President Barack Obama on Thursday urged the Israeli people to put themselves in the shoes of Palestinians and recognize their "right to self-determination, their right to justice."

In a televised speech at the Jerusalem Convention Center, Obama said there should be "two states for two peoples."

Breaking off from his prepared text, he said that he recently met with a group of young Palestinians.

"Talking to them, they weren’t that different from my daughters, they weren’t that different from your daughters or sons," he said.

"I honestly believe that if any Israeli parent sat down with these kids, they’d say, 'I want these kids to succeed, I want them to prosper, I want them to have opportunities just like my kids do,'" he added to applause.

Obama, on the second day of his first official trip to Israel, warned that "the only way for Israel to endure and thrive as a Jewish and democratic state" was through the creation of an independent Palestine.

That state had to be "viable" with real borders, he said, criticizing the building of settlements in the West Bank.

He urged ordinary Israelis to put pressure on their leaders to achieve a future in which Jews, Christians and Muslims could live in peace.

"I also know that not everyone in this hall will agree with what I have to say about peace. I recognize that there are those who are not simply skeptical about peace, but question its underlying premise, have a different vision for Israel’s future and that's a part of democracy and the discourse between our two countries," he said.

"Peace is necessary, I believe that. I believe that peace is the only path to true security. You have the opportunity to be the generation that permanently secures the Zionist dream, or you can face a growing challenge to its future," he added.

Jason Reed/ Reuters

President Barack Obama shakes hands with Israel's President Shimon Peres after Obama was presented with the Presidential Medal of Distinction, Israel's highest civilian honor, during an official state dinner in Jerusalem on Thursday.

At a state dinner in Jerusalem Thursday evening, Israel's President Shimon Peres awarded Obama with Israel’s highest honor — the Presidential Medal of Distinction — emphasizing what Peres called his "unforgettable contribution" to the security of Israel.

U.S. support for the Iron Dome missile defense system had been instrumental in saving Israeli lives, Peres said.

As Obama sat at the dais with Prime Minister Benjamin Netanyahu and his wife Sara before a room full of Israeli dignitaries, Peres called out the U.S. president's "tireless work to make Israel strong to make peace possible."

Peres said he was "convinced" the United States "will do whatever is necessary on the Iranian threat."

Obama said he was accepting the award "on behalf of the American people."

Israel must avoid 'isolation'
In his address at the convention center Obama stressed that America would always support Israel, echoing his comments Wednesday that the U.S. was Israel's "eternal" ally.

But he said peace had to be made between "peoples" and could not be achieved through military hardware alone.

"Given the frustration in the international community, Israel must reverse an undertow of isolation. And given the march of technology, the only way to truly protect the Israeli people over the long term is through the absence of war — because no wall is high enough, and no Iron Dome is strong enough and perfect enough, to stop every enemy that’s intent on doing so from inflicting harm," he added.

Obama said Israel could not be expected to negotiate with anyone "dedicated to its destruction."

But he said he believed that Israelis had a "true partner" in Palestinian President Mahmoud Abbas, along with Prime Minister Salam Fayyad. On a visit to the West Bank earlier Thursday, Obama condemned the Palestinian Hamas party, which holds sway in the Gaza Strip and is a rival to Abbas' Fatah movement.

Oliver Weiken / EPA

President Barack Obama embraces Palestinian Authority President Mahmoud Abbas upon his arrival at the presidential compound in the West Bank city of Ramallah on Thursday.

"So many young Palestinians have rejected violence. There’s an opportunity there. There’s a window," he said. "Peace is possible."

At one point in the speech, someone in the audience began heckling Obama, who peered toward the back of the hall to try to see what was happening.

"This is part of the lively debate we talked about," he said, referencing a line earlier in his speech. "This is good."

He joked about media reports that he and Prime Minister Netanyahu do not get along. It was just a "plot" between him and "my friend Bibi" to give journalists something to write about, he suggested.

Earlier, Obama met with Abbas in the West Bank.

After his helicopter touched down in Ramallah, Obama was greeted cordially by Abbas and the two hugged.

"We cannot give up on the search for peace, no matter how hard it is. ... Too much is at stake," the president said during a joint news conference.

'Misery' of Hamas
He sounded hopeful about Abbas and the Palestinian Authority and reiterated U.S. willingness to help.

"The United States is deeply committed to the creation of an independent and sovereign state of Palestine," he said, adding, "Simply, Palestinians deserve a state of their own."

When asked whether he thought a halt to further settlement activity was required before peace talks could begin in earnest, Obama demurred. 

"If the only way to even begin the conversation is that we get everything right from the outset … then we’re never going to get to the broader issue, which is how you actually structure a state of Palestine that is sovereign and contiguous," the president said.

"The core issue right now is how do we get sovereignty for the Palestinian people and ensure security for the Israeli people," he added. "If we solve those two problems, the settlement problem will be solved."

The president praised Abbas for his leadership and sharply criticized rival group Hamas for the "misery" of Palestinians in Gaza.

For his part, Abbas said he had "renewed confidence" in U.S. assistance with the peace process after meeting with Obama.

"We have conducted a good and useful round of talks," he said through an interpreter.

Abbas called for an end to Israeli construction of settlements in Palestinian territories.

He warned that continued building of the sites was causing Palestinians, particularly the younger generation, to lose hope that Israel and a sovereign Palestine could peacefully co-exist.

When young Palestinians see the settlements, he said, "they do not trust the two-state solution anymore, and this is very dangerous" for the future.

Two rockets that may have been a show of protest were fired into southern Israel close to the border with the Hamas-controlled Gaza Strip early Thursday.

Related:

Iran threatens to destroy Tel Aviv, Haifa if Israel attacks

Obama says 'still time' for diplomacy with Iran

Israel walls off the Arab Spring

On the Brink: Palestinians, Israelis lukewarm on visit

This story was originally published on Thu Mar 21, 2013 4:53 AM EDT

Reuters file

An Iranian long-range shore-to-sea Qader (Capable) missile is launched during Velayat-90 war game on the Sea of Oman near the Strait of Hormuz in southern Iran on Jan. 2, 2012.

A Chinese businessman indicted in the United States over sales of missile parts to Iran is still making millions of dollars from the trade, say security officials who monitor compliance with Western and U.N. sanctions.

These officials, speaking on condition of anonymity, said the businessman, Li Fangwei, has earned at least $10 million from illegal sales to Iran since his indictment by the New York County District Attorney in 2009.

Trade sanctions are at the heart of international efforts to curb Iran's nuclear program for fear it is for military ends -- a suspicion Iran rejects. Li's alleged activities may point to Iran's resourcefulness in circumventing those sanctions and turn a spotlight on China's ability to police its own export restrictions.

It is hard to quantify the contribution of foreign firms and individuals to Iran's nuclear and missile programs, but analysts believe some vital components are all but impossible for Tehran to produce at home.

Contacted by Reuters on Feb 4, Li said he continued to get commercial inquiries from Iran but only for legitimate merchandise, such as steel products. Li said his company, LIMMT, had stopped selling to Iran once the United States began sanctioning it several years ago.

He dismissed allegations by the security officials that he had used deception, including changes of company names, to supply Iran with Chinese and foreign-made parts such as high-grade alloys that can be used to enrich uranium and guidance devices suitable for missiles.

"Sure, we did business with Iran, but we did not export the goods they said we did, missiles or whatever," Li said. "We still get inquiries from Iranian clients, but we don't respond to them."

A Chinese Foreign Ministry spokeswoman said Beijing was adhering to trade restrictions, including a U.N. ban on helping Iran build missiles that can deliver nuclear warheads.

Officials from Iran, including at firms the security officials said were clients of Li and at the embassy in Beijing, did not respond to requests for comment. A Chinese bank that the security officials said Li used for Iranian business denied it had breached U.N. sanctions.

Targeted by feds, local prosecutor
In 2006, the U.S. Treasury barred Li from the U.S. financial system for allegedly selling goods with potential military uses to Iran.

Three years later, the New York County District Attorney unsealed a fraud indictment against Li and his metals company LIMMT on suspicion they had used false names to process further payments for sales to Iran through several U.S. banks.

The U.S. banks employed by Li were innocent of any wrongdoing because Li and other suspects had concealed their identities, then-District Attorney Robert Morgenthau said.

On Feb 4, Li said that at the time of the indictment he had felt there was no point in saying anything because U.S. courts and prosecutors "don't listen to reason. It's useless."

Three weeks ago, on Feb. 11, the U.S. State Department issued fresh sanctions against Li, saying he had "engaged in missile technology proliferation activities that require the imposition of missile sanctions", and placing additional restrictions on any missile technology trade involving him.

A State Department official said Li had been sanctioned because of his "proliferation to Iran" since his 2009 indictment. Li did not respond to calls seeking comment on the Feb 11 action.

China reacted with irritation to the Feb. 11 measures. Foreign Ministry spokeswoman Hua Chunying said the U.S. step "seriously violates the norms of international relations and harms China's interests" and urged the United States to immediately revoke "these irrational sanctions."

China has no extradition treaty with Washington.

Alloys, gyroscopes
The security officials allege that since the 2009 indictment Li, working in concert with the Iranian Embassy in Beijing, had supplied parts to firms that make Iranian missiles, in particular the U.N.-blacklisted Shahid Bakeri Industrial Group (SBIG). SBIG did not reply to faxes and emails sent by Reuters for comment.

The goods allegedly supplied included 15 metric  tons of high-grade aluminum alloy, more than 20 metric  tons of ultra-high strength steel and 1,700 kg of graphite cylinders.

Li agreed in 2011 to supply 1,500 gyroscopes and accelerometers to SBIG, the security officials alleged, referring to devices that can be used in missile guidance and control systems -- a quantity sufficient for about 500 missiles.

Gyroscopes are "controlled items" under the Missile Technology Control Regime (MTCR), an informal and voluntary partnership between 34 mainly Western countries. China is not a party to the MTCR but has similar export controls of its own.

Li also supplied more specialized devices known as fiber-optic gyroscopes, the officials allege; their main uses are in missiles, robots or remotely operated land or sea vehicles.

The officials accuse Li of advising SBIG and other Iranian clients to change details of shipments, including the falsification of the end-user and supplier details in contracts.

Li denies all the allegations.

Between 2010 and 2012, Li took over $10 million in payments from SBIG alone and travelled often to Iran, the officials allege. He used deception within China to hide his activities, not only from the authorities but from Chinese companies as well, the officials added.

In 2012, they said, Li listed a Chinese company as a false end user to obtain repair equipment he intended to send to SBIG in Iran.

A diplomat in Iran's Beijing Embassy helped Li, who is about 40, arrange meetings with defense officials when he visited Tehran, the security officials allege. In the Iranian capital, the officials said, some contacts knew him only as "The Tailor" to conceal his identity.

Critical components
The officials alleged that some of his clients were not always satisfied with the quality of his goods but kept on using him, perhaps for lack of choice.

Asked in Beijing whether China knew of Li's purported activities, Foreign Ministry spokeswoman Hua said China's position was "clear and steadfast" on non-proliferation: China had always upheld U.N. Security Council resolutions on non-proliferation. If a Chinese individual or company was doing anything illegal, it would be dealt with.

An internal report for the U.S. Congress in December concluded that sanctions, respected by China, were making it increasingly tough for Tehran to obtain certain critical components and materials for its missiles.

From 2004 to 2007, Chinese arms transfer agreements with Iran totaled about $300 million at today's prices; between 2008 and 2011 total arms transfer agreements dropped to less than $50 million, according to the report by the non-partisan Congressional Research Service (CRS) on Iranian missiles.

Li said his company, LIMMT, had stopped selling to Iran once the United States began sanctioning it several years ago. He did not indicate a date, but the U.S. Treasury first sanctioned LIMMT in June 2006, citing its alleged support of and role in the proliferation of weapons of mass destruction to Iran.

"We used to export steel, things like that. Nothing to do with missiles," he said.

At two buildings in the northeastern city of Dalian which the security officials said had been used by Li, people either had never heard of him or said he had left some years ago.

Additional reporting by William Maclean, Ben Blanchard and Michael Martina in Beijing and Dalian, Marcus George in Dubai, Dan Williams in Jerusalem, and Mark Hosenball, David Ingram and Anna Yukhananova in Washington.

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By Anna Schecter
Rock Center

This article was originally published on Oct. 11 and was updated on Feb. 22, as more information became available.

UPDATE: In a new report released this week, cyber-security firm, Mandiant, pinpointed exactly where some of the most sophisticated hackers in China are working – in or around a building that serves as a Chinese military unit's headquarters on the outskirts of Shanghai.

This elite group of hackers has been dubbed the "Shanghai Group." They've struck 141 times since 2006 across all sectors of the U.S. economy.  This is the first time such a group has been tracked right to the doorstep of the People's Liberation Army.

Two major United States newspapers, The New York Times and The Wall Street Journal, reported earlier this year that their computer systems have been repeatedly targeted by hackers based in China for the past several months.

The New York Times said the attacks, which began in mid-September, were in response to a Times investigation of the relatives and family of China’s Premier Wen Jiabao. The Wall Street Journal simply stated that the infiltration was "for the apparent purpose of monitoring the newspaper's China coverage."

This is not the first time cyber-attacks originating from China have been in the national spotlight. According to current and former intelligence officials at the highest levels of government, the Chinese have playing dirty in the international spy game for years.

“This is stealing American wealth.  It's stealing American jobs.  It's stealing American competitive advantage,” General Michael Hayden, former head of the Central Intelligence Agency and the National Security Agency, said in an interview with NBC News.

Hayden’s comment was echoed by a House Intelligence Committee report released on October 8, 2012 warning that two Chinese telecommunications companies, Huawei and ZTE, could be funneling sensitive information back to Beijing, and cautioned American carriers to avoid doing business with them.

Intelligence Committee Chairman Mike Rogers, R-Mich., told NBC News that the Chinese have targeted every sector of the American economy.

“Everything you can possibly imagine we have seen the Chinese make a concerted effort to steal that information and use it for their own economic advantage,” he said.

That includes blueprints for the next generation of auto parts, formulas for pesticides and pharmaceuticals, and other information that makes American companies competitive in the global marketplace.

Though the United States limits its espionage to national security interests, intelligence officials said, China has launched a well-organized campaign to steal American corporate secrets via the Internet.

“I know states steal secrets. Our states steal secrets. And we're actually pretty good at it.  But we self-limit.  We steal things that are valuable and useful for your security, for your liberty and for your safety,” Hayden said.

One of the first to find himself on the front lines of the economic cyber war with China at the corporate level was Brian Shields. He was a computer security specialist for Nortel, a giant Canadian telecommunications company.

A success story from the early Internet age, Nortel made cell phone and computer network equipment. At its height, the company employed 20,000 people in the U.S.

Shields said he first got wind of the Chinese in Nortel’s network in 2004.  An employee working in highly technical research and development saw some curious activity on a computer server.  His documents were being downloaded apparently by a senior executive named Brian McFadden, who worked in a completely different department.

Shields said McFadden had not downloaded anything.  Instead, someone had hacked into the computer network using McFadden’s stolen password. Shields said he discovered that seven passwords had been stolen, including that of then CEO Frank Dunn.

Though Shields could never determine who the individual hacker was, he was able to track the activity to servers in Shanghai and Hangzhou, China.

In total more than 1,400 documents were stolen including product designs and valuable customer information, according to Shields.

“They could know what companies we're buying, how much. They could know where we saw our future product. They could know where we saw our profitability,” he said.

After the attack, Shields said he watched his company steadily lose business, while a competitor, Huawei, began to grow.  Nortel went bankrupt in 2009, while Huawei has become one of the world’s premiere telecommunications companies. Shields said he believes Nortel went under as a result of spying by companies like Huawei. 

Most industry insiders say that Nortel was a victim of bad business decisions coupled with the burst of the Internet bubble.

A spokeswoman for Nortel said the company responded appropriately to the 2004 attacks and “found no evidence of wide spread security issues.”

Huawei has denied stealing from Nortel or any other company. In a statement emailed to NBC News, the spokeswoman said the company has "the highest respect for the intellectual property of others."

In response to October 8th's House Intelligence Committee report, a Huawei spokesman said the accusations were based on rumors. The company defended its record as a member of the Fortune 500 list of the largest companies in the world.

“For the past 25 years, we have held an upstanding record…We have been emphasizing that Huawei is committed to cooperating transparently with any and all government agencies who wish to carry out an open and impartial dialogue about our company and the products and services that have made us successful internationally,” read a Huawei statement responding to the report.

Huawei has already sold equipment to a dozen small carriers in the U.S.

The Huawei spokesman said company is a “partner to the U.S. high-tech industry” and “helps create jobs in the U.S.”

ZTE released a statement saying that the company is China’s “most transparent, independent, globally focused, publicly traded telecom company.”

Click here to read a full response from Huawei

In response to this story, China’s Foreign Ministry Spokesman Hong Lei denied stealing from any corporations, adding that last year the Chinese helped international agencies address hundreds of cyber-attacks.   He said the Mandiant report linking attacks to the Chinese military was “unfounded” and “unprofessional.”

“China is also a victim of cyber-attacks, and we take a firm stance on continuously playing an active role in international cooperation,” Hong Lei told NBC News.

But top American brass said they are exasperated by China’s efforts to portray themselves as victims. Hayden said it is time to hold China accountable.

“Don't treat me like a child.  We know what you're doing.  We have good evidence with regard to what you're doing.  And if you continue to do what you do actions will have consequences,” said Hayden.

Rogers advocated that the White House make Chinese cyber espionage the number one issue in bilateral relations with China.

“They do respond to embarrassment.  And we ought to embarrass them for being thieves of the research and development of the United States of America.”

Police in Singapore have warned men to be more careful about whom they talk to over webcams, reporting an alarming increase in the number of men who've been lured into nude conversations with "foreign" women, only to be blackmailed with video-chat recordings.

In terms of sheer numbers, the increase isn't much — from 11 in 2011 to more than 50 last year — but it suggests a burgeoning scam that could ensnare many more men in the future, the national police force said in a bulletin that was first reported by Singapore's Straits Times newspaper.

Police singled out Facebook and Tagged as especially popular vehicles for the extortion scheme, in which "female foreign suspects ... would commence a webcam conversation with the victims and initiate cybersex by undressing themselves first before persuading the male victims to appear nude or perform sexual acts in front of the webcams."

"Unknown to the victims, the suspects had recorded the acts," police said. "These suspects would then threaten to circulate compromising photographs and videos of the victims to extort money from them."

The spike in cases was first noted halfway through last year, leading CrimeWatch, a joint program of the national police and the National Crime Prevention Council, to "re-create" the scam in a (safe for work but entertainingly cheesy) video in June:

Graham Cluley, a consultant with the Internet security firm Sophos,  reported the bulletin Monday on the company's appropriately named Naked Security blog and warned of another potential hazard:

"You can imagine how a man, believing he is being seduced online by a sexy woman, might be all too eager to click on a link she suggests or run a malicious program on his computer. Before he knows it, his computer could be under the control of a hacker."

Police offered these tips to keep your money in your wallet:

• Be wary of messages from unknown people who want to befriend you.
• Do not accede to any request that may put you in vulnerable positions, such as performing compromising acts in front of a webcam or giving personal details about yourself when interacting with other Internet users.
• If anyone attempts to extort money from you or should you become a victim of such an attempt, call the police immediately.
• Do not remit or transfer money.

Follow M. Alex Johnson on Twitter and Facebook.

Related:

• Worried about 'sextortion'? FBI shares cautionary tale
• Indiana man to plead guilty to 'sextortion'

Kim Kwang Hyon / AP

Former New Mexico governor Bill Richardson is interviewed by journalists after arriving at Pyongyang International Airport in North Korea on Monday.

Google Executive Chairman Eric E. Schmidt and former New Mexico Gov. Bill Richardson arrived in North Korea on Monday to begin a controversial private mission that includes an effort to secure the release of an imprisoned American tourist.

The prisoner, Kenneth Bae, is a 44-year-old Korean-American who was detained last month. He was in a group of five tourists who visited the northeast city of Rajin, South Korea's Yonhap news agency said last month, citing a report by the Kookmin Ilbo newspaper. Bae entered North Korea on Nov. 3.

North Korea: Detained tourist 'admitted his crime'

Richardson, a former ambassador to the United Nations, has made numerous trips to North Korea. Before Monday's trip, he said: "We are going to ask about the American who's been detained -- a humanitarian private visit."

David Guttenfelder / AP

Google Executive Chairman Eric Schmidt, center, arrives at Pyongyang International Airport in North Korea for a controversial visit on Monday.

"We'll meet with North Korean political leaders," Richardson told The Associated Press. "We'll meet with North Korean economic leaders, military. We'll visit some universities. We don't control the visit. They will let us know what the schedule is when we get there."

The former governor also said the delegation would try to "lay the groundwork for him coming home," the AP reported. "We're going to try to inquire about the status. ... I heard from his son who lives in Washington state, who asked me to bring him back. I doubt we can do it on this trip."

US cool to Schmidt's trip to North Korea

Schmidt did not respond to requests for comment. But Richardson gave at least a hint about Schmidt's purpose for the trip to the country where the Internet, like most other things, is strictly regulated.

"This is not a Google trip, but I'm sure he's interested in some of the economic issues there, the social media aspect," Richardson told the AP. "So this is why we are teamed up on this." He did not elaborate on what he meant by the "social media aspect."

The trip comes a month after North Korea launched a rocket to put a satellite into space. The reclusive state continues work on its nuclear testing facilities, according to satellite imagery, potentially paving the way for a third nuclear bomb test.

PhotoBlog: Thousands celebrate rocket launch

The delegation comprised Schmidt, his daughter, Richardson and Google executive Jared Cohen, according to South Korean news media, and it arrived in Pyongyang on a flight from Beijing.

The mission has been criticized by the White House because of the sensitivity of the timing. The United States does not have diplomatic relations with North Korea and the isolated and impoverished state remains technically at war with South Korea.

South Korea is in the midst of a transition to a new president who will take office in February, while Japan, another major U.S. ally in the region, has a new prime minister.

North Korean leader offers olive branch

A U.S. official said the trip's timing was particularly bad from the Obama administration's point of view because it comes as the U.N. Security Council ponders how to respond to North Korea's Dec. 12 rocket launch.

"We are in kind of a classical provocation period with North Korea. Usually, their missile launches are followed by nuclear tests," said the official, who spoke on the condition of anonymity.

NBC News' John Newland, Reuters and The Associated Press contributed to this report.

Slideshow: Journey into North Korea

David Guttenfelder / AP

In this March 9, 2011, photo, a girl plays the piano inside the Changgwang Elementary School in Pyongyang, North Korea.

Launch slideshow

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By Anna Schecter
Rock Center

The Chinese are playing dirty in the international spy game, according to current and former intelligence officials at the highest levels of government. 

“This is stealing American wealth.  It's stealing American jobs.  It's stealing American competitive advantage,” General Michael Hayden, former head of the Central Intelligence Agency and the National Security Agency, said in an interview with NBC News.

Hayden’s comment was echoed by a House Intelligence Committee report released on October 8th warning that two Chinese telecommunications companies, Huawei and ZTE, could be funneling sensitive information back to Beijing, and cautioned American carriers to avoid doing business with them.

Intelligence Committee Chairman Mike Rogers, R-Mich., told NBC News that the Chinese have targeted every sector of the American economy.

“Everything you can possibly imagine we have seen the Chinese make a concerted effort to steal that information and use it for their own economic advantage,” he said.

That includes blueprints for the next generation of auto parts, formulas for pesticides and pharmaceuticals, and other information that makes American companies competitive in the global marketplace.

Though the United States limits its espionage to national security interests, intelligence officials said, China has launched a well-organized campaign to steal American corporate secrets via the Internet.

“I know states steal secrets. Our states steal secrets. And we're actually pretty good at it.  But we self-limit.  We steal things that are valuable and useful for your security, for your liberty and for your safety,” Hayden said.

One of the first to find himself on the front lines of the economic cyber war with China at the corporate level was Brian Shields. He was a computer security specialist for Nortel, a giant Canadian telecommunications company.

A success story from the early Internet age, Nortel made cell phone and computer network equipment. At its height, the company employed 20,000 people in the U.S.

Shields said he first got wind of the Chinese in Nortel’s network in 2004.  An employee working in highly technical research and development saw some curious activity on a computer server.  His documents were being downloaded apparently by a senior executive named Brian McFadden, who worked in a completely different department.

Shields said McFadden had not downloaded anything.  Instead, someone had hacked into the computer network using McFadden’s stolen password. Shields said he discovered that seven passwords had been stolen, including that of then CEO Frank Dunn.

Though Shields could never determine who the individual hacker was, he was able to track the activity to servers in Shanghai and Hangzhou, China.

In total more than 1,400 documents were stolen including product designs and valuable customer information, according to Shields.

“They could know what companies we're buying, how much. They could know where we saw our future product. They could know where we saw our profitability,” he said.

After the attack, Shields said he watched his company steadily lose business, while a competitor, Huawei, began to grow.  Nortel went bankrupt in 2009, while Huawei has become one of the world’s premiere telecommunications companies. Shields said he believes Nortel went under as a result of spying by companies like Huawei. 

Most industry insiders say that Nortel was a victim of bad business decisions coupled with the burst of the Internet bubble.

A spokeswoman for Nortel said the company responded appropriately to the 2004 attacks and “found no evidence of wide spread security issues.”

Huawei has denied stealing from Nortel or any other company. In a statement emailed to NBC News, the spokeswoman said the company has "the highest respect for the intellectual property of others."

In response to October 8th's House Intelligence Committee report, a Huawei spokesman said the accusations were based on rumors. The company defended its record as a member of the Fortune 500 list of the largest companies in the world.

“For the past 25 years, we have held an upstanding record…We have been emphasizing that Huawei is committed to cooperating transparently with any and all government agencies who wish to carry out an open and impartial dialogue about our company and the products and services that have made us successful internationally,” read a Huawei statement responding to the report.

Huawei has already sold equipment to a dozen small carriers in the U.S.

The Huawei spokesman said company is a “partner to the U.S. high-tech industry” and “helps create jobs in the U.S.”

ZTE released a statement saying that the company is China’s “most transparent, independent, globally focused, publicly traded telecom company.”

Click here to read a full response from ZTE

Click here to read a full response from Huawei

In response to this story, China’s Foreign Ministry Spokesman Hong Lei denied stealing from any corporations, adding that last year the Chinese helped international agencies address hundreds of cyber-attacks. 

“China is also a victim of cyber-attacks, and we take a firm stance on continuously playing an active role in international cooperation,” Hong Lei told NBC News.

But top American brass said they are exasperated by China’s efforts to portray themselves as victims. Hayden said it is time to hold China accountable.

“Don't treat me like a child.  We know what you're doing.  We have good evidence with regard to what you're doing.  And if you continue to do what you do actions will have consequences,” said Hayden.

Rogers advocated that the White House make Chinese cyber espionage the number one issue in bilateral relations with China.

“They do respond to embarrassment.  And we ought to embarrass them for being thieves of the research and development of the United States of America.”

Editor's Note: Rock Center with Brian Williams airs Thursdays at 10pm/9c on NBC.

NAIROBI, Kenya – In an Olympic summer, the first thing people probably associate with Kenya are its distance runners.  When I was recently in Kenya, only days before the London 2012 opening ceremonies, expectations for the Kenyan track team were running high – almost as high, incongruously, as expectations for the next big technology in Kenya.

From Kibera, the largest slum in Kenya, to Karen, the Nairobi equivalent of Manhattan’s Upper East Side, conversations often turned to cell phone banking, the Kenyan government’s embrace of “open data,” and whether or not a Silicon Savannah could ever be a reality.  

In an effort to understand what that future might look like, I sought out Dr. Bitange Ndemo, Permanent Secretary in Kenya’s Ministry of Information and Communications.  

Impressive stats
According to the World Bank, Kenya’s recent headline technology statistics are impressive.  In the 18 months from June 2010 to December 2011, cell phone usage rose by 25 percent and Internet usage rose by 60 percent.

Today, in 2012, Kenyan mobile phone usage exceeds 70 percent – there are now more mobile subscribers than adults in Kenya; and Internet usage exceeds 35 percent, according to the Communication Commission of Kenya.  There are now more Internet users in Kenya than in South Africa – even though South Africa has 25 percent more people and its GDP is ten times that of Kenya’s, according to the World Bank.  

More interesting than the headline statistics is what that technology explosion has enabled.  In 2011, Kenyan cell phone users accounted for more than 50 percent of all the money transferred via cell phones globally – or more than $11billion, according to Ndemo.

Today, M-PESA, the dominant money-transfer service in Kenya run by Safaricom, counts more than 17,000 agents throughout Kenya enabling banking to reach rural areas not served by one of Kenya’s approximately 800 bank branches, according to The Economist.

M-PESA is easy to use. Customers register at an M-PESA agent and deposit cash that is credited to a mobile-money account / cell phone number known as an “e-float.” Then, that e-float can be transferred to another M-PESA user by SMS. Fewer than 10 percent of Kenyans had a bank account four years ago, according to Ndemo.  Today, because of M-PESA, Ndemo says close to 60 percent of Kenyans effectively have a bank account, even if their “bank” is their cell phone company and they never walk into a traditional bank branch. Indeed, today, Kenyans use ‘e-float’ via cell phones for everything from buying groceries to paying rent.

I asked Ndemo whether credit was the next frontier for M-PESA and cell phone banking broadly– whether or not Kenyans would soon be able to apply for and receive small loans via SMS. 

“Yes,” Ndemo said with a smile. He added that he and the Ministry of Information were already working with the Ministry of Finance on a framework to enable M-PESA and other mobile platforms to assess the credit worthiness of their subscribers and then to make loans to them, hopefully by the end of 2012.  

Kenyans use cell phones for everything from buying groceries to paying rent

An increase in more widely available loans would enable more people in more places throughout Kenya, including rural areas, to start their own small businesses.  If SMS-lending becomes a reality, Kenya will again be in the vanguard of mobile technology.  While M-PESA was the world’s first large-scale SMS money transfer system; today, there are more than 60 such platforms across the world, according to The Economist. 

Ndemo believes microcredit via SMS has the potential to “completely change the livelihood of many [Kenyans] and create wealth where it was never to be found.”

Silicon Savannah
We also discussed another dream of Ndemo’s: building a Silicon Valley in the Savannah. His dream is to build a technology hub for all of Kenya and East Africa, a vision dubbed Konza Technology City.  

Perhaps surprisingly, Ndemo does not want Kenya to compete with India for outsourcing jobs – quite the contrary: “India went outside, we looked inside.” He explained that Kenya decided to take a different tack. “Kenya would outsource to itself and create efficiencies,” for the government and eventually the private sector. 

Ndemo said there were already more than enough young, well-educated Kenyans to work for General Electric or Accenture. But what he believes is missing in Kenya is a place for those companies to work – a place with enough clean water, offices and housing up to United States’ standards and a density of technology companies to make it worth individual companies moving to the 5,000-acre planned site.

Even though Konza City has not broken ground – Ndemo hopes to begin building this year. Kenya’s technology sector is growing by 20 percent a year, outstripping the rest of the nation’s industries.  Already, more than 3,000 people – predominately Kenyans – work in Nairobi’s iHub technological center, according to The Financial Times.  Ndemo said the government is partnering with multinationals like Nokia and Samsung to do research in Kenya on next generation mobile platforms.

Using technology to create greater transparency
Ndemo offered two big examples of how greater technology efficiency could help transform Kenya.  The first example was tax collection – currently, Kenya collects less than 30 percent of potential tax revenue. If Kenya could get to 50 percent of tax revenue, “We may not need aid from any other country, including the United States,” he said.  

The second was around government procurement. Ndemo freely acknowledged corruption is still a big problem in Kenya – and often manifests itself in government procurement. 

He gave an example of a pen that might cost $2 in a store in Nairobi, but that the government would pay $20. (It reminded me of the 2011 audit that found $16 muffins at a U.S. Justice Department conference).  Ndemo believes an electronic platform on which contractors have to submit open bids will minimize corruption by making it more difficult for government employees to game the system and easier for the public to hold the government accountable.

One of the major catalysts for the technology sector is the Kenyan government’s demand to support its own transparency initiatives. Ndemo and the Kenya government have already embraced transparency in a way few governments have –in Africa or anywhere in the world.  KENYA Open Data  is the government’s online open government portal. 

Initiated only a year ago, in July 2011, the Kenyan government has now put hundreds of different data sets online – including everything from health and education statistics by county.  The government has also created and now supports dozens of applications to help users navigate the data.  One application allows users to track budget expenditure by individual members of parliament at the county levels.  Users can view the data in different, user-friendly formats including charts and graphs, as well as in English or Swahili.  The government also solicits, on an on-going basis, requests for data and applications that Kenyan citizens or the media want to access or utilize to make raw data more useful. 

I confess I felt a twinge of jealousy – the United States’ Data.gov site has hundreds of thousands of data sets compared to Kenya’s hundreds – but there is not the same technological collaboration between government and citizens. The U.S. government doesn’t ask people to create apps that it may then put online for all to use.

Ndemo believes this type of online citizen engagement and widespread Internet use is “critical” to ensure that Kenya’s next general election in 2013 does not spark a repeat of the 2007-2008 election violence. In the aftermath of the widely-disputed 2007 elections, hundreds of Kenyans were killed and thousands displaced because of violent clashes between different tribes and political parties. 

But Ndemo is confident 2013 would be different because of Kenya’s new constitution and hate speech regulations Kenya adopted in the interim. Ultimately he believes, “Kenyans themselves do not want to go there.”   Only time will tell whether his optimism is well-founded.

Looking to leapfrog ahead
Looking beyond 2013, Ndemo sees Kenya taking its place among the world’s emerging economies, and he believes technology is key to helping Kenya leapfrog its way there in the next decade. 

When I asked him what challenges technology and open data do not solve, he said good governance. He believes ultimately people running for office and holding office “have to have integrity.”

When I talked to different people in Kenya about Ndemo, not everyone had heard of him, but those who had viewed him as someone who had just that – integrity. 

When I asked Ndemo about his future, he said he’s likely “done with government” after the next election and that he couldn’t see himself ever running for office. 

Instead, he says, in 2013 he’ll return to his life as an academic and advocate. He said he has “many opportunities to play a big role in [Kenya], but not as a politician.” 

That may be the right answer for Ndemo but it may be a pity for Kenya. It is often impatient visionaries who do the leapfrogging Ndemo sees in his country’s potential future.

Chelsea Clinton is an NBC News Special Correspondent. She was recently on assignment in Kenya. See another recent story from her: 'Building Tomorrow' - one school at a time

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