A recent report from a leading American think tank reveals that some Chinese-owned companies pose as American corporations to acquire intellectual property in the United States, in order to strengthen China’s industrial and military competitiveness. Experts have suggested measures to tackle this issue, emphasizing the need for U.S. firms to increase national security awareness and address regulatory loopholes to prevent China’s widespread technology theft.
On November 3rd, the Information Technology and Innovation Foundation (ITIF), a technology policy think tank based in Washington, released a report titled “How Some Chinese Companies Disguise Their Connections to China and How Policymakers Should Respond.”
The report highlights how certain Chinese-funded enterprises disguised as American companies obtain intellectual property, talent, and substantial funding from the U.S. government under the guise of market investment. However, their true motive is to support China’s strategic industries and military development.
Three Chinese-controlled companies were specifically mentioned in the report: China Aerospace Technologies (CAT), California Manufacturing and Engineering Corporation (CMEC), and Farasis Energy. These companies operate in strategic sectors such as aerospace, engineering machinery, and advanced batteries in the U.S., with their employees and employers being American taxpayers, yet their parent companies are Chinese.
Through a series of transactions, China Aerospace Industry Group (AVIC) holds a 46.4% stake in CAT, while the State-owned Assets Supervision and Administration Commission of the State Council (SASAC) of China owns 100% of AVIC.
Similarly, CMEC’s ownership lies with Zhejiang Dingli Machinery Company. Zhejiang Dingli is a Chinese manufacturer of high-altitude operation platforms, with one of its major clients being the Chinese military.
Farasis has long received funding from the U.S. government and undertaken research projects for the Department of Defense, but in 2009 the company relocated to Jiangxi, China, establishing a joint venture with a Chinese state-owned enterprise, leading to increased control by the Chinese government. Yu Wang, a Canadian Chinese and co-founder of Farasis, was included in China’s “Thousand Talents Program.”
In 2017, China’s Ministry of Commerce instructed all Chinese multinational companies that “internationalization must coexist with localization,” and for the purpose of achieving “localization,” companies should “downplay their nationality.”
Chen Mingshi, a researcher at the Taiwan Institute of National Defense and Security Studies, stated to The Epoch Times that China is adept at disguising civilian companies as foreign-funded entities, or directly disguising state-owned enterprises as private companies to seek cooperation or do business abroad, exploiting opportunities to bring back technology or intellectual property to China.
Chen noted that China’s intention is to “learn or extract technology and knowledge from the U.S., and then cultivate its own enterprises to surpass the U.S.”
Sun Guoxiang, a professor at the Department of International Affairs and Business at Southern China University, also commented that based on the technological capabilities of the three companies mentioned in the ITIF report, it is evident that China aims to “weaken U.S. competitiveness in key high-tech sectors.”
The ITIF report specifically points out that when these Chinese-funded companies disguised as American companies conceal their ownership or connections with the Chinese government or military, it creates a unique risk profile: “A U.S.-based American company can silently advance Beijing’s strategic goals,” affecting U.S. industrial, technological, and national security competitiveness.
The report calls for the U.S. to implement “more robust regulatory measures,” including strengthening foreign investment reviews, expanding ownership disclosure requirements, to ensure U.S. resilience against China’s “strategic exploitation” while maintaining an open economy.
Sun Guoxiang believes that the overall significance of the ITIF report lies in warning the U.S. to reassess assumptions regarding investment freedom and technology sharing, stating that in the context of global competition and strategic confrontation, open policies may pose national security risks, as the monitoring mechanism for such disguised investments still has loopholes.
He added that China’s infiltration methods will become increasingly covert over time, employing tactics such as disguise, cross-border control, and penetration of supply chains. U.S. enforcement, ongoing monitoring, and international cooperation pose challenges, requiring substantial resources and political will.
Chen Mingshi suggested that for companies willing to cooperate with China for profit, the U.S. regulatory mechanism may consider enhancing punitive measures. Ultimately, the key lies with U.S. companies being aware of China’s practices and whether they prioritize national security over potential financial gains, technology transfer, or theft.
In conclusion, the need for the U.S. to address the ongoing threat of technology theft by China remains critical, highlighting the importance of vigilance and proactive measures to safeguard national security and economic interests.