China's Intelligence Apparatus: Implications for Foreign Firms

Wednesday, May 16, 2012

Contributed by Jeffrey Carr, White Paper by Matt Brazil

Introduction

The PRC has three main intelligence services. They all monitor non-Chinese firms with offices and factories in China.

These services have some overlapping responsibilities and compete for money and mission scope in a time when the country’s leaders perceive a growing need for their services due to the growing international role of the country.

Their activities have roots in the revolutionary period before 1949 and even in ancient times, but there are new aspects to the behavior of the Chinese services which reflect China’s development as a more assertive international actor.

Altogether, the situation is increasingly troublesome for non-Chinese businesses with intellectual property (IP) to protect not just in China, but on their own soil: any business with IP needed by the Chinese state or even a state owned enterprise (SOE) may be targeted by not just one, but multiple Chinese intelligence services and even PRC end-users themselves: the civilian and military intelligence agencies, military companies, civilian SOEs, private Chinese firms, and academic entities.

Since they are independent of each other, they are unlikely to coordinate their meddling and thievery (though there is some predictability; intelligence agencies will target bigger ticket items—e.g.: submarine systems—compared to commercial items chased by smaller actors).

Moreover, a business does not need to be located in the PRC to fall victim to clandestine Chinese technology acquisition or other snooping.

Everyone expects hacking from afar, but this problem includes good old fashioned spying outside of China, sometimes by a classic sleeper agent like Chi Mak, discussed below, or by a PRC-owned or invested firm that spots, assesses, develops, and recruits an agent inside your firm.

Some of the activities of the Chinese services are based on longstanding assumptions about dealing with foreigners predating the 1949 founding of the PRC.

Their efforts seem to be growing more intense as PRC decision makers perceive increasing national power and become insistent upon settling disputes on Chinese terms—a trend that will not reverse in the foreseeable future.

Download the entire white paper, The Peoples Republic of China’s Intelligence Apparatus: Implications for Foreign Firms Operating in China, here:

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