Intelligence Notes: Chinese Corporate Espionage at GE

Zheng Xiaoqing, a former employee with General Electric Power, was sentenced to two years in prison for hiding confidential files stolen from his employer in the binary code of a digital photograph. The technique, called steganography, involved hiding a data file within the code of another data file, and was used by Zheng to steal sensitive files from GE on multiple occasions. The stolen information related to the design and manufacture of gas and steam turbines and was sent to an accomplice in China, to ultimately benefit the Chinese government and companies. The theft of trade secrets is attractive as it allows countries to quickly advance up global value chains without the costs of relying on their own capabilities.

FBI director Christopher Wray warned in July 2022 that China aims to “ransack” the intellectual property of Western companies to speed up its industrial development and eventually dominate key industries. The FBI’s Alan Kohler Jr. added that China is targeting “American ingenuity” and seeking to “topple our status” as a global leader.

China is targeting a range of sectors for rapid development, including aerospace and aviation, pharmaceuticals, nanotechnology, and bioengineering. Silicon Valley-based consultancy Constellation Research’s CEO, Ray Wang, cites a case of a former head of research and development for a Fortune 100 company who found a close friend to be on the payroll of the Chinese Communist Party.

In the past, industrial espionage from countries like Japan, South Korea, Taiwan, and Singapore was a concern, but once these countries’ firms emerged as market leaders, their governments started taking the issue more seriously. China has also gained expertise by making foreign companies hand over technology in exchange for access to the Chinese market, but the Chinese government denies allegations of coercion.

In 2015, the US and China made a deal not to carry out cyber-enabled theft of intellectual property, but by 2016 the US National Security Agency accused China of violating the agreement. Despite attempts to rein in hacking, trade secret theft remains a major concern in the US as China strives to gain technological knowhow and challenge the geopolitical order.