U.S. Congress urged to consider sanctions on Chinese cyber-spies

WASHINGTON (Reuters) - U.S. lawmakers should look into options for punishing cyber-spying and the theft of trade secrets from U.S. companies, a congressional advisory committee on China said on Thursday.

Congress should ask U.S. trade officials to report on whether they had power to sanction companies that benefited from stealing trade secrets, the U.S.-China Economic and Security Review Commission said in its annual report to Congress.

"If authorities do not exist, they should provide a proposal to address such problems," said the commission, a bipartisan advisory body that monitors economic and security relations between the United States and China.

The United States accused five Chinese military officers in May of hacking into American companies to steal trade secrets.

Prosecutors said the suspects targeted companies including Alcoa Inc, Allegheny Technologies Inc, United States Steel Corp, Toshiba Corp unit Westinghouse Electric Co and the U.S. arm of solar manufacturer SolarWorld AG, some of which had filed unfair trade claims against Chinese rivals.

The leaders of the commission said hacking from China was continuing. "It remains unabated," commission Chairman William Shea told a news conference previewing the massive report.

There were actions companies could take, like setting up fake information accounts to divert hackers' attention, he said, but for most the benefits of doing business in China outweighed the cost of hacking.

The report said Chinese companies benefited from a host of unfair trade practices, including subsidies and limits on foreign investment, that violated at least the spirit of Beijing's World Trade Organization commitments and contributed indirectly to a loss of U.S. manufacturing jobs.

The commission also pointed out a worrying increase in U.S. imports of pharmaceuticals and pharmaceutical ingredients from China, given the prevalence of "fake and substandard" drugs.

Although the U.S. Food and Drug Administration was expanding its team of China-based drug inspectors, slow action on visa applications meant there were currently only two full-time and one-part-time FDA inspectors for China’s entire drug industry, commission Vice Chairman Bill Reinsch said.

(Reporting by Krista Hughes and Patricia Zengerle; Editing by Lisa Von Ahn)