U.S. Planning Actions Targeting Chinese Hackers, Spies, Sources Say

(Bloomberg) -- The Trump administration is planning to take several actions aimed at calling out China for efforts to steal intellectual secrets from American high-tech companies, according to two people familiar with the matter.

The Justice Department is set to indict a number of alleged hackers it believes work for Chinese intelligence agencies and attacked U.S. technology companies, according to the people. The Justice Department had planned to make one or more announcements related to Chinese espionage, including the indictments, but the plans have been put on hold, according to one of the people.

Some of the expected actions include declassifying some U.S. intelligence concerning Chinese espionage activities, according to one of the people. The pending indictments were reported earlier by the Wall Street Journal and the Washington Post.

The tougher steps come as the U.S. continues to pursue a truce with China in an escalating tariff battle. The Trump administration has been trying to negotiate a trade deal on automobiles, agricultural purchases and other issues, even while pledging to keep fighting what it says are intensive ongoing Chinese efforts to steal U.S. intellectual property.

Chinese Vice Premier Liu He, U.S. Treasury Secretary Steven Mnuchin and Trade Representative Robert Lighthizer spoke by phone Tuesday morning Beijing time, exchanging views on a road map for negotiations. Lighthizer has been tasked with reaching a deal over “structural changes” to China’s economic model by March 1.

But U.S. outreach on the trade talks has sometimes been accompanied by tough actions against China on related issues.

On the same day that President Donald Trump was dining with Chinese President Xi Jinping in Buenos Aires at the recent G-20 summit, the U.S. arranged for Canadian authorities to arrest the chief financial officer of China’s Huawei Technologies Co. over accusations she helped the company evade sanctions against Iran.

A Canadian judge said this week that he’s not satisfied with a bail proposal by the executive, Meng Wanzhou, who faces extradition to the U.S. Her lawyers reject the accusations.

The latest U.S. moves follow debates within the Trump administration about imposing sanctions on Chinese entities caught stealing U.S. intellectual property through cyber attacks, three people familiar with the matter said.

The plan being discussed would use an Obama administration executive order that lets the U.S. impose sanctions on individuals or entities engaging in “malicious cyber-enabled activities.” But it has sparked a heated debate among administration officials, with Mnuchin, who has jurisdiction over the potential sanctions, said to be blocking the effort, according to the people.

If the administration chooses to go ahead it could seize or freeze the assets of Chinese companies caught stealing U.S. firms’ intellectual property. It could also ban them from doing business with American companies.

The ongoing debate highlights how the Trump administration has been looking at raising the pressure on Beijing via measures beyond tariffs, in what officials see as an existential war with China over innovation.

The president faced bipartisan criticism in May that he was going soft on China after he intervened at Xi’s request in a Commerce Department case against ZTE Corp. that would have driven it out of business. The Chinese telecommunications equipment company has been accused of repeatedly violating sanctions by illegally selling equipment containing U.S. components to Iran and North Korea.

(Updates with delay of planned Justice Department announcement in second paragraph.)

--With assistance from Jenny Leonard, Shawn Donnan and Andrew Mayeda.

To contact the reporters on this story: Jennifer Jacobs in Washington at jjacobs68@bloomberg.net;Chris Strohm in Washington at cstrohm1@bloomberg.net

To contact the editors responsible for this story: Kevin Whitelaw at kwhitelaw@bloomberg.net, Larry Liebert

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