The chamber highlighted complaints about efforts to nurture Chinas computer and other technology companies - a policy dubbed “indigenous innovation” - by favoring them in government procurement and other areas.

American companies are “troubled by a mounting number of policy challenges ranging from the inconsistent enforcement of laws, to Chinas discriminatory domestic innovation policies and regulations that limit market access into sectors that had been increasingly open to foreign investment for the past 30 years,” the group said in an annual report on business conditions.

The report said a survey of 388 companies found for the first time that inconsistent regulation has become the most significant challenge faced by American companies in China. Previously they cited trouble finding enough Chinese managers as their biggest problem.

“These policies appear to be diminishing the ability of foreign companies to access the Chinese domestic market,” chamber chairman John D. Watkins said in a statement. The chamber represents 1,200 companies.

The report comes amid a series of incidents that have rattled foreign businesses, including Google Inc.s dispute with Beijing over censorship and the trial of four Rio Tinto Ltd. employees on commercial spying charges.

A deputy Chinese commerce minister, Chen Jian, said Friday that government policies on attracting foreign investment remain unchanged but economic activities should be based on laws.

“All companies that comply with Chinese laws will have great development,” Chen said.

The Chamber of Commerce report emphasized concern about “indigenous innovation,” which many businesspeople say is the biggest obstacle right now for foreign companies in industries from computers to factory equipment.

The chamber said 28 percent of companies surveyed said they already are losing business due to “indigenous innovation” and 40 percent expect to be hurt once the policies are fully implemented.

Beijing caused alarm among foreign companies with a November announcement that it would favor technology developed in China when buying computers and other goods on which the government spends billions of dollars each year. The government is the biggest customer for many types of computer and other technology, and companies worry the restrictions might be extended to state-owned companies as well.

The government has spent a decade promoting “indigenous innovation” and is using increasingly intrusive policies to try to protect and support Chinese developers.

The survey found 74 percent of companies this year found Chinas enforcement of intellectual property rights ineffective.

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On the Net:

American Chamber of Commerce in China: http://www.amchamchina.org

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For Iraqi Prime Minister Nouri al-Maliki, the executives and their investments are a vital part of his bid to win a second term in March 7 elections. Al-Maliki has billed himself to voters as the leader that can ensure the development of Iraqs dilapidated oil sector and bring in billions of dollars to rebuild the countrys struggling economy.

Al-Malikis promises could take years to fulfill and many experts see his predictions for increasing oil output as wildly optimistic. But what matters for the premier is persuading voters to keep him in his post to shepherd the process.

“Al-Maliki can present himself as a guarantor to these plans … whether they are going to meet their huge targets or not,” Mideast oil analyst Samuel Ciszuk of the London-based IHS Global Insight said.

Iraq sits atop 115 billion barrels of crude, the worlds third largest proven reserves of conventional crude oil. But current production of about 2.4 million barrels per day remains well below levels before the 2003 U.S.-led invasion that toppled Saddam Hussein.

Al-Malikis government has vowed, based on developers promises, to raise output to more than 12 million barrels a day within six to seven years. The production increase would translate into hundreds of billions of dollars in sorely needed revenue for a government that relies on crude sales for 95 percent of its revenues.

Iraqi officials hailed the multibillion dollar deals as the dawn of a new day in the oil sector after two international auctions since June secured commitments from international firms to develop 10 oil fields. The government plans to develop 11 others left over from the two biddings on its own.

But meeting the governments timetable will be difficult. After decades of neglect because of years of war and Saddam-era sanctions, infrastructure is poor. Also, continuing violence in the country means security costs to keep workers safe as the U.S. looks to withdraw all its troops from the country by 2011.

“Bottlenecks are everywhere and it is going to be very tall order,” Ciszuk said. “Its going to be very, very tough to do.”

The southern city and province of Basra - home to 70 percent of Iraqs daily oil output and its only Persian Gulf outlet - is a key litmus test for al-Maliki. Five of the fields awarded in the auctions are located near the city, and representatives from 11 oil companies have been visiting since early this month to meet with oil officials and tour the fields.

Yet Basra, Iraqs second largest city with 3 million residents and a Shiite stronghold crucial for al-Malikis Shiite-led government, looks like a city that fortune overlooked.

Its dust-covered streets are strewn with mounds of garbage around which some of its poorest residents compete with sheep and goats for discarded food. Streets are packed with cars jostling for space with donkey carts and, in a few neighborhoods, residents still endure water and electricity shortages.

But his stature in Basra has been hurt by the continued lack of basic services and the faltering fight against corruption - as well as continued militant attacks in Baghdad.

“During the last elections, they promised to change everything, but they didnt honor their word and instead they focused first on lining their pockets, then those of their aides,” said Jassim Riadh Mohammed, a 43-year-old supermarket owner. Mohammed wont be voting for al-Maliki.

Al-Maliki also faces sharp competition in the south from rival Shiite parties, some of which harshly criticized his oil deals. The Sadrist party, loyal to radical cleric Muqtada al-Sadr, Fadhila Party and nationalist Iraqis, accused him of surrendering the nations oil wealth to international companies.

Al-Maliki is hoping the promise from Basras giant oil fields will be enough to win over voters. But years of neglect weigh heavily on that possibility.

About 60 kilometers (38 miles) northwest of Basra, roaring flames billow from Rumaila, Iraqs biggest oil field. The flames are the result of the burning of natural gas that is extracted along with the crude - a reminder that Iraq desperately needs foreign help even in capturing and selling the gas instead of burning it off.

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The Journal reported on its Web site that the deal could be worth about $30 billion.

AIG has said it plans to sell the unit, American International Assurance Co., or spin it off into a separate company through an initial public offering, part of an effort to pay off the debt it owes to the U.S. government.

Messages left with AIG and Prudential seeking comment Saturday were not immediately returned.

AIG said Friday it lost $8.87 billion in the fourth quarter as its general insurance business remained weak. It also warned it may need additional support from the government. However, AIG has included such warnings in past filings with the Securities and Exchange Commission.

AIG was bailed out in September 2008 by the government as the financial crisis spiraled out of control. The insurer has received aid packages with a total value of $182.5 billion from the government. In return for that financial support, the government received an 80 percent stake in AIG.

AIG reported $6.2 billion in expenses from repaying government loans in the fourth quarter.

Prudential PLC is not connected to Prudential Financial Inc., based in Newark, N.J.

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The policy is known as “high road” contracting and could draw the Obama administration into a larger debate over whether the government should use public purse strings to strengthen the middle class and promote higher labor standards.

Advocates of the plan include unions. They say too many jobs financed by government contracts come with low wages and limited benefits and support companies that violate employment laws.

The Economic Policy Institute, a liberal think tank, estimates that nearly 20 percent of the 2 million federal contract workers in the U.S. earn less than the poverty threshold wage of $9.91 per hour. As many as 22 million workers are employed by federal contractors.

Documents obtained by The Associated Press show the plan under consideration would examine the wages and benefits - such as health insurance, retirement benefits and paid leave - a company pays its employees as a factor in the contract award process.

Another factor would be whether a contract bidder is a repeat violator of labor and employment laws. Businesses with legal violations are already supposed to be restricted under current contracting rules, but the new policy would create a better system for tracking those companies.

A Labor Department compliance office would compile a score on contract bidders based on the new criteria.

The White Houses consideration of the new policy was first reported earlier this month on the political Web site Daily Caller.

Earlier this month, a group of four Republican senators led by Sen. Susan Collins of Maine wrote a letter to Budget Director Peter Orszag arguing that imposing such a policy could increase the cost of federal contracting and hurt small businesses.

“These small businesses could choose not to compete for federal contracts, undermining the diversity of the federal contracting base and lessening competitive pressure on larger federal contractors,” the lawmakers wrote.

The U.S Chamber of Commerce goes further, calling the policy a payback to labor unions. Unionized companies that already pay workers higher average wages and offer better health and retirement benefits would be in a better position to compete with nonunion contractors.

“This is an attempt by the unions to force their policy agenda on a wide swath of the economy by rigging the government procurement process,” said Glenn Spencer, executive director of the Chambers Workforce Freedom Initiative.

Madland said raising labor standards and wages also saves taxpayers from hidden costs when employers pay so little that their workers rely on publicly funded health insurance and other safety net programs.

In 2007, Maryland became the first state to adopt a living wage law that requires state contractors to pay a minimum salary to workers. More than 100 other cities and counties have adopted similar mandates. By contrast, the federal “high road” policy would not require the government to prefer companies with higher wages - it would be one factor among other criteria.

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The governors of four states with Toyota plants wrote to House lawmakers to complain about the federal governments “disturbing statements and hasty actions.”

For some critics, U.S. scrutiny of Toyota Motor Corp.s handling of vehicle defects is motivated by more than safety concerns. They say the government may be beating up on Toyota partly because of the federal stakes in GM and Chrysler.

“Heres another reason you dont want the government in the car business,” Indiana Republican Mitch Daniels, one of the governors who signed the protesting letter, said in an interview. “It sure has given every impression of the government discriminating against its direct competitor.”

The U.S. owns 61 percent of Detroit-based GM, the biggest U.S. car company, after bailing out the automaker with $49.9 billion in aid. Auburn Hills, Michigan-based Chrysler received $14.3 billion, giving the U.S. a 10 percent stake.

The National Highway Traffic Safety Administration, part of the Transportation Department, is investigating reports of unintended acceleration and brake problems in Toyota cars and trucks that have caused the recall of more than 8 million vehicles on five continents.

The carmakers shares fell 0.5 percent to 3,325 yen in Tokyo trading today.

Three Hearings

The Toyota probe takes center stage in Washington today, with the first of three scheduled congressional hearings. The House Energy and Commerce Committee, headed by California Democrat Henry Waxman, holds todays session. LaHood and Jim Lentz, Toyotas U.S. sales unit president, are among the scheduled witnesses.

Akio Toyoda, president of Toyota City, Japan-based Toyota, which last year passed GM as the worlds biggest automaker, is due to testify tomorrow before a separate House committee. A Senate panel will have a hearing on March 2.

Critics may be justified in wondering about the politics behind the controversy, said Chester Spatt, a finance professor at Carnegie Mellon University in Pittsburgh and a former chief economist for the Securities and Exchange Commission.

Administration officials dismiss the notion that the governments stakes in GM and Chrysler are influencing the investigation.

Safety Only

“We take auto safety very seriously and base all decisions for investigations on the merits of the data regardless of who manufactures the vehicle,” LaHood spokeswoman Olivia Alair said in an e-mail responding to the conflict-of-interest suggestions. Of the agencys 44 open investigations, 39 involve automakers other than Toyota, she said.

Bill Burton, the White House deputy press secretary, and Meg Reilly, a spokeswoman for the Treasury Department officials who oversee the GM and Chrysler stakes, also said the ownership issue plays no role in the investigation.

The U.S. can juggle its interests, particularly considering that the GM and Chrysler stakes dont give it the kind of economic motivations that a private owner would have, said Julian Zelizer, a Princeton University professor of history and public affairs in Princeton, New Jersey.

The government “took over GM not simply as a business venture, but to shore up the economy,” Zelizer said. “A lot of Toyota is in the U.S. now. They want Toyota to be healthy as well.”

Witch Hunting

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A winter shortage has sent authorities scrambling to find a solution and has once again fueled criticism that the government of this key Mideast U.S. ally is unable to deal with the problems of its people. For many, it raises memories of acute shortages of cheap subsidized bread in 2008 that raised similar frustration and anger.

“Every year this butane crisis gets a little worse, so why doesnt the government take a stand and provide for its people,” said Mahmoud al-Askalani, a spokesman with the consumer group Citizens Against the High Cost of Living.

In Cairos low-income neighborhood of Bashteel this week, women helped each other balance the empty 3-gallon (12-liter) cylinders on their heads as young boys pushed bicycles laden with cylinders to a government distribution center, where they are supposed to get them refilled or exchange them for new ones at a subsidized price.

Hundreds of men and women lined up for hours into the night waiting for fuel tanks and trucks carrying cylinders to arrive. “All the women here have walked here to sit for hours hoping that a truck of butane will show up today,” said one woman, Um Ahmad, sitting on her empty ambooba as she waited in line for two hours at Bashteel.

When the trucks did arrive, people swarmed over them, elbowing their way to grab a cylinder before they all disappeared.

In the past two weeks, local papers reported clashes between frustrated consumers armed with switchblades. Police say two people were killed last week, crushed as they clung to a moving truck loaded with cylinders. On a radio show, a young boy called in saying all he hoped for was for his family to get an ambooba so his mother could cook dinner - prompting the host to mourn, “Is this what Egyptians hopes are reduced to, gas to cook with?”

The troubles fuel what has been a frequent public refrain in recent years - that the government, headed for the past 29 years by President Hosni Mubarak, has grown out of touch with the population as the influence of powerful businessmen has grown. More than 40 percent of Egypts population of 80 million lives on less than $2 a day.

At the same time, the government is burdened with a rickety, decades-old system of subsidies and other benefits meant to provide cheap basics of food and supplies for the poor. The system is riddled with inefficiency and disorganization, as well as corruption and black markets.

“The crisis of the gas cylinders embodies the governments failure to draw up a realistic plan to resolve the problems in Egypt,” wrote Mohammad Shordi in the daily al-Wafd newspaper. “It is a simple matter of supply and demand, and the government should simply close the gap between the two.”

The cause of the shortage remains unclear.

According to a study performed by al-Askalanis group, demand for butane only increased by 8 percent this winter, which he said shouldnt have caused such stark shortages in poor neighborhoods in Cairo, where some were left without butane cylinders for weeks. The study found that government delays in paying for imported butane caused a delay in shipments sent to Egypt.

The government has ordered four more distribution stations set up to handle the spike in demand, and while residents of some areas closer to downtown Cairo claimed the crisis was slightly lifting, others are still waiting in lines for as long as eight hours in many suburbs of the city.

The shortages at distribution centers, where a cylinder costs the equivalent of about 50 cents, has forced many people to resort to the black market, where the price soars to nearly $12.

Even though Egypt produces close to 48 billion cubic meters of natural gas a year, it lacks the refineries to process the gas into usable butane. For this, Egypt must import 2 million tons of butane at a cost of $3 billion from countries like Algeria and Saudi Arabia.

For many Egyptians the current gas shortage smells similar to 2008s subsidized bread crisis in which at least seven people died in clashes while waiting in bread lines. It got so bad, Mubarak ordered the army to increase the production and distribution of subsidized bread to cope with the shortages. The army and the Interior Ministry, which controls the police, own bakeries that they normally use to feed their own employees.

“We dealt with the bread crisis by eating rice and pasta,” Badreya Hamdy, a woman from the Cairo slum of Kit Kat, told local media. “But what should we use to make up for this kind of shortage?”

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On Monday, Transportation Department spokeswoman Olivia Alair said NHTSA is quickly gathering information to help guide the governments examination of sudden acceleration, the Prius braking system and other safety issues.

Toyota Motor Corp. has recalled 8.5 million vehicles globally during the past four months because of problems with gas pedals, floor mats and brakes, threatening the safety and quality reputation of the worlds No. 1 automaker. The government typically receives a surge in complaints following a recall. None has yet been verified.

The new complaints reflect the heightened awareness of the massive recalls among the public and underscore a flurry of lawsuits on behalf of drivers alleging deaths and injuries in Toyota crashes. Three congressional hearings are planned on the Toyota recalls.

In the past three weeks, consumers have told the government about nine crashes involving 13 alleged deaths between 2005 and 2010 due to accelerator problems, according to a NHTSA database. The latest reports are in addition to previous complaints from consumers that alleged 21 deaths from 2000 to the end of last year.

The database also shows that new complaints skyrocketed over the 2010 Prius gas-electric hybrid, which was recalled last week to replace braking software.

When NHTSA opened its investigation of Prius on Feb. 3, the government had received 124 consumer complaints. Through Feb. 11, the government had a total of 1,120 complaints alleging 34 crashes, six injuries and no deaths.

The government has renewed an investigation into potential electromagnetic problems in vehicles built by Toyota and other manufacturers. Consumer groups have pointed to potential electrical problems while the company has said recalls to fix sticking gas pedals or accelerators that can become jammed will address the problem.

Toyota spokeswoman Martha Voss said the company takes “all customer reports seriously and will, of course, look into new claims.” Toyota was taking steps to improve quality control and investigate customer complaints more aggressively, Voss said.

Testing by Toyota, NHTSA and Exponent, an outside consulting firm hired by Toyota, has found no evidence of problems with Toyotas electronics, said Toyota Vice President Bob Carter at the National Automobile Dealers Association convention in Orlando, Fla.

“There is no problem with the electronic throttle system in Toyotas,” Carter said Monday. “Theres not anything that can even remotely lead you in that direction.” Carter said Exponent was told to tear the components apart to try to find anything wrong and initial tests could find nothing.

Carter said Toyota has repaired about 500,000 of the 2.3 million vehicles recalled over a potentially sticky gas pedal.

In 2009, Toyota received the most complaints that year - a total of 130 for Toyota, Lexus and Scion vehicles. Ford and its Mercury brand received the second-highest with 14, followed by General Motors and Honda vehicles with 9.

Among Toyota vehicles in the 2009 model year, the Camry led the list of models with 52 complaints, followed by Corolla (17), Tacoma (16) and Prius (13). The AP found eight of the top 10 vehicles with complaints over vehicle speed control were manufactured by Toyota.

In the 2008 model year, Toyota vehicles received 176 complaints of vehicle speed control, followed by Ford with 44 and Chrysler with 25. In that year, Prius had 31 complaints, followed by Tacoma with 28 and Camry with 25.

Since Jan. 27, NHTSA has processed 686 complaints from consumers about problems related to “vehicle speed control” on cars and trucks manufactured by Toyota, nearly all of them submitted through NHTSAs Web site or by e-mail.

Regarding the AP analysis, Alair, the Transportation Department spokeswoman, noted that Toyota had a large market share of vehicles in the U.S. but said she could not comment on the AP figures without further analysis.

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North Americas largest insurer is building capital, having sold about C$2.5 billion in stock in November and halving its quarterly dividend last year as it and other insurers such as Sun Life wait for Canadas financial-services regulator to give them guidance on minimum levels of required capital. About 45 percent of Manulifes C$187.5 billion of invested assets were in bonds last quarter, up from 44 percent a year earlier.

“We released a fair amount of capital during the year,” Manulife Chief Executive Officer Donald Guloien said in a phone interview. “The easiest way to deploy it is in very liquid markets. Obviously the Canadian government, the provincials and so on, is a very liquid market to deploy that capital.”

Guloien, 52, said the capital will be deployed in other areas over time. He didnt elaborate.

Yield Spreads

Elsewhere in credit markets, the extra yield investors demand to own Canadas corporate debt instead of government bonds ended Feb. 12 at 123 basis points, unchanged from a week earlier and down from 134 basis points, or 1.34 percentage points, at the end of 2009, according to Bank of America Merrill Lynch indexes. Yields overall rose to 3.795 percent from 3.702 percent a week earlier.

Canadian corporate bonds have lost 0.39 percent this month after gaining 2.37 percent in January, the best month since May 2003, the Merrill Lynch indexes show. Year-to-date, about C$10.1 billion has been raised in the nations corporate bond market, compared with C$4.78 billion in the same period of 2009, according to data compiled by Bloomberg.

Bank of Canada Deputy Governor David Longworth speaks tomorrow in Toronto about the central banks liquidity facilities. The speech will be available on the banks Web site from 12:20 p.m. Ottawa time.

Beating Governments

The nations corporate bonds have outperformed government debt this month, which has lost 0.55 percent amid signs of an improving economy. Canadian manufacturing sales rose in December by 1.9 percent, from a gain of 0.1 percent in November, Statistics Canada is likely to say today, according to the median forecast of 18 economists in a Bloomberg survey.

Yield spreads on Manulife debt widened to 114 basis points on Feb. 12 from 113 basis points at the end of January, according to the Bank of America Merrill Lynch indexes. Sun Life yield spreads narrowed to 121 basis points on Feb. 12, from 122 basis points on Jan. 31. A shrinking spread typically signals greater confidence in a companys ability to meet debt payments.

Manulife and Sun Life, also based in Toronto, told investors last week that the capital-requirement rules may not be made public until the end of the year.

“It will be at least a quarter, and it might not even be until the year” before capital rules are announced by the Office of the Superintendent of Financial Institutions, Sun Life CEO Donald Stewart said in a phone interview.

Sun Life held C$3.1 billion in Canadian federal government bonds at the end of the fourth quarter, up 9.2 percent from a year earlier, according to the companys Feb. 11 filing. Provincial and municipal government bonds in Canada rose 8.6 percent to C$6.87 billion, Canadas third-largest insurer said.

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The collapse of a real estate- and consumer-fueled boom has left Spain with a eurozone high jobless rate of nearly 20 percent, and the government ran up a deficit that in 2009 equaled 11.4 percent of GDP. That is way over the eurozone limit of 3 percent and earned Spain a place as the letter “S” in the inelegant PIGS acronym coined by analysts (the others are Portugal, Ireland, and Greece).

Spanish officials argue they are better off in several respects. National debt as a proportion of GDP - 66 percent this year and peaking at 74 percent in 2012 - is well below the EU average and far under Greeces 113.4 percent for 2009.

It does not have credibility problems like Greece, which is accused of fudging its debt numbers, and its banking system is relatively sound compared with other countries that had to bail their banking systems out.

Still, Spain has tried to spend its way out of recession with costly job-creation and stimulus measures, running up a budget shortfall that has spooked markets and lenders. Spanish sovereign debt has come under pressure, with creditors demanding a steeper interest rate to buy it and rates also rising for insurance against default.

Spains economy is much larger than that of Greece, so its a far bigger problem for the European Union and the euro if markets begin to doubt Spains ability to pay.

If there is an EU country next in line for troubles with financing itself, it is Spain, even if the likelihood of this is low for now, said Javier Diaz-Jimenez, an economist at Madrid-based IESE Business School.

“Spanish public finances are under severe stress. Nobody in their sane mind can deny that,” he said.

Spains Socialist government rejects suggestions that the eurozones fourth-largest economy, which had posted budget surpluses and robust growth as recently as 2007 but has suffered dearly following the collapse of a real estate bubble, has a debt mess similar to Greeces, which has driven down the euro and shaken the European Union.

But Spain did see fit to dispatch a team led by Finance Minister Elena Salgado to London and Paris last week to meet with ratings agencies and investors in an effort to explain Spains deficit-reduction plans and restore its credibility.

And at times the government has looked on the defensive.

Last week it sent Brussels a document that raised the possibility of lowering most Spaniards retirement pensions by changing the way it measures their working life. Amid a furious outcry from unions, hours later the government literally erased that paragraph from the document, saying it was not a firm proposal but rather an accounting simulation.

One of the governments most prominent spokesmen, Infrastructure Minister Jose Blanco, also raised eyebrows by saying that shadowy outside forces are ganging up on Spain. He said: “Spain is the victim of an international conspiracy designed to destroy the countrys economic status and, then, the euro.”

The deficit-cutting blueprint calls for euro50 billion ($70 billion) in budget cuts over the next four years, with the goal of cutting the deficit to the EU limit of 3 percent in 2013.

When Salgado announced it, she left out the deficit numbers for the intervening years, and markets were rattled when days later Spain released projections for them that were about two points higher than they had previously banked on.

There are also concerns that the plan is short on details and not aggressive enough.

Ireland, by comparison, has slashed pay for state workers, cut welfare benefits and imposed new environmental taxes on fuel to try to contain its runway deficit.

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Police in Hubei province arrested three people suspected of running the hacker site known as the Black Hawk Safety Net that disseminated Web site hacking techniques and Trojan software, the China Daily newspaper said. Trojans, which can allow outside access to a computer when implanted, are used by hackers to illegally control computers. The report did not say exactly when the arrests took place.

Black Hawk Safety Net recruited more than 12,000 paying subscribers and collected more than 7 million yuan ($1 million) in membership fees, while another 170,000 people had signed up for free membership, the paper said.

The report said police seized nine servers, five computers and a car, and shut down all Web sites involved in the case. Authorities also froze 1.7 million yuan ($250,000) in assets.

The shutdown of the site followed an investigation involving 50 police officers in three other provinces, the local d iang Times newspaper said.

The case can be traced to a hacking attack in 2007 on an Internet cafe in Macheng city in Hubei that caused Web services for dozens to be disrupted for more than 60 hours, the paper said. A few of the suspects caught in April said they were members of the Black Hawk Safety Net.

Black Hawks Web site 3800hk.com could not be accessed, but a notice purportedly from Black Hawk circulating on online forums said that a backup site had been set up. The notice also sought to reassure members of its continued operations and said its reputation was being smeared by some Internet users.

“At this time, there are Internet users with evil intentions who have deliberately destroyed Black Hawks reputation, deceived our members and stole material,” the notice addressed to members said. “We must join forces and attack these Web sites.”

A customer service officer contacted by phone, who refused to give his name, said the backup site provides content for its paying members to download course material to allow them to continue their computer lessons - though not in hacking.

The Hubei government refused to comment Monday while officials at the provincial public security bureau did not respond to repeated requests for comment.

Google threatened last month to pull out of China unless the government relented on censorship, an ultimatum that came after the search giant said it had uncovered a computer attack that tried to plunder its software coding and the e-mail accounts of human rights activists protesting Chinese policies.

Government officials have defended Chinas online censorship and denied involvement in Internet attacks, saying the country is the biggest victim of Web attacks. The Ministry of Industry and Information Technology said hackers tampered with more than 42,000 Web sites last year.

Security consultants say it is hard to know what proportion of hacking from China is the work of individuals and whether the government is involved. But some say the high skill level of some attacks suggests Chinas military or other agencies might have trained or directed the hackers.

“The scale, operation and logistics of conducting these attacks - against the government, commercial and private sectors - indicates that theyre state-sponsored,” security firm Mandiant Corp. said in a report last month. “The Chinese government may authorize this activity, but theres no way to determine the extent of its involvement.”

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Associated Press researcher Xi Yue contributed to this report.

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