Cyber security issues have been a major source of irritation in the Sino-American relationship in recent years. During Chinese President Xi Jingping’s US state visit in September, attention focused on possible resolutions to two issues in particular.
On the cyber agenda was the issue of trade barriers faced by US tech companies in China and the trend of Chinese cyber espionage against US businesses for the purposes of commercial gain.
Trade concerns featured prominently in commentary about Xi’s time in Seattle, the first stop on his state visit. US tech firms face tough treatment in China as they must comply with the requirement that all information systems be “secure and controllable”. This is generally interpreted as a demand for ‘backdoors’ to be built into software, enabling government monitoring. This is a risk for US firms for multiple reasons:
Customer data may be compromised;
These backdoors could lead to a transfer of proprietary technology to their Chinese competitors; and
Firms could incur reputational damage if it is perceived that they support the regime’s censorship and social-control apparatus.
Whilst in Seattle Xi met with industry leaders, including Bill Gates (Microsoft), Tim Cook (Apple), Jeff Bezos (Amazon), Mark Zuckerberg (Facebook) and Ginni Rometty (IBM).
According to Reuters, some companies had privately spread word that these meetings with their CEOs could prove significant. However, it appears that it was little more than pleasantries and a photo op. A Microsoft spokeswoman reported that Xi spoke for about six minutes and that no US business leaders responded. The Wall Street Journal reported that a discussion between Chinese and American cyber security experts, held during Xi’s visit, was frustrated by a lack of common understanding on key issues.
Things appear more hopeful on the topic of corporate cyber espionage.
This issue is a big one for the US – former National Security Agency Director Keith Alexander estimated that in 2012 the cost for the US was $250 billion annually – and China is considered the major antagonist.
Xi and Obama addressed this issue in a summit in Washington. On 25 September, the two released an official agreement stating that they had “reached a common understanding on the way forward” and would be working together to prevent cyber theft of intellectual property.
The US and China agreed to establish a high-level joint dialogue mechanism, to be initiated later this year. China has designated officials from the Ministry of Public Security, the Ministry of State Security, the Ministry of Justice and the State Internet and Information Office to participate. The US Secretary of Homeland Security and the Attorney General will co-chair the dialogue, and representatives from the FBI and the US intelligence community will also be engaged.
This mechanism will provide oversight on timelines and quality of responses to requests for information. A hotline will also be established for the escalation of any issues that may arise in the course of responding to such requests.
Some have argued that this agreement will not curb China’s theft of trade secrets, that the deal will soon disintegrate, that we need to see action to judge its effectiveness, or that the deal is too narrow in covering only cyber espionage for corporate gain.
Others see reasons to be positive. James A. Lewis, writing before the release of the agreement, devised a matrix against which to judge the summit’s success. Lewis argued that the success of the summit would be predicated on whether it was able to define and initiate an open-ended, political-level negotiation between governmental or military officials. On this count, the summit’s outlining of the joint mechanism points to progress.
Additionally, as Dr Bates Gill pointed out, Xi is staking his reputation on this issue in a very public way. Gill states: “For the first time, China’s top-most leader has acknowledged that malicious cyber activity is a problem for US−China relations … [that] government-backed targeting of confidential commercial information is wrong”.
What is clear is that Xi would not have made this agreement if it was not in China’s interests. This suggests that China values their relationship with the US to the degree that it does not want to threaten the liberal trading environment from which they have benefitted enormously.
This agreement marks a step forward on cyber cooperation. Rather than rehashing previous agreements or positions, Xi has taken a stance against the stealing of trade secrets and in doing so has opened up future Chinese actions to international scrutiny. We can now expect to see very careful monitoring of the number of cyber attacks against American companies, and even if there is partial reduction, this should be seen as a positive shift.
Harriet Ellis is the International Security Fellow for Young Australians in International Affairs.
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Image credit: US Embassy The Hague (Flickr: Creative Commons)