US Emphasizing Export Controls, Investment Screening to Combat Chinese Tech Theft, State Department Official Says

The Trump administration is prioritizing efforts surrounding its export controls, investment screening and diplomacy to restrict China from acquiring sensitive dual-use technologies, a senior State Department official said. The official, speaking to reporters March 12, said China has ramped up technology theft and said companies and research institutions should be cautious of any attempts by Chinese companies to divert their products for military end-use, which are often masked in “incentives and inducements.”

“We have certainly looked at our export controls … with a more jaundiced eye towards this. We have expanded our investment screening processes. Cases of [intellectual property] theft are being prioritized,” the official said. “So we’ve undertaken a lot of actions as a government to do something about it.”

The State Department comments came as the administration continues several efforts to restrict sales of critical technologies to China. The Commerce Department is working on export controls for emerging and foundational technologies (see 2002040057), and the recently issued regulations for the Foreign Investment Risk Review Modernization Act expanded the Committee on Foreign Investment in the U.S.’s jurisdiction to screen investments that may lead to diversion of critical technologies (see 2002270049).

The administration is highly concerned with China’s intention to dominate certain technology sectors by 2025, including artificial intelligence, which could undermine U.S. technology dominance and weaken national security, the official said. “It fundamentally violates the norms of international trade, the assurances that countries supply and provide in terms of where dual-use technology is going to end up.” The U.S. has a plan to combat China’s strategy, the official said. “Every country has a right to revise and review its export controls and investment screening procedures,” the official said. “So that’s what we’re doing.”

The U.S. is also working to convince other countries to spurn certain business partnerships with China and its companies. The administration scheduled a meeting this month with Japan and the European Union to advocate for improved scrutiny of foreign investment screening (see 2002260042) and has lobbied multiple countries to reject telecommunications equipment from Huawei, failing in the case of the United Kingdom (see 2002040056). “We have to work with our partners internationally to try to get a hold of this challenge,” the official said.

While the official declined to say whether the administration is asking countries to cut off business ties with China, he said the U.S. wants them to be aware of China’s technology-stealing practices. “I think how I would characterize it is, just based on our experience, our eyes are open to what China’s doing in a way that our eyes weren’t open to before,” the official said. “And so now we’re working with our partners internationally to try to help them open their eyes as well.” The U.S. is focusing on countries with producers of “advanced technologies,” the official said.

Countries have been receptive in those discussions, the official said. “I can say that everyone has concerns with this. These are fundamental nation-state concerns,” the official said. “So from that perspective I think a lot of the countries we’ve engaged have understood what’s going on.” But the official said it may take longer for all U.S. allies to recognize the threat, the official said. “It took us a while to fully open our eyes. So I think it would be premature to expect all of our partners to have their eyes just snap open suddenly and know what to do.”

Despite these efforts, the U.S. does not want to “cut off our interactions with China,” including trade of technology and all business partnerships. “That’s not what we’re trying to do ... it’s a fool’s errand to try to do that,” the official said. “We benefit greatly from both our economic exchanges, our business exchanges with China, as well as our research with China. But my responsibility is for national security, and we have to look out for that aspect of it as well, and so that’s what we’re trying to do.”