China whacks Justice Dept.’s ‘ungrounded and absurd’ hacking charges

China slammed the U.S. Monday for indicting five Chinese Army officials on hacking charges, saying Washington’s move was “ungrounded and absurd” and that Beijing is responding by halting participation in joint cyber talks pursued by officials from both sides over the past year.

“Given the lack of sincerity on the part of the US to solve issues related to cyber security through dialogue and cooperation, China has decided to suspend activities of the China-US Cyber Working Group,” Chinese Foreign Ministry spokeswoman Qin Gang said following the U.S. Justice Department’s announcement of charges.

“China will react further to the US ’indictment’ as the situation evolves,” she said in a statement posted on the ministry’s website.

The Justice Department announced on Monday morning that U.S. authorities had charged five individuals in the Chinese Army with hacking into U.S. company computers in an attempt to steal trade secrets and gain a competitive advantage. The indictment marks the first time in U.S. history that criminal charges have been filed against another country for computer espionage.

“When a foreign nation uses military or intelligence resources and tools against an American executive or corporation to obtain trade secrets or sensitive information for the benefit of its state-owned companies we must say: Enough is enough,” said Attorney General Eric Holder in a press conference Monday. “This administration will not tolerate actions by any nation that seeks to illegally sabotage American companies and undermine the integrity of fair competition in the operation of the free market.”

The alleged hacking directly led to job losses in the U.S., an industrial plant closing in Texas, stolen design information for a nuclear power plant, as well as cost and pricing information from a solar panel firm, U.S. law-enforcement officials said.

The sting should serve as a “wake-up call” to the seriousness of the ongoing threat of cyber crimes and how the U.S. plans on dealing with them, said Mr. Holder. He added that the U.S. doesn’t collect intelligence to help U.S. companies – unlike what the Chinese were attempting to do. He hopes China will cooperate with the indictment and allow the five accused to stand trial in the United States, although the prospect of that is slim, given the U.S. has no extradition powers in China.

In what perhaps is an effort to shame the suspects, U.S. authorities released photos of the suspects, including one man in military uniform. Monday’s announcement was long-planned, dating back at least a year as the Obama administration was searching for more punitive measures to take against Chinese hackers. The most serious charge of economic espionage includes a maximum 15 year prison sentence.

The gesture is largely symbolic and draws a much needed line in the sand by the U.S. government to foreign entities trying to steal commercial secrets, said Shawn Henry, former executive assistant director of the FBI’s Criminal, Cyber, Response and Services Branch, where he oversaw all of the bureau’s criminal and cyber programs and investigations worldwide.

“It’s a good first step,” said Mr. Henry, who is now the president of CrowdStrike Services, a cybersecurity detection and prevention firm.

He has long advocated that because the U.S. government’s primary responsibility is the protection, safety and security of its citizens it should actively be defending cyberspace with the same red-lines, diplomatic gestures, military moves, and legal ramifications, it does when lines or borders are crossed in the physical world.

“The U.S. government can have some pretty candid conversations with heads of state and other governments about what’s acceptable and what’s not acceptable and what the red lines are,” said Mr. Henry. “If you launch a cyberattack into our space, this is what the results are going to be.”

The Chinese attempted to steal secrets from six entities in the steel and energy segments: U.S. Steel, Alcoa, Allegheny Technologies Inc., or ATI, a specialty steelmaker, Westinghouse, the U.S. Steelworkers’ Union, and SolarWorld AG, a german . These companies were were all targeted in the scheme that allegedly began in 2006.

The indictment names five individuals, named Wang Dong, Sun Kailiang, Wen Xinyu, Huang Zhenyu and Gu Chunhui, with conspiracy to commit computer fraud and abuse. The indictment was handed up by a grand jury in Pittsburgh, a city close to many of the U.S. firms targeted.

U.S. government officials have long said that China is aggressive in pursuing cyber-espionage – trying to gather trade secrets and intellectual property knowledge from U.S. companies. China has denied this charge, saying it’s not based in fact.

Despite the tense rhetoric on both sides, there appeared to be potential for positive dialogue on cyber issues following the high-level Strategic and Economic Dialogue that U.S. and Chinese officials engaged in last year.

Following the July 2013 talks, the State Department circulated a fact sheet outlining how both sides had agreed to “promote an open, cooperative, secure, and reliable cyber space.”

Heading into the talks, the State Department document said, U.S. and Chinese officials had “held the first meeting of the civilian-military Cyber Working Group, where the two sides committed to work together on cooperative activities and further discussions on international norms of state behavior in cyberspace.”

“Both sides commented positively on the candid, in-depth dialogue,” the department said.

Such positivity appeared to dissolve with Monday’s indictments, with China’s Foreign Ministry spokeswoman asserting that it is China, not the U.S., that is “a victim of severe U.S. cyber theft, wiretapping and surveillance activities.”

U.S. official did not immediately respond to the Chinese statement.

But the rising overall cyber threat facing the United States from China and Russia, as well as from non-state actors, is a narrative that several high-level U.S. officials have promoted publicly over the past year.

In November, FBI Director James B. Comey testified that the risk of cyberattacks is likely to exceed the danger posed by al-Qaeda and other terrorist networks as the top national security threat to the United States and will become the dominant focus of law enforcement and intelligence services.

“We have connected all of our lives — personal, professional and national — to the Internet,” Comey said in a Senate Homeland Security Committee hearing in November. “That’s where the bad guys will go because that’s where our lives are, our money, our secrets.”