How China sneaks out America’s technology secrets

GE turbine blades in France

GE turbine blades in France

It was an innocuous photo that turned into the downfall of Zheng Xiaoqing, a former employee of the energy conglomerate General Electric Power.

According to an indictment by the Department of Justice (DOJ), the US citizen hid confidential files stolen from his employers in the binary code of a digital photograph of a sunset, which Mr. Zheng then sent to himself.

It was a technique called steganography, a method of hiding a data file within the code of another data file. Mr. Zheng used it many times to take sensitive files from GE.

GE is a multinational conglomerate known for its work in the healthcare, energy and aerospace sectors, making everything from refrigerators to aircraft engines.

The information stolen by Zheng related to the design and manufacture of gas and steam turbines, including turbine blades and turbine seals. Estimated to be worth millions, he was sent to his accomplice in China. It would ultimately benefit the Chinese government, as well as companies and universities based in China.

Zheng was sentenced to two years in prison earlier this month. This is the latest in a series of similar cases prosecuted by US authorities. In November Chinese national Xu Yanjun, said to be a career spy, was sentenced to 20 years in prison for plotting to steal trade secrets from several US aviation and aerospace companies – with includes GE.

It is part of a wider struggle as China seeks to gain technological know-how to power its economy and challenge the geopolitical order, while the US tries to prevent a serious challenger to American power from emerging. ahead.

The theft of trade secrets is attractive because it allows countries to “raise global value chains relatively quickly – and without the costs, in terms of time and money, of relying entirely on indigenous capabilities”, said Nick Marro of the Unit Economist Information. the BBC.


Last July the director of the FBI, Christopher Wray, told a meeting of business leaders and academics in London that China aimed to “reappropriate” the intellectual property of Western companies so that it can speed up its own industrial development. and ultimately influence key industries.

He warned that it was creeping up on companies everywhere “from big cities to small towns – from Fortune 100s to start-ups, people focusing on everything from aviation, to AI, to pharmaceuticals”.

At the time, Chinese foreign ministry spokesman Zhao Lijian said Mr Wray was “smearing China” and had a “Cold War mentality”.

‘China is trying to override our status’

In the DOJ’s statement on Zheng, the FBI’s Alan Kohler Jr. said China was targeting “America’s intelligence” and trying to “override our status” as a world leader.

Zheng was an engineer specializing in turbine sealing technology and worked on various leakage containment technologies in steam turbine engineering. Such seals optimize turbine performance “by increasing power or efficiency or extending the usable life of the engine”, the DOJ said.

Gas turbines that power aircraft are central to the development of China’s aviation industry.

Aerospace and aviation equipment is among 10 sectors that Chinese authorities are targeting for rapid development to reduce and eventually overcome the country’s dependence on foreign technology.

But China’s industrial espionage is also targeting a wide range of other sectors.

According to Ray Wang, founder and CEO of Silicon Valley-based consultancy Constellation Research, they include pharmaceutical development and nanotechnology – engineering and technology done at the nanoscale for use in fields such as medicine, textiles and fabrics and automobiles. A nanometer is one billionth of a meter.

It also includes pharmaceuticals, bioengineering – mimicking biological processes for purposes such as the development of biocompatible prostheses and the growth of regenerative tissue.

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Mr Wang cited a story from a former head of research and development for a Fortune 100 company, who told him that “the person he trusted the most” – someone so close that their children grew up together – was on the payroll finally. of the Chinese Communist Party.

“He kindly explained to me that the spies are everywhere,” he said.

Shanghai, September 2022

China needs technological expertise to power its economy and challenge the geopolitical order

Industrial espionage from countries such as Japan, South Korea, Taiwan and Singapore has been a concern in the past, Mr Marro said. But once indigenous firms emerge as innovative market leaders in their own right – and therefore start trying to protect their own intellectual property – then their governments start passing legislation to take the issue more seriously.

“As Chinese businesses have become more innovative over the past decade, the protection of domestic intellectual property rights has been strengthened significantly,” said Mr Marro.

China has also acquired expertise by giving technology to foreign companies under joint venture agreements in exchange for access to the Chinese market. Despite complaints the Chinese government has always denied allegations of coercion.

Hacking game a ‘joke’

Efforts were made to specifically restrict the hack.

In 2015, the United States and China reached an agreement in which both sides pledged not to commit “cyber-enabled theft of intellectual property, including trade secrets or other confidential business information for commercial advantage”.

The following year, the US National Security Agency accused the Chinese of violating the agreement, although it admitted that the number of attempts to hack government and corporate data had dropped “significantly”.

But observers say the overall impact of the transaction is minimal. Mr Wang said it was a “joke” because of the lack of enforcement. China’s cyber-espionage in the US has been “pervasive” and extends to academic labs. “It is taking place in all aspects of Western affairs,” he told the BBC.

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However Lim Tai Wei of the National University of Singapore noted that there were no “conclusive and undisputed studies” on the extent of the phenomenon.

“Some believe that there was a brief drop in Chinese cyber espionage against the US, but it has since resumed its former level. Others believe that it failed because of the overall breakdown in US-China relations ,” he said.

The US, meanwhile, is directly trying to block China’s advances in the vital semiconductor industry – vital to everything from smartphones to weapons of war – saying China’s use of the technology poses a national security threat .

In October, Washington announced some of the broadest export controls yet, requiring licenses for companies to export chips to China using US tools or software, regardless of where in the world they are made. Washington’s measures also bar US citizens and green card holders from working for certain Chinese chip companies. Green card holders are permanent US residents who have the right to work in the country.

Mr. Marro says that while these measures will slow China’s technological progress, they will also accelerate China’s efforts to remove US and other foreign products from its technology supply chains.

“China has been trying to do this for years, with mixed success, but these policy goals now have a greater urgency as a result of the recent rulings in the United States,” he said.

With China also invoking its own national security, the scramble for technological edge between the world’s two largest economies is unlikely to escalate further.

But Mr Wang reckons the US still has the edge.

“My cyber security friends tell me when they hack Chinese sites, the only technology worth [they can find there] it is US intellectual property,” he said.


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