September 7, 2024:
For the second time this year, Chinese students studying in neighboring countries were arrested for espionage activities in South Korea and Japan. This is nothing new as China has been expanding its espionage activities for some time.
China has long developed an international network of spies, local agents, and operatives. The foreigners working for this network are often unaware that they are working for China. This is part of China’s concealment of the extent of their operations. China also obtains the services of internet hacking groups through a third party to conceal the fact that data is being stolen for the Chinese. Despite years of successful efforts to conceal the extent of their espionage network, that anonymity has unraveled during the last year and the process continues despite Chinese efforts to delay, disrupt, or stop it.
This result is that Chinese spies and espionage efforts are becoming known in Europe, the Americas, the Middle East, Africa and south, southeast, and east Asia. An increasing number of arrests have taken place and subsequently been publicized. It’s not just the espionage that annoys foreigners but the covert meddling the Chinese were engaged in worldwide. China sought to influence foreign governments to cooperate with local Chinese goals without knowing, or revealing what was being covertly done to benefit China.
Many of the operatives were nor local Chinese but ethnic locals covertly hired to support the local Chinese agenda. Many of the Chinese operatives convincingly presented themselves as anti-Chinese. This sort of deception was particularly useful when it came to sabotaging efforts by the major foreign intelligence and counterintelligence agencies of countries like the United States (FBI and CIA), Britain (SIS), Germany (BND), France (DGSE), and Turkey (MIT).
In Europe, the 27 members of the EU (European Union) concentrate on economic matters but are now more aware of the efforts and impact of foreign intelligence agencies and operatives. This is particularly true with the Chinese, who have the second largest economy in the world and want to obtain, one way or another, more market share from the United States, which has the largest economy in the world. American GDP is about $26.9 trillion while the Chinese economy is valued at $19.4 trillion. The global economy is currently worth $105 trillion with the Americans controlling 25.6 percent of it and China 18.5 percent.
Government and corporate espionage are heavily involved with monitoring and sometimes disrupting foreign economies when it suits them. The countries with the largest economies, especially those in Europe and the Americas, also depend on non-government BI, or Business Intelligence. The Japanese pioneered the use of BI in the 1960s as they sought to establish foreign markets in the United States, Europe and, as the Chinese economy grew enormously from the 1980s to 2010, the Chinese commercial and consumer markets.
BI played a major role in exposing and documenting Chinese efforts to gain large shares of foreign markets in Europe and the United States. With this evidence available American and European efforts to disrupt and eliminate illegal Chinese trading practices have become effective and the Chinese don’t like it. With China on the defense, the Chinese have to use BI and other forms of espionage to get themselves out of that mess. The Chinese are patient and willing to wait a decade or more to do whatever it takes to recover their market share in western countries.
European nations are now more aware of Chinese using BI as part of their economic trade practices. In the last few years European governments, as well as the Americans have come to realize the extent of the deceptive Chinese trade practices that brought great wealth to China without their foreign trading partners being aware of what was going on. Western BI efforts detected that something was up but not enough to act on. Chinese espionage was more effective at supporting Chinese economic efforts. Some European historians pointed out that, when Europeans began trading with China in the 1500s, the Europeans eventually realized that the Chinese were better at this trade business because they had an early version of BI while the Europeans were learning the hard way what they were up against. It took the Europeans several centuries to figure out how to deal with the Chinese trading practices and when the Americans came along in 1784, after the American Revolution, they started small but by 1844 had their first trade treaty with China and soon came to take a disproportionate share of foreign trade with China.
That didn’t last long because in the 1860s China entered a century-long cycle of civil war and economic disruption. China suffered greatly, with over 30 million Chinese dying and the economy collapsing. It wasn’t until the 1980s that China began to rebuild their economy and trade with foreigners. Western BI was primitive during that period and the Americans and Europeans could not come up with an effective way to make it better. As large as the Chinese market was, the western nations prospered during the 19th and 20th centuries as they traded with each other and jointly created the largest economies the world had ever seen. That lasted until the late 20th century when the Chinese economy began to make a comeback.
The Chinese frequently used BI to maximize their internal and foreign trade. The trade advantages China gained began to weaken in the last few decades as corruption in China and more efficient trade practices developed outside of China, especially in South Korea and Japan. These two nations took more of the trade that had long gone to China. The Japanese made good use of the BI techniques they had pioneered. South Korea followed suit and also became a major exporter. Both Japan and South Korea joined the list of top exporters, with Japan at number five and South Korea at number six. China had surpassed the United States in exporting activity to take first place, with the Americans close behind. This development stirred more American firms to use BI to recover their export markets. That will take a while because the other major trading countries are also using BI.
The Americans also began to crack down on Chinese espionage. In 2023 the United States revealed that two American sailors were arrested and charged with spying for China. Both men were ethnic Chinese who were born in China but grew up in the United States, and one had applied to become a naturalized citizen. Both men provided confidential, not highly classified information, including technical manuals used by sailors to do their jobs on various warships. The two sailors also provided details on planned deployments of some ships. The mother of one of the sailors encouraged her son to cooperate with Chinese intelligence because that might enable him to move back to China and get a better civilian job. That will have to wait until they are out of custody. Both men were jailed pending trial because both were considered a flight risk to China.
Despite years of growing numbers of arrests and prosecutions of Americans accused of spying for China, the Chinese persist. While ethnic Chinese Americans are prime targets for Chinese recruiters of pies or informants, any foreigners with pro-Chinese attitudes are potential candidates for Chinese intelligence officers looking for potential recruits.
A favorite tactic of Chinese intel officers is to arrange for a financial arrangement between Chinese organizations and people China considers potential candidates for Chinese intelligence sources. Much of this effort is concentrated in large English speaking nations like the United States and Britain that have many trading relationships with Chinese firms and institutions. Western universities and faculty were always a prime target because these institutions and their key staff are not seen as a major target for Chinese influence operations. China understands that the staff of universities in the West are recognized by locals as a source of expert opinion on many matters. These faculty members can also be influenced by gifts of cash. These are not called gifts or, more accurately, bribes. Rather the money is considered a grant to support further academic studies on one subject or another. China arranges large grants for such purposes. Government and popular opposition to these programs has not eliminated them, just forced China to change how it implements the program. While Western intelligence agencies remain alert and aware of this program, few others in government or academia seem to be concerned. After several years of indifference by university administrators towards requests to monitor and block Chinese influence efforts, governments are becoming more energetic and aggressive about this.
This was a return to methods last employed over a decade ago. For example, in 2020 an American and two Chinese were indicted for secretly providing China with U.S. technology. The American was Charles Lieber, head of the Harvard Chemistry and Chemical Biology department. He was accused of secretly establishing a working relationship with a Chinese university at Wuhan. Lieber established research efforts at Harvard, recruiting top scientists to work on projects of interest to China and secretly passing research results to China. He also received millions of dollars from China to further this research. During the FBI investigation Lieber repeatedly lied about these activities, which did not prevent the FBI from eventually gathering all they needed to arrest Lieber and indict him. It is rare for China to convince a senior American academic, like Harvard department head Charles Lieber, to get involved in illegal research projects. Why Lieber got involved in such blatantly illegal activities was not disclosed and details probably won’t emerge until his trial.
Also indicted for Harvard related espionage was a Chinese citizen, Zheng Zaosong, who was studying at Harvard on a student visa and was accused of trying to smuggle 21 vials of biological material and research data back to China. The third defendant was Yanqing Yeh, a Chinese student at nearby Boston University. She was also an active duty lieutenant in the Chinese Army who was supervised by a colonel at a Chinese military academy that was working on new technology for the Chinese military. This school was on an American list of Chinese educational institutions that were banned from working with anyone in the United States. Yeh was also caught trying to smuggle research data back to China. Yeh had lied about her military status when she applied for a student visa, asserting that she had been discharged from the army and left out her connections with the banned (in the U.S.) Chinese military academy she was working for as an army officer. She was also accused of being an unregistered foreign agent. Among the items uncovered by the FBI was that Yeh had been assigned to investigate one American academic at the U.S. Naval Postgraduate School who was researching computer security. Given how active China has been using hackers to steal valuable data from the United States, that particular assignment was ominous. Yeh had presented herself as a student but further investigation showed she was a very active Chinese spy.
It is illegal for American academics and researchers to secretly work for Chinese government or commercial firms. These restrictions won’t trigger similar measures for Americans in China because China has long assigned police and intel specialists to closely observe who visiting Americans visit. This surveillance often involves MSS (secret police) agents advising Chinese to refuse such meetings or only do it with an MSS agent present, usually pretending to be an employee of the firm.
Meanwhile, China has been making the most of their access. One recent FBI investigation documented the use of the Chinese Confucius Institute's cultural centers at American universities and how these programs were actually part of a widespread intelligence operation that employed visa fraud for Chinese visiting scholars who were actually MSS operatives. This program recruited Chinese-born businessmen, academics, and others, often naturalized American citizens, to participate in IP, or Intellectual Property, theft. Further encouragement was that some of these operatives could sometimes profit from it personally. Not all these recruits knew they were participating in espionage but the Chinese could effectively pressure their citizens to cooperate. Worse, the FBI discovered that many of the Chinese in the U.S. on J-1 visiting scholars visas spent most of their time on espionage and a bare minimum on actual research.
As successful as this espionage effort was, most of the Chinese Americans approached by recruiters were not interested and politely declined. More importantly, many of them quietly reported their encounters to the FBI or to friends they knew could do it for them. The Chinese knew these alerts to the FBI posed a risk but considered it an acceptable risk given the amount of intellectual property that was being stolen and put to work back in China. The same thing happens when China seeks to recruit informants or spies in the American armed forces.
The United States has been 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.
It was known that China had a state-sponsored program to make it easy for foreign-educated Chinese to return home and apply what they had learned in the West to start their own companies. China offered billions of dollars in venture capital for this program. This made it easier for Chinese moving back to China from the West to establish their own companies using what they learned in the West. This program helped create thousands of new firms. Many of these firms were using stolen trade secrets and patents that were being laundered. That is, changed sufficiently to make it difficult for the owners of the stolen intellectual property to easily prove theft.
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 IP. 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 to 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. Plus the aggressive recruiting of Chinese and non-Chinese academics willing to help China perpetrate the largest IP theft in history.
Participating in this program has become riskier. The growing number of convictions are for conspiring to steal or actually stealing trade secrets. Many of the technologies involved are dual-use, for commercial and military applications. Many of these investigations began when American companies provided the FBI with documentation showing how the Chinese obtained and applied the trade secrets. What the American firms usually lack is information about who was getting the information, often including detailed manufacturing techniques, to the Chinese. The U.S. is not the only victim here. Many other Western nations are experiencing the same losses. Even Chinese neighbor and ally Russia has suffered heavy losses due to this Chinese economic espionage.
There have been a lot more court cases about this because Chinese firms have become bolder in how they exploit stolen software, trade secrets and other technology. In the past, the Chinese were careful in the use of stolen tech when exporting their own military equipment copied from Russian designs. The Chinese had started doing this during the Cold War, which sometimes got fairly hot when there were some deadly border skirmishes in the 1970s, because China and Russia developed some territorial and ideological disputes that did not settle down until the Soviet Union dissolved in 1991.
The Russians are still angry about the continued Chinese theft of their tech, and growing Russian threats over this caused the Chinese to sign agreements in the last decade that declared Chinese firms would stop stealing and reselling Russian tech. In practice, this only slowed the Chinese down, but it placated the Russians for a while. Currently, the Americans are starting to sound like the Russians in the 1990s, but the Americans have more legal and economic clout to deploy and this situation is liable to get ugly before, if ever, it gets better.
By 2012 most American officials had come to openly admit that a whole lot of American military and commercial technical data has been stolen via Chinese internet as well as with more conventional espionage efforts. Details of exactly all the evidence of this is unclear, but apparently, it was pretty convincing for many American politicians and senior officials who had previously been skeptical. The Chinese efforts have resulted in most major American weapons systems having tech details obtained by the Chinese, in addition to a lot of non-defense or dual-use technology. It’s not just the United States that is being hit but most nations with anything worth stealing. Many of these nations are noticing that China is the source of most of this espionage and few are content to remain silent any longer.
It’s no secret that Chinese intelligence collecting efforts since the late 1990s have been spectacularly successful. As the rest of the world comes to realize the extent of this success, there is a growing desire for retaliation. What form that payback takes remains to be seen. Collecting information, both military and commercial, often means breaking laws and striking or hacking back at the suspected attackers will involve even more felonies. China has broken a lot of laws. Technically, China has committed acts of war because of the degree to which it penetrated military networks and carried away copies of highly secret material. The U.S. and many other victims have been warning China there will be consequences. As the extent of Chinese espionage becomes known and understood, the call for consequences becomes louder.
China tries hard to conceal its espionage efforts. Not just denying anything and everything connected to 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.
Undeterred, China has sought to keep its espionage effort going and has even expanded operations. For example, starting in 2008 China opened National Intelligence Colleges in many major universities. In effect, each of these is an Espionage Department where, each year, several hundred carefully selected applicants are accepted in each school, to be trained as spies and intelligence operatives. China has found that espionage is an enormously profitable way to obtain military and commercial secrets and now China trains and rewards those who have a talent for such things and make a career of it. The Internet-based operations, however, are only one part of China’s espionage efforts.
While Chinese Cyber War operations in this area get a lot of publicity, the more conventional spying brings in a lot of stuff that is not reachable on the Internet. One indicator of this effort is the fact that American counter-intelligence efforts are snagging more Chinese spies. This is partly due to increased spying efforts by China, which puts more of their people out there to get caught, as well as more success by the FBI and CIA. All this espionage, in all its forms, has played a large part in turning China into one of the mightiest industrial and military powers on the planet. China is having a hard time hiding the source of the new technologies they are incorporating into their weapons and commercial products. Many of the victims initially had a hard time accepting the fact that the oh-so-eager (to export) Chinese were robbing their best customers of intellectual property on a grand scale. Now Western firms are a lot more wary about dealing with the Chinese.
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 businesspeople 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. There are over a million Chinese students attending foreign universities. Even more Chinese 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 and 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 method 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.