Top intelligence and law enforcement officials in Washington are issuing a stark warning to American companies: The Chinese government wants to replace you.
That message comes in a new CNBC documentary, “China’s Corporate Spy War,” which details the increasing sophistication of Beijing’s efforts to steal sensitive U.S. technology and corporate information.
For years, corporate America largely saw theft by the Chinese government and state-run companies as an attempt to catch up with advanced U.S. technology. But officials now say the effort is more nefarious than generally understood, viewing — in many cases — an adversary that wants to eliminate the American companies they are targeting, not just narrow the gap between Chinese firms and their U.S. competition.
Asked whether the Chinese government wants to compete with or eliminate American companies, FBI Director Christopher Wray told CNBC: “Well, their definition of competing, I think, involves embracing the idea of eliminating.”
In an interview, Sen. Marco Rubio, R-Fla., warned that U.S. companies are “committing long-term suicide” by doing business with China and risking their high technology trade secrets.
“I think every major American corporation in any of these fields needs to assume that they are a target to be either replaced or gutted,” Rubio said.
His Democrat counterpart on the committee, Sen. Mark Warner, D-Va., admitted in an interview with CNBC that he brought an approach to China that has turned out to be wrong.
“I was part of the more general consensus: the more you bring China in the [World Trade Organization] … everything’s going to come along,” Warner said. “And that presumption that we were all working on, that the closer we all come together, it’s going to be kumbaya, I think has proven to be factually wrong.”
“China’s Corporate Spy War” details an FBI sting operation that took down Chinese Ministry of State Security officer Xu Yanjun, a spy who targeted employees at icons of the U.S. aerospace industry, including GE, Boeing and Honeywell.
In 2017, Xu Yanjun pursued an engineer at GE Aviation who had valuable knowledge of the company’s jet engine composite fan blade technology. Posing as an academic official and using a fake name, Xu was introduced to the GE engineer who was visiting Nanjing, China, to give a speech at a prestigious university. Xu began a pressure campaign to get the engineer, who had family in China, to reveal more and more information about the engine tech the Chinese government had targeted.
But the FBI discovered the GE engineer’s travel and alerted GE, which confronted the engineer in a dramatic meeting at the company’s Cincinnati offices. FBI agents presented the engineer with a stark choice: He could face the consequences for his actions so far, or he could cooperate with U.S. law enforcement in an operation to expose the Chinese operation.
When the engineer agreed to cooperate, he became a double agent — working for the FBI against the Chinese spies.
Decorated 31-year CIA veteran James Olson, the agency’s former chief of counterintelligence, called the operation a textbook double agent operation. U.S. intelligence ought to be running more double agents back against Chinese intelligence in order to frustrate their efforts to gather American secrets, he added.
China’s embassy issued the following statement to CNBC:
The Chinese government has never participated in or supported anyone in any form in stealing commercial secrets. Some people and institutions in the US have been making false accusations. We ask the US side to handle the case without bias and in accordance with the law and protect the lawful rights and interests of Chinese citizens.
These facts show that China remains a popular destination for foreign investment. The American Chamber of Commerce in South China (AmCham South China) recently released its 2023 White Paper on the Business Environment in China, which noted that more than 90% of the participating companies select China as one of the most important investment destinations and 75% of the companies plan to reinvest in China in 2023. This is because China has a huge market and full-fledged industrial and supply chain networks. It is also a result of our relentless effort to advance high-level opening up, our support for the multilateral trading system and a market-oriented, world-class business environment governed by a sound legal framework.
This past January saw an influx of foreign investment into China. The paid-in foreign investment reached 127.69 billion yuan, up 14.5% year on year. Foreign companies including US investors have been upbeat about the China market and plan to expand in China. According to statistics from the US Department of Commerce, total trade in goods between the US and China hit a record $690.6 billion in 2022. All this speaks to the fact that trade and investment cooperation between China and the US are mutually beneficial and win-win. Decoupling and cutting off industrial and supply chains benefits no one. It has no support and will not lead anywhere.
No matter how the international landscape may change, we will not waver in our resolve to open wider at a high standard and our determination to share development opportunities with the rest of the world. We welcome US and other foreign companies to access the Chinese market, share development dividends and work together for a stronger world economy.
Xu Yanjun’s attorney declined CNBC’s interview request. Former GE engineer David Zheng declined to comment. A GE spokesperson, in a statement sent to CNBC on Wednesday, said: “Intellectual property is among our most valued assets, and we appreciate the Department of Justice’s efforts in pursuing this case.”