(Adds comment from analysts, technology companies decline
By Michael Martina and Matthew Miller
BEIJING/SHANGHAI May 20 American technology
companies appear most likely to feel any backlash that could
come from China after the U.S. government charged five Chinese
army officers with cyber spying and stealing trade secrets.
U.S. equipment and software providers such as IBM Corp
and Cisco Systems Inc have already seen their
China sales drop after last year's revelations by former
National Security Agency contractor Edward Snowden of U.S.
IBM's China sales have fallen by a fifth or more for three
straight quarters, the firm reported in April. Cisco said last
week that its China business declined 8 percent in the quarter
to April 26. Microsoft Corp has long
struggled with sales and the government is not using Windows 8,
the company's latest operating system.
Doing business in China could now get even tougher, although
any retaliation may not be immediate or obvious, industry
analysts and executives said.
"U.S. companies were having difficulty anyway. This will
give them more difficulty," said Howard Anderson, a senior
lecturer at MIT's Sloan School of Management. "The Chinese will
use any excuse to turn to internal suppliers."
Officials with IBM and Cisco did not respond to requests for
comment. Boeing Co. had no immediate comment. An Intel
Corp spokesman declined comment.
Experts said U.S. technology executives are unlikely to
publicly complain about the decision to indict five members of a
Chinese People's Liberation Army unit on hacking charges, which
Assistant Foreign Minister Zheng Zeguang denied in a meeting
with U.S. Ambassador Max Baucus.
James McGregor, chairman for advisory firm APCO China, said
that if American technology companies are "losing their
intellectual property to cyber hacking they probably see this
action as necessary and worrisome."
Another person who works closely with U.S. technology firms
said that the damage is so pervasive that no company is going to
say that the U.S. government acted inappropriately.
"Companies in any industry seen as a priority for China's
industrial policy could be at risk," the person said.
In December, Google Inc, Microsoft Corp and six
other companies called for an overhaul of practices and laws to
limit how governments collect user information amid growing
concerns about online surveillance.
Last week, Cisco CEO John Chambers wrote to President Barack
Obama calling for "standards of conduct" to ensure that
Washington's surveillance programs don't undermine U.S.
technology firms ability to sell overseas.
Some U.S. companies in China were caught off guard by the
charges. People at several U.S. firms and trade sources said
they were given no advance notice.
"It was very surprising to see that it came out in the way
that it did," said a person at a China-based business lobby. "I
don't think it will be overt retaliation, but there will
certainly be ways that the Chinese government will preclude
foreign companies from certain sectors."
Other experts said the indictments were largely symbolic
because no one expected the five people accused to be arrested
or to answer the charges in a U.S. court.
Dean Cheng, a China expert with the Heritage Foundation,
said the U.S. government was sending a powerful message, but
China was unlikely to change its behavior unless other countries
followed suit. He said similar actions by European countries who
believe their companies are also victims of Chinese hackers
could increase pressure on Beijing.
Tensions over cyber security were ratcheted up in late 2012
after Washington banned Chinese communications equipment makers
Huawei Technologies Co Ltd and ZTE Corp
from building U.S. telecoms infrastructure.
Beijing responded by pressuring big state-owned firms to
stop buying U.S.-made hardware, emphasising security risks
following Snowden's revelations, people in the industry said.
(Additional reporting by Jim Finkle, Andrea Shalal, Adam
Jourdan, Noel Randewich and Marina Lopez; Writing by Paul
Carsten; Editing by Ian Geoghegan and Grant McCool)