Washington has lately been awash in spy talk—most recently from the revelations that the FBI dispatched an operative in 2016 to make contact with two Trump campaign officials suspected of ties to Russia. And if you don’t follow politics closely, maybe you at least know that the latest seasons of TV spy dramas Homeland and The Americans are wrapping up.
Yet the real action with spies nowadays lies not with Russia but with China. For years, American counterintelligence officials have been sounding the alarm about Chinese theft of U.S. intellectual property and the threat it poses to national security. These concerns seem to be reaching a critical point. That’s because of changes within the Chinese economy and a newly aggressive U.S. posture toward the country.
China itself is changing. Its economy is no longer the agrarian and industrializing behemoth that it was 15 years ago when its exports started pouring into the United States. It is an industrial powerhouse, yes, but also has larger ambitions to become the world leader in high tech—and it has no compunction about violating international norms to achieve that objective.
The “Made in China 2025” plan, announced in 2015, outlines the country’s strategy to become the global leader in 10 high-tech fields, including information technology, robotics, alternative-energy vehicles, aerospace, and biotechnology. Last year, artificial intelligence was added to the list. China sees developing these high-brainpower industries as an economic imperative, because decades of restricting birthrates will leave it with too few younger workers to keep up the labor-intensive factories. Unlike the clothing and toy manufacturers of the past, these high-tech fields are also brimming with military applications—which moves this development from the realm of international economics into the center of the Venn diagram that overlaps with U.S. national security.
If you’re China, with a lackluster history of innovation and a weak entrepreneurial culture, how do you accelerate such a transition? You subsidize it and acquire the technology however you can, while handicapping your foreign rivals. A 148-page report in January from the office of the U.S. Trade Representative details the many ways China seeks to secure its advantages, often in violation of international trading rules and commitments:
It’s a coordinated effort among government, industry, and individual Chinese citizens. Senator Elizabeth Warren (D-Mass.) had it right in late May when she described the Chinese approach as a “longtime whole-of-government strategy that keeps driving toward an end”—an assessment she intended as contrast to Trump administration inconsistency but that came off as showering praise on the Communist regime.
The approach to becoming a world power in high-tech fields includes economic espionage—stealing trade secrets from U.S. companies either by human means or through cyberattacks. Analysts say it’s hard to know precisely how severe the problem is. Companies might not know that they have suffered a security breach. Those that do are unlikely to report them for fear of negative publicity. A report last year by the bipartisan Commission on the Theft of American Intellectual Property labeled China “the world’s principal IP infringer” and estimated that such theft inflicts as much as $600 billion a year in costs to the U.S. economy.
When it comes to foreign operations in the United States, Russia has lately received most of the attention, in large part because of its efforts to influence the 2016 presidential campaign. But FBI director Christopher Wray has said that in terms of the scope of the effort, there is no parallel to China.
“There is no nation that targets America’s assets more aggressively than the Chinese government,” Wray told NBC News in March. “The Chinese government works hand in hand with Chinese companies and others to do everything they can through all sorts of means to try to steal our trade secrets, our economic assets. . . . It’s a real issue, and it ultimately is going to have a real impact on American jobs, American businesses, and American consumers.”
One of the tactics that sets China apart, Wray told the Senate Intelligence Committee in February, is its “use of nontraditional collectors, especially in the academic setting, whether it’s professors, scientists, students.”
A Taiwan-born U.S. citizen, Allen Ho, pleaded guilty in 2017 to conspiring to provide technical assistance to China’s largest nuclear-power company without Energy Department approval, as required by law. Prosecutors say Ho recruited nuclear technicians to help, telling one of them, “China has the budget to spend. . . . They want to bypass the research stage and go directly to the final design and manufacturing phase. They said budget is no issue.” Ho was sentenced to 24 months in prison.
A Chinese scientist working at a Kansas biopharmaceutical research facility was convicted last year of conspiring to steal genetically modified rice seed. Prosecutors said the scientist, Weiqiang Zhang, hosted visitors from a Chinese crop-research institute in the summer of 2013, and customs officials found the rice seeds, which have potential medical uses, in the visitors’ luggage. Zhang was sentenced to 10 years in prison.
In January, a federal jury in Wisconsin convicted Chinese wind-turbine manufacturer Sinovel of stealing trade secrets from a U.S. company, American Superconductor. Prosecutors said the Chinese company hired away an engineer from American Superconductor, who then stole turbine-operating software and passed it along to his new bosses. After the theft, American Superconductor lost $1 billion in shareholder equity and had to cut 700 jobs. Sentencing is scheduled for early June.
The U.S. government has spies in China, of course. In May, the Justice Department charged a former CIA case officer, Jerry Chun Shing Lee, with conspiracy and unlawfully retaining top-secret documents—including the names and phone numbers of assets and covert CIA employees in China. The indictment says Chinese agents promised Lee $100,000 and to “take care of him for life.” The arrest followed the jailing or killing of 18 to 20 CIA sources in China between 2010 and 2012, as the New York Times reported last year, citing anonymous former U.S. officials. Lee’s lawyer disputes the charges. There are at least two other cases underway involving former CIA or State Department officials accused of working with Chinese agents, the Wall Street Journal reported last month.
When a U.S. trade delegation heads to China later this month, negotiators will have a lot to talk about. There’s the trade deficit, the steel tariffs, the threatened $50 billion in tariffs on Chinese goods (intended as retaliation for China’s closing off its economy), and the fate of the Chinese telecom company ZTE, which the Commerce Department sanctioned for trading with Iran and North Korea. And the talks take place against the backdrop of such significant geopolitical concerns as China’s military designs on the South China Sea, its increasing pressure on Taiwan, and the proposed June 12 U.S.-North Korean summit.
That’s a lot of levers. And it is easy to see a modest deal emerging from the talks, one in which China agrees to buy more U.S. goods, to take firm steps to allow greater and freer U.S. investment, and to help with North Korea—in exchange for the United States’s dropping the most punishing tariffs and providing some sort of lifeline to ZTE. That would help reduce the U.S. trade deficit with China, a Trump priority.
But knocking off the rampant economic espionage? That’s a much tougher objective.
“We are not going to get them to stop unless we really hurt them,” says Derek Scissors, who studies U.S. economic relations with Asia at the American Enterprise Institute. “The evidence shows they’ve been stealing for a long time, for decades. You don’t get them to change by talking to them. You put up with it or you retaliate, and the retaliation has to be serious.”
Tariffs, Scissors says, seem to be the Trump administration’s weapon of choice. But a smarter, more targeted approach would be to sanction individual Chinese companies that have benefited from stealing U.S. secrets.
Until now, Trump has chosen to confront China mostly with hot rhetoric. We should soon know if the new administration is a force to reckon with or a paper tiger.
