The United States wants China to pack up its hackers, China wants U.S. support for its flagging economic growth, and Chinese President Xi Jinping will visit Washington on Friday. Any deal announced this week for stopping Internet espionage would make the data of multinationals safer and lower the costs of trying to keep it confidential.
But China relies on Internet espionage to know what its old Cold War enemy is up to via companies that are close to the U.S. government, analysts fear.
So whatever agreement emerges this week would prove to be a token, short-term one. When it wears off, nervous American companies must push Beijing again for longer-term pledges as they fret over data leaks and spend more on protection -- a boon for vendors of security software.
"Any hypothetical cyber agreement with China will be worthless, as China will feel an obligation to violate it for national security purposes," said Sean King, senior vice president with the consultancy Park Strategies in New York. "State hacking is today's new warfare. It can have physical consequences in terms of comparative economic advantage and military capabilities."
The Chinese president proposed a solution while in Seattle Tuesday, his first stop on a U.S. trip before meeting with his counterpart Barack Obama on Friday. He said then China was "ready to set up a high-level joint-dialogue mechanism with the United States on fighting cybercrimes," according to a report in the state-run China Daily newspaper online.
China denies it's a hacker, calling itself a victim of the crime instead.
Cyber espionage would resume slowly and quietly after any short-term fixes wear off, experts said. That way China might avoid losing U.S. support for reviving Chinese GDP growth, a top point on Xi Jinping's trip agenda.
The Chinese president, joined in the U.S. by several top entrepreneurs, hopes to strengthen economic and trade cooperation, said Pascal Siu, a Hong Kong-based economist with French investment bank Natixis.
U.S. officials may be weighing sanctions against China. On Sept. 10, the U.S. director of National Intelligence said Washington must increase security against Chinese hackers to sever less sophisticated breaches while raising the costs and risks of more complex hits.
"It's like catching an ocean wave with a net," said Danny Levinson, a Beijing-based technology angel investor. "China will always try to benefit by using the latest cyber techniques to help propel its slowing growth."
American companies are exposed to hacking of any data stored in China, where the Internet is already problematic due to censorship and theft of proprietary technology. E-mails may be opened to look for company secrets.
"You talk to executives who visit here and don't bring their normal computers," said Jack Perkowski, managing partner with merchant bank JFP Holdings in Beijing.
This month malicious China-linked software evidently infected Apple's (AAPL - Get Report) App Store, for example, hobbling popular downloads in China such as the WeChat messaging service by Chinese Internet services giant Tencent Holdings (TCTZF) . A U.S. Senate report last year found that hackers linked to China had infiltrated the files of American airlines and high-tech firms.
Continued threats from China will raise interest in protective software and platforms offered by firms such as Cisco Systems (CSCO - Get Report) and Trend Micro (TMICY) , which estimates a "median cybercrime cost of $8.9 million per organization."