people.”

After deepening cross-Pacific economic ties during the 1980s and early 1990s, the U.S. under President Bill Clinton spearheaded financial bailouts during the Asian financial crisis. The ensuing administration of George W. Bush turned its attention to the Middle East and Afghanistan following the Sept. 11, 2001, terrorist attacks on the U.S., before Obama embarked on the “pivot” in attention back to Asia.

“Obama’s strategic focus on the Asia-Pacific is already a signature achievement,” he told the Asia Society in New York. “But its full impact will require sustained commitment over the coming years.”

On cybersecurity, Donilon said the U.S. would do everything necessary to shield the nation’s computer networks from attacks on vital infrastructure, such as power grids and transportation links. The issue surged after Alexandria, Virginia-based Mandiant said in a Feb. 19 report that the Chinese army may be behind a hacking group that has hit at least 141 companies worldwide since 2006.

Shaky Ground

Chinese Foreign Minister Yang Jiechi said March 9 that news articles blaming China’s government and military for computer hacking are on “shaky ground,” and such stories serve political motives.

China opposes turning cyberspace into a “new battlefield” and countries should introduce global rules to govern conduct, Yang told reporters at a press conference during the National People’s Congress in Beijing.

U.S. House Intelligence Committee Chairman Mike Rogers has said that cybersecurity should be made the top issue in any U.S. trade discussions with China as a way to pressure the government in Beijing to halt computer espionage.

Rogers, a Michigan Republican, has accused China of widespread digital spying aimed at stealing intellectual property from U.S. companies.

“We have to deal with it now or we’re going to have a horrible problem,” Rogers said in a March 1 interview with Emily Chang on Bloomberg Television’s “Bloomberg West.” “If they want to be great international players in the international global economic market, you can’t act like a thief.”

Before it's here, it's on the Bloomberg Terminal.