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Authorities also arrested three people accused of running the Black Hawk Safety Net which offered online attacking programs and software, and froze about $249,000 of its assets, the report said.

The news comes in the wake of Chinese government's recent rejection of accusations that it was involved in cyberattacks.

Search engine giant Google has said it might pull out of China because of disagreements with government policies and unidentified cyberattacks targeting its service in China.

The China Daily report said Black Hawk Safety Net, established in 2005, openly recruited members and disseminated hacker techniques through lessons, trojan software and online forum communications.

The report said the Web site had recruited more than 12,000 VIP members and collected more than 7 million yuan or about $1 million in membership fees. More than 170,000 people registered for free membership, the report said.

"I could download trojan programs from the site which allowed me to control other people's computers. I did this just for fun but I also know that many other members could make a fortune by attacking other people's accounts", a 23-year-old member of Black Hawk Safety Net was quoted as saying.

Police were led to the Web site in April 2009 after three people caught disseminating virus and disrupting Internet services in Macheng City admitted they were members of the Black Hawk Safety Net, the official Xinhua news agency reported.

The report, quoting official figures, said the hacker industry in China caused losses of 7.6 billion yuan or about $1.1 billion last year.

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