Vice President Says China Cyber Theft Must Stop

Vice President Joe Biden said Wednesday that China’s rise is good for the U.S. and the world but its theft of U.S intellectual property must stop, as the two global powers began annual talks to build cooperation and hash out their deep-seated differences.

The Strategic and Economic Dialogue is taking place a month after the U.S. and Chinese presidents held an unconventional summit at a California resort that aimed to set a positive tone in relations but also made plain Washington’s growing anxiety about Chinese cyber theft.

“We both will benefit from an open, secure, reliable Internet. Outright cyber-enabling theft that U.S. companies are experiencing now must be viewed as out of bounds and needs to stop,” Biden said in his opening remarks at the State Department.

Heavyweight delegations from the two sides will also discuss barriers to U.S. trade and investment in China, the nuclear program of China’s ally North Korea, and a host of other strategic issues, including Iran and Syria’s civil war. The first rounds of talks Wednesday focused on climate change and energy security.

Secretary of State John Kerry returned for the start of the dialogue from his wife’s bedside in Boston, and issued tearful thanks for the outpouring of good wishes for his wife who remains hospitalized. He will return to Boston later Wednesday and will be replaced in the talks by his deputy William Burns, said State Department spokeswoman Jen Psaki.

The Chinese side in the talks is led by Vice Premier Wang Yang and State Councilor Yang Jiechi, who declared U.S.-China relations had “reached a new starting point” after the June summit of new Chinese President Xi Jinping and President Barack Obama.

“China will stay committed to reform and opening up,” Yang Jiechi said, adding that his nation was also committed to being a responsible player in the international system.

But he made only passing reference to cybersecurity as one of the “global challenges” that the U.S. and China should work together on. On other thorny topics, he said China was ready to discuss human rights with the U.S. and develop military relations that Biden stressed were important for avoiding the risk of confrontation between them in the Pacific.

Beijing has often bristled at Washington’s criticism of its suppression of ethnic minorities and political dissent, and has also been reluctant to deepen military ties.

Despite that reticence, civilian and military officials Tuesday talked about maritime security, cybersecurity, nuclear policy and missile defense, and agreed to hold more talks later in the year, Psaki said.

The strategic rivalry between the U.S. and China belies deep economic interdependence between them and common interest in avoiding armed conflict. The upbeat tone of the Obama and Xi summit went some way to ease mutual suspicion, but it was short on concrete outcomes.

Xi did express common cause with Obama in his opposition to North Korea’s nuclear weapons program but that has yet to translate into effective pressure on Pyongyang. Biden said Wednesday the U.S. intends intensify cooperation with China “to denuclearize North Korea.”

Another longtime Washington concern in its relations with China – the low value of China’s currency and its impact on the skewed trade balance – has eased as the yuan has appreciated in value against the dollar. But the U.S. is still prodding Beijing to expedite economic reforms.

Biden said China needs to free its exchange rate, shift to a consumption-led economy instead of relying on exports, and enforce intellectual property rights. He said the U.S. welcomes China’s growth, but it should be based on international rules.

Treasury Secretary Jacob Lew also urged China to “follow through decisively” on its economic reform commitments, saying it will be critical to China’s success and consequential for the wider world.

U.S. businesses and lawmakers want easing of barriers to American trade and investment, a roll back of subsidies for Chinese state-owned enterprises and progress on negotiations for a bilateral investment treaty.

The Center for Strategic International Studies think tank said the Chinese side will have little room to maneuver as the dialogue comes ahead of a meeting in October of the ruling party’s central committee, where Xi’s economic reform plans will be rolled out. Still, Beijing will likely want to show some incremental progress on Washington’s concerns.

For its part, China objects to security screening of its companies as they look to invest in the U.S.

In Congress Wednesday, a Senate agriculture committee was examining China’s biggest takeover of a U.S. company – a proposed $4.7 billion bid by Shuanghui International for pork producer American Smithfield Foods Ltd. A bipartisan group of 15 senators have urged Lew to consider U.S. food security and food safety issues when the deal undergoes a national security review. That could fuel China’s suspicions that its companies are subject to tougher scrutiny than other foreign investors in America.

There was no mention at the dialogue’s opening of National Security Agency leaker Edward Snowden, whom the U.S. had wanted extradited from the semiautonomous Chinese territory of Hong Kong before he flew to Russia.

U.S. officials have said that China’s failure to cooperate was damaging to its relationship with the U.S. but the case is not expected to overshadow the talks. Washington has been put on the defensive by Snowden’s claims that the U.S. hacked targets in China, including the nation’s cellphone companies and two universities.