U.S. Considers Sanctions Against China For Cyber Hacking And Trade Secret Misappropriation

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You may have missed it this past weekend, but reports indicate the United States is considering sanctioning Chinese companies and individuals who have benefited from their government’s alleged cyber hacking of U.S. trade secrets. The Washington Post, quoting unidentified officials, states the “unprecedented” package of sanctions is part of a larger strategy to expand the “administration’s public response to the rising wave of cyber-economic espionage initiated by Chinese hackers” and to confront malicious cyber actors. If executed, the potential sanctions could highlight the Obama administration’s year-long campaign to curb cybersecurity threats to U.S. companies and the public, a campaign which included:

  • the February 13, 2015 Executive Order—Promoting Private Sector Cybersecurity Information Sharing;
  • the April 1, 2015 Executive Order—“Blocking The Property of Certain Persons Engaging in Significant Malicious Cyber-Enabled Activities”; and
  • the April 27, 2015 announcement that the Department of Homeland Security would open a Silicon Valley Office dedicated, in part, to combating cybersecurity.

In fact, the potential sanctions would mark the first use of the April 2015 Executive Order authorizing the freezing of financial and property assets of, and barring commercial transactions with, individuals and entities overseas who engage in destructive attacks or commercial espionage in cyberspace.

Details on the possible sanctions packages are sparse. However, it appears the sanctions would not be in retaliation to the state-sponsored cyberattacks the United States attributes to China for intelligence gathering purposes, such as the cyberattack on the Office of Personnel Management. According to an Obama administration official, the sanctions are meant as a message to China that “enough is enough” and to the private sector that the U.S. has its back: “It sends a signal to Beijing that the administration is going to start fighting back on economic espionage, and it sends a signal to the private sector that we’re on your team. It tells China, enough is enough.”

Even without full details on the possible sanctions, there are skeptics who believe the sanctions will only firm China’s resolve or lead to retaliation against the United States and U.S. companies. Some officials suggest sanctions would need to be one of a variety of tools used to curb cyber theft. With few details available on what the sanctions package may contain, the jury is still out on whether it will ultimately curb the cyber theft of trade secrets or whether it will spark further attacks.

According to the Washington Post, an announcement of the proposed sanctions could come as early as mid-September 2015. We will continue to monitor these developments.