U.S. Detains Alleged Chinese Spy It Says Tried to Steal GE Trade Secrets
By Aruna Viswanatha (Wall Street Journal)
Updated Oct. 10, 2018 6:58 p.m. ET
Yanjun Xu, arrested in Belgium and extradited this week, is an official of China’s Ministry of State Security, Justice Department says
An alleged Chinese intelligence operative arrested in Belgium has been brought to the U.S. and charged with conspiring to steal trade secrets from GE Aviation and other companies, marking a rare break for the U.S. in its increasingly aggressive effort to target Chinese industrial spying.
Prosecutors have previously charged Chinese government officials with economic espionage and hacking-related offenses pointing to state-directed efforts to steal U.S. technology, but have never publicly identified anyone in custody as a Chinese intelligence officer. The arrested man, Yanjun Xu, made an initial appearance in federal court in Ohio on Wednesday.
“This case is not an isolated incident. It is part of an overall economic policy of developing China at American expense,” John Demers, the head of the Justice Department’s national-security division, said in announcing the charges.
Mr. Xu was identified in court papers as a deputy division director in a department of China’s Ministry of State Security, the country’s intelligence agency. Prosecutors allege that he worked from 2013 through this year with others associated with the ministry and several Chinese universities to obtain sensitive and proprietary information from U.S. aviation and aerospace companies. They say he worked in part by recruiting U.S. employees to travel to China for what was characterized as an exchange of ideas.
The case emerges amid growing tensions between the U.S. and China on several fronts. On Monday, the top U.S. and Chinese diplomats, Secretary of State Mike Pompeo and Foreign Minister Wang Yi, exchanged testy words over trade and other issues.
Trade talks between the two countries have made little progress, as have military discussions. And Vice President Mike Pence last week accused China of working against U.S. interests in various ways, including by interfering in American elections.
Also on Wednesday the U.S. Treasury Department issued new rules requiring all foreign investors in certain deals involving critical U.S. technology to submit to national-security reviews, a move designed to address U.S. concerns about a spate of Chinese technology deals in Silicon Valley.
A lawyer for Mr. Xu couldn’t be identified. The Chinese Embassy didn’t immediately respond to a request for comment.
A General Electric representative said the Chinese official targeted a former GE Aviation employee and that the impact to the company was minimal. “For months, GE Aviation has cooperated with the FBI investigation,” the company said in a statement, adding that “no sensitive information relating to military programs was targeted or obtained.”
U.S. officials echoed those assertions, saying GE Aviation cooperated in the investigation, no defense-related information was removed, and internal controls protected the company’s proprietary information.
Mr. Xu allegedly concealed the “true nature” of his employment and identified himself as affiliated with a provincial Chinese entity called the Jiangsu Science & Technology Promotion Association, according to court papers filed against him.
Mr. Xu was arrested by Belgian authorities in April after a criminal complaint was filed in federal court in Cincinnati. He was extradited to the U.S. on Tuesday, the Justice Department said. GE Aviation is based in Evendale, Ohio, outside Cincinnati.
The development is the latest in an accelerating series of cases prosecutors have brought against foreign intelligence officers for behavior the government alleges is criminal and outside the bounds of traditional espionage. Last week the U.S. unsealed the indictment of seven Russian intelligence officers, charging them with persistent efforts to hack into the networks of agencies that expose their misdeeds.
Prosecutors have also brought a number of cases accusing Chinese nationals of stealing proprietary information on sophisticated technology to benefit Chinese competitors. Officials say the theft of trade secrets costs the U.S. hundreds of billions of dollars a year, and that China and Chinese companies are the leading offenders.
While previous defendants have either not been caught or have been identified only as private Chinese individuals, the case against Mr. Xu suggests a stepped-up effort to target foreign intelligence officers engaged in criminal conduct.
“It’s unprecedented to lay hands on them and declare their intelligence role,” said Christopher Ott, a former prosecutor of cybercrimes and other offenses who is now with the law firm Davis Wright Tremaine. “That’s an expression of confidence in the evidence, and that they won’t have to reveal actual intelligence assets to convict this guy.”
Joseph Campbell, a former FBI official now with Navigant Consulting, said the arrest could also provide the U.S. with a window into Beijing’s operations in the U.S. to target sensitive technology, either through Mr. Xu’s own cooperation or through devices he had with him at the time of his arrest.
“This is an opportunity to gain much more current information about China’s efforts,” Mr. Campbell said.
The case came weeks after Ji Chaoqun, a Chinese national court documents linked to Mr. Xu, was arrested in Chicago and charged with failing to register as a foreign agent. Mr. Ji allegedly performed tasks for Chinese intelligence agents, including buying background reports on potential espionage recruits.
Many of those targeted recruits were ethnic Chinese engineers or scientists who worked for cleared U.S. defense contractors. Mr. Ji also enlisted in the U.S. Army Reserves and failed to disclose his foreign contacts during his background investigation, according to the charges filed against him.
Mr. Ji hasn’t yet entered a plea in the case and an attorney representing him didn’t immediately respond to a request for comment.
According to the case against Mr. Xu unsealed Wednesday, Mr. Xu helped another official at a Chinese aeronautics university target an engineer at GE Aviation, seeking information about the company’s signature material used in aviation engines and other sensitive technology.
Mr. Xu particularly sought information about composite materials in the manufacturing of fan blades and fan-blade encasements, prosecutors said.
Earlier this year, Mr. Xu allegedly continued to press the employee to provide information about the application of research data to engine production and asked him to meet in Europe. Mr. Xu was arrested in Belgium as he sought to hold that meeting, court documents said.
—Thomas Gryta contributed to this article.
Write to Aruna Viswanatha at Aruna.Viswanatha@wsj.com
Appeared in the October 11, 2018, print edition as 'U.S. Accuses Chinese Operative Of Stealing Trade Secrets.'