China's Economic Espionage

Why It Worked in the Past But It Won't in the Future

(wvs / flickr)

Mao Zedong believed that revolutionary fervor could overcome technological backwardness. But when more pragmatic leaders took power in Beijing, they found that China lagged so far behind the West that the country risked permanent second-class status.

Mao’s successor, Deng Xiaoping, launched China’s rise by reforming the economy and opening the country to the West. With this opening, however, came a long-running, state-sponsored espionage program to acquire advanced technology and accelerate the growth of China’s civil and military industries. And when Western companies first went into China, they believed that the damage from espionage was tolerable, part of the cost of doing business in the world’s fastest-growing market, and that they could “run faster” to create new technologies, thereby minimizing any loss. But what was tolerable when China was a developing economy is no longer acceptable when it is the second-largest economy in the world and a potential military competitor.

China is not the only country to use economic espionage, but it is the most aggressive. In key industries -- telecommunications, aerospace, energy, and defense -- the strategy has worked well. Now, the new Chinese leadership risks seeing the boost from spying undercut both China’s international leadership and its quest for indigenous innovation. 


China’s efforts combine official collection programs with the efforts by individuals, companies, and civil agencies. This reflects China’s broad approach to foreign intelligence gathering -- instead of relying on officers under official cover, China uses businessmen, researchers, and students to assemble information. The targets include contracts, merger and acquisitions plans, and above all, technology.

There are dozens of cases. The efforts are bold and ambitious -- a single program once targeted dozens of companies, foreign governments, and Tibetan activists. Google lost search technologies that helped its Chinese competitor. Chinese spies sat on Nortel’s networks for years, harvesting data until the company went out of business. Spies hacked into U.S. nuclear labs and stealth research

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