Stock Market

US, China reach ‘understanding’ on cyber theft

President Barack Obama announced on Friday that he had reached a “common understanding” with Chinese President Xi Jinping on curbing economic cyber espionage, but threatened to impose US sanctions on Chinese hackers who persist with cyber crimes.

The two leaders also unveiled a deal to build on a landmark emissions agreement struck last year, outlining new steps they will take to deliver on pledges they made then to slash their greenhouse gas emissions.

Speaking after White House talks during Xi’s first US state visit, Obama quickly homed in on the thorniest dispute between the world’s two biggest economies – growing US complaints about Chinese hacking of government and corporate databases, and the suspicion in Washington that Beijing is sometimes behind it.

“It has to stop,” Obama told reporters at a joint news conference in the White House Rose Garden, with Xi standing beside him. Obama said he and Xi made “significant progress” on cyber security.

But he added warily: “The question now is, are words followed by actions?” and made clear he is prepared to levy sanctions against cyber criminals.

The two leaders said they agreed that neither government would knowingly support cyber theft of corporate secrets or business information.

But the agreement stopped short of any promise to refrain from traditional government-to-government cyber spying for intelligence purposes. That could include the massive hack of the federal government’s personnel office this year that compromised the data of more than 20 million people. US officials have traced that back to China but have not said whether they believe the government was responsible.

Xi reiterated China’s denial of any government role in the hacking of US corporate secrets and said the best way to address the problem was through bilateral cooperation and not to “politicize this issue.”

“Confrontation and friction are not the right choice for both sides,” he said. China has routinely insisted that it too is a victim of cyber hacking.

Analysts said the agreement was significant. James Lewis, senior fellow at the Center for Strategic and International Studies, said the leaked plan for sanctions helped push the Chinese toward a better-than-expected agreement, but noted that Beijing also got Washington to consider some Chinese concepts for norms of behaviour.

POMP AND TECH

Obama hosted a lavish black-tie state dinner for Xi on Friday night, featuring Maine lobster and Colorado lamb for about 200 guests, with technology executives featured among them.

Seated with Obama and Xi at the head table were Apple (AAPL.O) CEO Tim Cook, Satya Nadella of Microsoft (MSFT.O), Facebook’s (FB.O) Mark Zuckerberg and Salesforce.com’s (CRM.N) Marc Benioff.

In their dinner toasts, both leaders focused on the theme of friendship. But Obama also referenced the tensions. “There will be times when there are differences between our two countries. It’s inevitable,” Obama said, also gently urging China to accept diverse views and “uphold the rights” of all people.