China sponsors Cyberwar against USA

A US government report warned Thursday that China is sharply stepping up espionage against the United States as the rising Asian power invests in cyber warfare and grows more sophisticated in recruiting spies.

"China is changing the way that espionage is being done," said Carolyn Bartholomew, the chair of the US-China Economic and Security Review Commission.

In its wide-ranging annual report to Congress, the commission reported a steep rise in the disruption and infiltration of websites of the US government and perceived Beijing rivals such as Tibet's exiled leader the Dalai Lama.

Colonel Gary McAlum, a senior military officer, told the commission the US Defense Department detected 54,640 malicious cyber incidents to its systems in 2008, a 20 percent rise from a year earlier. The figure is on track to jump another 60 percent this year.

While the attacks came from around the world, the commission said China was the largest culprit. Some Chinese "patriotic hackers" may not receive official support, but the report said the government likely planned to deploy them in a conflict to disrupt a foreign adversary's computers.

The bipartisan commission found that China was the most aggressive nation in spying on the United States and was trying to recruit more American spies.

While China historically tried to tap Chinese Americans -- believing, often incorrectly, that they would be sympathetic -- it was now turning to the Soviet model of seeking to bribe informants with cash and gifts, the report said.

It said the Chinese were expanding "false flag" operations, in which sources are deceived into thinking they are providing information elsewhere.

It pointed to the case of Tai Shen Kuo, a furniture salesman in New Orleans arrested last year after persuading two retired US military officials to give sensitive information by telling them it was headed to Taiwan, not mainland China.

The commission also found that China has launched an effort to influence US think-tanks and academia by rewarding scholars with access and depriving visas to more critical voices.

"It becomes self-censorship. If you're in graduate school and want to become a China scholar, you need to go to China. And if you criticize the Chinese government on certain things, you won't get in," said Bartholomew, a former top aide to House Speaker Nancy Pelosi.

"What it means is that we have a generation of China analysts who are being created who don't necessarily have the freedom or the ability to think through a broader range of questions," she said.

The commission also criticized China on its trade policy, recommending that the United States press Beijing to make its yuan more flexible and to turn to the World Trade Organization to fight what it termed predatory trade practices.

Shortly after the release of the report, two lawmakers called for an investigation into China's "currency manipulation," which would set the stage for slapping import duties on Chinese goods.

President Barack Obama this week paid his first visit to China, which is now the top holder of the ballooning US debt. His administration has sought cooperation with China on battling the global slowdown.

The commission paid a field trip to Rochester in upstate New York, where it said core industries such as machine tools, auto parts and optoelectronics were struggling against Chinese competition that often enjoys state support.

"For 20 years we have watched China policy be controlled really by a handful of large multinational corporations. They're the ones who determine the interests," Bartholomew said.

"But there are a lot of constituency interests out there -- particularly small and medium-sized enterprises -- that are being hurt by the current US-China policy," she said.

Separately, the report recommended that the United States "continue to work with Taiwan to modernize its armed forces," saying China was rapidly expanding its military advantage despite easing tensions with the island.

The Obama administration has yet to decide on Taiwan's requests to buy arms, including F-16 jet fighters. Such a step would almost certainly anger China, which considers the island its territory.