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Source: US Department Of Defense

Posted on September 10, 2010

The U.S. for the first time is publicly warning about the Chinese military's use of civilian computer experts in clandestine cyber attacks aimed at American companies and government agencies.

In a move that is being seen as a pointed signal to Beijing, the Pentagon laid out its concerns this week in a carefully worded report.

The People's Liberation Army, the Pentagon said, is using "information warfare units" to develop viruses to attack enemy computer systems and networks, and those units include civilian computer professionals.

The assertion shines a light on a quandary that has troubled American authorities for some time: How does the U.S. deal with cyber espionage emanating from China and almost certainly directed by the government - despite the fact that U.S. officials don't have or can't show proof of those ties?

Asked about the civilian hackers, a Defense Department spokesman said the Pentagon is concerned about any potential threat to its computer networks. The Pentagon, said Cmdr. Bob Mehal, will monitor the PLA's buildup of its cyberwarfare capabilities, and "will continue to develop capabilities to counter any potential threat."

The new warning also comes as U.S. and other international leaders are struggling to improve cooperation on global cybercrime and set guidelines for Internet oversight.

"The Chinese government, particularly the PLA, has sought to tap into the hacker community and take advantage of it," said cybersecurity expert James Lewis, a senior fellow at the Center for Strategic and International Studies. "One of the things that the Defense Department has been looking for is a way to start signaling potential opponents about activities that might cross the line in cyberspace."

The China report, he said, is one way to send that signal to Beijing.

The Pentagon report says that last year "numerous computer systems around the world, including those owned by the U.S. government, continued to be the target of intrusions that appear to have originated within" the People's Republic of China.

Those attacks, the report said, "focused on exfiltrating information, some of which could be of strategic or military utility."

The Pentagon also pointed to an alleged China-based computer spying network - dubbed GhostNet - that was revealed in a research report last year. The report said the spy ring stole sensitive information from nearly 1,300 computer hard drives, including networks belonging to embassies, government offices, and the Dalai Lama and his exiled Tibetan government. Chinese officials denied any involvement.

U.S. government agencies and major corporations have repeatedly complained about cyber attacks targeting sensitive defense programs and other high-tech industries. Computer security experts say they are often called to companies to dissect computer network intrusions that contain Chinese code or can be tracked to Internet addresses in that country.

But experts acknowledge it is difficult to precisely determine if the cyber intrusions are directed or sanctioned by the Chinese government or its military.

The use of civilian cyber mercenaries gives countries such as China deniability, said Jerry Dixon, former director at the Department of Homeland Security's Computer Emergency Readiness Team.

"It really makes it more complex. They can use multiple groups to carry out cyber espionage," he said. "If you want to have deniability you use a firm through covert channels to carry out some action for you, on behalf of your country."

The civilian hackers or front companies, he added, often may have particular expertise, such as knowledge about certain defense contractors, critical industries or government agencies.

"It's a great dodge," said Lewis. "You, the government, isn't responsible because it was some civilian that did it."

He and others noted, however, that there are hackers in China who are not connected to the Chinese military or government but are also targeting U.S. companies and agencies. And officials acknowledge it is difficult to determine what percentage of those civilian cyber criminals have ties to the PLA.

Still, the fact that U.S. officials are talking more openly about the problem now than they were just a year or two ago suggests U.S. authorities have amassed more proof of PLA involvement than they are willing to reveal.

U.S. officials tread very carefully when talking about China's cyber activities, mindful of the impact it could have on America's roller-coaster relations with the communist giant.

Pentagon leaders - from Defense Secretary Robert Gates to the commanders at U.S. Pacific Command - have worked to improve military ties with Beijing. But tensions spiked again earlier this year, when Beijing suspended contacts with the U.S. in retaliation for the Obama administration's $6.4 billion arms sale to Taiwan, the self-governing island that China claims as its own territory.

China also was unhappy with recent U.S and South Korean joint military exercises in the Yellow Sea.

Chinese officials have warned that the new Pentagon report could further damage ties between the two nations, but they did not speak directly to the cyber issues.

Read the Annual Report To Congress: Military and Security Developments Involving the People's Republic of China 2010 at this PDF link.

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