China's Cyberattacks

Chinese hacker who obtained details of 78 million people is charged in US with one of the worst data breaches in history
by Robert Delaney

This photo provided by the FBI shows a wanted poster of Wang Fujie (left). The US Justice Department says a grand jury has indicted Wang and another man identified only as John Doe for hacking into the computers of health insurer Anthem Inc and three other, unnamed companies, in an indictment unsealed May 9, 2019, in Indianapolis. 

A US federal grand jury on May 9 charged a Chinese national in a hacking campaign described by the Justice Department as “one of the worst data breaches in history”, an effort that yielded the personal data of 78 million people.
Wang Fujie, also known as Dennis Wang, and another individual in the indictment, have infiltrated the US-based computer systems of US health insurer Anthem and three other companies, the Justice Department said in a statement on May 9.
“The allegations in the indictment unsealed today outline the activities of a brazen China-based computer hacking group that committed one of the worst data breaches in history,” Assistant Attorney General Brian Benczkowski, said in the announcement.
“These defendants attacked US businesses operating in four distinct industry sectors, and violated the privacy of over 78 million people by stealing their [personally identifiable information].”
The indictment was the latest in a series of efforts by the US Federal Bureau of Investigations to tackle hacking operations and cybertheft emanating from China.

The bureau has become increasingly vocal about the country.
The second suspect, who was identified in court documents as John Doe and through aliases including Zhou Zhihong, conducted the hacking activities in China.
The other three companies affected by the hacks, conducted between February 2018 and January 2019, operated in the technology, basic materials and communication services sectors, according to the department.
Information taken from the companies included health identification numbers, birth dates, social security numbers, addresses, telephone numbers, email addresses, and employment information.
Wang and Doe obtained personal information by installing malware on the victim companies’ computers systems through “spearfishing” emails sent to the companies’ employees, according to the indictment, which was filed with the Indianapolis division of the federal court’s Southern District of Indiana, where Anthem is based.

The information obtained by the defendants was encrypted and sent through multiple computers to destinations in China. 

The files installed in the victim companies’ computers systems were then deleted.
Anthem and the other US companies involved notified the FBI when they became aware of the operation, allowing the federal investigators to monitor the activity and trace it to the defendants, according to the Justice Department.
The FBI has worked closely with companies in recent years to respond to attempts by Chinese to steal information from US companies. 

GE Aviation, for example, had worked with the bureau for more than a year to lure Xu Yanjun, a spy working for China’s Ministry of State Security, into a law enforcement trap in Belgium last year. Xu was then extradited to the US and is now awaiting trial.
According to Xu’s indictment filed in the Southern District of Ohio, the MSS officer sought GE Aviation technology used in the development of fan blades and engine encasements.
FBI Director Christopher Wray has been an outspoken critic of China since he assumed his post in 2017.
Last year, Wray accused Beijing of increasing its use of “non-traditional collectors” – such as professors, scientists and students – for its intelligence gathering.
“One of the things we’re trying to do is view the China threat as not just a whole-of-government threat but a whole-of-society threat on their end, and I think it’s going to take a whole-of-society response by us,” Mr Wray testified at a Senate hearing in February 2018.
Eight months later at another hearing, Mr Wray declared China “the broadest, most complicated, most long-term” counter-intelligence threat confronting the US – surpassing even Russia, whose interference in the 2016 election dominated headlines for more than two years and continues to roil the country.
Speaking at a separate Senate hearing in December, Bill Priestap, the FBI’s assistant director of counter-intelligence, also called for more coordinated action to counter espionage and cybertheft originating in China.
“There are pockets of great understanding of the threat we’re facing and effective responses, but in my opinion we’ve got to knit that together better,” he said.
Warning against what he called “ad hoc responses”, Priestap added: “We need more people in government, more people in business, more people in academia pulling in the same direction to combat this threat effectively.”

Sina Delenda Est

The United States is finally confronting China’s economic aggression

By Josh Rogin

U.S. Trade Representative Robert E. Lighthizer testifies on trade policy before the House Ways and Means Committee at Capitol Hill on March 21. 

Lost in last week’s coverage of tariffs and trade deficits was the Trump administration’s landmark decision to confront China’s unfair and illegal practices that threaten our economic security.

It’s the opening salvo of the key economic battle of the 21st century and part of a worldwide struggle the United States must lead.
The Chinese government’s strategy to amass control of critical technologies while undermining the rules-based trade system built by the United States and its partners will be hard to combat. 

Exactly how the administration plans to tackle the task remains unclear. 

But the implications of that long-term project reach far beyond the short-term battle over tariffs or deficits now brewing between Washington and Beijing.
The Trump administration is now basing U.S. policy on a recognition that the massive scale of China’s technology transfer effort cannot be addressed with the usual levers of trade policy. 

That means the United States and other countries will have to respond with new tools and a new attitude.
“Technology is probably the most important part of our economy,” U.S. Trade Representative Robert E. Lighthizer said Thursday. 

“And we concluded that, in fact, China does have a policy of forced technology transfer; of requiring licensing at less than economic value; of state capitalism, wherein they go in and buy technology in the United States in non-economic ways; and then, finally, of cybertheft.”
Lighthizer released the results of a months-long investigation by his office meant to form the basis of the new U.S. response. 

Its findings confirm what academics and the private sector have long known. 

His office estimates that Chinese illicit practices rob the U.S. economy of at least $50 billion annually. 

A bipartisan commission chaired by retired Adm. Dennis Blair and former Utah governor Jon Huntsman estimated the loss to the U.S. economy due to intellectual property theft overall to be between $225 billion and $600 billion annually. 

The commission’s 2017 report named China as the “principal IP infringer.”
The administration plans new tariffs and will bring a case against China at the World Trade Organization regarding discriminatory licensing practices. 

But officials told me that the real game changer is yet to come, saying that the administration will soon announce restrictions on Chinese investment in a range of technology and other critical sectors.
While the specific actions haven’t been finalized, expect executive actions aimed at preventing Chinese state-controlled companies from swallowing up U.S. technology firms, stopping U.S. companies from handing over key technologies to China and working to persuade other Western countries to do the same.
The Senate is sitting on legislation to reform the Committee on Foreign Investment in the United States to cover new industries and fix loopholes. 

The administration is already increasing actions to prevent Chinese firms from purchasing U.S. companies crucial to our technological infrastructure or that control personal information of Americans.
Make no mistake, these are deviations from normal practice to single out China — for good reason. For one, Chinese firms are increasingly connected to the Chinese government, serve the political objectives of the Chinese Communist Party and are the beneficiaries of massive subsidies and protectionist benefits given by Beijing. 

In essence, China has politicized its entire economy.
There was a belief that China would develop a private economy that would prove compatible with the WTO system. 

Chinese leadership has made a political decision to do the opposite. 

So now we have to respond.
“The Chinese are engaged in a fundamental attack on the principles of free trade,” said Derek M. Scissors of the American Enterprise Institute. 

“They are not close to free traders, so we are not obligated to abide by free trade. We are overdue to confront China on this.”
Given the stakes and risks, the next U.S. moves must be smart and strategic. 

If this really is the economic battle of the future, the United States needs allies in the fight. 

Alienating partners with tariffs on steel and aluminum at the start of this journey was a counterproductive distraction. 

European countries face the same threat from China but need to be brought along via positive U.S. engagement. 

Persuading them to join America’s new WTO case would be a good start.
Overreach is also a risk. 

Some Chinese investment in the United States is positive, and defining which sectors to protect is key. 

Our issue is with the Chinese Communist Party.
There must also be a dialogue with Beijing to offer it the opportunity to change its behavior, abide by its international commitments and build reciprocity into the U.S.-China economic relationship.
This new effort to prevent China from unfairly moving to dominate the industries of the future is complex, risky and sure to have unintended consequences that will have to be managed over time. But the future of our economy depends on its success.

President Trump's Art of the Deal

For China, a Painful Rethink on Donald Trump
By ANDREW BROWNE

A man at a bar in Beijing takes a photo of the inauguration of Donald Trump. Whether banning refugees or going ahead with a wall along the Mexican border, President Trump has made clear in his first days as president that he actually means what he says to his popular base.

SHANGHAI—The officials who look after China’s relations with the world respect—even admire—a tough negotiator. 

That’s how they first thought about the challenge of Donald Trump.
Even when he rattled the foundations of U.S.-China relations by taking a call from the Taiwan president after his election, their calm response reflected hopes that he was bluffing. 

Indeed, President Trump encouraged the idea by suggesting that trade concessions from Beijing might make his threats to abandon America’s longstanding “One China” policy go away.
By now, it is dawning on Chinese policy makers how badly they may have misread him. 

Whether banning refugees or going ahead with a wall along the Mexican border, President Trump has made clear in his first days as president that he actually means what he says to his popular base.
The course appears set for confrontation between the two nuclear-armed giants over issues that have been stewing for years: China’s mercantilist trade practices, its cybertheft, military buildup and ambitions to dominate its neighborhood. 

Chinese leaders must decide how—or whether—to deal with a U.S. president who has proven unrestrained by diplomatic protocol than they could have imagined, and just as prone to sound off about U.S. allies as adversaries.
Can China do business with this White House?
The Mexican president, Enrique Peña Nieto, asked himself the same question after increasingly hostile exchanges with President Trump over whether Mexico would pay for the proposed wall—and canceled his visit to Washington. 

The two leaders later spoke by phone.
The episode stands as a warning about how quickly U.S. ties could unravel with China, a far more important relationship.

Jorge Guajardo, a former Mexican ambassador to Beijing, says the Chinese dictators may conclude that attempting to make nice with President Trump is a waste of time. 

Mr. Peña Nieto had “bent over backwards” to accommodate President Trump, he says, welcoming him to Mexico in August with all the courtesies of a state visit.
“I didn’t think he would be so callous and cruel immediately,” said Mr. Guajardo.
Then there are the tweets. 

Chinese diplomacy is fastidious. 

Official exchanges are minutely scripted. 

Chinese public opinion, conditioned by a sense of national victimhood, is acutely sensitive to foreign slights. 

Imagine, then, the anxiety of Beijing’s leaders knowing that Mr. Trump could blow up a high-level meeting by embarrassing them with a 140-character blast.
That’s the point, of course. 

President Trump employs impulsiveness as a negotiating tactic—the “Art of the Deal.” 

He believes—with some justification—that Chinese negotiators have outsmarted their predictable U.S. interlocutors at every turn. 

Lopsided trade flows illustrate the point. 

U.S. technology markets are open, China’s are closing. 

Where’s the reciprocity? 

“They’re killing us,” President Trump complains.
Mr. Peña Nieto can’t afford a complete rupture; he’s torn between national pride and fear that President Trump will withdraw from the North American Free Trade Agreement and badly damage Mexico’s trade-dependent economy.
China’s trade surplus with the U.S. dwarfs that of Mexico. 

But Beijing has more cards to play. 

If Mr. Trump raises trade tariffs, it can retaliate against U.S. multinationals such as Boeing or Apple that are reliant on the Chinese market.
China has missiles and cyberwarfare capabilities. 

Ultimately, the U.S. would prevail in a military contest over Taiwan or the South China Sea, but at some cost.
Beijing would greatly prefer tough negotiations over a standoff, or worse. 

Xi Jinping needs internal stability as he prepares to consolidate power at a key Communist Party congress late this year. 

Any mishandling of the U.S. relationship could expose Xi to criticism. 

Meanwhile, the economy is stumbling; as capital flees the country, export revenues from the U.S., China’s largest market, are more important than ever.
High-level communication between Beijing and Washington is vital to prevent disagreements spiraling into crises. 

Risk-averse Chinese leaders may try to wait out President Trump, hoping he softens, or his presidency implodes.
If they take the plunge and engage, his unpredictable negotiating style will be a wild card.

Trying to use Taiwan as a bargaining chip will play as disastrously with China as the wall does with Mexico. 

In that sense, President Trump’s ugly spat with the Mexican president is ominous.
Says Mr. Guajardo, the former ambassador: “He doesn’t even allow you to get to the table.”