The Great Leak Forward: Chinese Economic Espionage
In The U.S.
By Camille Mouillard & Maxime Proud
In September 2015, Barack Obama and Xi Jinping publicly agreed
that the United States and China would not engage in cyber espionage
for commercial gain. The agreement came after China’s corporate
espionage activities began to be seen as a national security emergency,
costing American companies billions of dollars in losses, and
millions of jobs every year.
By espionage for commercial gain, the 2015 agreement between
Obama and Xi was specifically referring to the hacking activities
conducted by state and non-state Chinese actors targeting U.S.
private companies. The agreement did not seem to encompass more
traditional espionage activities, such as intelligence gathering
for political and military gains, and other forms of espionage
such as HUMINT operations. After the agreement, cyber security
experts worldwide have noted a significant decrease in the Chinese
cyber attacks targeting private companies. One might think that
Beijing is ready to adopt a less aggressive posture. However,
knowledge of Chinese intelligence services and the Chinese government’s
global agenda shows that nothing could be farther from the truth.
U.S. As A Prime Target
For many years, Beijing has been conducting a relentless campaign
of economic espionage targeting the most developed nations, including
the United States. In July 2015, NBCNEWS released an exclusive
secret NSA map of the country displaying more than 600 red dots,
each dot representing a unique corporate, private, or U.S government
victim of Chinese cyber espionage since 2010. That means that
for five years, China has conducted approximately one successful
cyber attack against U.S. interests every three days, raising
major concerns in Washington.
More recently, in February 2017, hackers allegedly working for
the Chinese government breached the National Foreign Trade Council
in Washington. NFTC board members include the CEOs of some of
the most successful American companies such as Amazon, Exxon Mobil,
or IBM. Experts believe this attack on the NFTC network was linked
to the trade negotiations between Donald Trump and Xi Jinping
in April 2017. At the same time, PwC and BAE Systems released
a report highlighting the role of a China-based threat actor in
a global hacking campaign. Called Operation Cloud Hopper by PwC
and BAE Systems, it was targeting managed IT service providers
and their clients in a wide range of countries including the U.K,
Japan, India and the United States. Known as APT10, the hackers
successfully gained access to an unprecedented amount of intellectual
property (IP) and trade secrets.
But cyberattacks are not the only way for China to gain access
to America’s IP and trade secrets. For decades, the Chinese
Ministry of State Security (MSS) or Guojia Anquanbu targeted and
recruited Chinese-American in its efforts to infiltrate the highest
levels of the American government. On March 28, 2017 the FBI arrested
Mrs. Claiborne, a State Department employee on the charge of lying
to the FBI about her contacts with Chinese intelligence officers.
The State Department employee, who held a top security clearance,
allegedly received money and other gifts in exchange for information
on Sino American relations. Interestingly, the MSS tried to recruit
Mrs. Claiborne, even though she was not ethnically Chinese.
was not the first-ever Westerner to be approached or recruited
by Beijing, but China’s intelligence services have traditionally
been more cautious with non-Chinese agents and assets. As another
example of Chinese operations in the U.S, electronic technician
Kun Shan Chun, who worked for nearly two decades for the FBI,
was charged with espionage on behalf of China last year. This
case demonstrates that even loyal employees can be turned. Finally,
engineer ‘Allen’ Ho pleaded guilty to espionage in
January 2017, making it the first case of nuclear espionage involving
China in the United States. Beijing has been very creative in
finding new assets: tourists, businessmen, interns, trained operatives,
naturalized citizens, etc.. Even though some individuals do the
work willfully, others endure pressures and are left with little
choice but to comply.
So what makes the United States so attractive for Chinese espionage?
One of the obvious answers is the fact that the United States
is the first world power. The U.S does not only make things, it
creates ideas. As a world leader in almost every aspect of modern
technologies and human development, the U.S. is a prime target
for a developing country like China. Intellectual property-intensive
industries are a major and vital part of the U.S. economy, representing
approximately 40% of the country’s GDP, according to the
Intellectual Property and the U.S. Economy 2016 Report Update.
The same report shows that 45 million jobs in the country are
directly or indirectly linked to IP-intensive industries, accounting
for roughly 30% of all employments in America. These industries
are critical to maintaining America’s competitive edge in
the global economy.
In summary, innovation, creativity and efficiency are what make
the United States such an attractive target. With all the fingers
pointed at Beijing these last few years, one might think that
the country will stop spying on American businesses, and save
face. But the reality is: it probably won’t. The Chinese
Communist Party (CCP) relies on espionage to survive and achieve
its short, medium and long term goals.
Ensuring The Party’s Survival
Since the birth of the People’s Republic of China (PRC)
on the ashes of the civil war between the nationalist of Chiang
Kai-Shek and the communist of Mao Zedong, modernizing the country
has always be an imperative for Beijing. When looking at the big
picture of China’s development as a modern country, one
crucial element is too often dismissed: the importance of Chinese
intelligence services in the building of the nation.
services deeply shaped modern China as a state. As opposed to
other countries, China did not create or developed its intelligence
and security services decades after its birth, nor did it create
them to respond to a peripheral threat. Before the official birth
of the PRC, the communists relied on their intelligence networks
to conduct the civil war and eventually seize power. And since
the Chinese Communist Party (CCP) has been ruling China since
1949, it has had plenty of time to readjust and improve the country’s
intelligence services. As former Canada’s CSIS agent Michel
Juneau Katsuya puts it, Chinese intelligence agencies do not plan
in terms of years, but rather generations. Today, in contrast
with other countries and especially Western democracies, China’s
priorities are aligned with the priorities of a very specific
group of people that has always ruled the country. So when China
as a country gains a significant advantage over foreign nations,
the CCP gains a significant advantage over the Chinese people
by increasing its legitimacy.
About the Authors
Camille Mouillard and Maxime Proud are Junior Associates at
Security Management International.