That's why it looked like a retaliatory move when China's State-run television told iPhone owners that the device is a threat to national security because it tracks users' movements. The warning was that iOS 7's "frequent locations" app, which records places users have been to and the time they spend there, can help the IT giant obtain sensitive information, including State secrets.

Apple has explained the app's functionality as designed to learn important locales to provide pre-emptive information, such as directions to a frequently patronized restaurant or the estimated commute time to work. However, Chinese concerns are that Apple's mobile phone positioning can view users' addresses and whereabouts, because information will be recorded even if the app is turned off. From this app, someone can get a cell phone user's occupation, place of work, home address and then obtain all other relevant information on him/her.

It is understandable that such permitted culling of information would raise concerns after the "Snowden Effect" - many US technology companies' relations with foreign governments, including China's, have come under scrutiny and many big service providers asked the NSA to drastically change its policies before the surveillance program further harms their businesses. Apple is one of the companies at the forefront of this risk. In the first quarter of 2014, Apple said revenue from the "Greater China" region, which included the mainland, Hong Kong and Taiwan, accounted for 20 percent of its total sales, up 13 percent year-on-year.

The question is: Will the future see a shutting out of potentially useful US technological advances in China as a response to the lack of trust and dearth of knowledge on what these technologies could be used for?

Each side accuses the other of cyber espionage and each side views itself as a victim. China rightly cites the NSA scandal, which revealed widespread surveillance by US intelligence agencies on not only US citizens but also governments and companies worldwide, including Chinese companies. The US, on its part, continues to accuse China of using cyber warfare to steal confidential information, trade secrets and data of national importance.

Since most countries engage in some form of spying and can justify it in terms of national interest, a protocol on cybersecurity and boundaries of invasive behavior should be put in place. Unfortunately, such a possibility seems a long way off. At the next Strategic and Economic Dialogue, therefore, a new formula should be brought to the table, and perhaps the economic benefits of cooperation should be allowed to drive the agenda. But whatever is agreed, spying will take place. In some form, the cyber cold war is likely to continue.

The author, an economist and international educator, is director of China Programs at CAPA International Education, a US-UK based organization that cooperates with Capital Normal University and Shanghai International Studies University.