Tensions Mount Over China's Industrial Espionage in US

Tensions Mount Over China's Industrial Espionage in US
Photo Credit: AP / TPG Images

What you need to know

The closing of China's Houston consulate follows years of frustrated government efforts to thwart Beijing’s IP theft.

By Chu Wu 

WASHINGTON - Tensions between the United States and China are escalating at a dizzying pace, with July 24 marking the lowest point of bilateral relations in decades. On that day, the Chinese consulate in Houston, Texas, was closed and taken over by U.S. officials.

“We announced the closure of the Chinese consulate in Houston because it was a hub of spying and intellectual property theft,” said Secretary of State Mike Pompeo.

State Department officials asserted in a briefing that the consulate was the hub of a network of individuals in more than 25 U.S cities, who have been conducting economic espionage in the United States. 

The administration’s decision to shutter the Chinese consulate followed years of government frustration about China’s activity to steal trade secrets and expand pro-Beijing influence across the United States.

Photo Credit: AP / TPG Images
U.S. Secretary of State Mike Pompeo

“I think industrial espionage is already a major flashpoint in the U.S.-China relationship,” said Mara Hvistendahl, an investigative reporter at the online news publication The Intercept. “This conflict has been brewing for quite a while, but since the global pandemic exacerbated the tension between the U.S. and China, this issue has only been thrust more into the spotlight.”

Hvistendahl is the author of the book The Scientist and the Spy, in which she detailed how Chinese-born scientist Robert Mo was pursued by the U.S. government for trying to steal American corn seeds for a Chinese bio-agriculture company. 

Shift of focus

Trump administration concerns about industrial espionage by Chinese companies helped fuel the United States' recent trade war with China, and that theft has become one of the top counterintelligence targets of the FBI.

The FBI created a special economic espionage unit in 2010, and currently has over 2,000 active cases related to Chinese counterintelligence operations in the United States. FBI director Christopher Wray recently said the bureau is opening a new China-related counterintelligence case about every 10 minutes.

Economic espionage is certainly nothing new. When the U.S. passed the Economic Espionage Act of 1996, the focus was on Israel and France, and China wasn’t really in the picture.

Hvistendahl said the shift of focus started in the mid-2000s, when the business community decided to join the intelligence community to address the issue. These U.S. companies had previously hoped that if they kept their mouths shut, they could eventually break into the Chinese market and begin to see significant market growth.

“By the mid-2000s, it became clear to many companies that it was just not going to happen, they were going to get shut out of the market eventually," Hvistendahl told VOA. "So many CEOs started to be more vocal about some of the problems that they have received with China.”

The impact on the U.S. economy through loss of intellectual property (IP) is one of the main concerns among U.S. policy makers. According to a 2017 report by the Intellectual Property Commission, the cost of IP theft for the United States is somewhere between US$225 billion and US$600 billion. And China is responsible for 71% to 87% of that figure. (The percentage varies annually.) 

Apart from economic loss, there is also loss of domestic production capabilities, loss of industries, and loss of jobs along the way.

Eric Zhang, former chief representative of the Oklahoma Foreign Direct Investment (FDI) Office in China, told VOA that America is also realizing the potential security threat posed by these China-related industrial espionage activities.

“Espionage activities in other countries are mainly for economic gain, but China is different. Since Xi Jinping came to power, China has started to deem the United States as a competitor, especially in terms of military,” said Zhang. “In this sense, the purpose of Chinese industrial espionage is different from that of other countries. This is why the U.S. is very concerned now.”

Full-scale effort

Under the Trump administration, federal authorities have launched full-scale efforts to ferret out economic espionage.

In some high-profile cases, the FBI has recently arrested four Chinese research scientists in the U.S. who concealed their relations with Chinese military during their visa applications. 

Apart from the FBI, the Justice Department has also launched the China Initiative in 2018, with the goal of identifying and prosecuting those engaged in economic espionage, trade secret theft, hacking and other related crimes. 

Yet Zhang said that although there has been ample pushback, China has not slowed down its pace of stealing innovative technologies and trade secrets from developed countries.

“Innovative technology is key to China's economic growth, which is [a primary means] to legitimize CCP (Chinese Communist Party) rule. So if they can’t get anything from the U.S., I think Beijing will strengthen its economic espionage efforts in other developed countries," Zhang said.

Hvistendahl warns that when addressing the issue of industrial espionage and IP theft, the U.S. needs to be careful and avoid discrimination.

“You have to keep in mind that much of the research force in the U.S. is ethnic Chinese. So you have to deal with the issue in a way that it’s fair, that doesn’t give way to allegations of racial profiling, ethnic bias,” she said.

She added that it’s to America’s own benefit to keep the U.S. as an innovative place to which researchers from all over the world would want to come and study.

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TNL Editor: Nicholas Haggerty (@thenewslensintl)

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