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Thousands of Chinese students are trained in the United States with the hope of landing a job in a Western firm. These individuals could become moles for the Chinese government by integrating themselves into a company, which would allow them to steal trade secrets, according to the USCC.
One high-profile Chinese industrial espionage case was publicized by the U.S. Department of Justice in 2010. Kexue Huang, a.k.a. John, was arrested for stealing trade secrets from Dow Agro Sciences LLC.
“Economic espionage robs our businesses and inventors of hard-earned, protected research, and is particularly harmful when the theft of these ideas is meant to benefit a foreign government,” said Lanny A. Breuer, assistant attorney general, in a 2010 statement.
A trade secret espionage indictment was handed down to the Chinese couple Yu Qin and his wife, Shanshan, in July 2010 for stealing trade secrets from General Motors Co.
The indictment alleged that Qin gave “hybrid vehicle technology to Chery Automobile, a Chinese automotive manufacturer based in China and a competitor of GM,” according to a Federal Bureau of Investigation statement.
Keeping China’s Companies at Arms Length
The Committee on Foreign Investment in the United States (CFIUS) could derail the acquisition of a U.S. company by a foreign company or government if such purchase would impair or threaten the national security of the United States.
In 2009, President Barack Obama, after receiving recommendations from the CFIUS, didn’t block a single purchase of a U.S. company by a foreign company, according to the latest CFIUS annual report to Congress covering the calendar year 2009 and issued in November 2010. However, it should be noted that the report does not state if any recommendations to block purchases were presented to the U.S. president.
In 2005, China’s Lenovo Group Ltd. successfully passed all U.S. hurtles and bought IBM’s personal computer business.
A case in point, two U.S. companies filed lawsuits against Huawei Technologies Co. Ltd. “Motorola is suing Huawei over the alleged theft of trade secrets and demanded the return of all proprietary information and damages, according to a lawsuit filed on July 16 in federal court in Chicago. Cisco Systems Inc. agreed to settle a lawsuit with Huawei in 2004 after Cisco alleged that Huawei copied some parts of its data-traffic routers and switches,” according to an August 2010 Bloomberg report.
The Chinese Huawei Technologies Co. has been trying to purchase U.S. technology firms without success so far. In 2008, Huawei gave up in its quest to buy 3Com Corp. because of the CFIUS investigation into links between Huawei and the Chinese military.
Trade experts allege that Chinese companies, once they gain a foothold in a foreign company, appropriate company trade secrets, set up a separate company, and commence production of the same product.
The Chinese footprint took hold in 3Com when this company became a Chinese vendor through a partnership deal with Huawei, which resulted in a joint venture, Huawai-3Com. Huawei, after benefiting from its relationship with 3Com, including getting information of much coveted technologies, has become 3Com’s main competitor in the Chinese market.
