China Seen in Push to Gain Technology Insights

June 5, 2013

China Seen in Push to Gain Technology Insights

By EDWARD WONG and DIDI KIRSTEN TATLOW

SHENZHEN, China — A government-financed research institute in the Pearl River Delta here boasts an impressive range of specialties, from robotics to nanomedicine to magnetic resonance imaging.

But not all the cutting edge developments may be the result of indigenous innovation, according to American prosecutors, who last month charged three Chinese scientists at the New York University School of Medicine with taking bribes to share research findings with their real employers: the Shenzhen institute and a separate Shanghai medical technology company.Though considerable attention has been focused on Chinese cyberespionage efforts, the institute is at the vanguard of a related push to bolster China’s competitiveness by acquiring overseas technology directly from Chinese scientists working in the United States and other developed countries, say American officials and analysts. Those scientists are heavily recruited to return to China or, in some instances, to share their knowledge while remaining overseas, according to the federal court case and a book released last month by three experts who do China research for the United States government.

In advance of a summit meeting in California later this week between President Obama and President Xi Jinping of China, the two countries agreed to hold regular meetings on the issues of cybersecurity and commercial espionage. But there is no sign yet of what those discussions might accomplish.

The authors of the new book, “Chinese Industrial Espionage,” say that technology transfer is an official policy at all levels of the Communist Party and the state. It often takes place in a legal gray area, since laws governing technology transfer can be vague or nonexistent. The authors warn that the United States and other nations need to acknowledge the extent of the Chinese campaign, which they say far exceeds those of other countries and threatens American competitiveness.

They contend that the scale of China’s efforts to gather overseas technology is so immense that the National Counterintelligence Executive, a federal agency, has considered issuing separate annual reports each year: one for China and one for the rest of the world.

“China is in a different league altogether, exceeding the international norm not just in scale, the number and variety of transfer venues, the moral agnosticism of its practitioners, and the degree of government support,” the authors, William C. Hannas, James Mulvenon and Anna B. Puglisi, said in written answers to questions. “It’s an entire mind-set.”

China’s strategies range from setting up science parks for Chinese returnees to persuading foreign companies to open research centers in China, they said.

A private intelligence company in the Washington area, Defense Group Inc., which employs Mr. Mulvenon, says the government-financed center that the N.Y.U. scientists are accused of being part of, the Shenzhen Institutes of Advanced Technology, recruits overseas Chinese with technical knowledge and “has sought to develop collaborative relationships with foreign companies and research organizations which display high potential for technology transfer.”

A spokeswoman for the Shenzhen center said it was investigating the accusations in the N.Y.U. case. A lawyer for Yudong Zhu, an associate professor in the N.Y.U. radiology department and the lead scientist charged, said the government “has drawn some erroneous conclusions from some of the evidence they have observed” and that Mr. Zhu did not work for the Shanghai company.

The Commission on the Theft of American Intellectual Property concluded in May that technology theft amounted to a loss of more than $300 billion a year, the equivalent of total annual United States exports to Asia. “Virtually every sector and technology is attacked,” the commission said.

“National industrial policy goals in China encourage IP theft, and an extraordinary number of Chinese in business and government entities are engaged in this practice,” said the report by the commission, which was led by Dennis C. Blair, a former director of national intelligence, and Jon M. Huntsman Jr., a former ambassador to China.

The Chinese Foreign Ministry and the State Council, China’s cabinet, declined to comment for this article. In early May, the Commerce Ministry denied accusations by the United States Trade Representative that China was weak on enforcing intellectual property rights. “The Chinese government attaches great importance to intellectual property protection and has made great progress in areas like intellectual property legislation and enforcement,” it said.

Cases like the one at N.Y.U. of overseas Chinese scientists and scholars accused of secretly transferring technical information are considered rare, especially given that the number of Chinese students going abroad reached 400,000 last year. But the growing emphasis in the United States on technology theft by China has made some Chinese-Americans and overseas Chinese fearful of undue persecution. They point to the fiasco of the Wen Ho Lee case, in which a Chinese-American scientist was wrongly accused by federal officials of stealing classified nuclear-related documents.

Frank H. Wu, dean of the Hastings College of the Law at the University of California and a member of the Committee of 100, a Chinese-American advocacy group, urged Americans not to judge people on their ethnicity. “This is complicated because the facts are messy,” he said, calling for “due process and fairness.”

Some foreign economists say Chinese institutions have been unable to capitalize fully on technical knowledge acquired from overseas Chinese. A notable financial failure is Suntech Power, one of the world’s biggest solar-panel makers, whose main subsidiary declared bankruptcy in March. Its founder, Shi Zhengrong, was an overseas scientist who had gotten Australian citizenship and had several patents to his name before deciding to return to China to start a business. The city of Wuxi had lured him there with a $6 million initial investment in his company.

There are overseas Chinese associations in the technology field that are transparent about their ties to Chinese institutions and government agencies. One such group is the Silicon Valley Chinese Overseas Business Association, whose stated goal is to promote the business interests of its members, some of whom hold posts as technology advisers to Chinese ministries and universities. The president, Dongping Daniel Zhu, founded Zaptron Systems, which specializes in analysis of the Chinese stock market. The group has laboratories in Shanghai and Dalian.

An online biography says Mr. Zhu, who has a Ph.D. in electrical engineering from Virginia Tech, has been invited every year since 1995 by Chinese ministries and local governments to give seminars and consult with industrial and high-tech parks in China.

“If we transfer, we just bring our own technology,” he said in a telephone interview. “There is a fine line to draw between technology transfer and espionage. I believe everybody in the field knows where the bottom line is and will not cross it.”

The authors of the industrial espionage book said they were not trying to put overseas Chinese under unfair scrutiny; rather, they want the United States government and American companies to be aware of the sophistication of China’s efforts.

The book notes that beginning in the mid-1950s, China built a system of information extraction from overseas, focusing on open-source material and blurring the boundary between “information” and “intelligence.” Today, the government openly appeals to overseas Chinese to “lend” it technology, with a typical meeting in the city of Shenyang in 2001 attracting hundreds of overseas Chinese, the authors wrote.

The technology is converted into products and equipment across China, including in designated technology transfer centers. Shanghai alone has 10 such centers, and a single center may have a bank of thousands of projects, the authors wrote.

One, the Shanghai New High Technology Service Center, offers “one-stop shopping” for government and business customers. Another, the Shanghai National Technology Transfer Center, has about 7,500 employees spread across laboratories, research institutes and offices in the region who are engaged in the “conversion” of foreign technology, including in microelectronics, lasers and nuclear technology, the authors wrote.

In the N.Y.U. case, prosecutors say the Chinese scientists hid their work in Shenzhen and Shanghai from their American employers. The scientists specialized in M.R.I. technology and did research at N.Y.U. with millions of dollars of grant money from the National Institutes of Health. They were caught, prosecutors said, after the university secretly filmed their actions in the laboratory and reviewed their e-mails, including some written to the Shenzhen center and United Imaging Healthcare, the Shanghai company. Dr. Zhu and a colleague were arrested in May, but the third scientist had already left for China.

Asked about the case, a spokesman for United Imaging said, “Our company would never do such things.”