Intelligence Ops Greatest Chinese Threat to U.S.

By william matthews

With new submarines, destroyers and mine warfare ships, China's Navy is clearly benefiting from modernization financed by the nation's rapidly growing economy, a new report tells U.S. lawmakers.But a more shadowy Chinese force probably poses a greater immediate threat to the United States - that is, China's secretive army of intelligence collectors and cyber warriors, according to the U.S.-China Economic and Security Review Commission.

In its annual report to Congress on Nov. 19, the commission said that China has added 38 submarines, 13 destroyers, 16 frigates, support ships and dozens of aircraft to its Navy over the past decade. The Navy also has "vastly increased" its arsenal of advanced weapons, including anti-ship ballistic missiles specially designed to destroy U.S. aircraft carriers, the commission said in a 358-page report.

China's improved naval forces "could impede the U.S. military's access to the region in the event of a crisis," the commission said. Perhaps the most likely crisis that would require U.S. intervention would be a Chinese invasion of Taiwan.

China's new naval prowess was on display in March, when Chinese ships harassed two U.S. Navy surveillance ships. The U.S. Defense Department said the ships were operating in international waters off China's Hainan Island. China said they were operating in its exclusive economic zone.

But a better Navy might also mean that China would participate in international humanitarian missions that "benefit the global good," said Larry Wortzel, the commission's vice chairman.

China has taken a step in that direction by providing escorts for ships traveling through the pirate-infested waters off Somalia, Wortzel said.

While the beefed-up Navy is some cause for concern, malicious cyber operations and aggressive intelligence gathering against the United States are a present danger.

China is "heavily involved" in conducting human and cyber espionage against the U.S. military and U.S. companies "as a means of enhancing its military modernization and economic development," the commission warns.

"Chinese intelligence collection efforts are growing in scale, intensity and sophistication," the report says. And malicious cyber activity originating in China "has the potential to destroy critical infrastructure, disrupt commerce and banking, and compromise sensitive defense and military data."

The report portrays an aggressive cadre of Chinese military cyber spies, private sector computer experts and freelance "patriotic hackers" working to steal U.S. technology secrets that are beneficial to Chinese military modernization and economic development.

In one instance, Chinese cyber intruders are believed to have stolen "several terabytes of data related to design and electronics systems" of the Joint Strike Fighter, the commission reported. In another case, hackers "with probable ties to the Chinese government" broke into the computers of a U.S. high technology company and copied and expertly "exfiltrated" sensitive data. The report did not identify the victimized company.

The commission said the number of cyber attacks against the U.S. Defense Department increased from 44,000 in 2007 to 55,000 in 2008, and were on track to top 87,000 this year.

A major portion of those attacks are believed to originate in China, but tracking attacks back to their origin with certainty is problematic, the commission said. But the Chinese military is recruiting skilled cyber operators from technology companies into "numerous information warfare militia units."

The commission cites reports of malicious code being found in the computer systems that control oil and gas pipelines, telecommunications systems and financial services firms. Often, the commission report cites news reports as its source of knowledge about these intrusions.

It also cites court cases that spell out the details of investigations and prosecutions of spies working for China.

Some are former Chinese nationals who lived and worked in the United States. They include academics, business owners and scientists, and are believed to have stolen information as diverse as plans for quiet electric propulsion systems for Navy ships, data on the U.S. military's global information grid and proposed future U.S. military sales to foreign countries.

Other Chinese spies have targeted information on cryogenic fueling systems for rockets and carbon fiber material used in space technology. "China is the most aggressive country conducting espionage against the United States," the commission reported.

The commission urged members of Congress to "assess the adequacy of resources available" for intelligence, counterintelligence, defense intelligence, law enforcement and cyber defenses.

In particular, Congress should help "develop effective and reliable attribution techniques" so that computer exploitation and cyber attacks can be traced back to their source.

The report, which has been issued annually for seven years, is intended to keep Congress up to date on economic and military developments in China. That may be more important than some lawmakers realize.

"China has in only a matter of a few years become our most important relationship in the world. It is also by far the most difficult," said Scott Lilly, a scholar at the Center for American Progress.

"I think we are spending far less than we should be on trying to understand China and how changes in China will bring about changes in the United States," he said.

On the military front, for example, "virtually every decision we make with respect to the U.S. defense posture is predicated on assumptions about the likelihood of whether or not we will or will not have a peer competitor within the next two decades," Lilly said.

And on the matter of cyber espionage and cyberwarfare capability, "I think it is a big problem - potentially a huge problem," he said. In addition to China's military buildup and cyber capabilities, the commission report covers subjects ranging from Chinese industrial subsidies to censorship to currency manipulation.

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