This report considers how hacking, cyber-espionage, and the threat of cyberwarfare affect U.S.-Chinese relations. Americans hear more about Chinese threats to the United States than vice versa, but it is likely that U.S. private and government actors are probing China’s Internet as much or more than the Chinese are probing that of the United States. And in cyberspace, the advantage goes to the offense. On key issues relating to the Internet, Chinese and U.S. interests are fundamentally opposed. The United States favors information freedom, whereas China’s regime relies on control. The U.S. military operates on cybernetworks, whereas the Chinese quest for asymmetric strategies requires the capability to take such networks down. Even dialogue, which Lieberthal and Singer advocate as a first step in a long march, will be a challenge, given the diffusion of control over the Internet within each society. Moreover, one wonders whether even two such important powers can do much to enhance cyber-security when potential attackers are globally dispersed and often private.