The United States Department of Justice on Thursday unsealed an indictment against two computer hackers believed to be in the employment of the Chinese government, accusing the individuals in question of a wide variety of transgressions, including a conspiracy to hack dozens of companies from the U.S. and other parts of the world with the goal of stealing sensitive technologies and otherwise hurting China's economic rivals. Aggravated identity theft and a conspiracy to commit wire fraud are also part of the indictment.
"Advanced Persistent Threats"
The defendants are believed to have been working for APT-10, a group that the cybersecurity community describes as "Advanced Persistent Threats" due to their modus operandi that entails gradually and surreptitiously stealing information from their victims after compromising their system with malware. The China-backed hackers are accused of targeting and attacking Managed Service Providers (MSPs), the type of companies that process a broad range of sensitive information in the service of countless online solutions. At least a dozen counties — including the U.S. — have been affected by the APT-10's illegal activities, the indictment reads. Besides the consumer electronics sector, the hackers also targeted firms from various other segments, including mining, manufacturing, packaging, biotechnology, healthcare, telecommunications, banking, and general finance.
The U.S. prosecutors believe they can prove the defendants committed all of the aforementioned crimes in cooperation with the Chinese communist government, i.e. its main intelligence service – the Ministry of State Security. The accused individuals, Zhu Hua and Zhang Shilong, are currently believed to be residing in China and aren't likely to be extradited under any circumstances, with the DOJ acknowledging as much as part of its Thursday communication. Deputy Attorney General Rod J. Rosenstein only said he's hoping the defendants will someday "face justice" in a federal courtroom.
An "unacceptable" pattern of theft, lying, and espionage
AG Rosenstein minced few words while announcing today's indictment, describing the development as yet another piece of evidence suggesting China is worried about no laws when it comes to providing its domestic industries with an upper hand in the context of technological innovations. The DOJ first accused China of theft in 2014 when it indicted five officials of the People's Liberation Army and has filed countless other charges against state-sponsored actors from the Far Eastern country ever since. According to the agency's internal estimate, over 90-percent of its economic espionage cases processed over the last seven years implicate China in some way. Furthermore, more than two-thirds of its trade secret cases in general are associated with Beijing as well.
The DOJ on Thursday recalled the Chinese government's 2015 promise that it will stop with such surreptitious activities and compete with other countries' economies as part of a level playing field. The pattern of state-sponsored espionage observed over the last three years suggests Beijing did little to keep that promise, with AG Rosenstein describing that state of affairs as "unacceptable." The agency also highlighted Beijing's "Made in China 2025" policy targeting economic growth as a clear roadmap of the industries the country intends to target so as to provide its domestic companies with a competitive advantage by stealing protected ideas from other markets. In fact, many segments outlined in the said plan have already been targeted by China's hackers, the DOJ said.
A threat for the ages
AG Rosenstein, accompanied by FBI Director Chris Wray and several other top government officials, today warned China that the U.S. government knows what it's doing in terms of economic espionage, why it's doing it, and can occasionally even identify specific individuals hired to commit those illegal acts. None of that information will be forgotten, the official warned. China's communist administration has yet to respond to the allegations but is unlikely to change its rhetoric on the matter and is widely expected to once again deny involvement in such economically driven hacking campaigns and deflect with accusations of its own.
2018 just keeps escalating
The timing of the indictment's announcement is significant in that it signals yet another diplomatic escalation between Washington and Beijing. Following a full-blown that lasted for several months, resulted in massive tariffs on tens of billions dollars' worth of goods, and temporarily ended with a 90-day truce agreed at a late November G20 summit in Argentina, Canadian authorities arrested the CFO of Huawei, the world's second-largest phone maker and China's biggest privately owned company, on December 1. They did so at the request of the DOJ, with Washington's prosecutors believing Ms. Meng Wanzhou defrauded banks and hid ties to a Hong Kong satellite of Huawei called Skycom Tech with the goal of circumventing stateside trade sanctions placed on Iran. Ms. Meng is presently trying to fight off the DOJ's extradition request as she's facing up to 30 years in prison for fraud under federal law.
Beijing called the arrest illegal and accused Canada of being a U.S. puppet, openly threatening retaliation less Ms. Meng, also the daughter of Huawei founder Ren Zhengfei, is released imminently and unconditionally. Shortly thereafter, Chinese authorities detained three Canadian nationals, including a high-profile businessman and a diplomat, as part of officially unrelated probes, though some industry watchers called the development an eye-for-an-eye move by Beijing and demanded a response from Ottawa. While Prime Minister Justin Trudeau is currently trying to de-escalate the situation, the tensions between China and the West are growing to unprecedented heights and things are likely to become more heated if the Canadian government decides to extradite Ms. Meng.
The current state of affairs is just a continuation of the episode that saw the Commerce Department nearly bankrupt China-owned ZTE earlier this year, also due to violations of its trade sanctions imposed against Iran. Coupled with Huawei's long history of issues with the U.S. government that includes suspicious ties to China's communist regime and accusations of trade secret theft, the technological aspect of the ongoing Washington-Beijing conflict centered on trade appears to be set for further escalations in the near future. As for the DOJ's newly unsealed indictment, its timing suggests the move is only meant to put additional pressure on China and likely won't result in any actual consequences for the charged individuals anytime soon.