China has created an industry around stealing intellectual property from American companies, costing the U.S. economy up to $600 billion every year, but the U.S. Justice Department has begun cracking down on their network of spies.
Ninety percent of the perpetrators in U.S. espionage cases are Chinese operatives, according to the Epoch Times. The spies focus on military technology, data storage, and space innovations, illegally exporting finished products and other sensitive material to companies in China. As President Donald Trump’s trade war with China has escalated, so have the DOJ’s efforts to preserve America’s technological superiority over China.
The nature of the operatives U.S. authorities have sought to take into custody over IP theft varies wildly. One was a dual U.S. and Taiwanese citizen, working as an adjunct professor at the University of California at Los Angeles. He was arrested in 2018 for purchasing military-grade data chips from a U.S. company only to ship them to China for copying and reproduction.
Another is Xuehua “Edward” Peng, a naturalized American citizen came to the U.S. on a temporary visa to work as a travel agent in California. He was arrested in late September for making multiple cash drops of up to $20,000 in California hotels in exchange for sensitive documents from an undercover FBI agent, according to Fox News. He has been denied the right to a public defender.
But the most high-profile IP theft case is that of Huawei, the Chinese tech giant the U.S. has for years accused of stealing from companies like Cisco Systems and T-Mobile, as well as various individuals. Huawei is the single largest maker of telecom equipment in the world, and the second largest producer of smartphones, according to the Wall Street Journal. (RELATED: US Seeks To Extradite Huawei CFO After Her Arrest In Canada)
Canada arrested the company’s chief financial officer, Meng Wanzhou, in late 2018 in a show of solidarity with the U.S. She has been held under house arrest in her $10 million mansion as she awaits trial for extradition to the U.S. China responded to the move by arresting multiple Canadian citizens and holding them in solitary confinement. (RELATED: US Warns Germany To Steer Clear Of Huawei Or Pay A Stiff Price)
Meng and her company face 13 charges of fraud and flouting U.S. sanctions on Iran, leading Trump to make an executive order banning certain technologies produced in countries the U.S. deems a security threat. The order limited Huawei’s ability to access critical updates for Android phones in particular, though Trump lessened the ban’s severity in early October.
Meanwhile, Huawei has denied any wrondoing. (RELATED: Chinese Tech Giant Under International Scrutiny Pinky Promises Not To Spy On Everyone)
“Innovation and IP protection are the cornerstone of Huawei’s business success. No company can become a global leader by stealing from others. We have grown because we invest,” Chief Legal Officer Song Liuping told WSJ. “Disputes over IP are common. Huawei has been on both sides of these disputes. We believe these disputes should not be politicized.”
Huawei is not the only company to be seen as preying on U.S. allies. The U.S. convicted Chinese tech firm Sinovel of stealing trade secrets from a U.S. wind turbine firm in 2018.
Sinovel signed an $800 million service contract with AMSC in 2011, but sought to steal the firm’s copyrighted secrets rather than honor the contract. Sinovel convinced an AMSC employee to turn over the firm’s source code, allowing the Chinese company to manufacture and retrofit wind turbines without AMSC’s help. It then cut ties and refused to pay AMSC its $800 million.
While Sinovel’s stock dropped 4 percent with the verdict, ASMC lost $1 billion in shareholder equity and roughly half of its global workforce thanks to Sinovel.
Caution around Chinese fraud has escalated to such an extent that the U.S. Department of the Interior grounded its entire fleet of over 800 aerial drones Wednesday over fears of Chinese spying. Each of the drones were manufactured — either in whole or in part — in China. The fleet is currently being reviewed.
“Until this review is completed, the Secretary has directed that drones manufactured in China or made from Chinese components be grounded unless they are currently being utilized for emergency purposes, such as fighting wildfires, search and rescue, and dealing with natural disasters that may threaten life or property,” DOI spokesman Nick Goodwin said in a statement.
While the DOJ continues to make arrests and Trump pursues further executive action, Trump allies in the Senate have sought a legislative response. Republican Missouri Sen. Josh Hawley introduced legislation to prevent U.S. research projects from using technology developed in China. (RELATED: Hawley Takes Crack At Preventing China From Stealing American Research)
“It’s time we realized China is not one threat among many,” Hawley tweeted shortly after announcing his bill. “China is the biggest national security threat facing the U.S.”