It has been a pretty remarkable morning. The Department of Justice has indicted five officers in Unit 61398 of the Chinese People’s Liberation Army (PLA)—Wang Dong, Sun Kailiang, Wen Xinyu, Huang Zhenyu, and Gu Chunhui—for hacking into six American companies. The indictment alleges that the five stole trade secrets, information that would be useful to state-owned enterprises in China, and the strategies of American companies that could be useful to a competitor in litigation.
That’s what we know. The big question is what comes next.
What will China do, beyond ignoring the calls for help from the Department of Justice? The Chinese newspapers should be fun tomorrow. We will definitely see a return to the theme of hypocrisy, calling out the United States as the "real hacking empire." In his statement announcing the indictment, U.S. Attorney General Eric Holder stressed that the United States was pushing back against cyber economic espionage and the hacking of American companies for economic competitiveness. This distinction, between economic and national security espionage, is not one that the Chinese hold. And in the wake of National Security Agency’s (NSA) alleged hacking of Chinese technology company Huawei and Brazilian energy company Petrobras, the argument is not one that has much traction with the rest of the world. China will play up its status as victim and see this as a significant escalation.
The Chinese may cancel the planned meeting of the U.S.-China Cybersecurity Group or cyber discussions at the U.S.-China Strategic and Economic Dialogue.(Update: The Chinese Foreign Ministry announces that it is suspending the activities of the working group due to "lack of sincerity on the part of the US to solve issues related to cyber security through dialogue and cooperation.") Based on past experience with Taiwan arms sales or U.S. sanctions on Chinese companies for proliferation concerns, retaliation against U.S. firms is not likely, though threats are definitely possible.
What will the United States do? To answer that, we need to know if this is part of a larger public, diplomatic campaign against China, like the one waged at the beginning of 2013, or are these cases the outcome of processes started at least a year ago with the revelations of Edward Snowden, if not longer. The latter seems more likely. The revelations from Snowden about alleged NSA activities make it very hard to build support for large-scale diplomatic efforts from the rest of the world. And the administration probably does not want to further complicate the relationship with Beijing, which is already fairly tense given continued tensions with China over maritime disputes with its neighbors.
So expect a lot of heat, but not much concrete action from either side.