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The Siphoning of American Innovation: How China Acquires Technology

You have probably heard by now that China is stealing America’s intellectual property.  This has been one of the primary issues in President Trump’s trade war with China—and for good reason.  Keith Alexander, the former Director of the National Security Administration, has called this theft the greatest transfer of wealth in history.1  The transfer of technology to China likely costs America hundreds of billions of dollars every year.2  For many observers, it may be hard to comprehend how one country can steal so much from another, so below I briefly discuss a few ways that China’s government, companies, and citizens have been accused of stealing from America.

There are accusations of Chinese citizens stealing in their individual capacity.  In February, a Chinese scientist was accused of attempting to steal trade secrets from a Coca-Cola research program.3  This scientist was able to access the trade secrets while working for American companies doing research with Coca-Cola.  The scientist allegedly intended to use the trade secrets to setup a competing venture funded by China’s government.4  Assuming this technology provides a competitive advantage to beverage companies, access to it could be of significant value.  The technology purportedly cost $120 million to develop.5  By stealing the trade secrets, the Chinese venture obviously avoids this cost of development.  This makes them a tougher competitor, causing a loss of American profits.

Chinese state-owned companies have also been accused of stealing technology.  In November, Fujian Jinhua Integrated Circuit Co., a Chinese state-owned computer chip manufacturer, was indicted for stealing trade secrets from Micron Technology, an American company.6  Allegedly, a former Micron employee was a part of the scheme to bring the trade secrets back to China so that Fujian Jinhua could develop the same technology. In response, the Commerce Department has banned the export of U.S. technology to the company, which relies on such tech to manufacture its own chips.  The Justice Department is also seeking to ban the export of the technology by Jinhua back to the U.S. where it would compete with American manufacturers.7

China’s government may have encouraged some instances of theft through its funding of competing ventures, but it has also been accused of more directly encouraging the illicit transfer of American technology through its Thousand Talents Plan.8  The Plan encourages foreign experts to work in China for short or extended periods of time. As compensation, the experts are offered a significant salary and all expenses paid by the Chinese government, including travel, housing, medical, and insurance.9  The National Intelligence Council has said that the Plan’s intended purpose is to facilitate the illegal transfer of intellectual property and U.S. technology.10  Furthermore, the U.S. Energy Department has prohibited its scientists from participating due to national security concerns.11

The Chinese government has also been accused of pressuring American companies trying to break into the Chinese market. China expects foreign companies to contribute their technology in exchange for access to their markets.12  One way that China forces contributions is by requiring foreign companies to become a member of a Chinese joint venture before they can enter into certain Chinese industries.13  Similarly, a Chinese state-funded project might announce that it will only purchase from foreign companies that are part of a joint venture.14  During the course of the joint venture, the American technology is transferred to the Chinese company.  Another way that China’s government pulls technology from America is through regulatory review panels that question American companies doing business in China for details about their products and manufacturing processes.15  An American chemical manufacturer has complained that after one such review its Chinese competitors began using the same technology in their products.16  It is not immediately clear whether these technology transfer tactics are legal, but the Chinese government is quick to point out that American companies clearly benefit from their participation in China’s markets17 and denies that there is a national plan to steal American technology.18

As you can see, the transfer of technology from America to China is carried out through various actors and means.  This makes preventing unwanted transfers difficult as they must be dealt with according to the specific circumstances.  Some can be handled under current laws and international agreements, while others may require new agreements.  As more light is shed on the issue of technology transfer it will be interesting to see how these conflicts are resolved.

  1. Megan Henney, Chinese Theft of U.S. Intellectual Property ‘Greatest Transfer of Wealth’ in History, FOXBusiness (July 18, 2018), 

  2. Id. 

  3. Kate O’Keeffe & Aruna Viswanatha, Former Coke Scientist Accused of Stealing Trade Secrets for Chinese Venture, Wall St. J. (Feb. 14, 2019, 7:19 PM),

  4. Greg Norman, Former Coca-Cola Scientist Accused of Stealing Trade Secrets to form Chinese Beverage Rival, Wall St. J. (Feb. 15, 2019),

  5. O’Keeffe & Viswanatha, supra note 3. 

  6. Aruna Viswanatha, Kate O’Keeffe, & Dustin Volz, U.S. Accuses Chinese Firm, Partner of Stealing Trade Secrets from Micron, Wall St. J. (Nov. 1, 2018, 7:14 PM),

  7. Kate O’Keeffe, U.S. to Restrict Chinese Chip Maker from Doing Business with American Firms, Wall St. J. (Oct. 29, 2018),

  8. Timothy Puko & Kate O’Keeffe, Energy Department to Ban Foreign Talent – Recruitment Programs, Wall St. J. (Feb. 1, 2019, 6:52 PM),

  9. The Recruitment Program for Foreign Experts,, (last visited Mar. 14, 2019). 

  10. Anthony Capaccio, U.S. Faces ‘Unprecedented Threat’ from China on Tech Takeover, Bloomberg (June 22, 2018, 12:06 AM),

  11. Puko & O’Keeffe, supra note 8. 

  12. Lingling Wei & Bob Davis, How China Systematically Pries Technology from U.S. Companies, Wall St. J. (Sept. 26, 2018, 10:27 AM),

  13. Id. 

  14. Id. 

  15. Id. 

  16. Id. 

  17. Id. 

  18. O’Keeffe & Viswanatha, supra note 3.