WASHINGTON -- President Barack Obama's administration is developing a package of unprecedented economic sanctions against Chinese companies and individuals who have benefited from their government's cybertheft of valuable U.S. trade secrets.
The U.S. government has not yet decided whether to issue the sanctions, but a final call is expected soon -- perhaps within the next two weeks, according to several administration officials, who spoke on condition of anonymity to discuss internal deliberations.
Issuing sanctions would represent a significant expansion in the administration's public response to the rising wave of espionage initiated by Chinese hackers, who officials say have stolen a variety of information, including nuclear power plant designs, search engine source code and confidential negotiating positions of energy companies.
Any action would also come at a particularly sensitive moment between the world's two biggest economies. Chinese President Xi Jinping is due to arrive next month in Washington for his first state visit -- complete with a 21-gun salute on the South Lawn of the White House and an elaborate State Dinner. There is already tension over other issues, including maritime skirmishes in the South China Sea and China's efforts to devalue its currency in the face of its recent stock market plunge. At the same time, the two countries have deep trade ties, and the administration has sometimes been wary of seeming too tough on China.
The sanctions would mark the first use of an order signed by Obama in April establishing the authority to freeze financial and property assets of, and bar commercial transactions with, individuals and entities overseas who engage in destructive attacks or commercial espionage in cyberspace.
The White House declined to comment on specific sanctions, but a senior administration official, speaking generally, said: "As the president said when signing the executive order enabling the use of economic sanctions against malicious cyber actors, the administration is pursuing a comprehensive strategy to confront such actors. That strategy includes diplomatic engagement, trade policy tools, law enforcement mechanisms, and imposing sanctions on individuals or entities that engage in certain significant, malicious cyber-enabled activities."
China is not the only country that hacks computer networks for trade secrets to aid its economy, but it is by far the most active, officials say. Last month, the FBI said economic espionage cases had surged 53 percent in the past year, and China accounted for most of that.
The sanctions move would send two signals, a second administration official said. "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."
The sanctions would be a second major shot at China on the issue. In May 2014, the Obama administration secured indictments on economic spying charges against five Chinese military members accused of hacking into the computer systems of major U.S. steel companies and other firms.
Some officials within the government urged caution, arguing that sanctions would only create unnecessary friction. But everyone is on the same page now, officials said.
In particular, officials from national security agencies and the U.S. Treasury, which is the lead agency on economic sanctions under the executive order, have been eager to push ahead. The administration's goal is to impose costs for economic cyberspying. And the best strategy for doing that, officials said, is to use a variety of tools -- indictments, sanctions, maybe even covert cyberactions.
Sanctions alone likely will not change China's behavior, some officials said. "Done in tandem with other diplomatic pressure, law enforcement, military, intelligence, then you can actually start to impose costs and indicate that there are costs to the bilateral relationship," the first official said.
The executive order authorizes the Treasury secretary, in consultation with the attorney general and secretary of state, to impose the sanctions on companies, individuals or entities that have harmed national security or the nation's economy or foreign policy. It's not clear how many firms or individuals would be targeted, though one official said the Chinese firms would be large and multinational. Their activity must meet one of four "harms": attacking critical infrastructure, such as a power grid; disrupting major computer networks; stealing intellectual property or trade secrets; or benefiting from the stolen secrets and property.
It is that last prong, in particular, that has potential to be effective, sanctions experts say. "Obviously, there's no silver bullet," said Zachary Goldman, a former policy adviser at the Treasury Department's Office of Terrorism and Financial Intelligence and now executive director of New York University's Center on Law and Security. But if the sanctioned companies are large and global, "they will effectively be put out of business."
In practice, he said, most significant financial institutions refuse to do business with individuals who have been sanctioned by the U.S. "So any company that's been targeted under this authority," he said, "will likely find it very difficult to participate in the international financial sector."
The sanctions would not be imposed in retaliation for hacks of the Office of Personnel Management databases, which compromised the personal and financial data of more than 22 million current and former government employees and family members. The U.S. has not publicly blamed China for the attacks, but officials have privately said they believe China was behind them.
The data heists, which took place last year but were discovered this year, were judged as having been carried out for traditional intelligence purposes -- not for economic benefit.
Nonetheless, the severity of the personnel office attacks helped convince wavering officials that firm action in the economic spying realm was warranted.
The U.S. government's response to the personnel data hacks has been much more muted. Rather than a public naming and shaming, it is considering covert cyberactions. Officials have hinted at this, saying they may be taking steps that are not public.
Information for this article was contributed by David Nakamura, Steven Mufson and Alice Crites of The Washington Post.
A Section on 08/31/2015