China Emphasizing Efforts to Steal Tech From Inside US Companies, Universities, DOJ Official Says

The Chinese government is placing more of an emphasis on infiltrating U.S. companies and universities to steal export controlled technologies, said John Demers, the U.S. assistant attorney general for national security. China has increasingly turned to its intelligence agencies, such as the Ministry of State Security, to embed officials in U.S. institutions, Demers said.

Demers, speaking during an Aug. 12 virtual talk hosted by the Center for Strategic and International Studies, said “most of the cases” recently brought by the Department of Justice on technology theft charges have involved the Chinese government stealing technology from within U.S. entities. He said China has recently “shifted tactics” to send experienced intelligence officials to steal technology. “When you bring in the intelligence services, what they're really good at is developing relationships to get information,” Demers said.

Justice has increased outreach to companies and universities to inform them about these “insider cases,” Demers said, although outreach with universities has proved more challenging. While U.S. companies naturally want to keep their intellectual property and trade secrets private, the idea of restricting information runs counter to the goals of many academic institutions, Demers said.

“When I go to a company and I say the most important thing is that you protect the intellectual property that differentiates you from your competitors … it's like, no duh,” Demers said. “But the hallmark of being successful in universities is publishing your findings, not keeping them secret to monetize them. And you go there and you start to talk about theft of intellectual property, and it sounds very different.”

Although the COVID-19 pandemic has curbed Justice’s ability to do outreach, Demers said the agency is still trying to educate universities on risks posed by China and the penalties involved in releasing export controlled technology. The agency is especially focused on ensuring professors, researchers and students disclose any relationships with the Chinese government. “If you're comfortable that your professor has this relationship with China and it's all openly disclosed to you, we're not going to tell you that you cannot [share information], unless the information is classified or export controlled,” Demers said. “But we are going to push the value of transparency.”

Demers also said the Committee on Foreign Investment in the U.S. has seen an increase in “Chinese appetite for large volumes of sensitive personal data.” He said CFIUS has been reviewing proposed acquisitions involving U.S. health insurance and financial services companies “that wouldn't traditionally be thought of as falling within CFIUS” -- mostly because the transactions involve the acquisition of personal data.

“CFIUS was traditionally thought of as protecting technologies,” he said. “But as you think about the fact that more and more smart technologies exist, and those smart technologies are gathering data continually on your life ... we’ve had a lot more of those [acquisitions] come through the CFIUS process.”

While the U.S. continues to restrict exports to China and Chinese investments and to guard against Chinese 5G networks, it has also had more success in convincing allies to do the same, Demers said. China’s “behavior during the coronavirus” -- including its interference in Hong Kong (see 2008070039) and its human rights abuses of Muslim minorities in Xinjiang (see 2007310028) -- has helped U.S. allies move “into our camp,” he said.

“It's been a difficult road,” Demers said. “But Hong Kong and the Uighurs have been the biggest issues, especially in my discussions with the Europeans, that have really brought to life some of the risks we're talking about.”