China's relentless campaign of industrial espionage

(AP Photo/Andy Wong, File)

The NY Times Magazine published a story today about China’s efforts to steal proprietary information from US (and European) companies. As the story points out, all major countries have spies, but for western countries spying is usually limited to matters of politics and the military. But China doesn’t make a distinction between those areas and the economy, which makes sense if you think about it. From a communist perspective, the state is responsible for everything and everyone. So there is no political or military lane that is separate from the economic lane. Anything that makes China stronger is fair game for spying, especially US technology. And so in addition to cyberattacks, China has worked out a system of appealing to ethnically Chinese people who work in high tech fields in America.

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In March 2017, an engineer at G.E. Aviation in Cincinnati whom I will refer to using part of his Chinese given name — received a request on LinkedIn. Hua is in his 40s, tall and athletic, with a boyish face that makes him look a decade younger. He moved to the United States from China in 2003 for graduate studies in structural engineering. After earning his Ph.D. in 2007, he went to work for G.E., first at the company’s research facility in Niskayuna, N.Y., for a few years, then at G.E. Aviation.

The LinkedIn request came from Chen Feng, a school official at the Nanjing University of Aeronautics and Astronautics (N.U.A.A.), in eastern China. Like most people who use LinkedIn, Hua was accustomed to connecting with professionals on the site whom he didn’t know personally, so the request did not strike him as unusual. “I didn’t even think much about it before accepting,” Hua told me. Days later, Chen sent him an email inviting him to N.U.A.A. to give a research presentation.

Hua had been born in China and still had family there so he saw the trip as a combined stroke of his professional ego but also a free trip to relatives. But there was a problem. He knew GE would probably not approve the trip since the work he did was proprietary. So he simply didn’t tell them. He warned his Chinese sponsors in advance that he couldn’t talk about his own work in any real detail but planned to give a talk on the general topic.

A few dozen students and faculty members attended Hua’s talk. They asked several questions that Hua was happy to answer. “I remember one student asked specifically about the architecture of the material I was talking about in my presentation,” he says. “I said: This is G.E. proprietary information. I am just using this picture as an example, but I cannot share the details of what we are designing or using.”

After the presentation, Chen handed Hua an envelope filled with $3,500 in U.S. dollars — reimbursement for his plane ticket and an honorarium for the talk. Then they went to dinner with Qu and a couple of professors. That night, Hua took a train back to Shanghai; the next day, he flew back to the United States. Once home, he realized he had forgotten to delete his presentation from the computer at the university auditorium in Nanjing. He was concerned because the slides included some pictures with G.E.’s logo. “So,” Hua told me, “I emailed one of the students and said, Hey, can you delete the presentation?” He thought that would be the end of the matter.

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About six months later, he was called in to a meeting with GE’s security officers. They asked him a bunch of questions about the trip to China that he’d never told them about and then introduced two FBI agents.

Hua was shaking with nervousness, one of the agents told me in an interview. He repeated the answers he had given to his employer’s security officers. Hull proceeded to ask more questions about the trip, giving Hua several chances to amend his story and signaling that he didn’t think Hua was being truthful. Finally, he confronted Hua with evidence showing that Hua had met with people other than just friends and family. He had also paid a visit to the Nanjing University of Aeronautics and Astronautics.

Hua sank into his chair as if knocked back. It was a crime to lie to a federal agent, Hull told him. He advised Hua to relate everything he could remember about the visit to N.U.A.A. Hua, in shock, wasn’t immediately forthcoming, but over the course of the interview, as Hull pressed him with follow-up questions, Hua ended up providing an account of why he visited Nanjing and what he did there. The agent who spoke to me described the interview as incremental truth telling.

The FBI searched his home, his car and then told him he wouldn’t be prosecuted if he were willing to “cooperate and take part in a counterintelligence operation against the Chinese.” The FBI was convinced that Hua’s trip to China was part of an Chinese intelligence operation designed to recruit him for economic espionage. So a year and a half later, with guidance from the FBI, Hua contacted his Chinese handler and said he’d be willing to come back for another visit. The FBI meanwhile had gained access to the email accounts used by the Chinese handler and eventually from there accessed some cloud accounts which turned out to be very revealing.

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This included confirmation of what they had suspected all along: that Qu worked for Chinese intelligence. His real name was Xu Yanjun. He had worked at the Ministry of State Security since 2003, earning six promotions to become a deputy division director of the Sixth Bureau in the Jiangsu Province M.S.S. Like so many of us, he had taken pictures of important documents using his iPhone — his national ID card, pay stubs, his health insurance card, an application for vacation — which is how they ended up in his iCloud account.

Another trip to China was set up but at the last minutes, as planned, Hua backed out saying he had to travel to France for work that week. Xu, the Chinese intelligence officer, was disappointed but later agreed to try to meet Hua while he was on his trip. In fact, the FBI was hoping to get Xu to arrange to meet in a European country that would agree to arrest and extradite him.

Behind the scenes, U.S. authorities had been working to secure cooperation from a European country, which they ultimately got from the Belgian government. Hull had Hua explain to Xu that he couldn’t come to Amsterdam on March 31 as planned because his boss had asked him to visit a plant in Belgium. He could meet on April 1 instead, and it would have to be in Brussels…

The meeting was set for 3 in the afternoon. But Xu went to check out the coffee shop a few hours earlier, accompanied by a colleague from the M.S.S. The two men walked through the galleries. As they approached the coffee shop, Belgian federal police officers placed them under arrest. In addition to two smartphones and about 7,000 euros, Xu and his colleague had $7,000 in hundred-dollar bills — cash that they presumably planned to give to Hua that afternoon. Six months later, Xu was extradited to the United States to face charges of economic espionage.

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Xu was tried and convicted of economic espionage. He was later sentenced to 20 years in prison. As for Hua, he lost his job at GE early on and it took him a while to find any engineering job again.

The whole thing is worth reading if you have time. Hua’s situation is really just one example of a much broader economic espionage program China is constantly engaged in against US companies, engineers and academics. Much of China’s tech sector is built on theft from the individuals and companies that actually develop new technology here in the US.

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