China spies on U.S. companies for economic as well as military secrets, an expert told the House Select Committee on China on June 25, calling for a new approach to protect American power from this threat.
Beijing has adopted a whole of society espionage strategy under Chinese President Xi Jinping (習近平), David Shedd, former acting director of the Defense Intelligence Agency, told lawmakers.
“How does the FBI approach a partially owned Chinese firm seeing a perfectly legal commercial acquisition of a startup developing cutting-edge self-driving technology?” Shedd asked in his written evidence.
Shedd alleged that the Chinese military has “the first rights to use purloined commercial, proprietary intelligence to enable its vast military modernization.” Later in his remarks he linked this to Taiwan, saying that the risk of a hot war “grows with each passing day,” a war that “would likely involve deployment of new lethal technologies and could target the American homeland itself.”
China has “stolen blueprints, knowhow, and data from the West on everything from advanced aerospace technology to critical telecommunications,” Shedd said in his written statement for the record. This includes “genetic data on millions of people around the world,” with biotechnology being a specific focus of China’s economic plans through to 2030.
He explained that the security and intelligence capabilities of China’s Ministry of State Security have “ballooned in size, vastly outstripping the CIA, the NSA, the DIA and the FBI,” and said their mandate is “to carry out the world’s greatest and grandest larceny.”
Shedd outlined seven steps for the U.S. to “regain the initiative to protect the foundations of American power.” These are: modernize legal deterrence, secure the nation’s physical and digital perimeter, shield the innovation pipeline, cut off the capital lifeline, harden the corporate front lines, and make economic security a national imperative.
But it’s the seventh that seems the most important: Protect the crown-jewel technologies of the 21st century, with “nuclear-level safeguards.” Shedd argued the U.S.’s crown jewels are AI model weights, semiconductor architectures, quantum tools, and hypersonic research.
“A number of members of the committee have been properly captivated by your ‘Crown Jewels’ doctrine,” Representative Dusty Johnson told Shedd. But he posed a question: “How do we ensure that we don’t overstep with the regulations around American company behavior?”
“I am not here to argue that we are better off if the federal government introduces more legislation, more regulatory demands on most of corporate America,” Shedd replied, and instead argued for an “education process” in which companies protect themselves, motivated “by quarter-on-quarter profits that are affected by the stealing of their intellectual property.”
There’s clearly more to be done. “This had the potential to be a useful hearing, but really barely scratched the surface,” said Peter Mattis, the president of The Jamestown Foundation, writing on X. “We need a lot more members thinking, learning, and then pushing good ideas to strengthen the response to CCP activities at the sub-national level.”
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