Hank Paulson: Obama must help protect us from Chinese hackers

Fortune’s Andy Serwer (left) and former Treasury Secretary Hank Paulson

FORTUNE — It’s on all of us, in addition to the Chinese government, to stop the scourge of Chinese hacking. That was the message former Treasury Secretary Hank Paulson delivered Tuesday evening in a talk with Fortune managing editor Andy Serwer.

Paulson — now a distinguished senior fellow at the University of Chicago, where he’s established the Paulson Institute to focus on Sino-US relations — said American elected and business leadership needs to do a better job of policing the Chinese cyber menace.

“The Obama administration clearly has a responsibility to help our companies protect their intellectual property and trade secrets,” he said. “We need, I think, stronger laws; we need to be able to enforce the laws. Businesses need to do a much better job of hardening their computer systems so they’re not as vulnerable, and I think they need to do a better job of reporting attacks immediately.”

The attacks are vexing the Obama administration, which has struggled with how directly to pin responsibility on the Chinese government, though the White House in recent weeks has edged closer to calling out state-sponsorship.

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Paulson for his part sidestepped a question from Serwer about the regime’s role. “I think all governments engage in intelligence gathering vis-a-vis other governments,” he said, though he acknowledged the attacks are a “major area of tension with China and rightfully so. We desperately need some international protocols for enforcing this and need to find common ground with China on these things.” Reaching such accords should be possible, he said, considering the “Chinese have the same strong interest that we do in preserving the global economic system and not having it collapse because we can’t agree on rules to preserve our economic stability.”

In a brief backstage interview before Paulson took the stage at George Washington University’s Jack Morton Auditorium, he said Chinese wealth is fleeing the country in part due to frustration at the pace of economic reform. “I also think that there’s a certain frustration from those who have achieved a fair amount of success with the environmental issues — the living conditions, food security, air, water — and so some of them are looking to locate their families outside the country,” he said.

It’s too early to judge how new Chinese leader Xi Jinping will tackle those challenges, Paulson said, but the first signs are encouraging. “One of the very first things they can do to make a real difference, and they’re ready to do, is financial market reform,” he said. “It’s hard for me to imagine they’re going to have a competitive, efficient capital market if they don’t up to foreign competition. I’m optimistic that they will, but that will be something I’ll watch very closely.”

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