On Friday, an investigation by NPR and Frontline claimed that the White House estimates “technology theft and other unfair business practices originating from China are costing the American economy more than $57 billion a year.”
Last year, a U.S. Department of Justice report to the Senate Intelligence Committee claimed that “from 2011-2018, more than 90% of cases alleging economic espionage by or to benefit a state involve China, and more than two-thirds of the Department’s theft of trade secrets cases have had a nexus to China.” A significant proportion of those thefts traced back to the Chinese government, and if they didn’t, they always benefited the Chinese government’s economic policies.
This investigation now suggests those thefts are often enabled by the hacked companies themselves. “In dozens of interviews with U.S. government and business representatives, officials involved in commerce with China said hacking and theft were an open secret for almost two decades, allowed to quietly continue because U.S. companies had too much money at stake to make waves.”
The program interviewed a former U.S. Attorney from Pensylvania who was “inundated” with concerns businesses afraid they had been hacked. David Hickton told the program “I literally received an avalanche of concern and complaints from companies and organizations who said, ‘We are losing our technology — drip, drip, drip’.”
Hickton set his sights on Unit 61398 of China’s People’s Liberation Army. A well-reported militaristic office tower of ‘cyber warriors’ that has been known about for some time and which targets overseas companies with industrial-scale cyber theft. “They were really using a large rake,” Hickton said of the military group. “They were taking everything … personal information, strategic plans, organizational charts. Then they just figured out later how they were going to use it.”
A national security threat ‘no-one had heard of’
Michael Wessel, the commissioner on the U.S. government’s U.S.-China Economic and Security Review Commission, told the program that when China joined the WTO in 2001, “there was a honeymoon period in the first six or seven years, a desire to try [to] make things work.”
It didn’t last. In December, two Chinese nationals were chargedwith hacking more than 45 companies in coordination with China’s state security service. Deputy Attorney General Rod Rosenstein said that this level of “outright cheating and theft gives China an unfair advantage at the expense of law-abiding businesses,” adding that “we know what China is doing it, we know why they are doing it, and in some instances, we know who is sitting at the keyboard.”
The scale of Chinese state cybertheft from the U.S. “is unacceptable,” former Attorney General John Sessions said in November. “International trade has been good for China, but the cheating must stop, [and] China cannot be a safe haven for criminals who run to China when they are in trouble, never to be extradited.” Sessions tasked Assistant Attorney General John Demers from the Department’s National Security Division with the creation of a ‘China Initiative’.
At a media briefing a week ago, Demers reiterated the extent of Chinese IP theft in the U.S. He was joined by the U.S. Attorney for Massachusets, who described the “long-term, pervasive, consistent effort by the Chinese government to steal American intellectual property [as] one of the most important national security threats that no one has heard of.”
All roads lead to China
China is an enigma, and the world’s second-largest economy plays by its own rules. The mix of commerce and state, as seen in the emerging AI Cold War, in closed state procurements and strategic state investments, in ongoing trade discussions and posturing, in international arguments about Huawei and 5G, and in the mix of economic surety and national security, are a challenge. For businesses being asked to compete with China, to sell into China, and to defend against China, there are no easy answers.
In recent weeks, both Microsoft and Google have found themselves answering questions about the extent of their work in China. Microsoft for co-authoring three papers on AI with a Chinese university with military links and which raised questions relating to surveillance and Xinjiang and the level to which western technology might be helping to develop China’s surveillance state. Google for seeming to step back from supporting U.S. military development programs, while maintaining AI work in China that, according to politicians and U.S. military leaders, results in furthering China’s military technologies.
Talking of Google, cast your minds back to the company’s statement issued in 2010: “We [have] detected a highly sophisticated and targeted attack on our corporate infrastructure originating from China that resulted in the theft of intellectual property from Google… This attack was not just on Google. We have discovered that at least twenty other large companies from a wide range of businesses–including the Internet, finance, technology, media and chemical sectors–have been similarly targeted. We are currently in the process of notifying those companies, and we are also working with the relevant U.S. authorities.”
Nine years later and unsurprisingly “none of the dozens of companies or organizations that NPR reached out to that have been victims of theft or corporate espionage originating from China would go on the record.”
That’s the problem. And it’s not a problem limited to the U.S. On Thursday, the Dutch newspaper Financieele Dagblad reported on the theft of trade secrets from chipmaker ASML by “high-ranking R&D employees of the company” linked to the Chinese Ministry of Science and Technology.” Again, the company had played down any discussion on Chinese state involvement, a market from which it now generates $2 billion in sales.
China, for their part, is not open to the discussion. “China firmly preserves cybersecurity, always opposing and cracking down on any forms of cyber theft, ” according to a spokesperson for the Chinese Foreign Ministry. “The Chinese government has never participated in or supported any theft of trade secrets. We do not accept and are firmly opposed to such accusations.”
Read more in Forbes.