The Obama administration has been suggesting for weeks that it plans to impose financial sanctions on Chinese companies and individuals to punish them for cyberspying against U.S. corporations. But while officials aren’t ruling it out, the White House reportedly won’t take punitive actions against China before President Xi Jinping visits Washington next week.
The decision follows a visit last week by Meng Jianzhu, a top Chinese official and Politburo member who oversees legal and political issues and who met with representatives of U.S. law enforcement and intelligence agencies—including the director of the FBI and the secretary of homeland security. After three days of meetings in Washington, senior administration officials deliberated Friday whether to sanction Chinese companies or individuals who were involved in hacking U.S. firms or received stolen information, two sources familiar with the meeting, who spoke on condition of anonymity, told The Daily Beast.
In the end, U.S. and Chinese officials reached “substantial agreement” on a number of cybersecurity issues, and the Obama administration chose not to impose sanctions prior to Xi’s visit, The Washington Post reported Monday, citing an unnamed senior administration official.
Yet what that agreement is remains unclear. Two U.S. officials told The Daily Beast that substantial disagreement remains between the U.S. and China. China insists that it’s the victim of cyberspying, not a perpetrator. But the U.S. has filed criminal charges against Chinese officials for their role in stealing trade secrets and intellectual property from American companies.
Imposing the sanctions before Xi’s arrival would have cast a cloud over the entire state visit.
“The last-minute Meng visit shows that the Chinese got the message that the Obama administration is very serious, and even willing to accept that the Xi visit doesn’t go well to get this point across,” Samm Sacks, a China analyst at the Eurasia Group in Washington, told The Daily Beast.
“Meng’s visit shows the Chinese are desperate to avoid cybersanctions,” Scott Kennedy, the deputy director of the Freeman Chair in China Studies at the Center for Strategic and International Studies in Washington, told The Daily Beast.
Meng also met at the White House with National Security Adviser Susan Rice. “She had a frank and open exchange about cyberissues,” the White House said in a statement Saturday.
Those exchanges have become more frank and open of late, with President Obama publicly warning China last week that if it didn’t halt its spying on American companies, the U.S. would take action.
Kennedy noted that given the length of time Meng was in Washington, his visit almost certainly covered other issues, including China’s efforts to hunt down Chinese nationals accused of crimes who are living abroad. U.S. law-enforcement officials have complained that Chinese state-security operatives are working in this country illegally and trying to intimidate Chinese people living here legally.
Kennedy noted that the Chinese had planned another high-level visit to Washington last spring to discuss the issue, but that it was scrapped when the U.S. wouldn’t agree in advance to make any concessions on sending Chinese nationals back home or surrendering them to Chinese authorities.
Against that tense backdrop, Meng and Obama administration officials attempted to reach some agreement on cyberissues. Chinese press reported the two sides had come to a “consensus” without specifying any terms of an agreement.
The threat of sanctions hasn’t been removed. Indeed, the administration has been preparing to issue them, and potentially criminal charges, against Chinese citizens who take part in cyber spying or benefit from it.
Indictments on their own would be largely symbolic, since the accused would almost certainly never see the inside of an American courtroom. But pairing them with economic sanctions would constitute the administration’s strongest public response to a years-long campaign of Chinese cyberespionage that officials say has stolen billions of dollars in trade secrets and intellectual property from companies in practically every sector of the American economy.
Intelligence and law-enforcement officials have generally been seen as favoring aggressive action both to punish and deter Chinese cyberespionage. White House and State Department officials, however, have been more cautious about taking those bold steps before Xi’s arrival.
But Obama himself publicly ratcheted up the pressure on China last Friday, the last day of Meng’s meetings with U.S. officials.
“Ultimately, one of the solutions we're going to have to come up with is to craft agreements among at least state actors about what’s acceptable and what’s not,” Obama said during a town hall meeting with U.S. military service members at Ft. Meade, Md. “We've made very clear to the Chinese that there are certain practices that they’re engaging in that we know are emanating from China and are not acceptable. And we can choose to make this an area of competition— which I guarantee you we'll win if we have to—or, alternatively, we can come to an agreement in which we say, this isn't helping anybody; let’s instead try to have some basic rules of the road in terms of how we operate.”
The U.S. has a ready list of targets for sanctions. Last year, the Justice Department announced indictments against five Chinese military officials for their role in hacking into American companies and providing trade secrets to various “state-owned enterprises” in China. The companies are unnamed in the indictment, but the U.S. has already collected evidence to prove that they received the pilfered information, officials have said.
Under sanctions Obama authorized earlier this year, those companies could be penalized.