Espionage Fuels China’s Economic “Miracle”

Communist China’s long-term economic strategy is aimed at replacing the US-dominated post World War II order established by the United Nations and the Bretton Woods international monetary framework with an “authoritarian capitalist system” controlled by Beijing. A key characteristic of authoritarian capitalism is defined here as “the presence of a capitalist economy on one hand along with the absence or erosion of democracy and civil liberties on the other hand.”

The strategy involves penetrating, coopting, and leveraging international institutions in order to gain access to resources, foreign direct investment, advanced technology, and Western methods so that Chinese industry can leap ahead of all foreign competition in the race for next-generation technologies and production capabilities – in short to achieve world economic dominance over the long haul. To carry out this strategy, the Chinese Communist Party has devoted enormous resources, including manpower and money, to the conduct of economic espionage.

Economic espionage involves the theft of trade secrets, proprietary information, and/or intellectual property in order to advantage domestic companies while disadvantaging foreign competitors. For China, this meant replacing science and technology investments that were “deferred” due to the liquidation of many scientists, engineers, and innovators during the devastating decade of Mao Zedong’s Great Proletarian Cultural Revolution (1966-76), given that Chinese industry and technical capabilities were far behind the West before its end.

According to an unclassified report from the National Counterintelligence and Security Center, the Chinese strategic goals of modernizing its military, evolving a technology-driven economic model that paces the world, and obtaining a comprehensive capability to dominate geopolitics worldwide are heavily dependent upon extensive ongoing economic espionage activities organized as follows:

Intelligence services. Operatives, spies, and analysts within and/or controlled by the Ministry for State Security and all service elements of the People’s Liberation Army are dedicated to round-the-clock intelligence collection activities. The MSS is answerable to both China’s State Council—the chief administrative authority of the Chinese government—and the CCP Politburo Standing Committee in conducting worldwide intelligence collection operations. PLA intelligence directorates report to China’s Central Military Commission (CMC) in conducting HUMINT, technical intelligence collection, and cyber operations. According to Chinese billionaire Guo Wengui, there are over 25,000 Chinese intelligence officers and over 15,000 recruited Americans operating on China’s behalf operating within the United States alone. Cyber espionage to gain economic secrets is an important espionage mission. From this report from the US – China Economic and Security Review Commission, “Cyber intrusions allow Chinese businesses—in some cases acting at the CCP’s direction or with government assistance—to access information about U.S. firms’ proprietary operations and project-financing information, as well as steal IP and technology.”

Non-traditional collectors. The MSS exploits/coerces Chinese businessmen and scientists to steal and report secrets gained in their business dealings with foreigners. Since 2015, non-traditional collection efforts have increasingly been controlled by the United Front Work Department (UFWD), which reports to the MSS for intelligence collection coordination. Mao Zedong labeled the “united front” as one of the “three magic weapons” in the CCP arsenal. Its original domestic mission was to penetrate and control social groups and individuals to “persuade” them to support the Chinese Communist Party and its objectives. The new additional foreign mission involves “the co-optation of elites, information management, persuasion, and accessing strategic information and resources … as a means of facilitating espionage.” The UFWD uses the ChiCom version of Dale Carnegie’s classic book “How to Win Friends and Influence People,” including corruption, bribery, spying, and coercion. The UFWD provides cover for intelligence agents (spies) operating under the Ministry of State Security. UFWD tentacles reach into the Confucius Institutes, Thousand Talents program, Chinese news services, Overseas Chinese Affairs Offices, and the Cyberspace Administration of China. All of these are tightly controlled operations aimed at influencing foreign opinion and winning friends for Chinese government policies.

Legal and regulatory exploitation. Chinese laws and regulations frequently facilitate technology theft as a price for foreign company operations in China. The CCP has also been trying to get control of the international standards certification process by replacing the International Organization for Standardization (ISO) with “China Standards 2035.” Control the standards, control the technology, and make it much easier to access foreign-develop technology as the kicker.

Front companies. These are set up in foreign countries to obfuscate the direct involvement of the Chinese government in obtaining export-controlled technologies. “Front companies” could be a misleading term, as virtually all Chinese-owned companies have an obligation to conduct economic espionage on behalf of the PRC. And there is only one degree of separation between many Chinese companies and the PLA, as the CCP has developed and implemented a strategy of “maximizing linkages between the military and the civilian sector to build China’s economic and military strength.”

Joint ventures. Joint ventures are used to entice foreign companies to operate in China. Part of the joint venture agreements involve technology transfer to the Chinese partners. In essence, Chinese joint venture regulations ultimately require foreign partners to essentially sign over their IP and technology in order to access the Chinese market.

Research partnerships. Collaborating with foreign scientists on research projects provides direct access to advanced technologies. One good example was China’s establishment of the Alliance of Industrial Internet for “internet and collaborative manufacturing initiatives,” which is focused on leveraging and integrating domestic and especially foreign technologies in order “to accelerate the development of industrial Internet” – not uncoincidentally, to lead the world in IPv6 development. The partnerships are “two-fers” when the US government funds the research grants! Take for instance the collaboration between Peter Daszak’s Eco Health Alliance and Shi Zhengli, the director of the Wuhan Institute of Virology, using funds provided by the US National Institute of Health.

Academic collaborations. Reciprocal relationships with foreign universities are encouraged in order to obtain access to foreign technologies. One key aspect is the promotion of international professor and student exchanges, intertwined with the Thousand Talents program, which is aimed at attracting foreign scientists, engineers, and instructors for exploitation by the Ministry of Education and Ministry of State Security for espionage purposes. Other aspects involve credit transfer and qualifications recognition to encourage deeper academic exchange and scientific cooperation between Chinese and foreign colleges and universities.

Science and technology investments. The Chinese government invests in foreign S&T development as a mechanism to fill technology holes in Chinese technical sectors. S&T targets include: information technology, cyber security, advanced manufacturing techniques, defense technologies of all kinds, and energy technologies (especially of the “green” variety). A good summary of Chinese S&T investments and the CCP’s associated strategy can be found in this report.

Mergers and acquisitions. The Chinese government uses Foreign Direct Investment funding to invest in and acquire Western companies for the purpose of acquiring cutting-edge technologies and intellectual property. As noted here, the Chinese have made strategic acquisitions in key foreign companies in order to gain market share and access to key technologies, as well as to influence the culture.

Talent recruitment programs. Foreign scientists and engineers are offered research scholarships and paid sabbaticals in order to obtain their intellectual capital and technology innovations. The Chinese objective is to recruit overseas Chinese and foreign experts and entrepreneurs in key economic sectors to teach and work in China.

Conclusion: The Chinese have a robust, well-coordinated and ongoing economic espionage effort that targets US-developed intellectual property, technologies, and industries. This campaign is an important element of China’s ongoing pursuit of world economic domination and is key engine that powers the continuing growth of the Chinese economy – frequently at the direct expense of foreign competition!

The end.

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2 thoughts on “Espionage Fuels China’s Economic “Miracle””

  1. Conclusion: The Chinese have a robust, well-coordinated and ongoing economic espionage effort that targets US-developed intellectual property, technologies, and industries. This campaign is an important element of China’s ongoing pursuit of world economic domination and is key engine that powers the continuing growth of the Chinese economy – frequently at the direct expense of foreign competition!

    Germany had a problem with becoming dependent on trade with Russia that didn’t start to resolve itself until Russia went to war with Ukraine. Germany was warned about that dependency on Russia and that it wasn’t a good idea and either didn’t really hear about the danger or were, for many reasons, incapable of taking action on it.

    We seem to have a problem and have become dependent on trade with China… what will it take to break that dependency, a Chinese war with one of our close allies?

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