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A Chinese paramilitary officer rides a scooter in Beijing on Wednesday. Beijing dismissed an annual Pentagon report that accused it of widespread cyberspying on the U.S. government, rejecting it as an "irresponsible

BEIJING -- China on Wednesday accused the United States of sowing discord between it and its neighbors after the Pentagon said Beijing is using espionage to fuel its military modernization, branding Washington the "real hacking empire.”

The latest salvo came a day after China's foreign ministry dismissed as groundless a Pentagon report that accused China for the first time of trying to break into U.S. defense computer networks.

The Pentagon also cited progress in Beijing's effort to develop advanced-technology stealth aircraft and to build an aircraft carrier fleet to project power further offshore.

The People's Liberation Army Daily called the report a "gross interference in China's internal affairs.”

"Promoting the ‘China military threat theory’ can sow discord between China and other countries, especially its relationship with its neighboring countries, to contain China and profit from it," the newspaper said in a commentary that was carried on China's Defense Ministry website.

The United States is "trumpeting China's military threat to promote its domestic interests groups and arms dealers,” the newspaper said, adding that it expects "U.S. arms manufacturers are gearing up to start counting their money.”

The remarks in the newspaper underscore the escalating mistrust between China and the United States over hacking, now a top point of contention between Washington and Beijing.

A U.S. computer security company, Mandiant, said in February a secretive Chinese military unit was likely behind a series of hacking attacks that targeted the United States and stole data from more than 100 companies.

That set off a war of words between Washington and Beijing.

China has said repeatedly that it does not condone hacking and is the victim of hacking attacks -- most of which it says come from the United States.

"As we all know, the United States is the real 'hacking empire' and has an extensive espionage network," the People's Daily, a newspaper regarded as a mouthpiece of the Chinese Communist Party, said in a commentary.

"In recent years, the United States has continued to strengthen its network tools for political subversion against other countries,” the article said.

"Cyber weapons are more frightening than nuclear weapons," the People's Daily said. "To establish military hegemony on the Internet by repeatedly smearing other countries is a dangerous and wrong path to take and will ultimately end up in shooting themselves in the foot."

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Carlos Barria / Reuters

A Chinese People's Liberation Army soldier stands guard in front of 'Unit 61398,' a secretive Chinese military unit on the outskirts of Shanghai, on Tuesday. The unit is believed to be behind a series of hacking attacks, a U.S. computer security company said, prompting a strong denial by China and accusations that it was in fact the victim of U.S. hacking.

BEIJING -- China's military on Wednesday responded angrily to accusations by an American computer security company of systematic hacking of U.S. business and military interests, arguing it "lacked technical proof and was "not based on fact."

In a statement published on the Chinese Defense Ministry's website in response to the controversial report by Mandiant Corp., the military denied the charges, arguing the data was not enough to connect the hacking to them.

"The report, in only relying on linking IP address to reach a conclusion the hacking attacks originated from China, lacks technical proof," the ministry wrote in its statement, "Everyone knows that the use of usurped IP addresses to carry out hacking attacks happens on an almost daily basis."

The ministry also argued that there was no globally accepted definition of what constitutes hacking.

"There is still no internationally clear, unified definition of what consists of a 'hacking attack'. There is no legal evidence behind the report subjectively inducing that the everyday gathering of online (information) is online spying."

The Defense Ministry said that China itself is a frequent victim of hacking, a common theme in China's rebuttal of accusations of foul play in cyberspace. The ministry said it had tracked a "considerable number" of attacks against its networks that originated in the United States, but it noted that those intrusions had not been used "as a pretext to accuse the U.S. side [of hacking]."

The statement came a day after Mandiant released an explosive report, first detailed in a New York Times article, that tied a People's Liberation Army unit based in Shanghai to a prolonged and focused campaign of stealing corporate and defense trade secrets.

According to Mandiant, the Chinese hacking unit, believed to be "PLA Unit 61398," employed hundreds, perhaps even thousands, of operatives to raid secure American servers, extracting trade secrets, blueprints, pricing data and other valuable information.

In total, Unit 61398 was said to have pillaged hundreds of terabytes of information from 141 companies -- 115 of which were American -- representing 20 industries in a variety of fields including telecommunications and defense.

The hackers reportedly used techniques such as "spear-phishing" -- using spoof e-mails to trick users into granting access to internal servers -- demonstrating a strong proficiency in English and advanced understanding of computer security and network operations.

China pointed out that its Ministry of Public Security had assisted more than 50 countries and regions in investigating cybercrime cases and that the Beijing had entered into a number of bilateral law enforcement cooperation agreements with those countries to help combat hacking.

The Mandiant report and the media maelstrom around it prompted Chinese state media to lash out at the hacking accusations, though the Chinese-language version of the New York Times story was still blocked in China.

China's typically nationalistic newspaper, Global Times, said Beijing should be more vocal in exposing hacking attacks conducted against China.

"Some officials have been punished for internally reporting that government websites have been hacked and secrets leaked, but almost no details have come out," the paper wrote.

"The Americans really know how to talk this (issue) up. All China can do is concede defeat."

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Report: Chinese army tied to widespread U.S. hacking

Congress urged to probe Chinese computer espionage

A chance discovery during an FBI investigation uncovered what authorities say is proof of a phenomenon long suspected by corporate espionage experts: Companies owned by the Chinese government have a growing appetite for the trade secrets of American corporations, and they're soliciting foreign nationals in the U.S. to steal them.

In this case, a couple allegedly spent more than 10 years tracking down the formula for a white pigment produced by chemical company DuPont. The Wall Street Journal reported that Walter and Christina Liew planned to turn over their findings to Pangang Group, a company owned by the Chinese government.

"Chinese actors are the world’s most active and persistent perpetrators of economic espionage," the Office of the National Counterintelligence Executive wrote in a congressional report last October. "Of the seven cases that were adjudicated under the Economic Espionage Act ... in Fiscal Year 2010, six involved a link to China."

DuPont's method for manufacturing titanium dioxide is closely guarded by the company. Correspondence uncovered in a safe-deposit box linked the operation back to Pangang and high-level Communist Party officials in China, according to the Journal. The paper said DuPont alerted the FBI after receiving an anonymous letter about Liew's activities and finding DuPont information on the computer of a colleague, who has not been charged. 

The Liews were arrested in July and have been charged with trying to steal trade secrets and sell them to China. They have denied the charges.

Last week, the Department of Justice announced that another participant in the operation, Tze Chao, pleaded guilty to conspiracy to commit economic espionage. Chao, a former DuPont employee, "admitted that he provided trade secrets concerning DuPont’s proprietary titanium dioxide (TiO2) manufacturing process to companies he knew were controlled by the government of the People’s Republic of China," the DOJ said in a statement. 

M.E. "Mich" Kabay, chief technical officer of Adaptive Cyber Security Instruments Inc., and professor of information assurance and statistics at Norwich University, called state-sponsored corporate espionage "standard operating procedure" for China, although this case unearthed the first paper trail showing a request for trade secrets that began with the state, rather than a corporation, according to the Journal.

Chinese government officials have denied knowledge or endorsement of these kinds of activities. But Kabay said it's hard to believe that an autocratic, controlling government with significant involvement in the nation's industrial sector would be unaware of efforts to steal American trade secrets.

Unlike the relatively low-tech methods used by the spies in the DuPont case, Kabay said many attempts to steal trade secrets from American businesses are undertaken by computer hackers. He cited this as another example of Chinese state complicity or involvement in the theft of intellectual property, given its notoriously tight grip on its citizens' use of the Internet. "Their tolerance of criminal hacker groups is inexplicable without the assumption that the government is encouraging criminal hacking," he said. 

"Cyberspace is a unique complement to the espionage environment," the congressional counterintelligence report said, adding that "an onslaught" of recent attempts to penetrate the online security systems of American companies were traced to Chinese Internet  addresses.