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US accuses China of cyber espionage
Kesha West reports on the so-called 'cyber cold war' looming between the United States and China.

It's being called a cyber cold war, undeclared hostilities in the digital world between China and the United States.

US intelligence agencies claim Beijing is behind a sustained cyber espionage campaign, an allegation China strenuously denies.

In a report leaked to The Washington Post the agencies say Beijing is aggressively targeting American businesses and institutions.

It's also been revealed that in an echo of the old Cold War, the United States president has the authority to order a pre-emptive strike to prevent future cyber attacks.

Kesha West reports.
ROBERT HILLARD, LEAD PARTNER, DELOITTE CONSULTING TECHNOLOGY: The idea that a system can be hack-proof is ludicrous. The reality is all of our systems are like our credit card numbers. They have the potential to be compromised.

KESHA WEST, REPORTER: Reports of cyber crime and cyber attacks are rising year on year. The targets: banks, businesses, power grids and other infrastructure, as well as global organisations like the United Nations and the International Olympic Committee.

Globally the cost to business is thought to be about $380 billion a year.

ROBERT HILLARD: Every single country around the world is thinking about what happens when more and more of my economy is happening through digital channels and hence becomes a richer target and I can be more disrupted.

KESHA WEST: But it's the potential theft of intelligence and economic and military secrets that has forced governments and organisations worldwide to make cyber security a top priority.

And when there has been cyber attacks it's prompted some serious finger pointing.

The Chinese government has been blamed, for example, for a string of attacks over the past four months on major American media outlets, including the New York Times, The Washington Post and Bloomberg.

It's a charge Beijing denies.

TOBIAS FEAKIN, AUSTRALIAN STRATEGIC POLICY INSTITUTE: We're reaching this point of stand-off. We have accusations and counteraccusations being thrown around and various countries claiming to be victims of offensive attacks, be it Australia, China, US, you know, whoever. And we're getting to this point actually where there is an international stand-off.

KESHA WEST: The United States is describing it as cold cyber war; old enemies once again a potential threat.

In a speech to the New York business community late last year outgoing US defence secretary, Leon Panetta, warned attackers are plotting, an apparent reference to the growing capabilities of Russia, China and Iran. And he predicted a cyber version of Pearl Harbour might soon take the United States by surprise.

LEON PANETTA, OUTGOING US DEFENCE SECRETARY (October 2012): Greater danger facing us in cyber space goes beyond crime and it goes beyond harassment. A cyber attack perpetrated by nation states or violent extremist groups could be as destructive as the terrorist attack on 9/11.

Such a destructive cyber terrorist attack could virtually paralyse the nation.

TOBIAS FEAKIN: If you look at the way that the US is turning right now, there's a great deal of focus on cyber security, be it in the defence sector or the intelligence sector. Also in the UK as well, cyber security has been prioritised quite heavily. So I think it's part of a global trend that you're seeing.

KESHA WEST: Australia too is taking cyber warfare seriously. But national security analyst Tobias Feakin warns Canberra needs to do a lot more and quickly.

TOBIAS FEAKIN: Gillard is becoming more and more aware of the threat of cyber attack internally and, if you like, the lack of sensible policy to shape a whole of government approach to cyber security, be it cyber defence or, you know, indeed cyber operations, offensive operations.

KESHA WEST: Governments around the world are also rushing to firm up partnerships with those countries they do trust. Last month Britain and New Zealand signed an agreement boosting their intelligence sharing in a bid to fight cyber crime.

WILLIAM HAGUE, BRITISH FOREIGN SECRETARY: New Zealand and the United Kingdom have a long history of cooperation on defence and security policy based on our shared values and cyber space is one of the greatest national global and strategic challenges now of our time.

KESHA WEST: Global professional services firm Deloitte says it's crucial for governments and businesses to make cyber security the highest priority, but warns the threat shouldn't be overstated.

Launching Deloitte's technology trends report for this year, Robert Hillard said the best way to lower the risk of being hacked is to simplify our computer systems.

ROBERT HILLARD: If you have a house with 20 doors you're far more likely to forget to lock one of those doors. If you've got a house with a front door and a back door you've got a better chance of being able to remember to lock both doors.

Now what's happened is that as governments and business have built up their systems, they've had a need to go inside and outside. And rather than use a door that's already in existence, they've built a new door. They've built a new website, they've built a new system.

KESHA WEST: Still, with the US estimating that thousands of cyber attacks strike US companies and government institutions every day, it appears convinced the threat is real and its preparation warranted.

In the past week US media reports have said that the US is secretly claiming the right to launch pre-emptive cyber attacks, incredible threat scenarios.

TOBIAS FEAKIN: Clearly these rules of engagement, if you like, are very highly classified. So our understanding is that these rules have been developed over the past two years and it gives guidelines to when the military should be appropriated as the lead agency to respond. But also it gives guidelines to the intelligence agencies as to when, how and in what circumstances they can investigate foreign networks to appropriate sourcing of some kind of attack.

KESHA WEST: Tobias Feakin says he expects to see other nations follow suit and come out with these kinds of policies as well. America's defence chief says nations have no choice but to act aggressively to defend themselves against what is already a global cyber war.

LEON PANETTA: Potential aggressors are exploiting vulnerabilities in our security. But the good news is this. We are aware of this potential. Our eyes are wide open.
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