China’s ‘stealing its way up the economic ladder’

Intrigue and deception threaten to plunge China’s relationship with the United States back into the deep freeze and trigger a new economic Cold War.

As the tenth round of trade talks continued in Beijing on Wednesday between the world’s leading economies, the specter of spying hovered over the proceedings.

In an interview with the Council on Foreign Relations, Federal Bureau of Investigation Director Christopher Wray talked about the dangers posed by President Xi Jinping’s administration when he warned:

“No country poses a broader, more severe intelligence collection threat than China. [It] has pioneered a societal approach to stealing innovation in any way it can from a wide array of businesses, universities, and organizations.

“They’re doing it through Chinese intelligence services, through state-owned enterprises, through ostensibly private companies, through graduate students and researchers, through a variety of actors all working on behalf of China.

“At the FBI we have economic espionage investigations that almost invariably lead back to China in nearly all of our 56 field offices, and they span just about every industry or sector.”

Wray then hammered home his point when he made it clear that Beijing has simply ignored, before ripping up, the global rule book.

‘Economic security’

Digging deeper into the “illegal” practices used by the Communist Party government, he accused the world’s second-largest economy of stealing “its way up the ladder.”

“The kind of activity I’m talking about goes way beyond fair market competition. It’s illegal, it’s a threat to our economic security, and by extension, it’s a threat to our national security,” Wray told the New York-based think tank last week.

“But it’s even more fundamental than that. This is behavior that violates the rule of law. It violates principles of fairness and integrity. It violates our rules-based world order that’s existed since the end of World War II,” he continued.

“Put plainly, China seems determined to steal its way up the economic ladder at our expense. And to be clear, the United States – our country is by no means their only target,” he added.

Last month, former General Electric engineer Xiaoqing Zheng and Chinese businessman Zhaoxi Zhang were charged with economic espionage and conspiring to steal trade secrets from GE, according to an indictment unsealed by the US Justice Department.

The incident was the latest in a series of high-profile cases brought by Washington in a broader crackdown launched by President Donald Trump’s administration.

According to the indictment, Zheng stole data on GE’s turbine technology aided by “financial and other support” from Beijing. He has denied the charges.

In response, China’s Ministry of Foreign Affairs issued a scathing statement.

“The achievements of China’s development have not come from theft. It is the result of the Chinese people’s wisdom and sweat,” it stated. “We hope the relevant sides can stop unfounded hype and view, and deal with the relevant issues objectively and rationally.”

Naturally, those comments failed to placate the US with Wray revealing that technology theft by stealth has reached “strategic” proportions.

He indirectly mentioned the “Made in China 2025” program, rebranded and pushed forward to 2030 in the guise of “Intelligence Plus.”

The multi-billion-dollar project is crucial to Beijing’s ambitions to become a technological giant and encompasses an array of industries, from chips, computers and the cloud to smart cars, smart robots and the holy grail of 5G.

“They’re strategic in their approach. They actually have a formal plan set out in five-year increments to achieve dominance in critical areas,” Wray said.

“And to get there they’re using an expanding set of nontraditional methods, both lawful and unlawful, so weaving together things like foreign investment and corporate acquisitions, together with cyber intrusions and supply chain threats. The Chinese government is taking the long view,” he added.

“That’s probably an understatement. They’ve made the long view an art form. They’re calculating. They’re focused. They’re patient and persistent.”

Trade conflict

Last year, Yukon Huang, a senior fellow at the Carnegie Endowment for International Peace, described China’s trade conflict with the US as a “technological war,” with Washington “protecting” America’s status as “the world’s dominant economic power.”

The controversy surrounding telecom group Huawei fits into that scenario.

Set up by former People’s Liberation Army officer Ren Zhengfei, the poster child of “Made in China 2025” has come under mounting pressure amid concerns that its 5G technology will act as a backdoor for cyber snooping by Beijing.

In April, The Times newspaper in the United Kingdom reported that the Central Intelligence Agency, or CIA, had told spy chiefs that Huawei had “received funding from branches of China’s state security apparatus.”

Both the family-run firm and Beijing have denied the allegation.

Still, the US has already banned Huawei equipment because of security issues and has advised its allies to do the same.

Earlier this week, a report by Bloomberg news agency disclosed that one of the world’s largest phone groups Vodafone had discovered software flaws which could allow Huawei unauthorized access to homes and businesses in Italy.

“The issues identified in the story were all resolved and date back to 2011 and 2012,” Vodafone said in response.

Super-fast 5G

Yet major carriers are fighting to stop the Chinese company from being barred in Europe when it comes to super-fast 5G. Huawei has been heavily involved in 4G projects across European Union countries. Dismantling part of that equipment and shutting the group out from future 5G infrastructure ventures would cost billions of dollars and years to fix.

The alternative could be just as unpalatable.

“Overlaying all these threats [from China] is our ever-expanding use of technology: next-generation telecommunications networks like 5G, the rise of artificial intelligence and machine learning, cryptocurrencies, unmanned aerial system, deep fakes … I see blinking red right in front of me and right in front of all of us,” Wray said. “And we grow more vulnerable in many ways every day.”

Those “security risks” have been raised by Treasury Secretary Steven Mnuchin and Trade Representative Robert Lighthizer during countless hours of trade talks. Progress has reportedly been made. But even if a deal is finally sealed in the weeks ahead, the clandestine technology war looks certain to grind on.