In an unusual turn of events, the latest China-U.S. industrial espionage case resulted in the detention of a Chinese intelligence officer. The arrest is a warning to the Chinese Ministry of State Security that the United States takes industrial espionage threats seriously. Such action is, however, unlikely to stop Beijing's aggressive behavior. Editor's Note: This security-focused assessment is one of many such analyses found at Stratfor Threat Lens, a unique protective intelligence product designed with corporate security leaders in mind. Threat Lens enables industry professionals and organizations to anticipate, identify, measure and mitigate emerging threats to people, assets, and intellectual property the world over. Threat Lens is the only unified solution that analyzes and forecasts security risk from a holistic perspective, bringing all the most relevant global insights into a single, interactive threat dashboard.
The U.S. Department of Justice announced Oct. 10 that charges would be levied against a Chinese intelligence officer for conspiring and attempting to conduct economic espionage for state gain and theft of trade secrets. The officer, Yanjun Xu, is reportedly employed by China's Ministry of State Security. Belgian authorities arrested him April 1 in Brussels based on a U.S. criminal complaint filed March 21 in the U.S. District Court for the Southern District of Ohio. Xu was indicted April 4, and his indictment was unsealed Oct. 10 in connection with his extradition from Belgium to the United States.
A Familiar Cycle
The case follows a familiar cycle in which employees of a foreign company with technology the Chinese government wants access to are asked to travel to China to speak at a university, trade group or conference. Such employees are then commonly met by intelligence officers under cover of a university or association, who then assess the person and attempt to recruit them if deemed valuable. If successful, an ongoing relationship is then established.
In this case, a co-conspirator approached the target, identified as "Employee 1" in the indictment, in March 2017 under the guise of an academic exchange. As the conversation progressed, Employee 1 was eventually invited to speak at Nanjing University of Aeronautics and Astronomics (NUAA). After delivering his presentation in China in June 2017, Employee 1 was introduced to Xu, who was operating under the cover name Qu Hui and claimed to be from the Jiangsu Science and Technology Promotion Association, which is affiliated with NUAA. Xu flattered Employee 1, paid him $3,500 in cash for his presentation and set up arrangements to continue communicating. This visit to China was used for the spotting and developing stages of the human intelligence cycle.
As Xu continued to communicate with Employee 1, he pressed for technical data while holding out the carrot of another speaking engagement in China that would bring another cash payment. During these communications, it is clear that Employee 1 reported the interaction with Xu to his company (identified as "Company A" in the indictment"), which notified the U.S. government. Employee 1 agreed to provide more information to Xu and sent him a copy of the registry of his company-owned laptop, which the criminal complaint notes the company had sanitized and approved for release. This file contained warnings that it was the proprietary information of Company A.
The file directory appears to have whetted Xu's appetite for more information, so Xu discussed with Employee 1 the possibility of copying the contents of his hard drive. Xu also changed his plan, and instead of bringing Employee 1 to China where he ostensibly could not bring his company-issued computer, Xu agreed to meet Employee 1 in Brussels during a previously scheduled business trip. This would mean Employee 1 would have his laptop for Xu to clone the hard drive. In reality, Xu walked into a sting operation.
A Harder U.S. Stance on China
While this case is news to the world today, the Chinese, Americans, Belgians and presumably other NATO allies have known about it since April 1, so any shock at the official level should be over. It comes amid a recent harder U.S. stance on China in the media. In an Oct. 4 statement, U.S. Vice President Mike Pence called China the foremost threat to the United States. Other recent government statements have referred to the industrial espionage threat China poses, while FBI Director Christopher Wray called China "the broadest, most complicated, most long-term" threat to U.S. interests in Oct. 10 testimony before the Senate Homeland Security Committee.
Xu might well be convicted, but in the end, we suspect he will be traded as part of a spy swap for a U.S. intelligence officer, Chinese agent or perhaps dissident. Either way, the case has fired a shot across the bow of the Chinese Ministry of State Security, warning it that the United States takes the industrial espionage threat very seriously — and will pursue intelligence operations in third countries previously seen as safe theaters for collection. Even so, it is unlikely to dampen the aggressive nature of the Chinese Ministry of State Security and other intelligence agencies as they attempt to fulfill their political mandate to steal whatever China needs to catch up with the West.
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