Hackers from secret Chinese military unit charged in world-first move by US

A SHADOWY military unit operating out of a non-descript high-rise is behind a high-stakes hacking conflict between the US and China.

Press materials are displayed on a table of the Justice Department in Washington, Monday, May 19, 2014, before Attorney General Eric Holder was to speak at a news conference. Holder was announcing that a U.S. grand jury has charged five Chinese hackers with economic espionage and trade secret theft, the first-of-its-kind criminal charges against Chinese military officials in an international cyber-espionage case. (AP Photo/Charles Dharapak)

THE US has charged five members of a shadowy Chinese military unit for allegedly hacking US companies for trade secrets, infuriating Beijing which suspended cooperation on cyber issues.

Hacking has long been a major sticking point in relations between the world’s two largest economies — a report last year said Chinese hacking cost the American economy $US300 billion a year - but Washington’s move marks a major escalation in the dispute.

In the first-ever prosecution of state actors over cyber-espionage, a federal grand jury overnight indicted the five on charges they broke into US computers to benefit Chinese state-owned companies, leading to job losses in the United States in steel, solar and other industries.

Attorney General Eric Holder called on China to hand over the five men for trial in the steel city of Pittsburgh and said the United States would use “all the means that are available to us” should Beijing refuse.

President Barack Obama’s administration “will not tolerate actions by any nation that seek to illegally sabotage American companies and undermine the integrity of fair competition,” Holder told reporters.

“This case should serve as a wake-up call to the seriousness of the ongoing cyber threat,” Holder told reporters.

The grand jury indicted each of the five — Wang Dong, Sun Kailiang, Wen Xinyu, Huang Zhenyu and Gu Chunhui — on 31 counts, which each carry penalties of up to 15 years in prison.

Prosecutors said that the five officers belonged to Unit 61398 of the People’s Liberation Army.

A report last year by security firm Mandiant said that the unit had thousands of workers operating out of a nondescript, 12-story building on the outskirts of Shanghai where they pilfer intellectual property and government secrets.

‘Any means available’ ... Attorney General Eric Holder has warned China over the hackers.

China swiftly responded, calling the US indictment “ungrounded and absurd” and saying it “grossly violates the basic norms governing international relations and jeopardises China-US cooperation and mutual trust.”

“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,” foreign ministry spokesman Qin Gang said in a statement.

The working group was set up last year during a visit to Beijing by US Secretary of State John Kerry as a way to talk through rising tensions on cybersecurity.

The United States voiced regret over China’s move and said it expected a wideranging annual dialogue in July, for which Kerry is expected to visit Beijing, to go ahead as scheduled.

“We remain committed to developing a constructive and productive relationship with China and are ready to work with China to prevent this activity from continuing,” White House press secretary Jay Carney said.

Obama has directly raised hacking concerns with Chinese President Xi Jinping, making it a major priority despite the wide range of issues confronting the two powers, from North Korea to climate change to Beijing’s tensions with its neighbours.

China has in the past accused the United States of hypocrisy as Washington conducts sweeping surveillance around the world.

Leaks by former government contractor Edward Snowden have alleged widespread US snooping in China including into telecom giant Huawei — whose own attempts to penetrate the US market have been blocked by lawmakers’ concerns on national security.

US officials said they investigated the unit for several years and believed that the hacking had contributed to “substantial” job and profit losses in the United States.

Hackers stole secret designs from Westinghouse, the US nuclear plant giant owned by Japan’s Toshiba, just as it was negotiating with a Chinese state-owned company, said John Carlin, the assistant attorney general for national security.

He said that hackers also stole pricing information from the computers of company SolarWorld to help Chinese competitors in the solar energy sector, in which China has invested heavily.

The indictment said that victims also included industry titans Alcoa and US Steel as well as the United Steelworkers labour union.

Officials declined to put a financial cost on the hacking. A report led by former US officials estimated last year that cyber espionage — overwhelmingly by China — was costing the American economy more than $US300 billion each year, equivalent to what the United States sells each year to Asia.

Originally published as Hackers from secret Chinese military unit charged in world-first move by US