In a case that exposed the perils of industrial espionage, Zheng Xiaoqing, a former employee of General Electric Power, faced the consequences of hiding confidential files within the code of a seemingly harmless digital photograph.
Using a technique known as steganography, Zheng covertly extracted sensitive information from GE and sent it to his accomplice in China, ultimately benefiting the Chinese government, companies, and universities.
GE, a renowned multinational conglomerate operating in the healthcare, energy, and aerospace sectors, has been at the forefront of technological advancements, manufacturing a wide range of products from refrigerators to aircraft engines.
The stolen information primarily focused on the design and production of gas and steam turbines, including turbine blades and seals. Estimated to be worth millions, the stolen data aimed to enhance China’s industrial development, challenging the geopolitical order and intensifying the competition with the United States.
The allure of trade secret theft lies in its ability to expedite a country’s progress up the global value chains, bypassing the time and cost associated with developing indigenous capabilities, as noted by Nick Marro, an analyst at the Economist Intelligence Unit.
Last July, FBI Director Christopher Wray raised concerns about China’s systematic intellectual property plundering from Western companies to accelerate its industrial development and eventually dominate key industries.
Wray highlighted China’s snooping activities, targeting companies across various sectors, from aviation and artificial intelligence to pharmaceuticals.
While Wray’s warning sparked a response from China’s then foreign ministry spokesman Zhao Lijian, who accused him of having a “Cold War mentality” and smearing China, the US remains resolute in safeguarding its interests.
The recent indictment of Zheng sheds light on the broader struggle between the US and China. Alan Kohler Jr., an FBI representative, stated that China’s actions aimed to undermine American ingenuity and challenge the country’s global leadership status.
Zheng, an engineer specializing in turbine sealing technology, played a crucial role in developing leakage containment techniques for steam turbines.
These seals optimize turbine performance by increasing power, efficiency, and extending the engines’ usable life, as stated by the DOJ. The significance of gas turbines in China’s aviation industry adds to the value of Zheng’s stolen trade secrets.
While aerospace and aviation equipment are among the ten sectors targeted by Chinese authorities for rapid development, China’s industrial espionage extends to numerous other domains.
Ray Wang, CEO of Silicon Valley-based consultancy Constellation Research, highlighted sectors such as pharmaceutical development and nanotechnology.
Nanotechnology involves engineering at the nanoscale, with applications ranging from medicine to textiles and automobiles. Additionally, China’s focus extends to areas like bioengineering, which involves mimicking biological processes for purposes such as developing biocompatible prostheses and regenerative tissue growth.
Wang shared an anecdote from a former head of research and development at a Fortune 100 company, revealing the presence of spies within his trusted circle.
This emphasizes the widespread nature of industrial espionage. As indigenous firms in countries like China become leaders in their respective markets, their governments begin prioritizing the protection of their own intellectual property by passing legislation to address the issue more seriously.
China has also sought expertise by leveraging joint venture agreements with foreign companies, compelling them to share technology in exchange for access to the Chinese market.
Although the Chinese government has denied allegations of coercion, this practice has raised concerns about technology transfer.
Efforts to curtail hacking activities have been made, including a 2015 agreement between the US and China pledging to refrain from cyber-enabled theft of intellectual property and confidential business information.
However, the impact of the agreement remains limited, with insufficient enforcement measures. Observers note that Chinese cyber-espionage remains pervasive, infiltrating academic labs and affecting various aspects of Western businesses.
The intensifying US-China technological battle has led to direct attempts to impede China’s progress in the semiconductor industry, recognized as crucial for a wide range of applications, from smartphones to military weaponry. The US views China’s utilization of this technology as a national security threat.
To curb China’s technological advancements, Washington announced broad export controls in October. These controls require licenses for companies exporting chips to China, regardless of their global manufacturing location, if US tools or software were used.
The measures also restrict US citizens and green card holders from working for specific Chinese chip companies. Such actions by the US are expected to slow China’s technological growth while prompting accelerated efforts to remove foreign products from its tech supply chains.
While the battle for technological supremacy between the world’s two largest economies intensifies, the US still maintains an advantage, as suggested by experts. Reports indicate that when hacking Chinese sites, US intellectual property remains the most valuable find, according to sources in the cybersecurity field.