By Jim Wolf
WASHINGTON (Reuters) - Chinese cyberwarfare would pose a genuine risk to the U.S. military in a conflict, for instance over Taiwan or disputes in the South China Sea, according to report for the U.S. Congress.
Operations against computer networks have become fundamental to Beijing's military and national development strategies over the past decade, said the 136-page analysis by Northrop Grumman Corp. It was released on Thursday by the congressionally created U.S.-China Economic and Security Review Commission.
The report, based on publicly available information, said Chinese commercial firms, bolstered by foreign partners, are giving the military access to cutting-edge research and technology.
The military's close ties to large Chinese telecommunications firms create a path for state-sponsored penetrations of supply networks for electronics used by the U.S. military, government and private industry, the report added.
That has the potential to cause a "catastrophic failure of systems and networks supporting critical infrastructure for national security or public safety," according to the study.
On the military side, "Chinese capabilities in computer network operations have advanced sufficiently to pose genuine risk to U.S. military operations in the event of a conflict," it said.
Deputy Defense Secretary Ashton Carter, without referring to the report, said Thursday that he was not even "remotely satisfied" with U.S. ability to deal with cyberwarfare.
Pentagon spending on cyber capabilities was not really constrained by scarce funds, Carter told an industry conference hosted by Credit Suisse and consultancy McAleese and Associates. "I'd dare say we'd spend a lot more if we could figure out productive ways of doing it."
General Norton Schwartz, the U.S. Air Force chief of staff, told the conference that the Air Force was working on "cyber methods" to defeat aircraft. He declined to elaborate.
A spokesman for the Chinese Embassy in Washington did not respond to a request for comment.
Beijing in the past has complained about what it called unfair vilification by the 12-member bipartisan commission set up by Congress in 2000. The body investigates national-security implications of U.S. trade with China, the world's second-largest economy.
China is "fully engaged in leveraging all available resources to create a diverse, technically advanced ability to operate in cyberspace," and computer network operations are being broadly applied to assist with long-term national development, the report said.
Such operations, as defined by the report, include attack and defense as well as network "exploitation," for instance for intelligence collection.
The analysis did not go into reciprocal U.S. military efforts to gain an edge in cyberspace, which the Pentagon in recent years has defined as a potential battle zone like air, sea, space and land.
Keyboard-launched tools that China could use in a crisis over Taiwan or in the South China Sea could delay or degrade a potential U.S. military response, partly because of "the vagaries of international law and policy surrounding nation-state responses to apparent network attack," the report said.
The analysis was a follow-up to one that Northrop Grumman, one of the Pentagon's top five suppliers by sales, did for the commission in 2009. That study said Beijing appeared to be conducting "a long-term, sophisticated, computer network exploitation campaign" against the U.S. government and its military contractors.
Since then, official U.S. concern has grown over alleged Chinese espionage via computer penetrations. In October, the Office of the National Counterintelligence Executive, a U.S. intelligence arm, said in a declassified report to Congress that "Chinese actors are the world's most active and persistent perpetrators of economic espionage."
Commission Chairman Dennis Shea in a statement voiced hope that the new report would help the Congress in current deliberations over cybersecurity legislation to protect U.S. networks.
(Reporting By Jim Wolf; Editing by Bill Trott)