The Spy Hunter #51
Chinese economic espionage in the Netherlands and Germany exposes risks to military technologies
April 23, 2024
Welcome to The Spy Hunter newsletter!
In this week’s edition:
Two cases of Chinese theft of Western European military technologies expose the economic espionage threats facing Europe’s high tech sectors.
Hewlett Packard sues a Chinese competitor for technology copyright infringement, revealing the Chinese firm’s sanctions evasion measures.
Taiwan appoints a new economic minister from the semiconductor industry who promises to reduce the island’s economic reliance on China.
🔎 Economic Espionage Cases of the Week
Case #1: Chinese spies arrested in Germany
What happened?
Three German citizens have been arrested for stealing military technologies on behalf of China. The suspects, identified as Herwig F., Ina F., and Thomas R., were apprehended in Düsseldorf and Bad Homburg. Among the accusations are charges that the defendants exported laser technologies and machine parts for naval vessels. The arrests follow Chancellor Olaf Scholz's recent visit to China, during which he expressed concerns about intellectual property theft and security issues in German-China relations.
Why does it matter?
This incident highlights the persistent threat of Chinese economic espionage in Europe, particularly concerning the theft of sensitive military technologies. The arrests underscore the ongoing efforts by Chinese intelligence to acquire advanced technologies through illicit means, including obfuscating the identity of partners in university research. Understanding these tactics is crucial for European governments and businesses to enhance their cybersecurity measures, safeguard intellectual property, and mitigate the impact of espionage on national security and economic competitiveness.
Case #2: Chinese military theft of Dutch technologies
What happened?
The Dutch military intelligence agency MIVD revealed that Chinese espionage efforts targeted Dutch semiconductor, aerospace, and maritime industries, with the aim of bolstering China's military capabilities. China's pursuit of Western knowledge and technology, as highlighted by MIVD, underscores its ambition to achieve military parity with other nations. MIVD warned of China's multifaceted approach, which includes legal means like research and investments, alongside illicit espionage tactics. Additionally, the report sheds light on China's expanding cyber campaigns and the role of Chinese universities in intelligence gathering.
Why does it matter?
Dutch accusations of Chinese economic espionage are nothing new. I wrote about Huawei stealing technology from ASML back in October, and the Dutch prime minister raised the issue with Xi Jinping during a visit to Beijing last month.
But this new report alleges that China is stealing commercial secrets in order to improve their military capabilities. This distinction matters. Revelations like this shed light on China's "military-civil fusion" strategy and the technologies it targets, which helps industries prepare for attacks and protect their assets.
It also underscores the need for European governments to address this issue at the state level. Individual firms cannot compete against the PRC's whole-of-society approach to technology acquisition. So governments need to take the lead in treating economic espionage as a national security issue.
Case #3: Hewlett Packard sues China’s Inspur Group for IP infringement
What happened?
Hewlett Packard Enterprise has filed a lawsuit against China's largest server maker, Inspur Group, alleging infringement of five server technology patents. The complaint accuses Inspur of ignoring requests for patent licensing over several years. The lawsuit highlights how Inspur Group renamed subsidiaries after being placed on the US Department of Commerce's Entity List, suggesting it was used as a tactic to continue business in the US without obtaining necessary licenses.
Why does it matter?
This lawsuit emphasizes the importance of protecting intellectual property when dealing with foreign companies in strategic industries. It exposes potential risks associated with sanctioned entities, such as their renaming of subsidiaries to evade trade restrictions. The case underscores the need for thorough due diligence, transparency, and risk management in business dealings with China to safeguard proprietary technology and ensure regulatory compliance.
🌏 Around the region
Taiwan
Taiwan has named JW Kuo, a 71-year-old semiconductor industry veteran, as the next economic affairs minister. Kuo is expected to maintain the outgoing Tsai administration’s policies aimed at reducing Taiwan’s economic reliance on China.
The new administration will be sworn in on May 20.
📖 Best reads of the week
Lawmakers have a fix for Taiwan’s weapons backlog: Build them on the island - Politico
“There is an assumption that Taiwan is so leaky to China, that if you did IP [intellectual property] transfer or IP development that the Chinese would get it,” said Richard Weir, vice president of global strategy at the Utah-based radar firm IMSAR, which has signed preliminary contracts to supply radar systems to two military drone producers in Taiwan.
That assumption extends to Capitol Hill. Licensing of advanced weapons systems for production in Taiwan requires “ensuring our technology is safe from Chinese espionage, which we know is a challenge in Taiwan,” Moulton, the Democratic lawmaker, said.
FBI says Chinese hackers preparing to attack US infrastructure - Reuters
Chinese government-linked hackers have burrowed into U.S. critical infrastructure and are waiting "for just the right moment to deal a devastating blow," FBI Director Christopher Wray said on Thursday.
An ongoing Chinese hacking campaign known as Volt Typhoon has successfully gained access to numerous American companies in telecommunications, energy, water and other critical sectors, with 23 pipeline operators targeted, Wray said in a speech at Vanderbilt University.
📣 Upcoming Events
23 April. “Energy Security and Geopolitics Conference” - CSIS. 10:45 am EST [in person and online]
The conference will convene senior leaders from government, private sector, and think tank communities. Speakers will reflect on the last two years of policy developments in Europe related to energy security, specifically how energy policy is informing and shaping geopolitical decisions, and vice versa.
24 April. “A Conversation with Deputy Secretary of State Kurt Campbell: The New Era in the US-Japan Relationship” - Hudson Institute. 11:00AM EST [in person and online]
Deputy Secretary of State Kurt Campbell will join Hudson Asia-Pacific Security Chair Patrick Cronin to examine the new outlook for the US-Japan alliance.
25 April. “Geopolitical Risk Series: China’s Military Modernization and Military-Civil Fusion Initiative” - US-China Business Council. 8:00pm EST [online]
Tai Ming Cheung, Professor at the University of California, San Diego, and David Finkelstein, Vice President and Director, China and Indo-Pacific Security Affairs Division at the Center for Naval Analyses discuss China’s Military-Civil Fusion initiative.
29 April. The Diffusion of New Technologies | Using Text As Data In Policy Analysis - Hoover Institution. 9:00AM PST [in person]
The Hoover Institution Workshop on Using Text as Data in Policy Analysis showcases applications of natural language processing, structured human readings, and machine learning methods to analyze text as data for examining policy issues in economics, history, national security, political science, and other fields.
30 April. “In conversation with the Rt Hon Theresa May” - Chatham House. 6:00PM GMT [in person and online]
Former Prime Minister Theresa May discusses how abuse of power is eroding trust in democratic institutions.
🗣️ Job Opportunities
Foreign Affairs Officer-Direct Hire Authority - US Department of State (Washington, DC)
Senior Manager, Risk - Stanley (Seattle, WA)
Senior Intelligence Analyst - Sphere Entertainment Group, LLC (Las Vegas, NV)
GEOINT Analyst (TS/SCI) - Xcellent Technology Solutions (Springfield, VA)
Assistant Economist – Global and Cross-Cutting Risks - HM Treasury (London, UK)
📰 In Other News
Economic Espionage
US official says IPR infringement still main concern in China - Reuters
UK warns universities China could steal secret tech - Politico
Artificial intelligence is changing how companies snoop on each other - The Globe and Mail
Geopolitical risk
The world isn’t as messed up as you might think - Yahoo Finance
Geopolitical unrest: Assessing market implications - JP Morgan
With Mideast on brink, investors ignore geopolitical risks at their peril - SCMP
Economic Security
Biden admin, U.S. ports prep for cyberattacks as nationwide infrastructure is targeted - CNBC
Deputy Prime Minister's speech on economic security - UK Cabinet Office
Finance chiefs of S. Korea, U.S., Japan hold 1st three-way talks - Yonhap News
Technology
Why it’s so hard for China’s chip industry to become self-sufficient - MIT Technology Review
Malaysian trade minister touts 'neutrality' to grow chip industry - Nikkei Asia
The Tech Industry is the New Defense Industrial Base - The National Interest
US-China relations
Biden, Competing With Trump to Be Tough on China, Calls for Steel Tariffs - The New York Times
Jamie Dimon says the future of the world depends on whether the US can sort out its relationship with China - Business Insider
Are US export controls making China’s chip industry more innovative? - The Interpreter
Pan-Asia news
The Perception Game: How Are China and the US Viewed in Southeast Asia? - The Diplomat
Lawrence Wong, Singapore's next PM, seeks growth in 'troubled world' - Nikkei Asia
Australia pays controversial Chinese company millions for Nauru’s new port - The Age
🛜 Around the Web
Thank you for reading!
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The Spy Hunter is the personal opinion of the author and is not legal advice. Any individual or organization mentioned is presumed innocent until proven guilty. Articles or other media featured on The Spy Hunter should not be taken as an endorsement by the author.