U.S. Targets China on Economic Espionage

Technology Policy Brief # 55 | By: Henry Lenard | July 21, 2021

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Policy Summary

In public remarks last week President Biden implied that China’s main intelligence service had a role in the cyberattack on Microsoft’s email software earlier this year. Biden’s remarks underscored China’s decades long history of economic espionage.

An unprecedented group of allies and partners – including the European Union, the United Kingdom, and NATO – joined the United States in exposing and criticizing China’s malicious cyber activities. The attacks targeted tens of thousands of individuals and businesses worldwide to acquire proprietary information.

Microsoft has blamed China for the cyberattacks on its Exchange Server software since March, but Biden’s statement was the first time the U.S. government has backed up those claims with a “high degree of confidence.”

Though China is not being sanctioned, a senior U.S. administration official told reporters the White House believes the public shaming sends an important message. The Chinese government has denied any involvement in the cyberattack.

That China was involved is not surprising. The FBI has said confronting the economic espionage threat from the Chinese government is the agency’s top counterintelligence priority.

While other countries partake in economic espionage, the U.S. Department of Justice reports that 80 percent of such cases involve China.

Beyond the effort to acquire US company data through cyberattacks, the Chinese government uses international collaboration in academic and scientific research and business development to directly steal trade secrets and IP. Foreign governments often sponsor talent recruitment programs, or talent plans, to bring outside knowledge and innovation back to their countries.  China is the most prolific sponsor of such endeavors.

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To combat China’s cyberattacks and other economic espionage efforts, separate bills with broad bipartisan support have passed the Senate and House of Representatives that would limit Chinese access to U.S. trade secrets.

The United States Innovation and Competition Act (USICA) has passed the Senate, while the National Science Foundation for the Future Act has passed the House. Each spends at least $100 billion over five years on U.S. research and development.

Both bills prioritize NSF R&D funding for the industries of the future that will drive America’s continued economic growth, like quantum information sciences, artificial intelligence, supercomputing, cybersecurity, and advanced manufacturing.

The Senate bill includes many more provisions attempting to limit Chinese access than the House has to date. Even so, analysts believe that without stronger safeguards than even the Senate bill currently includes, China will still be able to capture new US technology.

Policy Analysis

The U.S.-led announcement pertaining to the Microsoft breach is the most significant action from the Biden administration to date concerning China’s years-long campaign of cyberattacks against the U.S. often involving routine nation-state espionage and the theft of valuable intellectual property such as naval technology and coronavirus-vaccine data.

The separate bills passed by the Senate and House focus on Chinese security threats through espionage, IP theft and foreign recruitment of U.S. researchers, such as through China’s Thousand Talents Program.

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Conversely, there is the use of foreign nationals at U.S. universities in the role of students, faculty, visiting scholars, and postdoctoral researchers that have access to proprietary R&D information.

The National Institute of Health is currently investigating over 500 scientists and more than 90 institutions including universities for their alleged ties with Chinese Talent recruitment programs and the smuggling of U.S. research and technology to the Chinese government. There are multiple documented cases of Chinese trade-secret theft for almost every year of this century.

The U.S. encourages international collaboration in academic and scientific research and business development. American businesses, universities and laboratories, however, need to understand the potential risks and illegal conduct incentivized by Chinese talent plans and take steps to safeguard their trade secrets and intellectual property.

The U.S. and its allies have talked about placing restrictions on universities that work with known or suspected Chinese spies. Another proposal is no-fly lists, rigorous customs screening and worldwide travel limits on such individuals.

FBI experts say China is seeking to become the world’s greatest superpower through predatory lending and business practices, systematic theft of intellectual property, and brazen cyber intrusions.

“The greatest long-term threat to our nation’s information and intellectual property, and to our economic vitality, is the counterintelligence and economic espionage threat from China,” said FBI Director Christopher Wray.

Engagement Resources​

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Official White House statement of July 19, 2021 on Chinese cyberattack:


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U.S. Innovation and Competition Act of 2021:


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National Science Foundation for the Future Act:


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FBI China Threat:


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