A US government report submitted to congress earlier this week has accused China of hijacking internet traffic, and detailed concerns over the potential for the Chinese government to manipulate or control internet content. The report cites two incidents from earlier in 2010, where China re-routed up to 15-percent of internet traffic over an 18 minute period, as well as blocking popular social networking sites for its own citizens with the apparently accidental side-effect of blocking users in the US and Chile. In response, the Chinese government has issued a strong denial, claiming "the spokesman of China Telecom Corporation Ltd. denied any hijack of Internet traffic."
Of the two incidents, it's the the re-routing that appears to have US security experts most concerned. While it's unknown whether any use of the data - which included traffic from US government and military networks - was made, the experts reckon China could have used the access to "enable surveillance of specific users or sites, disrupt transactions, prevent a user from establishing connections to specific sites or divert them to other spoofed sites."
"Although China is by no means alone in this regard, persistent reports of that nation's use of malicious computer activities raise questions about whether China might seek intentionally to leverage these abilities to assert some level of control over the Internet, even for a brief period" U.S.-China Economic and Security Review Commission
Part of the problem is that the incidents could either be down to ineptitude or intentional security exploits, and there's no way to know whether China purposefully manipulated servers or merely botched them. China's Foreign Ministry spokesperson, Hong Lei, declined to comment any further on the allegations, saying only that the "relevant company has already made a response on that matter."