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A US panel Wednesday called for tougher action against China, including possible sanctions to stop cyber spying, warning that Beijing has yet to be persuaded to end rampant espionage.
In an annual report to Congress, the US-China Economic and Security Review Commission charged that Beijing "is directing and executing a large-scale cyber espionage campaign" that has penetrated the US government and private industry.
"There is an urgent need for Washington to take action to prompt Beijing to change its approach to cyberspace and deter future Chinese cyber theft," said the commission, which was set up by Congress to make policy recommendations.
The report listed proposals aimed at "changing the cost-benefit calculus" for China including banning the import of the manufacturing giant's goods that are determined to include technologies stolen from the United States.
Other possibilities include restricting access to US banks for companies deemed to have used stolen technologies or banning travel to the United States for people involved in hacking.
The commission did not endorse specific steps but said the potential measures "would be more effective if used in combination."
"They probably would lead Beijing to make only temporary or minor changes to its cyber espionage activities if used in isolation," it said.
The report comes after months of disclosures by former contractor Edward Snowden that US intelligence has engaged in sweeping espionage worldwide, including monitoring online correspondence and tapping the communications of leaders of both friendly and rival countries.
China has cited Snowden's revelations to accuse US President Barack Obama of double standards, saying that Beijing is also a victim of cyber espionage.
The report said the United States and China have maintained dialogue on cybersecurity but quoted observers as estimating that Snowden's disclosures have set back US efforts "by at least six months."
"Frankly, yes, it has hurt the US ability to express concern. There's no question of that," Dennis Shea, the vice chairman of the commission, told reporters.
"But we continue to believe that this is an important issue, and at least I personally believe there is a distinction between what the United States does for security purposes and the whole scale economic espionage that's going on directed against the United States," he said.
In a report released in February, the security firm Mandiant said China was devoting thousands of people to, and has made a major investment in, a military-linked unit that has pilfered intellectual property and government secrets.
The commission said the Chinese unit decreased activity for about one month after the Mandiant report, but that the reduction may have been because the US government shared information with Internet service providers.
Challenging US military dominance
The wide-ranging annual report warned that China, which has steadily ramped up its military budget as its economy soared to the world's second largest, may soon challenge US forces' dominant role in Asia.
People's Liberation Army "modernization is altering the security balance in the Asia-Pacific, challenging decades of US military preeminence in the region," it said.
China is "rapidly expanding and diversifying its ability to strike US bases, ships and aircraft" throughout the region, including areas it could not previously reach, such as the US Pacific territory of Guam, it said.
Quoting the Office of Naval Intelligence, the report said that China by 2020 will likely have 313-342 submarines -- including around 60 that can fire intercontinental ballistic missiles or cruise missiles against ships.
Obama has pledged to "pivot" US foreign policy to pay greater attention to Asia in light of the rise of China, which has increasingly tense relations with US allies Japan and the Philippines over territorial disputes.
The commission called on Congress to fund shipbuilding to meet Obama's goal of stationing 60 percent of US warships in the Asia-Pacific by 2020, up from 50 percent.
The United States has reduced military spending as it seeks to control its debt following two wars and a recession. But the Republican Party, which has pushed Obama for greater cuts to social services, generally supports military funding.
US panel urges punishment for China cyber spying
