The Wall Street Journal, 20 February 2013

Mandiant Corp., the network security firm hired by the Journal and others hacked by the Chinese government, has released compelling evidence that the People’s Liberation Army conducted hacking attacks on 115 U.S. corporations over the last seven years. Huge amounts of data and proprietary information were taken. The report even traces the digital footprints to a single building, the headquarters of PLA Unit 61398 on Datong Road in Shanghai.

Chinese government spokesmen continue to deny any official involvement with hacking, portraying the country as a fellow victim. The scope and sophistication of the attacks have always made such protestations hard to credit. Now that the smoking guns have emerged, the question is how free countries should respond as the attacks accelerate.

Governments have always spied on each other and sought secrets with commercial value. So one might reasonably ask what makes China any different? If Western companies are foolish enough not to protect their data properly, their complaints about Chinese competitors stealing intellectual property fall flat.

But as Stalin is supposed to have said, quantity has a quality all its own. The world has never seen a state devote such large resources to siphoning off data from private companies to advance a broad range of national interests, political and economic. China’s penchant for online theft and sabotage could change the world economic order.

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Agence France-Presse/Getty Images

This general view shows the home of a Chinese military-led hacking group.

If that seems an overstatement, consider that the Industrial Revolution and successive waves of innovation have depended on a legal and cultural framework that allows entrepreneurs to profit from their ingenuity and hard work. In China and other authoritarian regimes by contrast, tycoons typically rise and maintain their position through political clout or corruption. They have always been free-riders on the free market’s creative power.

Until now China did little damage to innovators and even helped them, for instance, by supplying the labor to build Steve Jobs’s gadgets. But Beijing now seems intent on abusing the world’s economic rules to such an extent that it threatens the prosperity of everyone else. No wonder former Google CEO Eric Schmidt writes in a forthcoming book that China’s hacking and control over information make it dangerous.

The Soviet Union threatened the capitalist West using overt military might and political subversion. The danger from Chinese hacking is more insidious because Beijing purports to play by the rules while subverting them with tools that are hard to track and stop. Beijing has calculated that in order for Chinese companies to continue to grow at breakneck speed, they need to cheat. The effect could be to drag the West back to a world in which companies and states must work hand in glove instead of at arm’s length.

We hope China’s behavior proves self-defeating. Economic transactions are about mutual benefit, and nobody should continue doing business with a counterparty who continually rips them off. The signs are that the U.S. government may finally be getting up the nerve to respond with more than quiet, feckless pleading.

Better defenses are imperative. Naming and shaming the Chinese entities responsible, as Mandiant has done, are also important, and targeted sanctions against individuals and institutions will probably be needed. Chinese officials need to understand that if they want their current economic relationship with the U.S. to continue, they must stop their cyberattacks.

Beijing has long wanted to showcase the triumph of “socialism with Chinese characteristics,” and in a way it has. Its defining characteristic is theft.

A version of this article appeared February 20, 2013, on page A14 in the U.S. edition of The Wall Street Journal, with the headline: China’s Online Thieves.

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