International Affairs Academy
Document of the Day
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The annual cost to the U.S. economy of counterfeit goods, pirated software, and theft of trade secrets is between $225 economy of counterfeit goods, pirated The Chinese government is the world’s principal infringer of software, and theft of trade secrets is intellectual property, and it uses its laws and regulations to put foreign companies at a disadvantage and its own companies at $225–$600 BILLION an advantage. U.S. business interactions with foreign counterparts should be based on the principles of reciprocity, should be grounded in the rule of law, and should seek to uphold our market-based economy and its innovative ecosystem. The Chinese government, however, does not play by the same rules.
CHINA’S TECHNOLOGY DEVELOPMENT STRATEGY
China’s strategic goals include becoming a comprehensive national power, creating innovation-driven economic growth, and modernizing its military. It aspires to equal or surpass the United States as a global superpower and infuence the world with a value system shaped by undemocratic, authoritarian ideals. Using a whole-of-society approach to achieve these goals, China takes advantage of every opportunity— from joint ventures to economic espionage—to develop and maintain a strategic economic edge. To achieve its strategic goals, China relies on state-directed plans, which provide insight into the kinds of intellectual property and trade secrets the country targets and seeks to acquire from foreign sources. These plans govern foreign acquisition in science and technology, and their scale and infuence are impressive. Comprehensive National Power
CHINA’S STRATEGIC GOALS
Innovation-Driven Economic Growth Model Non-Traditional Collectors Joint Ventures Research Partnerships Academic Collaborations S&T Investments Mergers & Acquisition Front Companies Talent Recruitment Programs Intelligence Services Legal and Regulatory Environment Military Modernization This document focuses on the activities of the government of the People’s Republic of China. References to “China” in this document mean the government of the People’s Republic of China.
CHINA: THE RISK TO CORPORATE AMERICA
Made in China 2025 Plan The Made in China MADE IN CHINA 2025 2025 Plan lists 10 domestic Chinese industries in which China seeks to significantly reduce its reliance on foreign-produced technology and develop 70% of the components for these projects in China: Information technology Computer numerical control machine tools and robotics Electric power equipment Marine engineering equipment and high-tech ships Agricultural equipment Aerospace equipment Advanced rail transportation equipment New materials Biomedicine and high-performance Energy-efficient and new-energy automobiles medical instruments
FOREIGN TRADECRAFT USED AGAINST BUSINESSES
Corporate Targets of Foreign Adversaries If your company has a technological edge, expect foreign adversaries to target your technology—including your developmental process and those who have access to your technology. If your company is negotiating with another company or country, foreign adversaries could target your negotiators or negotiation strategy. Some of the information they target might seem insignificant, but by bypassing the research and development phase and stealing your proprietary business information, foreign adversaries can gain a competitive economic advantage.
Foreign adversaries might target your:
• Access protocols
• Acquisition strategies
• Budget estimates or expenditures
• Computer access protocols
• Computer network design
• Confidential documents
• Corporate financial data
• Corporate strategies
• Customer and employee data
• Equipment specifications
• Hiring or firing strategies and plans
• Investment data
• Manufacturing plans
• Marketing strategies
• Proprietary formulas and processes
• Negotiation strategies
• Passwords for your computer, phone, or accounts
• Phone and property data
• Pricing strategies
• Proprietary research, formulas, and processes
• Prototypes or blueprints
• Sales forecasts
• Software, including source codes
• Technical components and plans
• Vendor information and supply chain
Foreign adversaries who might target your company’s employees, intellectual property, or business information include:
• Foreign commercial rivals and foreign governments
• Foreign academic institutions
• State-owned enterprises—companies that are directed by foreign governments
Tactics China Uses to Target U.S. Businesses and Their Employees
To support its military and commercial research, development, and acquisition, the Chinese government leverages foreign investments, commercial joint ventures, business relationships originating from academic exchanges, and state sponsored industrial and technical espionage.
Business Techniques
The tactics below all represent legitimate business opportunities for your company. However, foreign adversaries might use any combination of them to strategically target your company.
JOINT VENTURES, including long-term visits, might provide an opportunity for a competing company to obtain restricted information and gain access to a vulnerable collaborative environment. Joint ventures can give foreign companies an opportunity to spot, assess, and befriend employees who might assist—either wittingly or unwittingly—in collecting restricted information during the joint venture or in the future.
Indicators that a joint venture might actually be a threat to a company include:
• A formal connection between the partner company and
• Obtaining sensitive information without a need to know a state-supported development goal • Use of offshore addresses for transshipment points
• Unauthorized access of proprietary information
• Company website under construction for long periods
• Funding provided by a foreign government entity
• Limited information about the company on websites
• Claims by the company with which you plan to partner in
• Requests from the potential partner company for foreign patents that it was the sole inventor of products on sensitive programs not related to the developed in a joint venture joint venture
VISITORS entering your facility might pose a security risk to your intellectual property or competitive edge. Some visitors could verbally elicit information, some might brazenly ignore the security restrictions of a tour, and others could use concealed electronic devices to obtain restricted information or access.
ACADEMIC COLLABORATION could open the door to foreign actors who target your employees based on their connections to universities or published scientific research. By participating in collaborative academic opportunities, such as incubators or joint research centers, employees might unknowingly pass intellectual property or confidential information to a foreign adversary. These opportunities to collaborate might also provide an opportunity to spot, assess, and befriend employees who might assist—either wittingly or unwittingly—in passing your research and development to a foreign adversary.
TALENT RECRUITMENT PROGRAMS (also called talent plans) are a vital part of a Chinese government national strategy to enhance Chinese civilian and military programs in key areas critical to China’s development. Talent plans integrate foreign technology into China by recruiting experts from businesses and universities across the globe to all technical jobs that drive innovation and growth in the economy. Various Chinese government talent programs use financial, personal, and professional benefits in exchange for working with universities, businesses, and state-owned enterprises in China. Talent plans target scientists, engineers, professionals, foreign government employees, and contractors to bring foreign research and technology with them to Chinese universities, businesses, and state-owned enterprises in China. All talent programs constitute a contractual funding source from a foreign government. Association with talent plans by itself is not illegal; however, potential participants and their current employers should be aware of legal issues that may arise as a result of participation, including economic espionage or violations of export-control laws. A simple download of intellectual property or proprietary information could become criminal activity.
TRADE SHOWS AND CONFERENCES provide a fertile environment for foreign adversaries to assess technology, identify and gain access to company personnel with knowledge of the technology, and illicitly acquire intellectual property. Foreign adversaries target those who want to demonstrate their expertise and are in a position to share their company’s information.
FOREIGN TRAVEL can leave U.S. employees vulnerable to targeting through covert searches of luggage and hotel rooms, extensive questioning, manufacture of compromising situations, and confscation of electronics. Foreign governments do not operate under the same laws or observe the same privacy rights that the U.S. government observes.
ELICITATION of information about your company can come in many forms. A foreign adversary might try to elicit information by using fattery, indicating interest, asking leading questions, claiming a mutual interest, or feigning ignorance.
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