Nine Questions About Chinese Spying and Stolen Technology

There are two ways to get this subject wrong, and cable television has found both. The first is to treat every Chinese student, tourist and shopkeeper as a suspect, which is un-American and also dumb. The second is to shrug and say "everybody spies," which is true in the way that "everybody drives" is true of a man weaving down the highway with his eyes closed. A grown-up conversation sits in the middle.

Folks write in with the same questions again and again. Which laws actually exist? What is a real threat, and what is a headline? Why does somebody always bring up farmland? So here are nine questions, with plain answers, built on the statutes and agencies you can look up yourself. One ground rule: this post does not name individuals and does not describe any case that is still open. It is about the rules, because the rules are what you can vote on.

First, a sorting rule

Before the questions, a rule that will save you a lot of grief. Sort every story you read into one of three bins: crime, regulated activity and ordinary commerce. A crime is something a prosecutor can charge, like stealing a trade secret or lying to the government about who is paying you. Regulated activity is lawful but watched, like a foreign purchase of a company that makes sensitive technology, which has to clear a review. Ordinary commerce is everything else, and in a free economy that is most of it.

Most bad arguments on this subject come from dropping a story into the wrong bin. The man who calls a lawful investment a crime is crying wolf. The man who calls a real theft "just business" is a fool. Keep the three bins in your head and the headlines get a lot easier to read.

Questions on the law

1. Is stealing a company's secrets actually a federal crime?

Yes. The Economic Espionage Act of 1996 made it one. It has two main provisions, and the difference between them matters.

• Section 1831 covers economic espionage: stealing a trade secret to benefit a foreign government, a foreign instrumentality or a foreign agent. This is the heavier charge, with penalties of up to 15 years in prison for an individual.
• Section 1832 covers theft of trade secrets for commercial advantage, whether or not a foreign government is involved. The penalty for an individual is up to 10 years.

Congress added a civil route in 2016 with the Defend Trade Secrets Act, which lets a company sue in federal court over stolen trade secrets instead of waiting for a prosecutor. So a business has two doors: call the FBI, or call a lawyer. Check Title 18 of the United States Code for the exact text and the current fine amounts.

2. What is the difference between "espionage" and everything else people call spying?

The word gets stretched, so here is a sorting guide.

• Classic espionage is secretly collecting national defence information for a foreign power. The Espionage Act of 1917 is the old backbone of the law.
• Economic espionage is the same idea aimed at commercial secrets: formulas, designs, source code, manufacturing processes.
• Acting as an unregistered foreign agent is a different offence. Under the Foreign Agents Registration Act of 1938 a person doing political or public-relations work for a foreign principal has to register and disclose it. The point of FARA is not to ban such work. It is to make it visible.
• Lawful activity includes buying a company, hiring a researcher, publishing a paper, lobbying openly, or running a business that happens to be foreign-owned. None of these is a crime merely because the other country is a rival.

That last bullet is where most of the confusion lives, and we come back to it in Question 9.

3. What is CFIUS and what does it do?

CFIUS is the Committee on Foreign Investment in the United States, an interagency committee chaired by the Treasury Department. Its job is to review certain foreign purchases of, or investments in, American businesses and decide whether they threaten national security.

The key legal moment was the Exon-Florio amendment of 1988, which added Section 721 to the Defense Production Act of 1950. It gave the President authority to block or unwind a deal that threatens national security. Later laws, including the Foreign Investment and National Security Act of 2007, tightened the process.

Two things to remember. First, CFIUS reviews transactions. It is not a general ban on foreign money, and most foreign investment goes through without trouble. Second, the President, not the committee, makes the final call to block a deal. Congress wrote the framework, and the executive branch decides.

4. What changed in 2018?

Congress passed the Foreign Investment Risk Review Modernization Act of 2018, known as FIRRMA. It was part of a larger defence bill, and it fixed some gaps that critics had pointed out for years.

• It extended review to certain non-controlling investments in businesses dealing with critical technology, critical infrastructure or sensitive personal data. Before, a foreign investor could take a slice of such a company without buying control and stay under the radar.
• It reached certain real estate transactions near airports, ports and sensitive government sites such as military installations.
• It made some filings mandatory where they had been voluntary.
• It paired with the Export Control Reform Act of 2018, which gave the Commerce Department firmer authority over the export of emerging technologies.

If you want to know whether Congress can act on this subject when it wants to, the answer is yes. This one passed with bipartisan support.

5. What did the Section 301 report find?

Section 301 of the Trade Act of 1974 lets the U.S. Trade Representative investigate foreign practices that are unreasonable or discriminatory and burden American commerce. An investigation of China opened in August 2017, and the findings came out in March 2018. In summary, the report said that Chinese policies and practices put pressure on American companies to hand over technology, including through joint venture requirements, that licensing terms were discriminatory, that state-directed investment targeted American assets in strategic sectors, and that cyber intrusions had taken commercial information from American networks.

The report is an official document and you can read it. Disagree with the tariffs that followed if you wish. Many conservatives do, and our post who really pays a tariff, following the dollar from dock to shelf explains why. But the underlying findings are a government record, not a talking point. We cover the larger story in We Bet That Trade Would Make China Free and the Bet Did Not Pay.

Questions on companies, campuses and land

6. Why does Huawei keep coming up?

Because telecommunications equipment is different from a toaster. The network that carries your calls, your bank data and, yes, military communications is built from hardware and software that the owner has to trust. The worry about Huawei is not that every phone is a bug. It is that a company with deep ties to a government that can demand its cooperation should not build the backbone of your communications.

That worry has a legal root. China's National Intelligence Law of 2017 says that organisations and citizens shall support and cooperate with national intelligence work. Whatever a company says about its independence, it operates under that law.

Washington responded with specific tools, not a general mood:

• The fiscal year 2019 defence authorization act, in Section 889, barred federal agencies from buying telecommunications equipment from certain Chinese companies, Huawei among them.
• The Commerce Department placed Huawei on its Entity List in May 2019, restricting exports to it of American technology without a licence.
• Later legislation set up a programme to help smaller carriers replace equipment already in their networks.

Notice the shape of it. These are supply-chain and procurement rules, aimed at a category of risk. They do not require anyone to claim that a particular company has done a particular thing. If you want a model for how this should work, that is it.

7. Why do universities come up so often?

Because American research universities are where the frontier work happens, and they are open by design. Openness is a strength. It is also a vulnerability.

Three legal hooks matter.

1. Disclosure of foreign gifts. Section 117 of the Higher Education Act requires colleges that receive federal aid to report gifts from, and contracts with, foreign sources when they total $250,000 or more in a calendar year. The reporting is the point. Sunlight, not a ban.
2. Export controls. Under export rules, sharing certain controlled technology with a foreign national inside the United States can count as an export. This is called a deemed export. A lab that works with controlled technology has to know the rules.
3. Research security. Federal funders ask researchers to disclose outside affiliations and funding, so that nobody is quietly serving two masters on the taxpayer's dime.

There is a balance to strike, and a government program to catch bad actors in this area was launched in 2018 and wound down in 2022 after critics said it had swept in researchers who had done nothing wrong. Whatever you think of that argument, it points to a real principle. The aim is to catch the thief, not to scare off the talent. A policy that drives the best foreign scientists to other countries is a gift to our rivals.

8. Why does farmland come up?

Two reasons. Farmland is a strategic resource: it feeds a country. And it is land, which is permanent, which makes people uneasy about foreign ownership of large tracts, especially near military bases.

Here is what the federal government actually does. The Agricultural Foreign Investment Disclosure Act of 1978 requires foreign persons who buy or hold agricultural land to report it to the Department of Agriculture. It is a disclosure law. It does not ban anything. CFIUS covers certain purchases of real estate near sensitive sites, as described in Question 4, but it is not a general review of farmland sales. Beyond that, the rules vary by state, and a number of state legislatures have written their own limits on foreign ownership of land. If you want to know what applies where you live, check your state legislature's website.

This is also a federalism question: property law is traditionally a state matter, which is why the patchwork exists. We can argue about whether the patchwork is wise, but it is the way the system is built.

The five-part test

9. How do I tell a real threat from a headline?

Use five tests, in this order.

1. Is a government directing it? A foreign firm doing business is commerce. A foreign government directing the activity is a different matter.
2. Is it hidden? Open ownership and open lobbying are lawful, and the law asks for disclosure. Concealment is the red flag.
3. Is it about sensitive technology, infrastructure or data? A restaurant is not a risk. The chip that guides a missile is.
4. Is there a specific legal hook? Look for the statute: the Economic Espionage Act, CFIUS, export controls, FARA, procurement rules. A claim that cites no law and no document is usually just a mood.
5. Is it aimed at conduct or at people? Good policy targets what is done, not who someone is. Anyone who tells you to distrust a neighbour because of his ancestry is not protecting the country. He is being lazy.

Here is a labelled hypothetical to show the test at work. Picture a small town where a foreign-owned company buys an empty warehouse and opens a plant that makes furniture. Run the five tests. Is a government directing it? Nothing says so. Is it hidden? No, the purchase is a matter of public record. Is it sensitive technology, infrastructure or data? No, it is furniture. Is there a legal hook? None needed. Is it about conduct? Yes, and the conduct is hiring local workers. That is commerce, and the town should welcome it.

Now change the facts. The same company wants to buy a parcel next to a military installation, the ownership runs through shell entities nobody can trace, and the stated purpose does not match the equipment arriving. Every test lights up. That is the kind of case that CFIUS, disclosure law and a county's own zoning board exist to look at. Same country of origin, completely different analysis. The facts decide, not the flag.

What you can do about it

If you run a business with valuable know-how, lock down access, limit who sees what, and use written confidentiality agreements. If you suspect theft, the FBI takes reports, and the Defend Trade Secrets Act gives you a civil option. If you are a voter, ask your senators and your state legislators what the law on disclosure, supply chains and land ownership actually says where you live. If you are a student, researcher or employee, follow the disclosure rules and ask your institution if you are unsure.

To see who does what on the government's side, read Who Does What in American Intelligence, Explained in Twelve Questions. For the point that trade has always been a tool of power, see Trade Is Foreign Policy and Every President Has Treated It That Way. And for the other half of the trade debate, seven trade myths both parties repeat, tested against the record is worth a read.

The bottom line

• The law already has real tools: the Economic Espionage Act, CFIUS review as updated in 2018, export controls, procurement bans, disclosure rules. The fight is over whether they are used well, not whether they exist.
• Aim at conduct and at governments, never at neighbours. A person's ancestry is not evidence of anything.
• Demand disclosure and clear rules over mood and rumour. When a headline cites no statute, treat it as a headline.
• Protect the openness that makes American research and business strong, while locking the doors that should be locked.
• Ask your representatives what the rules are where you live, whether on telecommunications, campus funding or land. They are the people with the power to change them.