Sino-US relations started off the Lunar New Year with a slew of suspicious headlines. An unnamed Beijing energy giant stands accused of hacking the computer networks of five multinational oil companies and stealing secrets. Whoever the attackers were, they started and stopped working strictly on Beijing office time.
In the same week, 74-year old former Dow Chemical (DOW.NYSE) scientist Liu Wen was convicted of leading a conspiracy to steal trade secrets from his employer beginning in 1995. Other Chinese scientists from General Motors (GM.NYSE), Ford (F.NYSE) and DuPont (DD.NYSE) are preparing to stand trial for similar charges. The US is also suspicious about similarities between China’s new stealth fighter and a US F-117 shot down in Serbia.
Everyone spies, and China and its companies are no exception. But headlines like these have business consequences: National security concerns over foreign investments into the US were a major justification for the creation of the Committee on Foreign Investment in the United States (CFIUS) in 1975.
CFIUS has a strong mandate to be paranoid, and it is now heavily influenced by China hawks: A representative from the Department of Homeland Security at a CFIUS meeting reportedly led off a question about a proposed Chinese investment with: “When we go to war with China – and we all know it’s ‘when,’ not ‘if’ …”
CFIUS has blocked one Chinese investment after another, especially investments by telecom equipment maker Huawei, which is currently embroiled in another dispute with the committee over intellectual property acquired from US-based technology firm 3Leaf Systems. However, as the string of court cases shows, blocking investment does not block theft: So long as the US continues to import top scientists and engineering students from China, the risk of industrial moles will persist – and of course scientists of any nationality can be bribed.
Preventing Chinese firms from buying competitive technology keeps US firms from selling it for a profit – it must be noted that mainland companies are known for overpaying for assets – and makes spying that much more attractive.
The US certainly has the right to protect its military secrets, but the struggle for dominance is economic, not military. If Chinese firms want to pay top dollar for trade secrets from willing sellers, the US should welcome them.