Editor’s note: This review appeared in The Occidental Quarterly in the Fall issue of 2013. This is the only online version at this time, and it seemed particularly appropriate to post it now because of China’s role in disseminating the Wuhan virus, as well as their cover-ups and lies about it. Given my interest in individualism, the sections on the lack of creativity among the Chinese and how it is quite possibly linked to their collectivism were also enlightening. It’s as if Chinese espionage is a compensation for their inability to create new ideas and technology.

Chinese Industrial Espionage: Technology Acquisition and Military Modernization

William C. Hannas, James Mulvenon and Anna B. Puglisi

New York: Routledge, 2013

The People’s Republic of China currently enjoys a $30 billion dollar trade surplus with America. More importantly, say the authors of this important study, she is exporting to us manufactured goods of increasing technological sophistication, while the principal US export to China is, “literally, scrap and rubbish.” China produces a million more automobiles than America and is now outpacing us in domestic computer sales.

Everyone has heard about China’s economic growth since 1978—“one of the fastest and largest accumulations of national wealth in world history” according to our authors—but it is not widely appreciated that this growth has been accelerating rapidly within just the last decade. Chinese GDP recently surpassed that of Japan and stands second only to the US. The long-anticipated rise of China has happened faster than anyone predicted, and many observers are left wondering where the Chinese acquired such capacities so quickly.

The answer is that they acquired them from us. In the authors’ words:

We are talking here of an elaborate, comprehensive system for spotting foreign technologies, acquiring them by every means imaginable, and converting them into weapons and competitive goods. There is nothing like it anywhere else in the world.

Although China’s stated goal is to become a scientifically “creative nation,” its science and technology are overwhelmingly driven by foreign developments; our authors speak of “the paramount role of mimicry.” Not all of this happens through espionage; much foreign knowledge is gathered in entirely transparent and legal ways, with the only distinguishing feature of China’s approach being the thorough and systematic nature of the process.

The Institute of Scientific and Technical Information of China (ISTIC), China’s foremost facility for acquiring, processing and distributing open source scientific and technological (hereafter S&T) materials, opened its doors in 1958. The following year saw the appearance of the first specialized journal on S&T information, “along with a magazine devoted to methods of searching English language periodicals.” By 1966 the system could deliver to Chinese end users

11,000 foreign S&T periodicals; half a million foreign research reports, government publications, conference proceedings and academic theses; over five million foreign patents from over 20 countries; more than 200,000 standards from 40 foreign countries; several hundred thousand foreign product samples; and had S&T document exchange links with more than 50 countries.

Progress was then held up for a decade by the Cultural Revolution.

In the late 1970s, information gathering was resumed and computerized. ISTIC began enrolling graduate students in what was essentially a degree program in exploiting foreign scientific literature. By 1985 China possessed over 400 major S&T intelligence institutes employing more than 25,000 people. Egalitarians will gnash their teeth to learn that 53 of the 60 journals most useful to Chinese researchers at this time came from just two countries: the US and Great Britain.

In 1991, two Chinese information specialists, Huo Zhongwen and Wang Zongxiao, published a 361–page book entitled Sources and Methods of Obtaining National Defense Science and Technology Intelligence. The book candidly describes the structure and methods of China’s open source S&T information gathering system. Among the sources discussed are the Congressional Information Service, the US National Technical Information Service (NTIS), NASA, the American Institute of Aeronautics and Astronautics, the Department of Energy and the Lockheed Corporation.

Huo and Wang blandly acknowledge that

there are similarities between what we refer to as ‘information’ and what the foreign intelligence community refers to as intelligence work. … By picking here and there among the vast amount of public materials and accumulating information a drop at a time, often it is possible to basically reveal the outlines of some secret intelligence, and this is particularly true in the case of the Western countries.

Huo and Wang give examples of discoveries of which they are especially proud. One involves the mining of declassified documents from Los Alamos National Laboratory:

[American agents] reviewed a total of 388,000 documents in 33 days, so each reviewer had to review around 1000 documents a day, about two a minute. The pace of the reviews resulted in a large number of errors—around five percent—that is, some 19,400 documents that were mistakenly declassified, and of these there were at least eight highly secret items regarding thermonuclear weapons.

Our authors express surprise that publication of Huo and Wang’s book was ever permitted, and speculate that the Chinese did not realize how unusual their practices were in an international context.

As of 2005, over fifty thousand networks were serving up S&T information to some 27 million Chinese end users. Information is stored not merely on S&T itself, but also on Western S&T organizations and even individual researchers; files on individuals include “biographical notes, work and home addresses, achievements, writings, range of primary activities, recent work circumstances and whether they have visited China.”

The whole system works like a library network, except that it is operated by intelligence officers working for the Chinese government. By relying on foreign models, China shortens its own research and development process, thus freeing resources for commercialization and production. Such is the prosaic reality behind the Chinese “miracle.”

A key element of technology transfer to China involves the presence in the country of foreign research and development (R&D) labs. Multinational corporations have taken to setting up such labs in China both to take advantage of inexpensive local expertise and in order to improve their access to the world’s largest market. In Beijing alone one can find R&D labs operated by Google, Hewlett-Packard, IBM, Intel, Microsoft, Motorola, Nokia, Samsung, Siemens and Sony Ericsson, among many others. Shanghai hosts Astra Zenica, Cisco Systems, Coca-Cola, Dell, Dupont, Eli Lily, General Electric, General Motors, Honeywell, Phillips, Unilever and many more. Whereas in 2000 there were just thirty such foreign R&D labs, by 2010 their number had grown to 1200.

At first, foreign R&D labs mainly concentrate on the adaptation of their products to the local market and offering technical support for local sales. Then they may expand their operations to “identifying and meeting local needs from the beginning of product development”—i.e., creating entirely new products specifically for the Chinese market. Some China-based labs, especially in the field of information technology, have already begun developing products for the global market. Primary research may soon be carried out in China by foreign R&D labs, if this isn’t happening already.

The Chinese government does a great deal to encourage the growth of foreign R&D on its soil. Its rationale is explained in the Ministry of Science and Technology’s 2006 policy statement Medium and Long Term Plan for S&T Development, 2006–2020. This document repeatedly stresses the need to build up “an indigenous innovation capability,” and even proposes to make China an “innovation-oriented” society by the year 2020. Yet, in a seeming paradox, the principal means for achieving this is to appropriate the maximum possible amount of foreign technology now. As our authors put it, “yet another period of acquiring foreign technology and know-how is perceived as critical for China to eventually wean itself from this reliance on foreign technology and know-how, transitioning to indigenous innovation.” This near-term emphasis on acquiring knowledge abroad is such that one observer has described the Medium and Long Term Plan as a “blueprint for technology theft on a scale the world has never seen before.” The authors stress, however, that R&D partnerships with China must be judged on a case-by-case basis, and that much depends on risk mitigation strategies which can be adopted by Western companies themselves well short of a complete pullout.

The authors devote one chapter to cataloguing some of the technology transfer organizations based in the PRC, and another to some of their counterparts in the US. In China itself I counted seven national-level agencies, ten supposedly nongovernmental organizations (some almost certainly fronts for the government) and ten web-based recruiting and placement networks, to which must be added an indeterminate slew of provincial and municipal bodies. The mission of these organizations is to send talented Chinese students to study abroad and to encourage foreign specialists to work or teach in China. Sometimes the latter efforts are focused specifically on ethnic Chinese living abroad.

After cataloguing these organizations as best they can, our authors append the following caveat:

While our account here is lengthy, we have no confidence that it is exhaustive. Entities expand, new ones appear, while others—including those run by technical ministries—stay mostly beneath the radar. Details about their transactions are often unavailable.

The recruitment practices of these organizations are not necessarily constrained by foreign espionage laws. In November 2006, Noshir Gowadia, an Indian-born US citizen, was indicted for divulging military secrets to China. He had visited China six times between 2003 and 2005; the visits were arranged through a representative of China’s State Administration of Foreign Expert Affairs (SAFEA), a high-level body which reports directly to the PRC State Council. According to SAFEA’s website, its mission is to facilitate the “introduction of advanced technology and make Chinese industry more competitive internationally” by managing the recruitment of skilled persons from abroad.

Another important recruitment organization is China’s Ministry of Personnel:

In December 2005, there was a banner-type ad posted near the top of the [Ministry’s] home page with the headline “Beijing Institute of Applied Physics and Computational Mathematics Invites Talented Persons from All Walks of Life to Join the Alliance.” This was followed by a description of the Institute’s mission in general terms, its facilities, staffing, and the types of skills sought. Details on application and compensation were also provided. For those unfamiliar with China’s S&T infrastructure, the Institute of Applied Physics and Computational Mathematics is China’s premier nuclear weapons modeling facility. In plain language, the [Ministry of Personnel] was asking ethnic Chinese scientists living abroad to support its atomic weapons program. Noteworthy was a statement requiring applicants to “cherish the socialist fatherland, support the leadership of the Chinese Communist Party and submit to the needs of the country”—a reminder to applicants that they will undergo security vetting. References to the ancestral country and the lack of an English version indicate that the ad was aimed at overseas Chinese.

China defines “overseas Chinese” to include not merely as PRC expatriates, but also persons of Chinese descent who may never have set foot in China. When such persons supply Western-developed technology to the PRC, Chinese sources matter-of-factly speak of them as bringing the technologies “back” to China. The authors describe one pomp-filled occasion where PRC operatives urged more than a thousand visiting overseas Chinese to set up enterprises in China: “appeals to ‘patriotism’ were thick [and] the event ended with the groups singing the PRC National anthem, performed by the guests ‘with tears in their eyes.’”

In other words, the Chinese concept of nationality is racial—the norm everywhere outside the modern West.

The authors devote their fifth and most important chapter to cataloguing US-based organizations engaged in acquiring technology for China, including “diplomatic offices, a facilitation company, an alleged NGO, and ethnic Chinese professional association and alumni associations.”

All PRC diplomatic offices on US soil—including the embassy in Washington, consulates in New York, Chicago, Los Angeles, San Francisco and Houston, as well as its UN mission—contain an S&T office. According to their self-description, the Washington, DC, office “makes full use of its resources to raise the level of service it provides to China’s domestic S&T plans.” They are involved in negotiating S&T agreements between the US and PRC governments, and also meet with high-tech US companies, universities and S&T consortia in the US, “the heads of which are typically ethnic Chinese who have demonstrated commitment to China’s S&T development.” The authors recount how one Los Angeles S&T official invited 220 members of local Chinese S&T groups to a meeting with a “policy advising and reporting group” from the PRC. Attendees, whom the S&T official described as people who live abroad but whose “hearts and minds belong to China,” were informed “in detail” how they could participate in China’s S&T development.

These diplomatic S&T offices maintain websites with detailed information, much of it in Chinese, on how to support PRC S&T projects. Readers are encouraged to “use multiple means to develop multi-channel, multi-layer, all-around international cooperation and exchange” and to contribute research of a “practical nature.” S&T officers also engage in public discourse to “rally sentiment against ‘obstacles’ the US government places in the way of ‘free scientific exchange.’”

In 1993, the Chinese government established Triway Enterprise, Inc. in Falls Church, VA. The company hosts events around the country for Chinese recruiters and talent scouts, as well as “talks and exchanges” with ethnic Chinese scholars, overseas students and professionals. “Triway boasts ‘a one-stop, fully integrated solution’ to technology transfer that includes handling ‘complex travel arrangements’ and providing ‘top-quality translators.’”

Triway was also hired to help establish a Washington liaison office for the Shanghai Association for the International Exchange of Personnel (SAIEP), an alleged non-governmental organization with close links to SAFEA. In our authors’ words, “[n]ominal ‘non-governmental’ offices such as this provide PRC state and provincial units with direct access to US S&T talent while insulating the latter from the stigma of supporting a foreign state whose goals are often inimical to US interests.” The distinction between ‘governmental’ and ‘private’ is necessarily unclear in an authoritarian state such as China.

SAIEP’s Washington office serves to connect East Coast Chinese S&T personnel with appropriate partners in Shanghai. They maintain a separate office in Silicon Valley and six other cities around the world. Some idea of the scale of SAIEP’s operation is evident in its ’10,000 Overseas Scholars Convergence Program’ which aims at raising the level of Shanghai’s S&T talent and ‘breaking conceptual restraints on using overseas scholars.’ The program boasts ‘new methods’ [of] using foreign experts to fill posts ’at all levels of Party and government.’

Another major player in tech transfer is the Chinese Association for Science and Technology USA (CAST-USA), a supposedly non-political professional association founded in New York City in 1992. The organization claims to “serve as a ‘bridge’ between the United States and China for both personnel and information exchanges, and for cooperation in science and technology,” overtly listing “technology transfer” as one of its most important activities. CAST-USA now maintains eleven regional chapters and eight disciplinary subcommittees.

High-level PRC officials serve on CAST-USA’s board of advisers and attend their business meetings and social events in the US. Indeed, “many CAST-USA members who live in the US [also] occupy PRC positions.” Besides hosting PRC delegations to the United States, CAST-USA sends missions to China for events such as the annual “Returning Overseas Scholars Innovation Week.”

Here is just one anecdote:

At the seventh annual [Guangzhou Overseas Chinese Scholars tech transfer convention] in 2004, CAST-USA sent a 50-person delegation which brought to China “over 40 projects,” more than any other foreign delegation. While at the convention, it joined up with the PRC organizing committee to host the first “High-level Forum on a Strategy to Strengthen China through Knowledge” and to pass a declaration of support for China’s efforts to usher in high-tech industry. The proposal—conceived, drafted and presented by CAST-USA—aimed at positioning China among the world’s top seven countries in innovation by 2010. A report describing it began by affirming “competition between countries in the 21st century is a competition in knowledge.” The irony of helping China prevail in a competition against the country in which one lives seems to have gone unnoticed.

Graduates of Chinese Universities living abroad are organized in alumni associations which, from China’s point of view, amount to “a ready-made support base inside the host country … with the motivation to contribute to China’s technical modernization.” Some of these associations involve both Taiwanese and PRC institutions; in our authors’ words: “alumni from both sides of the Taiwan Straits can put aside their differences for their common interests vis-à-vis the non-Chinese world.”

Chapter Five continues with discussion of some of the “well over 100 US-registered advocacy groups that aim directly at technology transfer or achieve this as a consequence of their organizational structure.” Membership includes “US citizens, green card holders, H-1B visa workers and graduate students” from China.

Evidence of a China bias on the part of these S&T groups is found in their charters, activities and web postings, and in the spirit that pervades their literature. For example, among the dozens of S&T associations examined by the authors, not one failed to solicit money for the 2008 Sichuan earthquake relief—a project that has nothing to do with S&T and everything to do with helping China. By contrast, nowhere did we find concern expressed about contributing technology to a foreign country whose position on issues is often antagonistic to that of the US.

The authors discuss ten of these organizations based in Silicon Valley alone, as well as nine more spread across the US. They maintain

that helping China become a competitive power through “transferred” technology entails for these advocacy groups no contradiction, and the implications of their behavior for the larger body of Americans are to them irrelevant. In addition, while declarations of support for China are common, it is hard to find sentiment, not to mention concrete action taken, in favor of their American host.

As the authors predict, this fifth chapter will not find favor with the persons and organizations discussed, and one can anticipate that the more America-savvy among them will be quick with talk of “racism.”

Another important conduit for Chinese technology acquisition is its citizens studying abroad, of whom there have been some two and a quarter million since 1978. A large proportion of these come to the US: in 2011 there were 194,000 Chinese enrolled at American universities. They study mainly scientific and technical subjects. Between 1988 and 1996, 92 percent of US-earned doctorates by Chinese were in S&T fields, with the favorites being engineering, physical sciences, biological sciences and mathematics. By contrast, the US sent just 14,596 students to China during the 2010-11 academic year, most of whom studied social science or language.

Many Chinese get into American universities under false pretences:

One consultant working for US universities estimates that 90 percent of Chinese applicants submit false recommendations, 70 percent get other people to write their application essays, 50 percent forge their high school transcripts, 30 percent lie on financial aid forms and 10 percent list academic awards and other achievements they did not earn or receive.

Once here, they are monitored carefully by the mother country. China’s US embassy maintains an education section with the mission of “provid[ing] guidance for Chinese students and scholars in the USA.” This may help explain, e.g., the coordinated protests and threats of violence by Chinese students in connection with visits by the Dalai Lama and other Tibet-related events on American campuses.

Recent articles in Chinese S&T journals have openly advocated “expanding the role of Chinese scientists living overseas in conducting research on behalf of Chinese research institutes and facilitating technology transfer.” Sometimes students preparing to study in the US are approached by the Chinese Ministry of State Security in order to establish a clandestine relationship or task them with acquiring information.

The majority of Chinese who go abroad to study end up staying. In America, “according to both observers of and participants in the process, it is relatively easy to obtain a degree and get practical training while on a student visa, then to find a job and eventually to qualify for permanent resident status or even citizenship.” A 2007 survey by the Wall Street Journal found that 92 percent of Chinese doctoral candidates who received their degrees in 2002 were still in the United States, though more recently the number has shrunk to 82 percent. The Chinese government has adopted policies to encourage scholars to return, but has also emphasized the many ways in which Chinese scientists abroad can contribute to China by “serving in place” or by returning only for short visits.

Recently there have been proposals for a formal data center to keep track of overseas Chinese scholars. It would be operated by professional “overseas study management personnel,” a dedicated corps of S&T transfer specialists distinct from the technical experts themselves, whose task would be to identify overseas experts and find use for whatever information they have.

Semi-official sources advocate, in our authors’ words, “nothing less than PRC state control and manipulation of foreign-based ethnic Chinese scientists.” They speak in martial language of building an “overseas S&T corps” of overseas Chinese who have made outstanding contributions on all “battlefronts.” The following note of caution from a recent official publication shows that the Chinese authorities are only beginning to recognize the need for discretion in carrying out such plans:

To protect the personal interests of overseas persons of talent, China should adopt a “do more, talk less” or “do it but don’t talk about it” policy on recruitment and foreign S&T cooperation, especially in sensitive fields, and avoid by all means propagandizing on a large scale in domestic and foreign newspaper reports successes in our cooperation and recruitment, to avoid making them vulnerable and putting these overseas persons of talent in an embarrassing situation.

As already mentioned, an increasing proportion of Chinese studying abroad have been opting to return. Indeed, more than half of those ever to return have done so since 2009. Returnees have long played an important role in Chinese S&T:

¶81 percent of Science Academy members have studied abroad, as had 21 of the 23 people awarded for their work on China’s “atomic bomb, ballistic missile and earth satellite” projects. Almost the entire upper echelon of scientists responsible for China’s strategic weapons programs learned their skills abroad.

Since 1994, China has established a network of over 150 S&T parks for returnees to work in. Their mission is

not to create new technologies but “to accelerate the commercialization and industrialization of achievements in high technology”—an entirely different mission that depends on access to outside ‘talent’ and the ideas of others…. Experimenting “for its own sake” [is] discouraged in favor of a “practical and realistic” approach that adapted ideas brought in from abroad.

According to China’s Ministry of Science and Technology, some 22,000 overseas Chinese had been brought to work in such S&T parks by 2006; some parks are known to be dedicated to military projects. The authors note: “We know of no other country with a structure that is remotely similar.”

China also engages in outright espionage against the US and other countries, of course: “As early as 2005, Dave Szady, then assistant director of the FBI’s counter-intelligence division, told the Wall Street Journal that ‘China is the biggest [espionage] threat to the US today.’ The authors quote similar statements from Britain’s MI-5, Canadian security services and the southwestern German state of Baden-Württemberg.

The Chinese-American community is said to be the target of 98 percent of recruitment efforts by China’s Ministry of State Security. By contrast, the Soviet Union targeted ethnic Russians no more than a quarter of the time. The June 2010 arrest of European-American Glenn Duffy Shriver for selling state secrets to the PRC, however, may indicate a broadening of Chinese recruitment efforts in response to growing scrutiny of Chinese-Americans.

Cyber-espionage appears to be a Chinese specialty, “principally because of its logistical advantages and the promise of plausible deniability.” Joel Brenner, then-director of the US National Counterintelligence Executive remarked in 2008 that Chinese hackers are “very good and getting better all the time.”

Some [attacks], we have high confidence, are coming from government-sponsored sites…. The Chinese operate both through government agencies, as we do, but also through sponsoring other organizations that are engaging in this kind of international hacking, whether or not under specific direction. It’s a kind of cyber-militia…. It’s coming in volumes that are just staggering.

Specific infiltrations discussed include that of the US State Department (June 2006), the office email of Defense Secretary Robert Gates (2007), and both the Obama and McCain campaign computer systems (summer 2008).

The authors are to be commended for explicitly raising the issue of the Chinese capacity for innovation. Simply put, East Asian man has yet to show he is capable of continuous innovation on the scale observed in the West. The authors cite data from Charles Murray’s Human Achievement and from Joseph Needham, the preeminent historian of Chinese science, who “spent a lifetime documenting hundreds of clever Chinese inventions.” Needham “puzzled over ‘the lack of theoretical science in China’ despite the ‘high level of technological progress achieved there,’” and reluctantly concluded that the West had a monopoly on

the application of mathematical hypotheses to nature, the full understanding and use of the experimental method, the distinction between primary and secondary qualities, the geometrisation of space, and the acceptance of the mechanical model of reality.

It is also surely significant that pure science preceded the development of scientific technology by many centuries in the West. The classical view of science is well-expressed in the (probably apocryphal) anecdote in which a student of Euclid asked the master what benefit he would derive from learning geometric theorems; Euclid is said to have told his slave boy to give the fellow a penny “since he must gain by what he learns.” This aristocratic view of knowledge predominated in the West until the enlightenment and remains influential to this day. There is no historical precedent for the successful pursuit of applied science in isolation.

Might the Chinese lack of interest in theoretical science and weak record of innovation have an evolutionary basis? Psychologist Richard Nisbett has demonstrated through controlled experiment a difference in cognitive preferences between East Asians and Europeans which he characterizes as “continuity vs. discreteness, field vs. object, relationship vs. categories, dialectics vs. logic, experienced-based knowledge vs. abstract analysis, interdependence vs. independence and communal vs. individualistic.”

Citing Nisbett’s work, neuroscientists Joan Y. Chiao and Katherine D. Blizinsky have proposed (2010) a sociobiological explanation for the coevolution of collectivist behavior and the dominance in East Asian populations of a genetic variant that codes for the psychotropic drug serotonin, which [has an impact on] cognitive bias:

we speculate that S [East Asian] and L [mostly European] allele carriers of the serotonin transporter gene may possess at least two kinds of information processing biases that enhance their ability to store and transmit collectivistic and individualistic cultural norms, respectively. S allele carriers may be more likely to demonstrate negative cognitive biases, such as engag[ing] in narrow thinking and cognitive focus, which facilitate maintenance [of] collectivistic cultural norms of social conformity and interdependence, whereas L allele carriers may exhibit positive cognitive biases such as open, creative thinking and willingness to take risks, which promote individualistic cultural norms of self-expression and autonomy.

Chiao and Blizinsky note a correlation between the ‘S’ gene and the greater ability of East Asians to resist anxiety and depression, states strongly associated with creativity in the sciences. Our authors write:

It has long been clear that individualism supports radical creativity, which by definition entails a rupture from collective wisdom and, usually, negative affect from peers. Factors cited in the creativity literature as inhibiting novel discovery are conformist education, lack of privacy and political centralism, ethnic homogeneity, and isolation from “diverse sociocultural environments” (such as Internet restrictions). To us, this sounds a lot like China.

Coauthor William C. Hannas has also theorized that the character writing system is an impediment to Chinese creativity:

Unlike Western alphabets that force learners to parse naturally occurring syllables into abstract phonemes and make other types of analytic judgments, [Chinese characters] map directly onto syllables, depriving children of an early life-changing opportunity to move beyond the concrete artifacts served up by nature to an abstract representations of [their] surroundings.

Hannes developed this theme in an article for the Fall 2005 TOQ (5:3).

Yet it would be easy to overstate the practical importance of the question of Chinese creativity for Sino-American competition. Even if “innovative science” end up becoming the Chinese equivalent of controlled fusion—something perpetually ten years in the future—China could still beat us with our own weapons by developing a successful “early adapter” strategy. The principal impression Chinese Industrial Espionage left me with was the contrast between a complacent West amusing itself with consumption and exploring the outermost reaches of antidiscrimination ideology, while on the other side of the world an alien civilization dedicates itself to the single-minded pursuit of power.

In their conclusion, the authors note: