Chinese espionage "single greatest risk" to U.S. technology sector

Published 16 November 2007

China’s disregard of intellectual property law is a matter of record; European governments are increasingly alarmed by Chinese intelligence engaging in massive industrial espionage campaign on behalf of Chinese companies; now, congressional panel warns of dire consequences to U.S. technology sector from sustained, sophisticated Chinese espionage campaign

During the 1992 U.S. presidential campaign, Ross Perot said that if the proposed North America Free Trade Agreement (NAFTA) were to go into effect, we would all be hearing a “giant sucking sound” made by millions of U.S. jobs heading south for Mexico. There is a new giant sucking sound being heard: That of American and European trade secrets, patents, and other pieces of intellectual property being brazenly and systematically stolen by China in its effort to short-cut its way to global economic pre-eminence. Chinese routine violations of intellectual property laws are a matter of record, and reverse engineering has become an art form there. We wrote the other day how Western European governments have become aware that the Chinese government has instructed its sprawling intelligence community to engage in methodical industrial espionage campaign against European companies in order to steal their secrets and hand them over to Chinese companies (many of these companies are owned, directly or indirectly, by the People’s Liberation Army or the intelligence services). Now there is this: Chinese espionage poses the “single greatest risk” to the American technology sector, according to a congressional advisory panel. In its annual report, the U.S.-China Economic and Security Review Commission accused Beijing of pursuing an aggressive spying program to acquire critical U.S. technology and adopting “destructive” tactics, including cyber attacks, to target American infrastructure. “Chinese military strategies have embraced destructive warfare techniques, including the use of cyber attacks (which) if carried out strategically on a large scale could have catastrophic effects on the target countries’ critical infrastructure,” the panel reported. “Chinese espionage activities in the United States are so extensive that they comprise the single greatest risk to the security of American technologies.”

The panel reported that the Chinese Communist Party still had a tight control on China’s economy and was keen to acquire technology through either licit or illicit means. Beijing’s voracious appetite for technology acquisitions was being conducted both through technology transfer or commercial agreements as well as industrial espionage, it said. “What the government cannot get through licit means, they are conducting an aggressive program of industrial espionage to acquire,” an official familiar with the report said.

A press report earlier this year said China’s military had successfully hacked into the U.S. military computer network. The Chinese military’s cyber attack was carried out in June following months of efforts, the Financial Times reported, citing unnamed current and former U.S. officials. Officials had told the paper the attack was by China’s People’s Liberation Army (PLA) and that it led to the shutdown of a computer system serving the office of Robert Gates, the defense secretary. The report also charged that China’s “control and manipulation of information” made it difficult or impossible for officials responsible for product safety in the United States and other nations to identify potential safety problems in Chinese imports on a timely basis. Dangerous exports from China ranging from toys to seafood have sparked a wave of global bans and recalls in recent months and severely tarnished the made-in-China label. Beijing has taken various steps to contain the problem, and in July executed the former head of its food and drug safety watchdog for corruption.