By copying or stealing new technologies through espionage or violation of the IPR norms, Chinese firms have been able to spend more on production by undercutting the prices of global competitors which need to develop such technologies through protracted research and development, spending millions.

‘Designing a chip can take hundreds of labour days and millions of dollars, simply copying it is cheaper and faster.’ When John D Halanka wrote it in ‘Espionage in the Silicon Valley’ around a decade ago, he never thought that the issue of industrial espionage or the theft of Intellectual Property Rights (IPR) would attain such crucial geopolitical dimensions impacting the relations between countries. China with its ambitious designs to emerge as a superpower is at the centre of this controversy. That is why Christopher Wray, the Director of the Federal Bureau of Investigation (FBI) had rightly commented; ‘The greatest long-term threat to our nation’s information and intellectual property, and our economic vitality is the counterintelligence and economic espionage threat from China.’ To substantiate his claims, Wray held that the FBI was opening a new China-related counterintelligence case about every 10 hours and of the nearly 5000 active cases currently underway in the US, almost 50 percent were related to China. And the quantum of Chinese Intellectual Property theft, according to the US congressional estimate, was to the tune of 225-660 billion dollars yearly. The issue is not limited to the US alone, but many other countries across the world.

China had prepared the blueprint for its clandestine operations in the cyberspace as early as in 2006 when it formulated the ‘National Medium-to-Long Term Plan (MLP) for the Development of Science and Technology (2006-2015)’ as part of the ‘great rejuvenation of the Chinese nation’. While the programme was progressing, Xi Jinping, in his address at the 17 th General Assembly of the members of the Chinese Academy of Sciences in 2014 made an appeal to the scientific community that China must catch up and try to surpass the world’s major countries in scientific and technological development. Highlighting the monopoly of other countries in many sensitive areas of science and technology, he stressed that important opportunities made available by the new scientific, technological and industrial revolution should be seized and made use of in building a strong and innovative country.

Thus, while pursuing an innovation driven indigenous strategy for the speedy development in the areas of science and technology, China had also focused on foreign technology transfer for which they had ‘institutionalised a system that combined legal and illegal means of technology acquisition from abroad’. They extensively use the new technologies/applications in cyberspace. In 2022, ‘Cybereason’, a security firm engaged in anti-hacking strategies, claimed that they discovered Chinese government-linked hackers targeting sensitive data from over thirty technology and manufacturing firms in the US, Asia and the Europe since 2019. It was also found that the hired hackers of the Ministry of State Security (MSS) – the key intelligence apparatus of China – were behind several of these attacks carried out for profit. In July 2020, the United States Department of Justice indicted two Chinese hackers on charges of computer intrusion targeting intellectual property and confidential business information, including COVID-19 research. These two hackers had allegedly worked with the Guangdong State Security Department of the MSS.  Besides, there are thousands of personnel attached to foreign information analysis and diffusion centres spread across China for the interpretation and analysis of open-source science and technology data to support defence and industrial enterprises there.

Besides the application of the novel computer network exploitation (CNE) through hacking and other techniques, China uses different sources such as the joint ventures, overseas Chinese and other open channels for the IPR thefts/foreign technology transfer. In many instances, the foreign firms are induced to partner with local companies which use the facility to enhance their technical knowhow in that particular sector. For example, Japanese and European rail firms have alleged that Chinese rail companies used technology from joint ventures to improve their potential in highspeed rail. The Spanish wind-power producer ‘Gamesa’ had also come up with similar allegations of misusing the joint-ventures for the advantage of local firms. The US Trade Representative in his Report to the American Congress in 2016, highlighted this as ‘intellectual property rights holders face not only a complex and uncertain enforcement environment, but also pressure to transfer intellectual property rights to enterprises in China through a number of government policies and practices’. But the irony is that China seldom pays much heed to such reports, nor complies with the rules framed by the World Trade Organization (WTO) streamlining the IPR or interrelated rules/regulations.

The Chinese designs on such matters are clear. By copying or stealing new technologies through espionage or violation of the IPR norms, the Chinese firms have been able to spend more on production by undercutting the prices of global competitors which need to develop such technologies through protracted research and development, spending in millions. In the words of James Lewis, senior vice president and director of the Centre for Strategic and International Studies – Technology Policy Program, New York, ‘the Chinese policy is to extract technologies from Western companies, use subsidies and nontariff barriers to competition to build national champions, and then create a protected domestic market for these champions to give them an advantage as they compete globally’. A number of entities ranging from consumer goods companies to strategically sensitive companies in oil/aerospace/aircraft-designing etc. had suffered such cyber-attacks or theft of intellectual property rights, adversely affecting the individual firms or the US economy in general. The Chinese ‘cyberwar’ against the US had evoked fierce debate in the US with startling jargons/expressions such as ‘digital Pearl Harbor’ or ‘death by thousand cuts’ which were manifestations of deep anguish and concern of the US administration on the Chinese efforts to subdue American industry/economy.

Such US concerns and the continued cyberattacks by China have sharpened the differences between the two countries. In the wake of escalation of such differences, Xi Jinping and US President Barack Obama had reached an agreement in 2015 that neither government would conduct or knowingly support cyber-enabled theft of intellectual property. This led to a decrease in Chinese cyberattacks against the US for a brief interregnum. But the ceasefire in the ‘cyber space’ was short-lived. Instead, the trade conflict between the two countries had aggravated during the period of the Trump administration. So long as China continues its ambitious policies and promotes legal and illegal means of technology, especially of the cyberspace for their strategic and economic interests, there won’t be any end to such conflicts and differences between China and other countries.


This article was first published on Asian Institute for China and IOR Studies

Views expressed by the author are personal and need not reflect or represent the views of the Centre for Public Policy Research.

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K V Thomas is Senior Fellow at CPPR. He has over 36 years of distinguished service in the Intelligence Bureau (Ministry of Home Affairs) of India where he rose to become the Associate Director. He can be contacted at [email protected]

K V Thomas
K V Thomas
K V Thomas is Senior Fellow at CPPR. He has over 36 years of distinguished service in the Intelligence Bureau (Ministry of Home Affairs) of India where he rose to become the Associate Director. He can be contacted at [email protected]

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