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China’s Amateur Spying Problem  (Page 2 of 3)

The French intelligence services have admitted to being involved in intelligence operations to support French business interests. However, French economic espionage never seems to make headlines. It’s not as though economic espionage is easy to uncover and to prosecute, especially in democracies with high burdens of proof like the United States. These two questions suggest something about China that encourages untrained amateurs to pursue criminal entrepreneurialism, and Chinese researchers to tap foreign sources of knowledge by any means necessary.

The National Counterintelligence Executive’s (NCIX) answer to these questions is to hold the Chinese government responsible. Perhaps it’s an offshoot of the “grains of sand” view of Chinese intelligence – a view that posits a vast network of collectors with Beijing at the center sweeping up technology. Or perhaps it’s based on the assumption that the Chinese state owns the economy, making economic espionage Beijing’s prerogative.

But while the Chinese state may be at the heart of the economy, the market reforms of the last thirty years have reduced Beijing’s control over the day-to-day company matters and created business interest groups that pressure the government – national and local – to support their more narrow and parochial interests. The overriding concern with GDP growth has also given companies more freedom to operate.

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Unfortunately, the NCIX report challenges this view with little justification and, in some cases, misunderstanding Chinese government programs. The report tells us, for example, the 863 Program “provides funding and guidance for efforts to clandestinely acquire U.S. technology and sensitive economic information.” However, Beijing initiated the State High-Tech Development Plan (known as 863 because of its start date in March 1986) to guide and to fund a research program for national technological modernization. It’s an overt program to fund scientific and engineering advancement, not a clandestine slush fund. At least in this respect, the Chinese government is guilty only of trying to incentivize Chinese researchers into developing world-class capabilities in strategic technology areas as fast as possible.

However, 863 Program funding makes its way into illicit technology theft in two ways: anxious recipients who can’t complete a project with indigenous parts and criminal entrepreneurs who seek to exploit the program. For example, Silicon Valley software engineers Ye Fei and Zhong Ming attempted to transfer intellectual property to a company in China, with the FBI’s investigation revealing the two sought 863 Program sponsorship for a company they planned to start with their ill-gotten technology.

The problem is Beijing has put a lot of money on the table without much in the way of guidelines for how researchers go about fulfilling their grants in an increasingly competitive and marketized Chinese economy. Combine this with a loose regulatory environment for intellectual property rights’ protection and the result is a big gray market for technical gadgets and specialized components needed to overcome technical hurdles and meet project deadlines. While the broad contours of the needs of Chinese leading laboratories can be identified, the specific requirements are as unpredictable as technical glitches, giving Chinese economic and industrial espionage a scattershot look despite its focus.

If the report lacks an appreciation for the marketization of China’s defense and high-tech industries, it fares even worse on the cyber front. “No evidence of involvement by independent hackers in economic espionage has been found in intelligence or academic reporting to date” may be technically true – intelligence or academic reporting that feeds into NCIX may not contain such references – but the reasoning is suspect if not outright false. The absence is “in large part due to the absence of a profitable market for the resale of stolen information.”

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