- The Washington Times - Wednesday, January 8, 2020

The Justice Department’s special China unit is aggressively prosecuting technology theft and other illicit activities by Beijing’s spies and government officials, a senior department official said in an interview.

China was implicated in more than 80% of all economic espionage cases brought by the Justice Department since 2012, and more than 60% of all trade secrets theft cases were linked to Beijing’s aggressive spying and acquisition programs, U.S. officials said.

Those activities involve traditional human and cyber intelligence gathering operations as well as what officials term “nontraditional” spying: the use of students, business people and other nonprofessional collectors of intelligence.

“It’s an objective fact that the number of economic espionage investigations has increased dramatically in recent years,” Adam Hickey, deputy assistant attorney general in the Justice Department’s national security division, told The Washington Times.

“That could be a function of us seeing more or the private sector reporting more. It also could suggest that China is doing more,” said Mr. Hickey, a key official in a program called the China Initiative.

China’s efforts also involve purchases of American companies, a noncriminal matter but one involving Justice Department officials who are part of the Treasury Department-led Committee on Foreign Investment in the United States. Congress has passed reform measures strengthening regulatory procedures used to control Chinese investments that could harm national security.

At the Federal Communications Commission, Justice Department officials help counter Chinese electronic spying in the United States through a group called Team Telecom.

Attorney General William Barr recently backed the FCC decision announced in November to ban the use of telecommunications gear in the United States made by Chinese tech giant Huawei Technologies over electronic spying concerns.

Fighting intellectual property theft

The department launched the China Initiative in 2018 after the U.S. Trade Representative Office published a landmark report revealing that China was obtaining, both legally and illegally, an estimated $250 billion and $600 billion annually in U.S. intellectual property. The trade report, known as a 301 report, led to the imposition of tariffs on China and the trade war with Beijing.

President Trump said he plans to sign a partial U.S.-Chinese trade deal Jan. 15.

As a key official in the China Initiative, Mr. Hickey is responsible for cases involving Beijing’s state-sponsored intelligence targeting the American private sector. Intellectual property theft occurs through computer hacking, the use of Chinese government officials who buy expertise from U.S. companies or specialists, and purchases of American firms that can provide valuable know-how.

Mr. Hickey said an example of a Beijing-directed technology theft program is its “Made in China 2025” effort.

“Made in China 2025 is as much a road map to theft as it is guidance to innovate,” Mr. Hickey said in a recent speech.

Since China announced the program in 2015, Justice Department prosecutions have involved eight of the 10 sectors outlined in Made in China 2025, including advanced information technology, robotics, aerospace components, maritime equipment, electric power transmission gear and agricultural machinery.

“Over a longer time period, since 2011, more than 90% of the department’s economic espionage prosecutions — cases alleging trade secret theft by or to benefit a foreign state — involve China, and more than two-thirds of all federal trade secret theft cases during that period have had at least a geographical nexus to China,” he said.

Chinese intelligence service prosecutions also have increased dramatically. Last year, prosecutions were brought against a specific branch of the Chinese Ministry of State Security, the civilian spy service, in Jiangsu province.

U.S. intelligence says the Jiangsu MSS is involved in acquiring foreign aerospace technology for the Chinese People’s Liberation Army.

In an unprecedented case last year, Yanjun Xu, a Jiangsu MSS intelligence officer in Belgium, was extradited to the U.S. to face charges in Ohio of stealing aerospace trade secrets.

Mr. Xu is deputy division director of the Jiangsu MSS’ Sixth Bureau. That bureau is the operational guidance section that directs and supervises the provincial MSS office.

Mr. Hickey said the case was a breakthrough for nations developing a greater understanding of the Chinese technology theft threat.

“What’s notable about that is this was the first extradition of an intelligence officer to the United States,” he said. “That’s a really important moment because it’s a sign that other nations, such as Belgium, are not willing to give a pass to that kind of espionage. There was maybe a time where certain types of intelligence work might end with you being asked politely to leave. But this was, we allege, commercial theft outside the boundaries of so-called wherever the boundary is of ‘legitimate’ intelligence collection.”

Corporate danger

Mr. Hickey said American technology companies also appear to be recognizing the danger posed by Chinese economic spies and are reporting more activities to authorities.

Based on feedback from companies in China and other parts of Asia, “there is a more clear-eyed understanding by American businesses that access to the Chinese market is not an unmitigated boon,” he said. “I don’t think anyone disputes the threat.”

“Big picture, I think American businesses understand, yeah, that is a place we have to be careful doing business in. I won’t go so far as to say that I know what the tech sector thinks about X and or Y. But I don’t think people think that we are merely issuing groundless jeremiads.”

The China Initiative was launched on Nov. 1, 2018, and has continued under Attorney General William Barr, who has made a priority of countering Chinese intellectual property theft.

The initiative is led by John Demers, assistant attorney general for national security. A working group within the unit includes U.S. attorneys in Massachusetts, Alabama, Northern California, eastern New York and northern Texas.

A senior Justice Department official involved in national security matters said on background that China’s government poses an economic espionage threat on a par with Russia, Iran and North Korea.

However, the official added, “I think China presents a particularly acute threat to innovation and theft of IP and economic superiority. And it’s not just the theft here. It’s also the coercive legal regime in China, forced technology transfer, [and] having the resources to invest in American companies that then gives you access to nonpublic information.”

The 2018 Foreign Investment Risk Review Modernization Act gave the Trump administration more power to block foreign investment that could undermine national security. The law allows greater power to restrict foreign companies from buying U.S. companies involved in critical technologies or critical infrastructure, or that hold sensitive personal data.

The senior official said prosecuting crimes such as Chinese computer hacking is not enough.

“What we needed to do was start with China’s industrial policy and understand how their policies drive and encourage behavior,” the official said.

China has hundreds of industrial plans that are set from a centralized point and prioritize development of key technologies.

One example is the Thousand Talents program, which involves Chinese recruitment of Americans with access to desired technology in legal and illegal ways.

The FBI arrested a Chinese government official, Liu Zhongsan, in New Jersey and charged him with being part of a large-scale scheme to illegally obtain American technology by recruiting high-tech specialists. The arrest was the first involving an official of the Thousand Talents program.

“So you’ve got an entire architecture of state-directed economic policy that creates incentives for people to behave both legally and illegally,” the senior official said.

• Bill Gertz can be reached at bgertz@washingtontimes.com.

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