The U.S. Justice Department is escalating prosecution of Chinese economic espionage cases, part of the Trump administration’s crackdown on China’s alleged theft of American intellectual property and other predatory practices that are at the heart of trade tensions between Washington and Beijing.
In the last 10 months, the Justice Department has brought charges against Chinese nationals and entities in at least seven separate economic espionage cases, up from three during the prior 10 months. In addition, the department has obtained guilty pleas and convictions in six older espionage cases, while charging four Chinese nationals for evading sanctions against North Korea.
Last week the Justice Department indicted a University of Kansas researcher on federal fraud charges for concealing his ties to a Chinese university while working on a government-funded research project. While not charged as economic espionage, the case is part of a broader U.S. effort to block Chinese attempts to steal American technology.
“The indictments and prosecutions that you’re seeing the public face of now are consistent with and a natural follow-up to the highest public priority now assigned by the Justice Department to countering Chinese-sponsored economic espionage,” said David Laufman, a partner at the Wiggin and Dana law firm who previously oversaw the prosecution of economic espionage cases at the Justice Department.
The surge in prosecutions is part of a “China Initiative” launched last November by then attorney general Jeff Sessions in response to growing Chinese theft of American intellectual property, which officials say costs the U.S. economy billions of dollars every year.
The escalating trade war between the U.S. and China started amid U.S. allegations of rampant Chinese theft of American technology. China has denied the allegations. With talks bogged down, U.S. President Donald Trump again accused China of “stealing our intellectual property.”
While focused on economic espionage, the initiative is also charged with identifying corruption cases involving Chinese companies that compete with U.S. businesses, implementing new rules for Chinese and other foreign investors in U.S. companies, and applying the Foreign Agents Registration Act to actors seeking to advance China’s political agenda in the United States.
“The purpose of (the initiative) was to underscore the strategic priority of countering Chinese national security threat across a spectrum of behavior,” Laufman said.
On the same day Sessions launched the “China Initiative,” the Justice Department announced a Chinese espionage case that officials said highlighted the scope of the problem.
A Chinese state-owned enterprise along with a Taiwan-based company and three Taiwanese nationals were charged with conspiracy to trade secrets from U.S. semiconductor maker Micron Technology. The Idaho-based firm controls about 20% to 25% of the market for dynamic random access memory (DRAM) chips, a technology China did not have until recently.
“Then to add insult to injury, the company that stole and is working to clone the legitimate American product turned around and sued the American company for violating its patents rights — which were built on the stolen technology,” said John C. Demers, assistant attorney general in charge of the national security division.
In an unprecedented move, the Justice Department filed a civil action to stop the export of the illegal technology and to prevent the Chinese company from competing with Micron’s technology in the United States.
In January, the Justice Department charged Chinese telecom behemoth Huawei Technologies of a host of federal crimes, including stealing trade secrets from wireless provider T-Mobile.
In April, Xiaoqing Zheng, a U.S. citizen of Chinese descent, and Zhaoxi Zhang, a 47-year-old Chinese national, were charged with conspiracy to steal turbine technology secrets from General Electric. The two allegedly received financial support from the Chinese government and had inked research agreements with state owned institutions in China to develop turbine technology.
“The indictment alleges a textbook example of the Chinese government’s strategy to rob American companies of their intellectual property and to replicate their products in Chinese factories, enabling Chinese companies to replace the American company first in the Chinese market and later worldwide,” Demers said in announcing the indictment.
Nicholas Eftimiades, a former intelligence official, said China has “considerably” expanded its espionage over the last 20 years, increasingly targeting high tech sectors identified in its “Made in China 2025” industrial development strategy.
Launched in 2015, “Made in China 2025” seeks to make China dominant in 10 strategic high-tech manufacturing sectors, from aerospace to robotics to new energy vehicles. The U.S. sees the initiative as a threat, accusing China pursuing the project through intellectual property theft and forced technology transfer from companies that do business with China.
“You can clearly see a direction from the central government: these are the technologies we need for the future, and that (is) being executed through the bureaucracy, and out through the commercial sector in China,” Eftimiade said.