joequant

At which point China kicks the US company out of China, and said company loses far, far more than any amount that is due to hacking.

Iran and Syria aren't subject to this problem because the amount of business that US companies do in Iran and Syria is trivial.

Which government?

If you are a software company and you let it be known that you actively cooperate with the NSA and CIA, I doubt you'll be doing much business in China. I doubt France is going to let you in, either.

Outside of a few industries, the business losses from actively cooperating with a national government are going to be much larger than any losses due to hacking.

There's also the matter of "is this worth starting a war over?"

One thing about this is that Chinese military is not the same thing as Chinese intelligence. The main Chinese intelligence agency is the Ministry of State Security. Mixing up the PLA with the MSS is like mixing up the DOD with the CIA.

I doubt that the United States government will do anything more than "raise the issue." The trouble is that if the US does something like file a formal diplomatic protest, it will be a promise by the United States not to try to do anything similar, and I don't see how the US would consider that to be in its national interest.

One other interesting thing is that the Chinese hacker community is very different from the US hacker community, in that US hackers tend to hate the military and authoritarian systems whereas the Chinese hacker community sees themselves as patriotic defenders of the motherland. A lot of this has to do with differences in history (i.e. the US involvement with Vietnam). Something that gives you an idea of the difference is that if you go to any newsstand, you'll see a lot of military magazines, and so hackers in China are "solider wannabees" in ways that hackers in the US aren't.

One problem is that multinational corporations are multinational with significant operations inside of China. I doubt that the NSA is going to be of much help in helping a US company secure its networks inside of China, and if that company has large numbers of Chinese employees in China, there are security issues with having US intelligence companies sharing sensitive US intelligence.

For example, the NYTimes has a bureau in Shanghai, and if they use a private contractor to help strengthen their networks, then I don't think that the Chinese government would be cancelling visas. If the NYTimes brought in the NSA, then I give the Chinese government five minutes before all of the visa get cancelled and the journalists get expelled.

And the particular neighborhood which the report targets happens to be the place where the main US-China cable hits the China network...

http://en.wikipedia.org/wiki/TPE_%28cable_system%29

In other words, you'd

1) expect to find a lot of PLA spooks in that location 2) expect to find that any China related hackers have their address there, because that's the last point that they can change their IP address before the packets head over to the US

Doesn't mean that the two groups are connected....

One thing that surprised me looking in this is how most internet traffic goes through a very few links. There are only two major connection points between the US and China and the neighorhood with the IP blocks hosts one of them.

In particular, if you the hackers were physically located in Beijing, I'd bet that the packets would look like they came from that part of Pudong.