Chinese hacking worries Pentagon

China in the last year has developed ways to infiltrate and manipulate computer networks around the world in what U.S. defense officials conclude is a new and potentially dangerous military capability, according to a Pentagon report issued Monday.

Computer network intrusions at the Pentagon and other U.S. agencies, think tanks and government contractors last year “appeared to originate” in China, according to the report.

In addition, computer intrusions in Germany, apparently by Chinese hackers, occur daily, along with infiltrations in France and Britain, the Pentagon said. Last year, British intelligence officials alerted financial institutions across the country that they were targets of “state-sponsored computer network exploitation” from China.

The Pentagon report does not directly accuse the Chinese military or government of the attacks but says the incidents are consistent with recent military thinking in that country. David Sedney, deputy assistant secretary of Defense for East Asia, said cyber-warfare was an area of growing concern and he called on the Chinese to clarify their intentions.

“The techniques that are used, the way these intrusions are conducted, are certainly very consistent with what you would need if you were going to actually carry out cyber-warfare, and the kinds of activities that are carried out are consistent with a lot of writings we see from Chinese military and Chinese military theorists,” Sedney said.

U.S. military officials believe that Chinese cyber-warfare advances, coupled with China’s increasing skill at neutralizing information-transmitting satellites and other capabilities, is part of a military objective of crippling potential foes, even those that may be militarily superior such as the United States, in the event of an international crisis or confrontation.

The report, an annual assessment of China, also says Beijing has continued to develop a sophisticated missile program and appears focused on warding off any U.S. intrusion in the area around Taiwan.

China considers Taiwan part of its territory and has threatened to take it by force if it declares independence.

“We are fully prepared to repulse any adventurous activities toward Taiwan independence,” Jiang Enzhu, spokesman for China’s parliament, told a news conference today.

Pentagon officials admit that they lack a clear understanding of China, despite its status as America’s second-largest trading partner. During nearly every U.S. official visit to China, military officials press Beijing to disclose details of its spending plans and explain why it is building up its military capabilities.

“The lack of transparency in China’s military and security affairs poses risks to stability by increasing the potential for misunderstanding and miscalculation,” the report says. “This situation will naturally and understandably lead to hedging against the unknown.”

Beijing announced plans today to increase its military budget this year by 17.6% to $59 billion. This follows a record 17.8% hike last year. But Western observers suspect that China’s actual military budget is much larger.

Chinese authorities are careful to downplay their military might, saying their spending is still a fraction of the American defense budget and most of the money will go toward peaceful purposes such as pay raises and equipment upgrades.

The infiltration of Pentagon computer networks has allowed hackers to tap into unclassified computer systems, Sedney said. But even though the hackers did not penetrate classified systems, the infiltration was still considered serious, Sedney said.

“There’s a whole range of scientific and technological material that is available through people in the contracting world and elsewhere that just isn’t classified that can be the subject of these intrusions,” he said.

Sedney said the computer break-ins did not amount to attacks, but he said the techniques used to penetrate Defense Department computers also could be used to attack them.

He compared the intrusions to someone breaking into a house but leaving the valuables in place and instead taking pictures of the interior.

The U.S. continues to believe that China’s ongoing military modernization is primarily driven by preparations for a potential future dispute involving Taiwan.

But as the scope of the modernization increases and China’s strategic thinking evolves, U.S. officials believe that China is preparing its military for other contingencies, such as conflicts over oil reserves or disputed territories.

The report takes particular note of China’s expanding missile inventory, including long-range missiles, cruise missiles designed to strike naval vessels and growing numbers of shorter-range missiles.

The primary focus of China’s missiles, Sedney said, is Taiwan.

David Helvey, one of Sedney’s deputies, said China also has purchased highly accurate cruise missiles from Russia that have been installed on Chinese submarines and could be used against U.S. Navy vessels.

But Helvey said the ability to strike ships will depend on China’s intelligence and surveillance abilities.

“This is still a new capability for China; we are going to be watching how they integrate that anti-ship capability into their submarine force,” he said.

In response to the Pentagon report, Rep. Ike Skelton (D-Mo.), chairman of the House Armed Services Committee, said he was concerned about China’s continuing modernization and rapid growth.

But he said there were signs that China was taking some steps toward increasing transparency, including an agreement to submit a report to the United Nations on its military spending and an agreement to create a defense hotline between Washington and Beijing.

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julian.barnes@latimes.com

Times staff writer Ching-Ching Ni in Beijing contributed to this report.