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Years of Chinese espionage is what prompted consulate closing, US says

Chinese consulate in Houston (WhisperToMe/WikiCommons)

The Trump administration’s decision to shutter the Chinese consulate in Houston followed years of frustration about criminal and covert activity directed by Beijing to steal trade secrets and carry out malign influence operations across the U.S.

While two Chinese citizens were convicted in the past year for trying to steal trade secrets in America’s energy capital, three administration officials briefing reporters on Friday said the sum total of activity conducted through the Houston consulate represented the “tip of the iceberg” when it comes to concerns about China.

Highlighting the scope of the challenge, the FBI currently has about 2,000 active cases related to Chinese counterintelligence operations in the U.S., one official on the call said.

But by couching the Houston closure as the result of years of work, officials sought to separate their decision from current tensions over everything from the coronavirus pandemic to Beijing’s increasing control over Hong Kong.

Instead, the U.S. seeks to send a broader signal that it will be less patient about Chinese efforts to conduct espionage, particularly on economic and intellectual property issues. That shift is partly the result of U.S. policy increasingly being led by hardliners inside the Trump administration, including Secretary of State Mike Pompeo.

“For the foreseeable future, Chinese government IP theft and foreign influence efforts will be treated not just as individual criminal matters or disagreements over economic policy but as issues of national security and strategic affairs,” said Sumon Dantiki, a former federal cyber-crime prosecutor and senior counselor to the director of the FBI.

China rejected the U.S. accusations that its consulate was a central hub of espionage, and retaliated on Friday by ordering the closure of America’s consulate in the city of Chengdu, a key outpost for watching events in Tibet, within 72 hours.

The U.S. move followed weeks of rising pressure on Beijing by Trump administration officials, culminating in a speech by Pompeo on Thursday in which he called the Chinese Communist Party a “Frankenstein” that threated the free world.

On Friday the administration said the Chinese government used its consulate in Houston and other U.S. cities to direct operatives to commit visa fraud while carrying out espionage, lobby elected officials and business leaders to back policies favorable to Beijing, and to conduct a program called “Operation Foxhunt.” That program’s goal has been to pressure dissidents to return to China, according to the three officials, who asked not to be identified.

Another official described the U.S. move as at attempt to sweep up years of “broken glass” with regard to China’s promises to stop its espionage activities in the U.S.

Chinese activities directed from Houston were seen as being particularly aggressive and followed recent accusations that the Chinese government was trying to steal medical research from U.S. institutions for developing a vaccine for coronavirus.

The Houston consulate also was being used to advance China’s Thousand Talents program, which was specifically designed to recruit Chinese citizens to come to the U.S. to steal from companies, the officials said.

“This is further evidence that companies and research institutions across a wide variety of sectors, including medical research and energy, that deal with sensitive data, novel IP, or innovative technology, are now squarely in the economic espionage cross hairs of sophisticated foreign governments,” said Dantiki, who is now a partner at the King & Spalding law firm in Washington.

U.S. efforts to crack down on economic espionage include at least two recent examples from the greater Houston area. Chinese citizens Shan Shi was convicted in federal court last year of conspiracy to steal deepwater trade secrets for the benefit of a China-based company called CBM-Future New Material Science and Technology Co. Ltd.

Hongjin Tan, a Chinese national who worked for a U.S. petroleum company, was arrested in late 2018 and charged with theft of trade secrets from his employer. He was sentenced to two years in federal prison earlier this year.

There were signs on Friday, however, that tensions between the U.S. and China may have peaked, at least for now. The closure of the Chengdu diplomatic compound wasn’t the most aggressive step Chinese officials could have taken, given the U.S. also have consulates in cities including Shanghai and Hong Kong.

In addition, a Chinese researcher wanted by the U.S. who took shelter at the country’s consulate in San Francisco was taken into custody on Friday. U.S. law enforcement had been seeking Juan Tang, a researcher at the University of California at Davis who was charged with lying about her military service in China. Officials declined to detail the circumstances of Tang’s handover to law enforcement.


©2020 Bloomberg News

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