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Chinese Government-Paid Scientists Plead Guilty to Stealing Research From an American Children’s Hospital

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Trans-Pacific View | Diplomacy | East Asia

Chinese Government-Paid Scientists Plead Guilty to Stealing Research From an American Children’s Hospital

The same week, hundreds of NGOs urged the U.S. attorney general to designate the Chinese Communist Party a “transnational criminal organization.”

Chinese Government-Paid Scientists Plead Guilty to Stealing Research From an American Children’s Hospital
Credit: Flickr/ Jamie Davies

A Chinese researcher pled guilty on July 30 for conspiring to steal proprietary trade secrets from a hospital research institute in the United States, and for the wire fraud that accompanied the theft. This was no ordinary hospital research facility, either. The victim was no less than the Nationwide Children’s Hospital’s Research Institute. The hospital earned a place on the Honor Roll in U.S. News and World Report’s latest rankings of similar hospitals in America.

The FBI called the theft “another example of economic malfeasance related to the People’s Republic of China.” It added that “far from being an isolated incident, we see the PRC implicated in around 60 percent of all trade secret theft cases.”

The case illustrates one of the worst sides of the Chinese Communist Party’s campaign to empty out the intellectual property coffers of not only the United States, but anywhere in the world where a hard-won nugget of scientific or engineering value may lurk.

The FBI said that researcher Li Chen “betrayed her employer of 10 years by stealing trade secrets from this American institution and transferring them to China after receiving payments from the Chinese government.”

Chen “was a trusted researcher at Nationwide Children’s Hospital, conducting cutting-edge U.S. government-funded research,” said the FBI. “With her guilty plea, she admits that she abused this trust to establish a company in China for her own financial gain.”

The secrets — at least five of them, according to the FBI — that Chen admitted she stole relate to exosomes. Exosomes are “key mediators of cell to cell communication, delivering a distinct cargo of lipids, proteins and nucleic acids that reflects their cell of origin. The exosomes released by regenerative cells such as stem cells, for example, are potent drivers of healing and repair,” according to Exopharm, an exosome medicine company. Both Chen and her husband (who is an alleged co-conspirator) worked in Nationwide medical labs for 10 years each.

The plea agreement says that Chen started a company in China to sell exosome isolation kits, and that she admitted to “receiving benefits from the Chinese government, including the State Administration of Foreign Expert Affairs and the National Natural Science Foundation of China,” while also applying for funds from “multiple Chinese government talent plans,” which China uses to soak up foreign technology and research for its own benefit.

Broadening the effect of the theft, a NASDAQ-listed American company, Avalon GloboCare, bought Chen‘s Chinese company. According to the FBI, Chen “agreed to forfeit approximately $1.4 million, 500,000 shares of common stock of Avalon GloboCare Corp. and 400 shares of common stock of GenExosome Technologies Inc.”

This case, and hundreds of others like it, point to direct collaboration with CCP-run talent attraction and other programs aimed at hoovering up primarily STEM-related IP from advanced foreign academic, business, and government research environments. This case also points to a level of official Chinese cynicism so great that it overrides what is supposed to be the key operating principle of Chinese culture: face.

CCP talent programs and the chicanery they invite are now well-known around the world. For a country and culture that purports to operate on the value of “face” — supposedly the currency of every relationship – it should defy logic that the CCP itself would bait Chinese living abroad to commit wholesale thievery in their host countries, and openly enrich them for doing so. The loss of face for the Chinese nation and people would surely act as a barrier to such behavior.

Apparently not. In fact, nothing so clearly illustrates how far the CCP has strayed from traditional Chinese cultural values than its current trend of recruiting well-educated Chinese citizens abroad, and encouraging them to betray their employers and colleagues by committing felony theft of that very employer‘s property, the development of which has often been funded by foreign taxpayers. In the United States alone, FBI Director Christopher Wray reported on July 7 that his agency is “opening a new China-related counterintelligence case about every 10 hours,” and that of the 5,000 such cases currently on their books, “almost half are related to China.”

By any definition of the word, the CCP is engaged in a conspiracy to steal from America, and is doing it in broad daylight. The CCP reads the news, so they know that we know. And since the theft, according to Wray, is ongoing and gives the FBI cause to open at least a case a day that is China-facilitated, the only possible conclusion is to say that the Chinese Communist Party leadership feels no shame or embarrassment in having been caught red-handed. In fact, they appear to have been emboldened by their “success” so far.

Not only do the U.S. prosecutions of CCP-facilitated cases of IP theft seem to be of little consequence to Chinese officialdom, the Chinese citizens who are used as a dragnet to pull in cutting-edge technologies and breakthroughs also appear to be expendable to the CCP, as the risk of being caught and convicted is growing. In the United States, the FBI has been exponentially developing its counterintelligence capabilities, with China as a particular target.

What smacks almost of desperation to acquire technologies at any cost is indeed counterintuitive on the surface of things. The reputational damage to China as a nation and to hard-working, honest Chinese themselves is incalculable.

So what explains China’s shortsightedness, and its seemingly carefree attitude toward its reputation – indeed, toward its “face”?

One group of human rights activists and NGOs thinks it has the answer.

Late last month, a letter signed by “hundreds of U.S. and international religious and human rights groups and activists” was delivered to U.S. Attorney General William Barr.

The letter urges Barr “to declare the Chinese Communist Party a ‘transnational criminal organization,’ or TCO.”

Among other crimes, the letter states that “for decades, the CCP perpetrated and proliferated IP embezzlement and economic espionage on Americans and U.S. businesses, resulting in theft and loss of vast wealth and prosperity. The extent and breadth of the criminal reach of the CCP knows no bounds.”

TCO designation in the United States has been used groups such as MS-13. If so designated, the CCP and its members would be slapped with multiple layers of penalties and sanctions anywhere in the world that U.S. laws have teeth.

Whether or not the United States would go so far as to officially designate the ruling party of China as a “criminal” organization remains to be seen. Nonetheless, just the concept is powerful.  It would certainly go a long way to explaining why the Chinese Communist Party is acting as a buyer of stolen goods.