McCaul: U.S. Pushing Back on Chinese IP Theft and Global Aggression

Former prosecutor recalls Beijing's 1996 election meddling

Michael McCaul

Michael McCaul / Getty Images

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The United States is finally pushing back against the mounting threats from China, including intellectual property theft, global expansion through coercive economics, and the attempted takeover of the South China Sea, a senior Republican member of Congress says.

Members of Congress in particular, from both parties, are waking up to the problem, said Rep. Michael McCaul (R., Texas), senior Republican on the House Foreign Affairs Committee.

"A lot of this has been under the radar and a game of deception, and I think a lot of members of Congress are starting to wake up to the fact this is a serious threat to the national security of the United States," he said in an interview with the Washington Free Beacon.

McCaul was chairman of Homeland Security Committee until 2017 and said he is well versed in Chinese cyberattacks through that experience. Those attacks involved the massive theft of American intellectual property from both government and private sector computer networks.

One of the most damaging attacks involved Chinese hackers stealing 22 million federal employee records, including millions with access to classified information. Security officials say the Chinese are using the stolen records for both cyber espionage and human intelligence-gathering efforts.

McCaul said several recent federal indictments of Chinese hackers are important steps in pushing back against the Chinese cyberattacks. "For the first time, you're seeing consequences to China's bad behavior when it comes to [intellectual property] theft," he said.

Prosecutors in Indiana on Wednesday indicted Wang Fujie, a member of what was described as a sophisticated Chinese hacker group that carried out the 2015 cyberattack against the healthcare provider Anthem that involved the theft of more than 60 million health records.

Curbs on China's data theft also are part of the ongoing U.S.-China trade negotiations, as the Trump administration seeks Beijing's agreement to stop illicit Chinese technology transfer.

McCaul also recalled how China sought to steal the 1996 election by funding Bill Clinton's re-election campaign. McCaul, a former Justice Department prosecutor, worked on the case of Johnny Chung, a California businessman who funneled more than $366,000 in funds to the Democrats, including money provided secretly by the People's Liberation Army intelligence service for the Clinton reelection campaign.

"I remember when I was in the Justice Department I prosecuted the Johnny Chung case and I saw what China was doing to steal our technology, and in fact our election," he said.

"The director of Chinese intelligence put money through China Aerospace into Chung's bank account, and he put it in to the Clinton campaign."

The election meddling operation involved PLA Gen. Ji Shengde, head of military intelligence. According to Chung's congressional testimony in 1999, the Chinese general told him "we like your president very much. We would like to see him reelected. I will give you 300,000 U.S. dollars. You can give it to the president and the Democrat Party." Chung would pleaded guilty to bank fraud, tax evasion, and campaign financial violations.

Investigators traced Chung's PLA connections to Lt. Col. Liu Chaoying, an executive at China Aerospace International Holdings, the Hong Kong-based subsidiary of China Aerospace Science and Technology Corp, a government space launch and missile manufacturer. Liu introduced Chung to Ji.

More recent Chinese election meddling surfaced in October. Vice President Mike Pence said in a speech that China is engaged in a comprehensive and coordinated campaign to undermine support for the president. "China wants a different president," Pence said Oct. 5.

McCaul said a recent example of Chinese technology theft involved the firing of three Chinese academics from the University of Texas MD Anderson Cancer Center in Houston last month. The center is a leader in immunotherapy.

"We're seeing a systemic [operation] across the United States," McCaul said of China's effort to obtain U.S. medical research and development information. "I think you're going to see indictments coming down in the future. And it's not just limited to MD Anderson. It's going to be all over the country."

McCaul said U.S. policy toward China for the past 40 years was shortsighted in thinking trade and engagement would coax China into evolving into a non-threatening power. "I think it was well intentioned but naïve," he said. "We have to engage but we can't be naïve. We have to recognize that [the Chinese] are a strategic competitor and we have to treat them as such."

The Trump administration is finally taking steps to make China pay for its bad behavior. "They are not going to change bad behavior unless there is a consequence to it," McCaul said. "China has gotten away with this for the last 40 years, and this administration is finally saying look, ‘We're not going to put up with this trade imbalance, we're not going to put up with your intellectual property theft, your espionage. There are going to be consequences. We're going to indict in espionage cases. And we're going to get better deals.'"

Another concern is China's efforts around the world using economic power to promote the communist political system and socialist economy through the Belt and Road Initiative, an investment program in the developing world that uses predatory lending and other economic means for geopolitical influence and control.

McCaul also said he is concerned about the technology race between the United States and China in developing artificial intelligence, quantum computing, and the advanced telecommunications system called 5G. "I just don't know if we have enough to compete with the Chinese 5G effort," he said.

Chinese telecommunications companies such as Huawei Technologies and ZTE are promoting the use of their 5G around the world in a bid to dominate the market for high speed communications.

U.S. security officials fear that if Chinese telecom firms dominate the 5G market, China will have a strategic advantage through its ability to exploit electronic equipment for intelligence gathering and business advantage. The worry is based on recent Beijing regulations requiring all Chinese companies to support intelligence gathering.

McCaul said the success of the pending trade deal with China will depend on whether Beijing follows through in adhering to the agreement.

China has violated numerous agreements in the past, including promises not to conduct cyber economic espionage and not militarize disputed islands in the South China Sea.

"I'm skeptical," he said. "On the trade agreement, the enforcement provisions are kind of a big question mark. Will it truly be enforceable?"

McCaul noted that Chinese President Xi Jinping announced controls on the export of fentanyl, the deadly opioid that is killing Americans by the thousands. "I don't believe that," he said. "They're making a lot of money off that and they're poisoning Americans. So from their perspective that's probably a great foreign policy."

On the South China Sea, McCaul said the Obama administration "almost conceded" control of the waterway that is used for trillions of dollars in trade annually by not preventing Chinese military expansion on some 3,200 acres of newly reclaimed islands.

The Trump administration has ramped up warship passages through the sea as well as through the Taiwan Strait in a bid to reassert that the areas are international waters and not, as Beijing asserts, sovereign Chinese maritime territory. "It's another part of the grab to establish dominance in the South China Sea," McCaul said of the Chinese encroachment.

Internationally, the Chinese Communist Party-ruled government is "taking over ports without firing a shot," McCaul said. "And they're everywhere. Everywhere I've traveled in Latin America, the African continent," he said.

To counter Chinese economic hegemony, McCaul is sponsoring legislation, passed by the House this week, designed to press the State Department to do more to promote American business interests around the world. The bill would establish an assistant secretary of state for economic and business matters.

McCaul said foreign representatives in the developing world have told him the United States and its companies are eclipsed by Chinese offers to build roads and other infrastructure. The representatives said the United States "is not there" in seeking development opportunities.

What developing nations seeking Chinese support do not understand is that they will be pressured to accepting loans that will be hard to repay and that Chinese workers, not locals, will be used in the projects. Foreign states' natural resources also will be unfairly exploited, McCaul said.

If American and other democratic states' companies do more to offer an alternative, the Chinese effort can be countered. "But that is not happening right now," McCaul said, adding that he hopes his legislation will seek to remedy the problem.

On Taiwan, McCaul said a resolution he sponsored calls for reassuring the democratic-ruled island nation of U.S. support.

An important factor is the South China Sea where China has demonstrated "aggression" in seeking the takeover, he noted.

"If [China] is in the South China Sea with those islands, the next step would most likely be Taiwan," McCaul said. "Are we going to be willing to go to war over that? Or will the Chinese do what the Russians did in Crimea and just annex it? That's a serious threat."

Bill Gertz   Email Bill | Full Bio | RSS
Bill Gertz is senior editor of the Washington Free Beacon. Prior to joining the Beacon he was a national security reporter, editor, and columnist for 27 years at the Washington Times. Bill is the author of seven books, four of which were national bestsellers. His most recent book was iWar: War and Peace in the Information Age, a look at information warfare in its many forms and the enemies that are waging it. Bill has an international reputation. Vyachaslav Trubnikov, head of the Russian Foreign Intelligence Service, once called him a “tool of the CIA” after he wrote an article exposing Russian intelligence operations in the Balkans. A senior CIA official once threatened to have a cruise missile fired at his desk after he wrote a column critical of the CIA’s analysis of China. And China’s communist government has criticized him for news reports exposing China’s weapons and missile sales to rogue states. The state-run Xinhua news agency in 2006 identified Bill as the No. 1 “anti-China expert” in the world. Bill insists he is very much pro-China—pro-Chinese people and opposed to the communist system. Former Defense Secretary Donald H. Rumsfeld once told him: “You are drilling holes in the Pentagon and sucking out information.” His Twitter handle is @BillGertz.

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