It’s not just the Russians who are spying on the U.S.

By Richard Parker

The arrest of 11 people on charges of espionage for the Russian government was a case of old-fashioned spy craft straight from the annals of the Cold War: dead drops, moles and communicating in code, known as steganography. Yet Russia is not alone in trying to crack U.S. secrets. China is engaged in a massive espionage effort against the United States that exceeds Russian efforts on a crucial front: Cyber espionage.

The Chinese military – namely the People’s Liberation Army – is behind many of the cyber intrusions into U.S. government and corporate computer networks as part of a broad effort to steal technological, military and political secrets. This form of espionage costs the United States hundreds of billions of dollars per year and represents a dangerous threat to U.S. national security.

In early 2010, news reports from Washington indicated that Google, along with other U.S.-based corporations, was being hacked by unnamed parties in China. A progressive political organization, Patriot Majority, asked me and a team of journalists and researchers to investigate the likeliest source of the attacks. After combing through government documents, military land technical literature we concluded the Chinese military was likely behind many cyber intrusions against the United States.

Why? In 1995, the U.S. Navy humiliated the PLA during the Taiwan Strait Crisis by a massive show of force, as not one but two aircraft carrier battle groups sailed unmolested between the mainland and Taiwan, quelling mainland threats of force. That episode underscored the PLA’s technological inferiority in case of an actual shooting war.

And it set off a rush within China’s huge but antiquated military to modernize. The military ramped up its spending to improve its technological quality in areas such as space and cyber warfare, as well as its traditional military’s precision-strike capabilities. The conception of this effort came in the form of a book in 1999 called “Unrestricted Warfare.” Written by two Chinese colonels and promoted as required reading for officers, it said, “The first rule of unrestricted warfare is that there are no rules, with nothing forbidden.”

As a result, and under orders from President Hu Jintao, the PLA reorganized to engage in cyber warfare in case of war – and to engage in cyber espionage during peace. In 2004, a PLA white paper stated that its primary goal in modernizing was “building an informationalized force and winning an informationalized war.” The military shed 200,000 troops while investing between $50 billion and $100 billion per year. The government has even conscripted entire civilian companies, in fact, and rolled them into the PLA as cyber warfare units.

One interesting focus of the PLA’s modernization efforts – and a potential source of the cyber intrusions against the United States – is a military complex on Hainan Island in the South China Sea. Hainan features a space launch complex, an underground submarine base and it is home to a large signals intelligence unit that seems to have been converted from eavesdropping on satellite transmissions to cyber missions.

Hainan has for years also been the scene of confrontations and collisions between U.S. efforts to gather intelligence and China’s efforts to safeguard its own secrets. In 2001, for instance, a U.S. Navy EP-3E Aries II spy plane collided with a Chinese fighter and landed there. And in 2009, Chinese trawlers intercepted and harassed the U.S. spy ship Impeccable approximately 75 miles from the island.

In addition, in 2009, Canadian researchers at The SecDev Group and The Munk Center concluded that a series of cyber intrusions against political and government targets around the world included many that emanated from an Internet protocol address on Hainan. “The attacker(s)’ IP addresses examined here trace back in at least several instances to Hainan Island,” researchers wrote. Later, Rafal Rhozinski, one of the report’s authors and chief executive of The SecDev Group, told the U.S-China Commission in testimony there was “a high degree of certainty that the attackers were located in Hainan Island, China.”

A commission member, Larry Wortzel, said that he has not seen confirmation of attacks originating in Hainan but there is no question about the involvement of the Chinese military in cyber espionage against the United States. “China has one of the most sophisticated and well-manned cyber operations around the world,” Wortzel said in response to questions. “And the effort is supported by what seems to be a well-thought through military doctrine consistent with China’s military structure and capabilities.”

“This is a reasonable and sensible conclusion based on decades of knowledge and work on the domestic politics of China and the workings of China’s government, the People’s Liberation Army, intelligence and security services and the Communist Party,” according to Wortzel, who recently wrote in the Federal Times that at least 43,785 reported incidents cyber intrusions were directed at the U.S. Defense Department alone in just the first half of 2009
China’s efforts to steal U.S. secrets, however, are not confined to the realm of computers. Cyber espionage is part of an unprecedented wave of espionage at large against the United States. Chinese intelligence agencies have begun to change tactics, including recruiting Americans, as well as sifting huge amounts of digital information. In the first three quarters of 2009, the U.S. Justice Department prosecuted 9 espionage cases involving spying for China and the Customs Department is investigating 540 cases of potentially illegal technology transfers to China.

Intelligence-gathering and military modernization is the normal business of governments around the world, particularly in peacetime. China’s military would not be doing its job if it wasn’t trying to steal secrets and train for conflict; the United States maintains a massive offensive cyber war capability as well and recently established a unified military command.

However, the price of China’s cyber-spying is high. By one estimate it costs at least $200 billion to the United States alone annually – a cost borne by both taxpayers and shareholders. Yet the national security cost is the highest price tag of all, particularly as the Chinese military focuses on attempting to cripple U.S. forces in case of an armed conflict.

There are plenty of warnings: The U.S.-China Commission provides a roadmap for both Congress and the administration to follow, in tracking the PLA’s cyber espionage and offensive warfare capabilities and dealing with them. Cyber espionage may not be as spell-binding as the Russian spy ring. But right now China’s cyber spying is far more damaging to U.S. national security.