Department of Justice Year-End Update Shows “China Initiative” Prosecutions Are Alive and Well

Key Takeaways:

• The Department of Justice (“DOJ”) recently updated its online information sheet on its China Initiative, which targets trade secret theft, hacking, and economic espionage in the United States by Chinese interests.
• The China Initiative began in 2018 as a key enforcement priority for the President Trump DOJ, but President Biden’s campaign comments directed at Chinese intellectual property theft and economic espionage suggested that his Administration might continue the program.
• The DOJ’s update shows that the Biden Administration has continued to prosecute China Initiative cases, highlighting 21 prosecutions including a conviction of a Chinese government official for conspiracy and attempt charges related to economic espionage and theft of trade secrets.
• Attorney General Merrick Garland has also reaffirmed to Congress his commitment to combatting Chinese espionage and intellectual property theft, suggesting that the DOJ will continue to focus its enforcement efforts on Chinese companies and individuals doing business in the United States.

The Department of Justice on November 19, 2021, updated its online information sheet about its ongoing China Initiative, which “reflects the [DOJ’s] strategic priority of countering Chinese national security threats” by “identifying and prosecuting those engaged in trade secret theft, hacking, and economic espionage.”¹ The DOJ’s update shows that, as the authors of this OnPoint predicted a year ago, the Biden administration has not shied away from, but in fact vigorously continued, this initiative begun under President Trump in 2018.²

Origin of the China Initiative

The 2018 launch of the China Initiative followed a series of federal government reports and investigations regarding China’s trade practices, including its alleged efforts to steal American intellectual property.³ The Trump administration emphasized its commitment to the China Initiative in a series of speeches, with then-Attorney General William Barr characterizing China as engaging “in an economic blitzkrieg—an aggressive, orchestrated, whole-of-government (indeed, whole-of-society) campaign to seize the commanding heights of the global economy and to surpass the United States as the world’s preeminent superpower.”⁴ Similarly, then-Secretary of State Mike Pompeo publicly stated that “China ripped off our prized intellectual property and trade secrets, costing millions of jobs all across America,” and highlighted the administration’s efforts to combat this threat.⁵

The DOJ followed through on this rhetoric with a series of prosecutions targeting both high-profile companies and rank-and-file individuals, including Chinese businesses, Chinese nationals working in the United States, researchers, professors, and U.S. intelligence officials.⁶ From when the China Initiative was first announced through the end of 2020, the DOJ had charged five economic espionage cases and more than ten trade-secret-related cases under the umbrella of the China Initiative.⁷ Prosecutions of academics, which the DOJ viewed as “non-traditional collectors” of intellectual property, were also emphasized for crimes like “fraud, false statements, tax, [and] smuggling.”⁸ The China Initiative also sought to counter foreign intelligence activities by combatting Chinese efforts to target former United States intelligence members and by monitoring career networking and social media sites for suspicious activity.⁹

The Biden Approach

As we pointed out after last year’s election, President Biden also made targeting China a centerpiece of his campaign, stating that “[i]f China has its way, it will keep robbing the United States and American companies of their technology and intellectual property.”¹⁰ China Initiative prosecutions have continued under the Biden administration, although some have speculated that“the Biden administration may be pulling back from non-disclosure cases against academics where current ties to the Chinese government are tenuous” while continuing to maintain “[p]rosecution of Chinese espionage and security threats [as] . . .  a strategic priority.”¹¹ Attorney General Merrick Garland recently reaffirmed the DOJ’s commitment to the China Initiative in a Congressional hearing, labeling China a “serious threat to our intellectual property” and “a serious threat with respect to espionage” against which the DOJ has an obligation to protect the nation.¹²

The DOJ’s 2021 year-end update to its China Initiative information sheet reflects the Initiative’s continued viability, highlighting 15 cases from the year.¹³ For example, the DOJ discussed its successful prosecution of Yanjun Xu, “the first Chinese intelligence officer to be extradited to the United States to stand trial,” for conspiring and attempting to commit economic espionage and theft of trade secrets.¹⁴ A jury in the Southern District of Ohio returned a guilty verdict after a trial in which the government alleged that Xu “used multiple aliases” to target leading aviation companies in the United States by recruiting their experts to travel to China “under the guise that they were traveling to give a presentation at a university.”¹⁵ Similarly, the DOJ reported its indictment of “four PRC nationals, three of whom were officers in the PRC’s Ministry of State Security ("MSS"), [for] participating in a wide-ranging global computer intrusion campaign targeting infectious disease research, among other things.”¹⁶ The indictment alleged that these defendants ran a hacking campaign that targeted victims not just in the United States but also Canada, Europe, Asia, and the Middle East, impacting multiple industries including aviation, defense, education, government, health care, biopharmaceutical, and maritime.¹⁷

Prosecutions of academics and researchers with Chinese ties also continued in 2021. The DOJ reported that an Ohio rheumatology professor and researcher with strong ties to China was sentenced to 37 months in prison for making false statements to federal authorities as part of an immunology research fraud scheme.¹⁸ A hospital researcher in Ohio was also sentenced to 33 months in prison for “conspiring to steal exosome-related trade secrets concerning the research, identification and treatment of a range of pediatric medical conditions.”¹⁹ Another hospital researcher was sentenced to 30 months in prison for trade secret theft, and two professors were indicted for grant fraud under the auspices of the China Initiative.²⁰

Indeed, statistics on China Initiative prosecutions recently compiled by journalists at MIT Technology Review suggest that the DOJ has aggressively broadened its focus over time, to the point of charging cases that it eventually dropped or dismissed.²¹ These journalists reported that: “Three years after the program’s start, less than a third of China Initiative defendants have been convicted. Of the 148 individuals charged, only 40 have pleaded or been found guilty, with guilty pleas often involving lesser charges than originally brought. Almost two-thirds of cases—64%—are still pending. And of the 95 individuals still facing charges, 71 are not being actively prosecuted because the defendant is in an unknown location or cannot be extradited.”²²

The MIT Technology Review data investigation also explains that “many of the cases concerned with research integrity have fallen apart.”²³ Specifically, according to the journalists’ investigation, although “eight are still pending, seven cases against academics have ended in dismissal or acquittal while six have ended in a guilty plea or conviction.”²⁴ Data from this investigation confirms what we anecdotally believed to be the case: That DOJ’s China Initiative prosecutions have been a mixed bag of results. This is not terribly surprising given the aggressive and expansive nature of these prosecutions.

Conclusion

As we predicted shortly after his election, President Biden has continued his predecessor’s China Initiative in an effort to combat trade secret theft and economic espionage. With less than a full year of prosecutions to analyze, there remains a long runway to evaluate how the Biden DOJ’s approach to the China Initiative will differ from that of the Trump DOJ. But with relevant prosecutions continuing to be filed and the Attorney General reiterating the importance of combatting Chinese espionage and trade secret theft, it appears to be clear that the China Initiative is alive and well.