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Chinese Hackers May Gain Advantage From U.S. Attempt to Block Chinese Hackers

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CHINESE HACKERS
Rep. Frank Wolf (Photo by Alex Wong/Getty Images) | Getty Images

WASHINGTON -- Congress has for years tried to block China's major telecommunications companies from entering the U.S. market, fearing they may help Chinese hackers snoop on American companies and government agencies.

But a new anti-hacking provision that restricts how the U.S. buys equipment from China may actually make the government more vulnerable to cyberattacks, not less, according to tech industry groups.

The new restriction, inserted into a funding bill that passed in March, may prevent U.S. technology companies from acquiring cutting-edge products from China, putting them "behind the security innovation curve," according to a letter sent Thursday to Congress by nearly a dozen tech industry trade groups.

It may also provoke the Chinese government to retaliate against American tech companies by screening U.S.-made products for use in China, the trade groups said.

The provision bars some federal agencies from buying technology "produced, manufactured or assembled" by entities "owned, directed, or subsidized by the People's Republic of China" unless the head of the agency consults with the FBI and determines the equipment is "in the national interest of the United States.”

Such limits “set a troubling and counterproductive precedent" that could put U.S. companies at a competitive disadvantage in global markets, said the letter from the industry groups, which represent thousands of American tech companies.

The buying restriction applies to the Commerce Department, Justice Department and NASA. Rep. Frank Wolf (R-Va.), who chairs a House subcommittee that funds those agencies, inserted the language into an appropriations bill because of concerns about Chinese telecom equipment-makers Huawei and ZTE, his spokesman said.

Huawei and ZTE executives testified last fall before Congress, where lawmakers claimed the Chinese government uses the companies' networking gear to spy on American companies. The companies denied the charges.

Wolf is "concerned about those two companies in particular in China and what they've been able to do and wants to make sure American companies are doing everything to protect themselves," said Dan Scandling, Wolf's spokesman.

In their letter, tech industry groups said the provision was not discussed during congressional hearings and was added to the funding bill that went through “an expedited legislative process with limited opportunities for amendment.”

However, Wolf issued a press release in May touting the limit on government purchase of Chinese IT products in a funding bill. That bill was not signed into law until last month.

In a blog post, Stewart Baker, a former assistant secretary of the Department of Homeland Security, said the new restriction may "bring some surprises" for American companies selling IT products to the U.S. government because sanctions will depend "on whether the company that supplies it is tainted by close ties to China's government.”

“It's not clear that they even know which of their suppliers and assemblers are directed or subsidized by the Chinese government,” Baker wrote.

While lawmakers have long worried about Huawei and ZTE, tensions between the American and Chinese governments over hacking escalated in February after the security firm Mandiant issued a report that tracked Chinese hacking groups to the People’s Liberation Army.

Then in March, President Barack Obama’s national security adviser, Tom Donilon, publicly confronted China for the first time on cyberspying, calling on the Chinese government to stop the theft of data from American computer systems.

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