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May 27, 2014

Hacking case belies profitable links

WASHINGTON — China may be trying to steal trade secrets from U.S. businesses, as federal prosecutors allege. Yet for many U.S. companies, China’s vast market remains an irresistible source of business.

The Justice Department’s indictment last week of five Chinese military officials accused them of trying to pilfer confidential information from American companies. But even some of the alleged U.S. corporate victims of the hackers have little incentive to cheer any trade rupture with China.

One, Westinghouse, is building four nuclear reactors in China.

Another, specialty steelmaker Allegheny Technologies, operates a joint venture in Shanghai.

A third, Alcoa, is the biggest foreign investor in China’s aluminum market. Indeed, Alcoa went so far as to downplay Justice’s charges: “No material information was compromised during this incident which occurred several years ago,” the company said.

American companies are in a delicate position. They want to maintain good relations with China, the world’s second-biggest economy and a market where U.S. firms’ earnings grew nearly 50 percent last year. But they’re also increasingly fearful of Chinese hackers stealing their trade secrets.

Looked that way, the hacking case is “going to be positive in opening up the conversation,” said Jamian Ronca Spadavecchia, founder of the Oxbow Advisory, which advises companies about risks in China and other emerging markets. “It’s bringing into the open some of the issues U.S. companies are facing.”

A U.S.-China Business Council survey has found that cybersecurity is a growing threat for U.S. companies in China: It jumped from to No. 14 last year from No. 23 in 2012 on a list of gripes about the Chinese market. American companies are also increasingly irritated by China’s attempts to censor the Internet, according to a survey by the American Chamber of Commerce in China.

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