The CIA has concluded that their overseas espionage efforts have suffered long-term damage as a result of several hacking operations that obtained personnel records for most of the U.S. population. Large scale data thefts apparently began at least a decade ago and reached a pinnacle when the U.S. government personnel office, or OPM (Office of Personnel Management), had its entire database of detailed records on 22 million current and former government employees, including data on people who had applied for jobs and did not get one, copied by hackers in 2014. Intelligence agencies, especially the CIA, realized that could have a catastrophic effect on American espionage efforts overseas as well as counterintelligence (catching spies) in the United States. The damage has come to pass and has been worse than anyone imagined. The OPM hack was traced back to China although earlier large-scale data hacks may have been the work of Russians or freelancers who knew China would pay a good price for such data.
The OPM hack got everyone’s attention but when it was considered in light of the many other hacking events before and after 2014 that made off with large quantities of personnel data that, taken together, gave Chinese intel analysts a comprehensive picture of the American population. Not just currently but in the future. The Chinese soon had a better database on the American population than any U.S. government agency or commercial firm. The CIA was one of the first U.S. agencies to discover how damaging that was first hand. After 2010 the CIA not only began losing a large network of informants and operatives inside China, but eventually in all foreign nations. This was most visible in how the Chinese counterespionage agents would, after 2014, no longer go to great lengths to conceal their efforts as new American agents, including those whose CIA employment was unknown to anyone, even most family members, back home, were identified and monitored by the Chinese secret police as soon as the CIA personnel arrived. But the Chinese always knew and eventually they were flaunting it. This was an intimidation tactic and it worked. China was using George Orwell’s 1940 novel “1984” as a how-to manual rather than a cautionary tale.
China was using the same nationwide personnel data analysis techniques inside China as part of their “Social Credit” program. This effort is Big Brother in action and designed to give the government unprecedented surveillance of and control over its entire population. Using biometrics, including facial recognition and predictive analysis the Chinese are slowly installing their Social Credit system nationwide and exporting the technology to foreign countries.
Meanwhile all the United States can do is increase the rate of uncovering Chinese spies posing as academic researchers in the United States, and this appears to be another aftereffect of the new Chinese databases on the American population. These Chinese operatives seek to steal trade secrets or patented material. There have been more of them in the last decade which can be attributed to the improved ability of Chinese agents to determine who will work for them and who cannot. This recruiting is often assisted by Chinese graduate students studying in the United States while also working for Chinese intelligence. One pattern that is becoming evident is the Chinese ability to detect which American academics, researchers and executives are most likely to work for the Chinese, either willingly or after experiencing a blackmail threat.
In the last few years, the United States has been indicting, prosecuting and convicting a growing number of Chinese born men (and a few women) conspiring to commit or actually carrying out economic espionage in the United States. Some of these suspects are naturalized American citizens but a growing number are Chinese citizens here on legitimate visas. As more suspects were identified, patterns began to appear which revealed the inner workings of known Chinese intellectual property espionage efforts.
Recent indictments are the result of the United States imposing more restrictions on Chinese officials who come to the U.S. and have contact, for whatever reason, with American academics, researchers and local (city, state and country) government officials. These Chinese will have to notify the U.S. government of such contacts. Based on recent FBI investigations and prosecutions, this will make it more difficult to operate their massive espionage program that seeks details of how American patents are implemented as well as trade secrets (items that are not patented but are essential for operating a business or factory).
The FBI and CIA again noted several interesting patterns. While many of the returning Chinese students were operating legally, a large number of those new Chinese firms were operating illegally by depending on stolen intellectual property. There were other patterns as well. A lot of the stolen tech seemed to involve Chinese and Americans associated with various Chinese efforts that helped returning Chinese profit from what they had learned in the West. These programs involved establishing hundreds of Confucius Institutes associated with Western universities, including a hundred in the United States. That, plus the aggressive recruiting of Chinese and non-Chinese academics willing to help China mobilize the largest IP theft in history.
China tries hard to conceal its espionage efforts. Not just denying anything and everything connected to its hacking and conventional spying, but also taking precautions. But as their success continued year after year, some of the Chinese hackers became cocky and sloppy. At the same time, the victims became more adept at detecting Chinese efforts and tracing them back to specific Chinese government organizations or non-government hackers inside China.
China has been getting away with something the Soviet Union never accomplished, stealing Western technology and then using it to move ahead of the West. The Soviets lacked the many essential supporting industries found in the West. These firms were largely founded and run by entrepreneurs, which was illegal in the Soviet Union. Because of that, the Russians were never able to acquire all the many pieces needed to match Western technical accomplishments. Soviet copies of American computers, for example, were crude, less reliable, and less powerful. It was the same situation with their jet fighters, tanks, and warships.
China got around this by making it seemingly profitable for Western firms to set up factories in China, where Chinese managers and workers were taught how to make things right. At the same time, China allows thousands of their best students to go to the United States to study. While many of these students will stay in America, where there are better jobs and more opportunities, a growing number are coming back to China and bringing American business and technical skills with them. Finally, China energetically uses the "thousand grains of sand" approach to espionage. This involves China trying to get all Chinese going overseas, and those of Chinese ancestry living outside the motherland, to spy for China, if only a tiny bit.
This approach to espionage is nothing new. Other nations have used similar systems for centuries. What is unusual is the scale of the Chinese effort, and that makes a difference. Supporting it all is a Chinese intelligence bureaucracy back home that is huge, with nearly 100,000 people working just to keep track of the many Chinese overseas and what they could, or should, be trying to grab for the motherland. This is where many of the graduates of the National Intelligence College program will work.
It begins when Chinese intelligence officials examine who is going overseas and for what purpose. Chinese citizens cannot leave the country legally without state security organizations being notified. The intel people are not being asked to give permission. They are being alerted in case they want to have a talk with students, tourists, or business people before leaving the country. Interviews are often held when these people come back as well.
Those who might be coming in contact with useful information are asked to remember what they saw or bring back souvenirs (legal or otherwise). Over 100,000 Chinese students go off to foreign universities each year. Even more go abroad as tourists or on business. Most of these people were not asked to actually act as spies but simply to share with Chinese government officials (who are not always identified as intelligence personnel) whatever information they obtained. The more ambitious of these people are getting caught and prosecuted. But the majority are quite casual, individually bring back relatively little and are almost impossible to catch, much less prosecute.
Like the Russians, the Chinese are also employing the traditional methods, using people with diplomatic immunity to recruit spies and offering cash, or whatever, to get people to sell them information. This is still effective and when combined with the "thousand grains of sand" methods brings in a lot of secrets.
Not getting caught is becoming more important because that can lead to increasingly dangerous diplomatic and legal problems. When the Chinese steal some technology and produce something that the Western victims can prove was stolen (via patents and prior use of the technology), legal action can make it impossible, or very difficult, to sell anything using the stolen tech outside of China. For that reason, the Chinese long preferred stealing military technology and tried to avoid using stolen commercial tech in a way that made it easy to determine the source of stolen data. This meant keeping stolen commercial tech inside China. And in some cases, like manufacturing technology, there's an advantage to not selling it outside of China. Because China is still a communist dictatorship, the courts do as they are told, and they are rarely told to honor foreign patent claims when stolen tech is discovered in China by its foreign owners.
Increasingly Chinese firms are boldly using their stolen technology, daring foreign firms to try and use Chinese courts to get justice. Instead, the foreign firms are trying to muster support from their governments for lawsuits outside China. Naturally, the Chinese government will howl and insist that it’s all a plot to oppress China. This has worked for a long time, but many of the victims are now telling China that this conflict is being taken to a new, and more dangerous, level.