Chinese spy caught in ‘rare’ sting after ‘plot to steal US trade secrets’

US agents have arrested a top Beijing intelligence official for allegedly attempting to steal trade secrets from GE Aviation and other US aerospace companies after luring the suspect to Belgium in what the US Justice Department called “an unprecedented extradition”.

Xu Yanjun, who also uses the names Qu Hui and Zhang Hui, was extradited to the US on Tuesday with assistance from Belgian authorities for seeking “to steal trade secrets and other sensitive information from an American company that leads the way in aerospace”, Assistant Attorney General for National Security John C. Demers said in a Justice Department announcement on Wednesday.

Xu, a senior officer with China’s Ministry of State Security (MSS), appeared in federal court in Cincinnati on Wednesday, the Cincinnati Enquirer reported. He could be given a prison sentence of up to 25 years in addition to fines if charged and convicted, the Justice Department said.

“Beginning in at least December 2013 and continuing until his arrest, Xu targeted certain companies inside and outside the United States that are recognised as leaders in the aviation field,” the Justice Department said in its announcement of the arrest.

“He identified experts who worked for these companies and recruited them to travel to China, often initially under the guise of asking them to deliver a university presentation.”

Responsible for intelligence gathering and conducting investigations on issues related to interaction between Chinese and foreign entities, MSS is roughly equivalent to America’s National Security Agency (NSA) and Central Intelligence Agency (CIA). Xu is a deputy division director with the organisation’s Jiangsu provincial division.

Xu’s case was announced just hours after FBI Director Christopher Wray said China was a greater security threat to the US than Russia, the latest warning about Beijing from government officials including Vice President Mike Pence, who said last week that China seeks to undermine American interests geopolitically, economically and militarily.

Wray spoke in a Senate Homeland Security Committee hearing, where he answered lawmakers’ questions about national security threats including allegations by Pence and President Donald Trump that China is attempting to influence US voters in upcoming midterm elections.

Concerns about Chinese espionage were echoed in the US Treasury department’s announcement on Wednesday that the federal government will tighten rules on foreign investment in high tech industries including aviation next month.

The move is in line with a new law passed in August – the Foreign Investment Risk Review Modernisation Act of 2018 (or FIRRMA) – in response to warnings from intelligence officials that advanced US technology transferred to Chinese companies through acquisitions and other means may have undercut the American military’s advantages over China.

The temporary regulations, intended as a stopgap until FIRRMA is fully implemented in 2020, give the Committee on Foreign Investment in the United States, or CFIUS, the authority to review any transactions that give a foreign entity access to nonpublic proprietary information of companies developing “critical technology”.

Xu’s extradition was “a timely enforcement event in light of the new FIRRMA regulations related to [CFIUS], which will tighten up oversight of transactions between US and foreign companies, especially China, with review of a wider perspective on how business transactions could compromise sensitive US technologies, negatively impacting US national security”, said Joseph Campbell, a Navigant Consulting director.

Campbell is a former assistant director of the FBI’s criminal investigative division, overseeing efforts to protect US trade secrets.

Industries targeted by Treasury’s new regulations also include telecommunications and semiconductors, aluminium production, computer storage devices, guided missiles and other military equipment in addition to aviation manufacturing.

The extradition of Xu was a joint effort of the Federal Bureau of Investigation’s Cincinnati Division, and substantial support was provided by the FBI Legal Attaché’s Office in Brussels as well as Belgian law enforcement officials, who “provided significant assistance in securing the arrest and facilitating the surrender of Xu from Belgium”, according to the Justice Department.

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The department also credited cooperation by GE Aviation in helping to bring Xu into US custody. “The cooperation and GE Aviation’s internal controls protected GE Aviation’s proprietary information,” the department said.

According to the indictment filed in the Southern District of Ohio, Xu sought technology used in the development of fan blades and engine encasements.

Using the alias Qu Hui, deputy secretary general of Jiangsu Science and Technology Association, Xu was making arrangements in January 2018 to obtain “signature material design and manufacturing technology”, focusing on “highly-technical topics, including the latest developments in the application … of signature material used in aeroengines, as well as engine structure design analysis technology and manufacturing technology development”, the court document said..

“No one begrudges a nation that generates the most innovative ideas and from them develops the best technology,” Demers said. “But we cannot tolerate a nation stealing our firepower and the fruits of our brainpower. We will not tolerate a nation that reaps what it does not sow.”

Xu often exchanged information with individuals at Nanjing University of Aeronautics and Astronomics, which is one of the top engineering schools in China and has significant influence over China’s aerospace industry, according to court documents.

GE Aviation cooperated with the FBI early on in the investigation, which dates back more than a year, officials said.

Xu’s case is linked to the arrest last month of Ji Chaoqun, 27, a Chinese citizen living in Chicago, according to individuals familiar with the matter. Ji was accused of passing information on eight Americans to Chinese intelligence officers for possible recruitment.

Ji targeted individuals in science and tech industries, seven of whom worked for or recently retired from US defence contractors. All were naturalised US citizens born either in mainland China or the self-governed island of Taiwan.

According to a criminal complaint, Ji began communicating with Chinese intelligence officers in late 2013. He travelled to and from China three times between 2013 and 2015.

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With additional reporting by The Washington Post