America Faced With Wave of Chinese Espionage

Defense Department officials are struggling to plan for a massive
 cyber-attack from Beijing – and fend off spies in the meantime. Tara McKelvey reports on the secret warfare.

07.16.11 1:47 PM ET

 Deputy Defense Secretary William Lynn III never said the word China 
in his speech on Thursday
 about “Cyber Strategy,” but he didn’t have to. The
 threat of a cyber-attack from Beijing weighs heavily on the minds of 
military commanders. And while officials have not said publicly who
 was behind the newly disclosed theft of 24,000 files from a defense contractor in 
March, one of the worst cyber-assaults in Pentagon history—
it may well have been a Chinese operation. And even if Beijing
 officials were not involved in the theft, they have been implicated in 
other matters—so many, in fact, that federal officials are
 discussing publicly what do to about cyber-attacks, without saying
 explicitly who their number-one villain is.

Meanwhile, people in Beijing are going through an even rougher time.
 Government officials are nervous about the Arab Spring, 
which they fear will inspire their own citizens, and in response
 officials have been brutally cracking down on dissidents. 
In addition, according to security experts, officials have been
 ramping up their efforts to spy on the United States. “They’ve been
 engaging in large-scale, almost automated espionage,” says Indiana
 University’s David Fidler, who writes about cyber-security issues.

Beijing’s leaders have ramped up spying operations partly because they 
are angry at the United States, and they have been especially peeved
 at State Department officials; China believes that the
 Americans have tried to empower dissidents and to influence domestic 
politics. Indeed, Secretary of State Hillary Clinton has pushed for
 greater access to the Web for dissidents, giving a speech 
in February in which she called for “a global commitment to Internet 
freedom,” a phrase that officials in Beijing found particularly 
galling. The Chinese officials resented her proclamations about the Net, which they believed are an underhanded way of trying 
to meddle in their affairs. “For them, this is a very aggressive 
interventionist policy,” Fidler explains.

Their irritation over U.S. policy is palpable, though they generally
 express it in an understated manner. During a meeting 
with a small group of Americans in Beijing in May, for example, a 
government official talked about the difficulties he had faced with 
his counterparts in Washington. “I wouldn’t say there is a lack of 
trust,” he told me. “I would say there is suspicion.”

However restrained he and other officials in Beijing may sound, they 
are expressing real frustration about their relationship with the 
United States, with real-world implications. “When you fight your enemy
 on the battlefield, you cannot be dogmatic,” a government economist in
 Beijing told me several weeks ago. “If you play strictly by the book,
 you are doomed.” He was describing their efforts to deal with domestic
 economic issues, but it is easy to see how this philosophy could be 
adopted for other arenas. It also may help to explain why some Chinese
 officials have begun to expand their spycraft, seeking revenge as much 
as intelligence through covert actions.

Meanwhile, Lynn and others in 
Washington are trying to figure out what to do about these 
developments. One of the challenges of cyber-warfare is that lines are
 not clearly drawn. Officials have had a hard time explaining when they
 believe that acts of espionage cross the line and become
 cyber-violence, or a strike against the United States, and yet despite the ambiguity are trying to plan their response–
perhaps armed retaliation. In his speech, Lynn said Americans should
 prepare for the possibility that “we will have to defend against a
 sophisticated adversary who is not deterred from launching a cyber-

 An even bigger problem is that there is no way to trace a cyber-attack
 back to its source: the architecture of the Internet allows people to 
carry out acts of sabotage and then to deny their role. A devastating
 attack could come from China, and nobody would know for sure, making 
it the perfect crime. So far Americans do not have a strategy, or a
 battle plan, for that.