15
UPDATE TO THE IP COMMISSION REPORT
is a leading concern for businesses operating in China, as intellectual property
infringements are dicult to prevent and remediate.
54
China also singles out high-tech sectors for special support in its ve-year plans. In testimony
to the U.S.-China Economic and Security Commission, Jen Weedon, formerly of the cybersecurity
rm FireEye, asserted that while all sectors are potential targets of Chinese cyberespionage, rms
in strategic industries identied in the 12th Five-Year Plan are targeted by a greater number of
advanced hackers sponsored by the Chinese government.
55
One such targeted high-tech sector is the
semiconductor industry. e Chinese government hopes that China can attain “world-class status”
in semiconductor production by 2030.
56
It aims to do so through subsidizing domestic rms, and
by what the President’s Council of Advisors on Science and Technology calls “zero-sum tactics”
that hurt the overall industry and global economy but help Chinese rms. ese tactics include
the overt and covert the of IP, among others.
57
Numerous examples help demonstrate the scope of the Chinese industrial policy of gaining access
to foreign expertise in key sectors. For example, in the United Kingdom, the sensitive nuclear project
at Hinkley Point proposed for co-development with China General Nuclear Power Company was
delayed. It came to light that the Chinese rm was indicted (along with one of its senior employees,
Allen Ho) for “conspiracy to unlawfully engage and participate in the production and development
of special nuclear material outside the United States, without the required authorization from the
U.S. Department of Energy.”
58
Perhaps the most recent case is China’s development of the Micius satellite, considered the world’s
rst quantum communications satellite, which China launched into orbit in 2016. Scientists at
national laboratories and academic institutions around the world have been working on developing
technology based on quantum mechanics to create a communications system that is considered to
be completely secure from penetration. China is eager to develop this technology to protect its own
communications from potential adversaries like the United States. However, perhaps ironically,
China was able to develop quantum communications technology ahead of its rivals by incorporating
their research ndings. In an interview with the Wall Street Journal, Pan Jianwei, the physicist leading
the project, was quoted saying, “We’ve taken all the good technology from labs around the world,
absorbed it and brought it back.”
59
is may be just an innocent quip about how scientists share
their basic research ndings with one another across borders. However, it has been demonstrated
54
USTR, “2016 Special 301 Report.”
55
Jen Weedon, testimony before the U.S.-China Economic and Security Review Commission, Hearing on Commercial Cyber Espionage and
Barriers to Digital Trade in China, Washington, D.C., June 15, 2015, http://www.uscc.gov/sites/default/les/Weedon%20Testimony.pdf.
56
“China’s Global Semiconductor Raid,” Wall Street Journal, January 12, 2017, http://www.wsj.com/articles/chinas-global-semiconductor-
raid-1484266212.
57
President’s Council of Advisors on Science and Technology, Report to the President: Ensuring Long-Term U.S. Leadership in Semiconductors
(Washington, D.C., January 2017), https://www.whitehouse.gov/sites/default/les/microsites/ostp/PCAST/pcast_ensuring_long-term_us_
leadership_in_semiconductors.pdf. e other zero-sum tactics include forcing customers to buy domestic and forcing foreign companies
to transfer technology for market access. A fourth zero-sum tactic, not mentioned in the report from the President’s Council of Advisors
on Science and Technology, is barring foreign rms from providing certain services in the Chinese market. For example, value-added
telecommunications services cannot be provided by a foreign-owned entity. e best a foreign company can do is own 49% of an entity
providing such services because the necessary license can only be granted to a majority-Chinese-owned entity. is means that online stores
and cloud storage, among other services, have to be provided by the latter, forcing the foreign company to share the technology and prots
with a Chinese partner.
58
“U.S. Nuclear Engineer, China General Nuclear Power Company and Energy Technology International Indicted in Nuclear Power
Conspiracy against the United States,” U.S. Department of Justice, April 14, 2016, https://www.justice.gov/opa/pr/us-nuclear-engineer-
china-general-nuclear-power-company-and-energy-technology-international.
59
Josh Chin, “China’s Latest Leap Forward Isn’t Just Great—It’s Quantum,” Wall Street Journal, August 20, 2016, http://www.wsj.com/articles/
chinas-latest-leap-forward-isnt-just-greatits-quantum-1471269555.