Why China doesn’t need balloons to spy on US companies

You might say that the balloon of our China illusions has finally burst. But for many of us who follow China closely, it’s been more like a slow deflating.

As much of the world’s attention was focused these past few days on the saga of the Chinese spy balloon, I thought back to a panicked phone call I received in the late 2000s from a chief security officer (CSO) of a major global technology company.

The CSO admitted his company didn’t do a background check on the Chinese individual their joint venture partners suggested as the venture’s CEO. Now, years into the partnership, his company had evidence that its intellectual property was being siphoned off by their partners, and there were rumors that the CEO had ties to the Chinese military. He stressed that my investigative team at the corporate security firm I worked for had to use extreme discretion because this joint venture was currently the only profitable arm of this company and while they realized they had to get to the bottom of what was going on, they were reluctant “to kill the goose that laid the golden egg”.

My team got to work and easily traced the CEO’s family ties to the Chinese military. We spoke with former employees of the joint venture who added to the evidence that proprietary information from the U.S. company was being taken by their Chinese partners.

Our client — a name anyone in the business world would recognize — took our report, reminded us of our responsibility to be discreet, and that was the last we heard of it until a news report came out that the company was acquired by an even bigger global conglomerate. We debated whether to alert that company of the ongoing Chinese theft, but felt it was beyond our purview.

The theft of intellectual property from eager Western companies setting up shops with dubious partners is just one aspect of how China powered its economic miracle based on theft. This widespread theft has allowed China to leapfrog ahead in military and corporate technology. FBI Director Christopher Wray recently told Congress that China has stolen more American data “than every other nation combined.”

The China threat seems to be the one issue that is bipartisan these days and that’s one of the reasons we are finally adjusting the course of our relationship with China. Many China observers feel that we’re entering a Cold War-like state of competition with China, and U.S. policy is beginning to reflect that with new restrictions on semiconductors and other advanced manufacturing a good example. On the business side, U.S. companies are increasingly decoupling their supply chains from China to better manage the risk of this new era. We’ll see more examples of these policies from both government and business in the coming months.

Sometimes it takes something big and obvious for people to understand an issue. The Chinese spy balloon that floated across the country is perhaps that big and obvious thing and it will hopefully be a part of a continuing wakeup call to be clear-eyed about an adversary that has been taking advantage of the U.S. for years. That doesn’t mean that war with China is inevitable. Adroit diplomacy could still leave room for important areas of cooperation on, for example, climate change, and mutual economic benefits could still be a feature of the relationship.

In tonight’s State of the Union address, President Biden must make clear that we are in a new era of U.S.-China relations. Going forward we can no longer give up long-term U.S. security interests for the sake of quarterly profits or naïve assumptions of China liberalizing as it develops. The president must make clear that China will not be allowed to violate U.S. sovereignty in airspace or cyberspace without a U.S. response to such actions.

Jeremy Hurewitz is a policy adviser on national security at The Joseph Rainey Center, a strategic adviser to Interfor International, and the founder of Sell Like a Spy.