China’s continued cyber espionage against the United States is undermining economic relations, White House National Security Adviser Susan Rice warned Beijing on Wednesday.
Rice said in unusually forceful language China must curtail government-backed cyber spying or risk undermining close trade ties.
"Cyber-enabled economic espionage hurts China as well as the U.S., because American businesses are increasingly concerned about the costs of doing business in China," Rice said during a speech at Georgetown University.
"If meaningful action is not taken now, this behavior will undermine the economic relationship that benefits both our nations."
The Obama administration is under pressure from the private sector to take action against China for a widespread campaign of cyber attacks that have included theft of both government and corporate secrets, including data on the military’s most advanced warplane, the new F-35 jet fighter.
Major corporations have told the administration that the Chinese have conducted large-scale intrusions into networks and compromised valuable data.
So far, the administration has turned down options posed by security and intelligence agencies to take action against China.
U.S. and Chinese officials in July held the first talks on cyber security that officials said they hoped would lead China to scale back the cyber attacks.
Rice’s warning to China was a more explicit high-level warning since her predecessor, Thomas Donilon, said in a speech in March that China’s cyber attacks would not be tolerated.
U.S. officials disclosed to the Washington Free Beacon that month that President Barack Obama two years ago rejected a series of tough actions against China for its cyber attacks. The options included counter-cyberattacks on China and economic sanctions, but were turned down as inconsistent with the administration’s conciliatory policies toward China.
China, for its part, has warned the United States in the past that if it continues to accuse Beijing of cyber attacks, China will curtail its relations with the United States.
Rice’s comments coincided with the formal release on Wednesday of the annual report by the congressional U.S.-China Economic and Security Review Commission. The report contains an extensive section on Chinese-government cyber attacks that it states have shown no signs of diminishing.
"In 2013, strong evidence emerged that the Chinese government is directing and executing a large-scale cyber espionage campaign against the United States," the report said.
"There is an urgent need for Washington to take action to prompt Beijing to change its approach to cyberspace and deter future Chinese cyber theft."
In Beijing, Chinese Foreign Ministry spokesman Hong Lei on Tuesday preempted both Rice’s comments and the commission report by angrily responding to a reporters’ question about new U.S. evidence that China is conducting state-sponsored cyber attacks on the United States.
"I don't know what you are talking about," Hong said. "The Chinese side has stressed many times that China is a victim of hacker attacks. The Chinese side is opposed to any and all forms of online hacker attacks and has enacted relevant laws and regulations."
Hong called for the international community to develop rules aimed at building a peaceful, secure, open, and cooperative cyberspace.
"A cooperative attitude, not unwarranted accusations, should be adopted on relevant issues," he said.
The commission report said the Chinese military, the People’s Liberation Army, "since 2006 has penetrated the networks of at least 141 organizations, including companies, international organizations, and foreign governments."
Additionally, published reports by the Pentagon and private security firms outlining the Chinese cyber espionage have not resulted in diminished attacks, the report said.
"There are no indications the public exposure of Chinese cyber espionage in technical detail throughout 2013 has led China to change its attitude toward the use of cyber espionage to steal intellectual property and proprietary information," the report said. "It is clear naming and attempting to shame will not be sufficient to deter entities in China from engaging in cyber espionage against U.S. companies."
The report concluded the countering China’s cyber attacks will require a broad spectrum of action, including legislation, economic sanctions, and other measures.
Among the steps being considered are linking Chinese cyber spying to trade restrictions on China; barring Chinese companies caught stealing U.S. technology from using U.S. banks, and banning travel for officials from Chinese organizations engaged in cyber espionage.
"To date, Washington has not implemented a comprehensive framework for addressing China’s ongoing cyber espionage," the report said.
Rice said In her speech that the United States is seeking to develop a new type of major power relationship with China and she noted that ties would remain contentious.
On North Korea, Rice said the administration is prepared for negotiations on Pyongyang’s nuclear program but the talks must be sincere.
"We are prepared for negotiations, provided that they are authentic and credible, get at the entirety of the North's nuclear program, and result in concrete and irreversible steps toward denuclearization," she said.