From: WSJ

U.S. Intelligence Report Labels Chinese ‘Most Active’ in Economic Espionage; Russia Also Named

By SIOBHAN GORMAN

WASHINGTON—The U.S. government accused the Chinese of being the world’s “most active and persistent” perpetrators of economic spying, an unusual move designed to spur stronger U.S. and international action to combat rampant industrial espionage threatening U.S. economic growth.

Russian intelligence agents also are conducting extensive spying to collect U.S. economic data and technology, according to a U.S. intelligence report released Thursday that concluded China and Russia are “the most aggressive collectors” of U.S. economic information and technology.

“The nations of China and Russia, through their intelligence services and through their corporations, are attacking our research and development,” said U.S. counterespionage chief Robert Bryant.

Mr. Bryant spoke at a rare public event Thursday to roll out the report by his staff at the Office of the National Counterintelligence Executive. The report focuses on spying primarily for commercial and economic purposes, as opposed to national security. “This is a national, long-term, strategic threat to the United States of America,” he said. “This is an issue where failure is not an option.”

The bulk of this theft of U.S. corporate and economic secrets is carried out in cyberspace, where vast volumes of data can be stolen in seconds, according to U.S. intelligence officials. The spying campaigns have reached a crescendo, they said, as U.S. government and business operations have grown extraordinarily reliant on communication technology.

The U.S. is a prime target of economic espionage by countries like China and Russia that seek to build up their domestic industries with stolen technology and intellectual property from more advanced U.S. firms, officials say. The leading areas of theft are components of the U.S. economy: information technology, military technology, and clean-energy and medical technology.

It’s illegal under U.S. law to steal corporate secrets from other companies, and there is less incentive for U.S. companies to pilfer from countries that are less developed.

Allies of the U.S. have also gotten in the game of stealing industrial secrets, the report said. It did not name those countries, but officials privately acknowledge that Israel and France have tried to steal U.S. secrets.

Thursday’s report was unusual because it called out China and Russia by name as the top perpetrators of economic espionage, which is something U.S. officials have been reluctant to do for fear of harming diplomatic relations.

“When you hide these things, nobody does anything about them,” said Alan Paller, director of research for the SANS Institute cybersecurity firm who also spoke at the rollout of the report.

A senior intelligence official said it was necessary to single out specific countries in order to confront the problem and attempt contain a threat that has gotten out of control. Economic espionage is condoned by both China and Russia and is part of each country’s national economic development policy, the official said.

The Chinese government is believed to have been behind a number of recent high-profile cyber attacks, including multiple hacks of Google Inc. and the EMC Corp.’s RSA unit, a security company that makes the numerical tokens used by millions of corporate employees to access their network.

Cyberattacks revealed earlier this year on Lockheed Martin Corp. and the International Monetary Fund are also believed be traced to China.

The threat will accelerate in the coming years and presents “a growing and persistent threat” to U.S. economic security, according to the intelligence report, which reflects the views of 14 U.S. intelligence agencies.

At the Chinese Embassy in Washington, spokesman Wang Baodong called the U.S. charges “unwarranted allegations” that were part of a “demonizing effort against China.” The Russian Embassy didn’t respond to requests to comment but has in the past denied allegations of cyberspying.

The U.S government doesn’t have calculations of the economic losses due to economic cyberespionage. The senior U.S. intelligence official cited estimates of $50 billion in losses in 2009 due to lost intellectual property and counterfeiting, through all means of theft, including cyber break-ins.

“If our research and development—$400 billion a year—is pilfered, frankly, it will destroy part of our economic viability in this country,” Mr. Bryant said.

Industrial espionage poses a number of national-security threats to the U.S., including the risk that stolen military technology will be handed to hostile countries like North Korea or Iran, the intelligence report concluded.

Government-sponsored economic spying is growing, the senior official said. Officials wouldn’t say, however, how much of the industrial spying is believed to be from government agents, though they said government, intelligence services, and private organizations and individuals all took part.

U.S. officials have confronted foreign counterparts with allegations of industrial espionage, the senior U.S. official said, but the official declined to provide an example or cite a particular country’s government. More confrontations are necessary, the official said, to begin to curb the spying.

One proposal intelligence officials are considering is building the cyberattack equivalent of the National Counterterrorism Center, which merges terrorism data from intelligence agencies and state and local governments.