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Curbing Chinese Cyber Espionage

Author: Adam Segal, Ira A. Lipman Chair in Emerging Technologies and National Security and Director of the Digital and Cyberspace Policy Program
May 9, 2011


Editor's Note: Dr. Adam Segal is the Ira A. Lipman Senior Fellow at the Council on Foreign Relations and author of Advantage: How American Innovation Can Overcome the Asian Challenge.

According to public reports, over the last several months computer hackers have stolen proprietary information from DuPont, Johnson & Johnson, General Electric, RSA, Epsilon, NASDAQ, and at least a dozen other firms.  Many of these attacks have been traced back to networks in China, but it is unclear whether criminals, government agencies or some combination of the two are responsible for the attacks.

U.S State Department cables obtained by Wikileaks further describe attacks code-named Byzantine Hades on U.S. technology and defense companies that appear to be the work of China's People's Liberation Army.

Regardless of the source of the attacks, the United States must work independently and, when possible, cooperatively with China to reduce the threat.

Chinese cyber espionage is part of a larger effort to reduce China's dependence on foreign technology.  Chinese leaders are unhappy with being a factory to the world.  It is too labor and energy intensive. Chinese leaders fear that Chinese firms will be trapped producing low-value components while American, Japanese and European companies dominate the high-return, intellectual-property-intensive sectors.

The desire for technological self-sufficiency is also tightly tied to concerns about national security.  As former Chinese minister of science Xu Guanhua put it in January 2006 when he unveiled a new plan designed to make the country one of the world's leading science powers by 2020, “China still lacks capability in innovation, particularly in those strategically important areas. We would never buy or borrow the key technologies from the global leading economies.”

The move from “made in” to “innovated in” China has been pushed along by three policy instruments: industrial policy, innovation strategy, and industrial and cyber espionage.  Industrial policy involves top-down, state-directed technology programs often focused on specific sectors and the government research institutes. Innovation strategy includes more bottom-up efforts to encourage technological entrepreneurship through university-industry collaboration and small start-ups.

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