Entrepreneurial Espionage
China’s President Hu Jintao promoted the emerging spirit of American-style entrepreneurialism during his visit to Washington D.C. this week for the highly-scripted U.S.-China Summit.
Jintao has not yet commented on the status of Chinese government’s home-grown brand of “shadow innovation,” which began nearly 30 years ago and is evolving today into an insidious and dangerous trend called “entrepreneurial espionage.”
In 1986, Deng Xiao Peng established “Program 863,” a sort of academy of sciences and technologies charged with closing the scientific gap between China and the world’s advanced economies in a very short period of time. The 863 program and its institutional derivatives not only sponsored actual research, they also promoted the acquisition of advanced technologies from other countries legally or illegally.
Today, counter-intelligence activities in the United States that have a nexus with China typically involve the illegal acquisition of U.S. technologies. Unlike Russian intelligence officers looking to exploit ego, greed, or other personal weaknesses, China has not normally paid agents for classified documents or engaged in clandestine activity like ‘dead drops.’
While some of the recent espionage cases brought against China have ties to China’s intelligence services, the vast majority are linked to other state organizations, particularly the factories and research institutes of China’s military-industrial complex. Multiple Chinese state entities are engaged in an active effort to acquire restricted U.S. technologies. Unlike other foreign governments, China has a history of encouraging and rewarding private individuals to obtain technology on its behalf.
Chinese intelligence practices rely on nonprofessional collectors motivated by profit, patriotism or other factors and acting either independently or on behalf of the Chinese government to gather science and technology intelligence.
Nonprofessional intelligence collectors—including government and commercial researchers, students, academics, scientists, business people, delegations, and visitors—also provide China with a significant amount of sensitive U.S. technologies and trade secrets,” according to reports by the Office of the Director of National Intelligence. “[I]n many cases, the collection efforts of these private-sector players are driven entirely by the opportunity for commercial or professional gain and have no affiliation with [PRC intelligence].”
This practice has led to a vast amount of ”entrepreneurial” economic and industrial espionage conducted by Chinese students, trade delegations, businessmen and educational and research institutions, according to reports by the U.S.-China Economic And Security Review Commission.
The Chinese government encourages such efforts and has benefited from them. In 2009, the Commission quoted testimony provided by former FBI Special Agent I.C. Smith that:
the Ministry of State Security sometimes places pressure on Chinese citizens going abroad for educational or business purposes and may make pursuit of foreign technology a quid pro quo for permission to travel abroad. However, this phenomenon of ”entrepreneurial espionage” appears to be particularly common among businessmen who have direct commercial ties with Chinese companies and who seek to skirt U.S. export control and economic espionage laws in order to export controlled technologies to the PRC. In such instances, profit appears to be a primary motive, although the desire to ”help China” can intersect in many cases with the expectation of personal financial gain.
”Espionage entrepreneurs” are not focused solely on obtaining state-of-the-art, high-tech data and equipment. In many cases there is no obvious direct state involvement in the theft or illegal export of controlled technology. These entrepreneurial efforts frequently take the form of ”mom-and-pop” companies—many of them nothing more than a titular business registered at a residential address—that legally purchase older military technology from U.S. manufacturers or through a secondary market of defense industrial equipment auctions, or even from the Internet, and then look for customer institutions back in China.
“There are pieces of technology . . . that the Chinese are trying to acquire that are 20, 25 years old, [and] that are mainstays of existing U.S. defense systems but come nowhere close to being considered state-of-the-art, and yet a means-ends test would correctly identify those as critical gaps in the Chinese system,” said Dr. James Mulvenon, a specialist on the Chinese military at the Defense Group, Inc., stated during testimony before the Commission in 2009.
