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tv   Judiciary FBI and Homeland Officials Testify on Chinese Espionage  CSPAN  December 13, 2018 6:02am-8:20am EST

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they are real threats that should not be underestimated. i felt seven hearings on election meddling, but the media from anacted attention arguably greater, more existential threat, and that happens to be china's effort to overtake the united states as the world preeminent superpower in all phases of society and economy. made no bones about doing this through any and all means, whether be president xi's stated goal of becoming the world's biggest superpower by
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2015 or the program made in is an2025, and that activity that calls for a 10-your overhaul of china's manufacturing high-tech industries, the plan for including even economic dominance. remains thetates most creative, innovative society honors, although china has made significant strides in very a sectors like technology, telecom, advanced robotics come artificial intelligence, and scientific research. one tool continues to be pervasive, that is economic and other forms of espionage. in simple terms, it is called cheating. it is only getting worse.
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in the past nine months alone, the department of justice has investigated, charged, and convicted at least 16 individuals and 4 corporate entities in eight separate cases involving theft of trade secrets over the past five years. six more individuals have been investigated, charged, and convicted by the department of justice for stealing research from american universities.
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then there is a massive plot to steal usm a conductor technology . i likeases in particular the threat of chinese state-controlled economic espionage. , we saw theek arrest of the chief financial ei, the largest telecommunications company in and a financial firm owned by chinese ministry of finance reportedly used various shell sensitiveto give satellite technology from boeing. that technology has potential military applications. although those cases did not , theyly involve espionage point to a broader issue,
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disinterest in a callous this difference for broader appearance to the rule of law. when it comes to espionage, fbi director ray has said there is no country that is even close to .he people's republic of china general keith alexander called china's estimated gains from economic espionage up to $600 billion, "the greatest transfer f wealth in history." china is believed to be responsible for 50% to 80% of the cross-border theft worldwide. of cyber enabled economic espionage in the united states reports issued this year
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by the white house office of trade and manufacturing of the u.s. trade representative and by report findings on china's primary role as a cyber attack or an thief of american technology. the national institutes of health announced in august of this year that it has discovered nih grants are going to researchers who are not disclosing their contributions from foreign governments. chinese talent programs seek to recruit american researchers in order to bring technology to advance china. confucius institutes found that many of our nations top universities indirectly funded by chinese government stifle intellectual freedom and quiet
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all those who would criticize china with revisionist histories. in response to the growing number of cases, the department of justice recently announced a new initiative to combat chinese economic espionage, so it look forward to hearing more about and anyiative legislative proposals needed to address these. we often get distracted by the shiny objects in front of us. i fear that china is all too happy to have our attention deflected away from the threat that they pose to our economy, our innovation, our business, and our very standing in the world. nobody is in favor of billions in american intellectual property being stolen. researchersrts violating the terms of the government grants in favor of
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foreign governments. we should all condemn cyber attacks on government and private sector information and assistance. the question is, how can we counter these activities? i hope we can come to an answer. senator feinstein. >> thanks very much, mr. chairman. as i listened to your statement, i believe i was the first american mayor to go to china to forge a relationship with my city, san francisco, which became one of the most active sister city relationships in the world and i think eased the transition for china. we sent scholars, technical relationships a that i have always been extraordinarily proud of. first -- the president of china and i were mayors together.
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we forged to this relationship. see things going awry. .t is very hard for me i've been very proud of china's economic and technological , which has been much faster than we thought in the mid-1970's it ever could be. it's continued economic and technological development presents many opportunities and many challenges for the global community and particularly for our continued relations are going to require a commitment to basic international norms regarding the use and protection -- excuse me, i have a cold -- and protection of intellectual
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property rights. transfer and theft of american by thectual property chinese government is today the most pressing economic and national security challenge facing our country and i believe china as well. 2017, a counterintelligence analyst testifying before the united states-china economic security review commission described chinese espionage intense,s "persistent, patiently executed, and include the simultaneous execution of such a large and diverse set of legal and illegal methods individuals, and organizations, there is little chance the targeted u.s. competitor can effectively defend or compete in the future without significant
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support of the united states government." u.s.-china economic security review commission from january 26, 2017. the communist parties of china use of illegal tools like cyber theft to acquire american intellectual property is well-documented. in 2013, the commission on the theft of intellectual property conducted by the national bureau of asia research cited a report that found state affiliated rctors were responsible fo 19% of successful data breaches. of those cases deemed to be motivated by espionage, the people's republic of china was determined responsible for 96%. moreover, the commission
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estimated that the chinese government cyber theft activities cost united states annually $300 billion in , onelectual property hundred billion dollars in lost sales, and 2.1 million lost jobs. that is the record. while cyber espionage and theft remains a lucrative practice for the chinese government, today's hearing will examine other more nontraditional forms of , though many of these efforts occur in plain sight, they are equally troubling in the context of china's overall economic and military objectives. for me, they do enormous damage between a relationship that i had hoped way back in the 1970's was really going to change that big pacific ocean into a small river of friendship and goods
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and services and interchanges and i hate to see it all beginning to come apart. recent studies by the white house office of trade and manufacturing policy and the defense innovation unit in california have attempted to catalog these nontraditional espionage tactics. ,rom placing chinese scientists including those associated with the chinese military, a top u.s. universities, research institutions, national laboratories to acquiring small promising u.s. technology companies to lowering top u.s. luringcs l --uring -- top u.s. academics to institutions in china to forced joint ventures and dubious inspections requiring u.s. firms to turnover source codes and
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other confidential information if they want to access chinese markets and patents, the chinese government has delivered early and purposefully created a system -- deliberately and purposefully created a system of maximum information extraction at nearly every sector of the united states economy. that is so hard for me to see and watch develop with all of the hopes that i had between china and this country. a recent report by the department of defense's defense innovation unit even includes ofmples of the combination overt and covert means of espionage by the chinese government. in one case, chinese government cyber attackers manipulated a company's sales figures to manipulate the company's view of
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toelf, making it more likely accept a purchase offer from a chinese company. perhaps the most concerning aspect of the chinese government's nontraditional espionage efforts is it scale. according to the defense innovation unit, in 2015, chinese investors participated in 271 early-stage investments in u.s. tech firms with a total 16% off $11.5 billion, all technology deals that year. new the end of 2017, chinese investors participated in 69 deals. in u.s. based artificial intelligence technologies alone.
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28,000 chinese foreign nationals studied at u.s. colleges and universities and chinese foreign nationals of all u.s.% graduate students in stem fields. the united states simply cannot tolerate theft of american intellectual technology as a means to achieve these objectives. front and will be up honest -- welcome and you are going to be honest anyway, but upfront with some of these problems -- and particularly with solutions.
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think you very much. cornynre i give senator a point of first privilege on this point, at 11:00, we are going to keep the meeting going as senator kennedy is going to preside so that i can be in the hatch givessenator his farewell speech to the senate. senator cornyn. senator cornyn: thank you, mr. chairman. i agree with every word that you when the ranking might -- member have said. other than the threat of a rogue nuclear power, i can't think of a more urgent threat to the u.s. and to u.s. national security than the subject we are talking about today. the chairman of the joint chiefs of staff said that by 2025, china will pose the greatest threat to national security of any nation. we are already seeing belligerent behavior in the south china sea, threatening the
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lanes of commerce, and the requisitioning of some of the islands in the south pacific and turning them into military outposts. they are on the march. an economic juggernaut with no respect for the rule of law. it's coercive state driven industrial policies distort and undermine the free market. it is engaged in aggressive military modernization and it intends to dominate its own region and beyond. china is not just exploiting the freeness and openness of our economy and institutions, it is also eroding our national security advantage. what might this mean for national security? we would potentially have an adversary that could dominate the cyber room, defeat our weapon systems, and control the skies as well or better than we can.
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thatne a chinese military is stronger, faster, and more lethal. such a china could unilaterally dictate which ships could region. the imagine if they could invade taiwan with impunity. the implications for the united states would be profound security wise and economically. this is what the future holds up unless we wake up and act. it is time to address the underlying problems. china is using any means to close the intellectual property .ap that youased to see included the intelligence community's wheel of doom in
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your written statement because i think it is very powerful and we would like to show this if we could find a way that is not right behind my head. doomso-called wheel of reflects the multifaceted ways that china is attempting to impose its will not only in the united states, but the world, as we can see in the security services, legal and regulatory, nontraditional. the do you talk about paradigm of spy versus spy no longer apply and i hope you will expand on that and explain that. all of these represent opportunities for china to do espionage on u.s. businesses and on the united states government as the chairman was alluding earlier and i hope we have a chance for you to describe in more detail exactly what this encapsulates.
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one of the tools china uses is investment in the united states, which has been weaponize to vacuum up u.s. industrial capabilities in emerging technologies. that is why it was so important -- i present senator feinstein on reforming the process that we can be on the tokout for efforts by china make for investments in the united states with a way to get a system intellectual property and the know-how to erode our national security advantage or threaten our economy -- so, mr. i think one ofis issues facingt today. i look forward to questioning our witnesses. i had a chance to hear from some
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of them recently with senator warner and senator burr. a briefing was hosted for the business community and we have a growing technology community in austin and i think many of them at what they heard and the threat that confronts and our community national security as well. john demers is the assistant attorney general and was previously vice president general counsel of boeing and senior counsel to the assistant attorney general for the office of law and policy in the national security business. was the firstebs director of the homeland security cyber security infrastructure agency. i congratulate you serve on
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being the first in this rle. his previous roles include serving as assistant secretary for infrastructure protection and senior counselor to the secretary of the department of homeland security and as a member of microsoft's u.s. government affairs team, and the director of cyber security policy. is theiestab assistant director of calendar -- counterintelligence division of the federal bureau of investigation. he has served in the fbi for 20 years and a number of roles, including deputy assistant director of intelligence operations branch and director of intelligence and special agent in charge of the new york field office. we will start left to right, so mr. demers, please proceed. you have been very patient while we have given long statements. [laughter] >> thank you.
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good morning, chairman grassley, ranking number feinstein, and distinguished members of the committee. thank you for the opportunity to testify on behalf of the justice department's efforts to combat chinese economic aggression including through a new china initiative. the challenges we face and our response are exemplified by the micron,macron --mi the boise, idaho, semiconductor company. they control a large portion of the market for the dynamic computer electronics -- until recently, chinese could not make dram, they had to buy it from companies like micron., in 2016, the chinese authorities set out to change that. the highest levels of the chinese government publicly identified the development of integrated circuit technology, which includes dram is a
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national economic priority. then it invested more than $5 billion to start the company for the sole purpose of designing, developing, and manufacturing integrated circuit chips, specifically dram. that same year, having never made a single computer chip, this company announced a partnership to manufacture dram with a taiwan semiconductor foundry known as unc. there was only one problem according to our indictment that we unsealed last month. neither company had ever made advanced dram, so how could they possibly manufacture it together less than a year after the company had been founded? according to the indictment, by onrraine micro -- luring micr employees to steal trade secrets and bring them to the company who would transfer them to the chinese state owned company.
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we have responded with the full force of our law. we have charged three former micron employees and two companies with economic espionage, stealing trade secrets for the benefit of a foreign government. we also brought a civil suit, the first of its kind, seeking an injunction to prevent exporting dram to the united states, where it would compete and wey with micron worked directly to add that company to its list, making it functionally impossible for the company to buy the materials it needs to make dram based on the technology it is accused of stealing. in these ways, we have deprived the thief of the benefits of its best, mitigated the damage to micron and discouraged future thefts. the macron case is one example of -- micron case is one example. china is driven to be at the forefront of 10 critical
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technologies laid out in its made in china 2025 plan. no one begrudge is a nation that generates the most innovative develops them them best technology, but we cannot tolerate a nation that steals the fruits of our brainpower. that is just what china is doing to achieve its development goals. china has turned the tradecraft of its intelligence services against american companies, taking trade secrets and other sensitive commercial information through computer intrusion and by co-opting company insiders, from underwater drones and autonomous vehicles to critical chemical compounds and inbred corn seeds, china has advanced -- targeted advanced technology across sectors that aligns with china's stated goals. the playbook is simple, rob, replicate, and replace. rob the american company of its intellectual property. replicate that technology. can replace the american company in the chinese market and one
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day in the global market. it is no wonder that from 2011 98% of there than departments cases alleging economic espionage on behalf of a state involved china. our china initiative prioritizes the justice department's response to these challenges. we will work to ensure we are devoting the right resources to these critical investigations. we must also adapt our enforcement strategy to reach nontraditional collectors, researchers, and labs, universities and industries, who may have undisclosed ties to china, and to better confront tona's covert efforts influence the american public and policymakers contrary to u.s. law. beyond law enforcement, we will work to mitigate threats from foreign investment and from supply chain compromises, working with the treasury it andent to implement other partners to better secure telecommunications networks as we transition to five g technology.
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we will raise awareness of these threats across the private sector and economic for your work to count the national security threat. am happy after my colleagues any questions. >> chairman grassley, ranking theer feinstein, members of committee, thank you for the opportunity to testify regarding nationalmic and security threats posed by china. appear beforeo you agency within the department of homeland security. like to thank congress for establishing the cyber security agency allowing us to
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change our name allowing us to change our name and providing us with a brand that more accurately reflects our mission, that we are the nation's risk manager. we work with government and industrial to understand and manage risks, digital or physical, facing our nation's critical infrastructure. as my colleagues have and will so clearly lay out, cyber security threats are increasingly one of the most strategic -- significant strategic risks for the united states threatening our national security, and public health and safety. our economy is built on a common fabric of cross-cutting systems. to our adversaries including china this is a vast web of targets. secure this broad common attack service necessitates a coordinated and whole of nation defense. our agency, cisa, serves as that zone across the federal government and industry seeking to break down silos and facilitate cooperation, particularly in the seams between agencies and sectors. at cisa, our vision is to fully realize this national effort and empower a collective defense in
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cyber space. crucially, we serve as an information and operations integrator and provide a broad range of capabilities to assist private sector entities across all sectors of critical infrastructure. we serve as the central hub for cyber security threat detection, response and coordination, for both government and industry, bringing together the intelligence community, law enforcement, sector specific agencies, international partners and the private sector. it's important to highlight that our primary goal is to raise the baseline of security across the country in a threat manner. we don't have to wait for attribution to a specific actor to issue, guidance alerts and warnings. why? becaise our job is to give network defenders every advantage at the greatest speed possible. for us, the possibility of a threat combined with the vulnerability is enough to act. when appropriate, these alerts may include public attribution to a nation's state sometimes after the fact. in the case of the threat posed
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by china, we work with our industry partners and government partners to understand general and discreet risks, share that understanding and help manage risk. as described in the u.s. trade representatives section 301 report issued earlier this year and updated last month, china uses a broad set of tools at home and abroad to facilitate the transfer of technology and intellectual property and other sensitive information. they use cyber enabled theft to take what they want, supply chain manipulation to spy on what they want, and work around to buy what they want. if they can't buy it, they steal it. to counter these tactics we conduct classified and unclassified briefings on the tactics and techniques used by china affiliated actors like the ones senator cornyn mentioned. we use mitigation guidance including more targeted alerts informed by intelligence to enable network defenders to improve their security posture across networks and supply chains. we advise companies on the risks
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of doing business in a complex and unpredictable environment that includes limited transparency and a lack of privacy. in a globally integrated world what happens over there can impact operations over here. it's essential for companies that choose to enter that market to go in with eyes wide open and with strategies to protect their broader operations in the nation as a whole. on supply chain, among other efforts, we've recently established an ict information and communications technology supply chain risk management task force bringing together the i.t. and communications sectors with government to consolidate supply chain risk management best practices, identify gaps and develop solutions. in addition, like doj and fbi, cisa participates in interagency risk management efforts including team telecom. dhs represents 10 of the 16 critical infrastructure sectors that go through with cisa, my
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agency, managing the relationships with the majority of those sectors, including manufacturing, i.t., and communications. we assess risks posed by transactions and engage with our partners to disposition of acquisitions. our goal, our vision, is to enable that broader collective defense against cyber security threats, where the government and industry understand the risks we face and are prepared to defend against them. i look forward to further outlining our efforts today and thank you and i look forward to your questions. >> chairman grassley, ranking member feinstein, and members of the committee, thank you for the opportunity to appear before you today. the united states is the world's sole super power and single largest economy, but our prosperity and place in the world are at risk because the chinese government and its proxies are aggressively
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exploiting our nation's economy, technology, and information. i believe this is the most severe counterintelligence threat facing our country today. it's impossible to overstate the differences between the american and chinese systems. china is an authoritarian one-party state, where the chinese communist party reigns supreme. at the party's direction, the chinese government dominates every facet of chinese life, through actions such as censorship, central economic planning and leveraging intrusive technologies. any semblance of free enterprise, free speech, or religious freedom exists merely at the whim of the party. it is, therefore, alarming that the chinese government's economic aggression, including its relentless theft of u.s.
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assets is positioning china to subplant us as the world's super power. since world war ii, the united states and our allies have created an international order that has led to greater peace, prosperity and human rights than at any other time in human history. the chinese government has been exploiting this order while simultaneously trying to challenge and replace it. the resulting double standards are everywhere. china tries to dominate internet governance to benefit chinese telecom companies, yet china censors its own internet and eliminates data privacy. a chinese police officer becomes president of interpol, yet that official later disappears into china's opaque criminal system, accused of vague crimes and
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never seen again. china ratifies the u.n. convention on the law of the sea, yet builds artificial islands in disputed waters. china claims to champion the developing world, yet china's loans create debt traps and undermine sovereignty. the chinese government pursues its goals by any means necessary, some are clearly illegal like economic espionage and computer intrusions. even those that appear legal often rely on deception, such as front companies or digital back doors. some are lawful but not reciprocal, exploiting the openness of free nations. that's why investigations and judicial actions are critical, but we need an even broader response to this threat. we must continue to inform businesses about supply chain risks and insider threats, inform academia about talent recruitment programs and theft of research, inform the chinese
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community about coercive repatriations, inform police and public officials about threat indicators, and inform the public about data risks and maligned foreign influence. as the united states pursues a society response to this threat, we must address the vulnerabilities within our system while preserving our values in the open, free and fair principles that have made us thrive. what hangs in the balance is not just the future of the united states, but the future of the world. thank you. >> thank you all very much for keeping within the time limit. we'll have five rounds of questions. i'm going to start with something that mr. demmers already addressed, but maybe you could be a little more definitive.
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on november 1st, 2018, doj announced the creation of a special initiative to counter the threat of chinese espionage activity and, of course, you're the leader on that, which calls for recommendation -- the recommending policies proposals to congress if necessary. how will the department's china initiative improve the department's ability to respond to these nontraditional chinese threats? >> thank you, senator. we are under way. this was an initiative announced by the former attorney general, but it continues at full speed. it -- our focus is this -- first, whenever the attorney general gets up and says this is a priority of the department, the department responds. the assistant u.s. attorneys in the field, the fbi investigators in the field, they hear that and they realize these cases need to
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be prioritized. now why that's important is that these cases are difficult, they are -- they take a long time, they involve sometimes sensitive intelligence sources and methods, and sometimes folks are discouraged from bringing them because they think they may not lead to prosecution. when the attorney general gets up and says this is a priority, i understand the difficulty of these cases, folks respond. so one thing that we're going to do, we're going to try to encourage and enable folks in a number of ways to do that, including by having training sessions with prosecutors to understand better how to bring these cases. we have prosecutors that are very experienced in these areas, but this is a problem that touches u.s. attorney's offices across the country in every state, so we've got to make sure we have the right expertise across the board. we're also going to arm the u.s. attorneys to work with the fbi that already does so much private sector outreach, arm them to go out to the universities in their districts, arm them to go out to the
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businesses in their districts to make sure those folks in the private sector, in the non-profit sector are aware of the threats they face and to develop the relationships that encourage them to work with us when something happens. the successful cases that we have had have been as a result of companies cooperating with us. that's a critical element of our investigations when the company is targeted. we have to develop those relationships as well and we'll be doing that. we'll also be looking at strategies to see how we can better address the nontraditional collection activities that we've talked about. researchers at universities, students who are here to study, most of whom are here for legitimate purposes and only doing legitimate activities, but some of whom are here to harvest our technology and to send it back to china. the trick is that not all of these things are illegal and i
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think it is a lot like we need to look at activity that's legal but presents a national security threat. that's one area where we may need help and to work with all of you. i highlight in my testimony a couple of areas that may require legislation to address, including theft of u.s. intellectual property outside the u.s. by non-americans. these are the things that we are hoping to accomplish and this is what we have begun to work on since november 1st. >> also for your answer, incidents of chinese economic espionage appear to be increasing just over the past nine months. we've seen a huge uptick in the number of cases brought by doj or maybe under investigation. what in your view accounts for the trend and does the increase in criminal cases mean that the
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chinese are intensifying efforts to steal from american companies more so than what we've known over a long period of time? >> i think, senator, that their activity has been steadily decreasing. the cases we've brought -- i'm sorry, increasing. the cases we've brought in the last nine months are results of investigations that have been taking place over a number of years, so they don't reflect just the last nine months worth of activity. i think what they reflect is starting several years ago, a real focus on the part of the department, on the part of the fbi, to investigate these cases and to bring these prosecutions. the moment i think being back in 2014 for the first time the department charged chinese -- in that case military officers with commercial espionage and from that, i think the fbi and the ausas realize these are cases that the department is going to be willing to bring and they started to do those
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investigations. we've been able to bring a number of cases because the activity is tremendous and the grounds for those cases very fer fertile. >> for my last question, i have a long lead in to this question, but i think you know what i'm getting at by asking you, mr. prestap, how does the fbi work with the nih and the universities to identify and prevent the conducts that we know and i've described in my opening comments and if you found that china is a serious threat to the integrity of this company's publicly funded research? >> so, sir, getting back just a minute ago to a question about the attorney general and department of justice standing up their china initiative, because i think that's relevant here, it comes down to raising awareness of the threat. of
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late, i pay attention to both global and american surveys of the greatest threats facing our country and again and again, it's called the top ten list, china's always near the bottom. yet meaning the average american, the average global citizen, when they think of the greatest threats facing them and their countries, they put china toward the bottom. in my opinion, china needs to be near if not at the top of that list. whether it's working with the national institute of health or american universities, with the fbi, doj, dhs, and others in the u.s. government are doing, we are trying to make them aware of the gravity of this threat, the capabilities of the adversary and the methodologies by which the adversary advances their aims. make no doubt that china is absolutely after the sensitive research in regards to those organizations. >> are you kind of inferring --
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don't go into depth on this because i'm taking too much time, are you kind of inferring in your question that our government agencies or the universities involved are not -- they're not aware of what the chinese are trying to do? >> sir, in my experience and i'm sorry if it was confusing at all, what i'm trying to convey is -- i had the opportunity recently to visit three u.s. states and speak with business leaders in each of those states. on one hand, i was amazed at some of those business leaders' understanding of the way the threat is working today. on the other hand and with different business leaders, i was amazed at the lack of understanding, again, of the gravity, capabilities and methodologies of china. what i'm trying to convey is there is still work to be done by the u.s. government in messaging to the american people the gravity of the threat we're facing. >> okay, senator feinstein.
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>> thank you, mr. chairman. in november of 2017, mr. krebs, you sent a letter to senator widen acknowledging that dhs was aware of portable international mobile subscriber identity catchers, also called stingrays which are machines that mimic cell phone towers to capture cellular signals being deployed in the national capitol region by unknown individuals. could you confirm that these imsi machines or cell phone signal interception machines have been found in our nation's capitol? >> yes, ma'am, we did detect anonymous activity in the capitol region and we couldn't attribute to a specific imsi or string ray and we shared that information with the carriers and in many cases, they were
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able to deconflict or determine it is not necessarily nefarious anonymous activity, and we partnered with a range of law enforcement partners, federal and state and local to share what we found. at that point, our role in the -- in the pilot has exhausted itself. our job is to eliminate, identify and share our findings with those that can take action. >> is there any information as to where those devices came from? >> ma'am, no, we were not able to isolate or capture a specific device and do any sort of forensics on that, that is not within. >> what did you know? >> we identified activity that appears anomalous.
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>> what does that mean? >> and i'm happy to follow up and provide a more detailed briefing on this issue. but it forced downgrades from lte or 3-g down to 4-g, so across the different bands. >> and what does that do? >> in some cases, that activity could push a phone or a signal into a dedicated antenna, so it could potentially -- for both legal in some cases for legal purposes capture a signal. >> so in other words it is a way of sort of wiretapping. >> well, mr. priestap, do you know where the lawful ones are as opposed to the unlawful ones?
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>> sometimes we know where the lawful ones are and sometimes we don't, but i think it is important to note that when it comes to china's activities, there are times they will abide by our law and there are times they will bend the law or operate in gray areas, and there are times they will break the law. the bottom line is they will do anything they can to achieve their aims. last year, i introduced legislation with senator cornyn, shaheen and young to modernize the foreign agents registration act known as fara. the bill would provide the department of justice with
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additional tools to investigate individuals acting as agents of a foreign power that failed to disclose their activity to the doj. chairman grassley has also introduced legislation to update and improve fara. those bills are pending in the senate foreign relations committee. mr. demers, mr. priestap, would improved authority under fara particularly additional civil investigative authorities be helpful in addressing some of the informal networks that the chinese government uses for these types of nontraditional espionage efforts? >> thank you, senator. >> thank you.
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so the increasing foreign enforcement has been a priority of the department and a priority of mine since i've been there. i think we have we've seen under far go up marketedly in the last year or two. i think when these -- the year numbers for 2018 come out you'll sea continued increase in those. and as well as indictments under fara for failing to register as -- as an agent of a foreign principal. we continue to do our investigations using letters of inquiry unless they are criminal investigations in which case we can use grand jury subpoenas. and continue to assess the degree to which it would be helpful to have civil subpoena authority. i do think that folks who get letters of -- of inquiry are just more responsive to subpoenas and provide fuller responses
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to subpoenas than letters of inquiry and i've seen that in some of the cases that we have done, so i know we've worked together with you and your staff on those bills as well as mr. grassley and i would propose that we continue to do that in the new year. >> i will defer to the senator from texas. but this is -- this is -- in your testimony you say made in china 2025 is as much a road map to theft as it is guidance to innovate. can you explain what you mean by that? why would china tell us this is their game plan? >> where they want to lead the wherein technology and they want to have domestic
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of theseies in terms areas theybroad believe will be the future the world. what they denied openly they are also using illegal man means to advance their development goals technologies, souped what i always say, in a said it don't bee grudge them the efforts to develop technology and, they could be great benefit to the world and of course china, but you cannot use theft as means to develop yourselves technologically and that is what they are day in number of yers. at the cases that we've charged in the last year or so. of them ofk so many the ten slops on the board.
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>> right, it is more than a shopping list. it's guidance to the rest of the government and the rest of their companies and to their people that this is what we want to be the best in class at and therefore you should organize your activities, whether they are legal or illegal, to achieve that, and that's the micron case we talked about. first, you have a high-level goal that i set, and then you have direction and funding to achieve that goal in that case through illegal activity. and that is what we see in a number of these cases that we've charged recently. aerospace is up there. a number of the cases that we've done recently are about commercial jet engine fan blades ant the use of composites in aerospace. >> i know my conversations with
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ambassador bolton just this week we talked about ways to work together to deter intellectual property theft. >> i know my conversations with ambassador bolton just this week we talked about ways to work together to deter intellectual property theft. we talked about ways to work you alluded to some of these, how is bni's being conducted by china is not a spy versus spy paradigm but all of government exercise.
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can you expand on that and why state-owned enterprises in china and other companies that look to be a freestanding entity really are not and heavy essentially the communist leadership in their board room d directing them what to do and getting access to the information they require. >> in my opening statement i mentioned i believe china was the most severe counterintelligence threat facing the country today and when i talk with outside groups and ask about the counterintelligence threat, i will hear things like it is countering activities of hostile foreign intelligence services, our spies trying to protect america's state secrets. what has happened in the last couple decades, china and other nations have realized you can't
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just rely on their spies to accomplish their aims. there aims are to gain strategically in whatever way they can. militarily am a technologically, economically, and if they can't rely on spies, they are relying on people from all walks of life to carry out there age. the last thing i intend to do is to demonize people, not trying to demonize the chinese people but as i said in my opening statement the communist party reigns supreme and they have a great ability to lean on people, some winning, some not in their society, to carry out there aims, and otherwise
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tourists, chinese intelligence services don't hesitate to ask those people to carry out there aims, don't rely on spies. in regards to state owned enterprises or any chinese businesses, we have to understand the idea of a communist party reigns supreme. it means those businesses ultimately are beholden to the chinese government and so what happens when the chinese government asks those businesses to engage in activity contrary to us interests? they have a choice if they want to do business, they follow the order of the chinese government. if they decide not to follow those orders they risk being shut down. our idea of a free-market economy is not what china's system is. it is different and we need to
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understand that. >> senator klobuchar. >> thank you very much. i want to thank you for being here. and mac, i let 18 senators in a letter urging john bolton to reconsider the decision to illuminate the role at the national security council. i was concerned we would be losing important expertise in cybersecurity workforce while the chinese, especially what you saw this week about marriott. the chinese are doing the opposite. given chinese government and cyber programs and investments, how can our government keep pace? do you believe cyber security leadership is needed and the nsc should have dedicated cyber security experts? i will refer that to you. >> thank you, it is important to look at history and the
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creation of a cybersecurity role established in the early days, president obama's tenure, the relative immaturity or lack in terms of cyber security capacity, department of homeland security under the national protection programs director in the old organization was just emerging out of the comprehensive -- >> i could not mistake the lack of coordinator for lack of coordination, what you see is lack of participation, we find sufficient capability. >> we saw reports in the press that it was chinese hackers that stole data on 500 million on the hotel chain. this is the most recent example.
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what outreach and coordination is being done with companies and limitations exist on your ability to share, with other government agencies. anyone can take it. >> i will start with the idea that, i am pleased the hearing is held today. we need greater awareness of the gravity of the threat and methodology and capabilities of our adversary in this regard. from all three organizations on panels with these gentlemen, we are doing what we can to convey message to as many business leaders are us government leaders on this topic as is possible. and because of the classification, and rest assured we are leaning forward,
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we the fbi, sharing more information from counterintelligence than i have ever seen before. it is not perfect, we are going in the right direction. >> do we have enough resources for the justice department including adequate enforcement of foreign agent registration act. microphone, i think. >> that is the question i have been asking myself. and the counterintelligence area implementation, congress gave the treasury department additional resources, an area we are looking at, with a request. >> one last question. can you provide clarity about
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any specific campaigns by chinese affiliated entities to influence our elections? a lot of us at this table, working on secure elections act, senator warner and mccain and i, talk about that? >> the nature of interference on the policy side is different from russia. there is a process we are undergoing under recently issued executive order to assess and layout in the report what we saw in the last election with regard to election interference if any. i don't want to get ahead of that process. to learn about chinese
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political influence or section 951 of the criminal code to make sure any efforts influence are transparent. >> hope to get your help in getting these bills passed. thank you. >> thank you for being here today. i want to look at this from 30,000 feet. one can debate the date of the rise of china but one seminal date seems to me when china was admitted to the wto in 2001 they were admitted on december 11th, decent the 12th 2001, china started its economic expansion and also started to cheat.
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we were told as it became more and more apparent that our friends in china or political leadership were not playing by the rules, be patient, eventually china will develop a market economy that will come to value property rights as people are lifted out of poverty into the middle class, they will embrace liberal, not liberal versus conservative but liberal in the classic sense values. we were naïve. i am happy people have been lifted out of poverty into the middle class in china and made the world richer. i don't want to hurt china but i don't want china to hurt us either. what are we going to do about this?
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we tolerated it for a long time. >> what we are trying to do along the line that you suggest is go after the malign activity. we don't want to do anything that will interfere with legitimate economic development and betterment of the lives of the chinese people but we have to address economic aggression we have been seeing and continue to see and what you are seeing in the china initiative in this hearing,
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>> at some point it ceases to be a virtue. let's talk about something specific. what is the confucius institute? >> go ahead. >> and institutes meant for language and cultural exchange, the chinese government funds them, and university campuses in the us. >> the chinese government comes to american universities and gives them gobs of money to open a confucius institute. >> i think we have or had one at tulane and what they veer. of those confucius institutes
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been used as propaganda arms of the communist party in china? >> i would put it this way. the confucius institutes in my mind are not strictly a cultural institute. the confucius institutes are a chinese government funded cultural institute. that means they are ultimately beholden to the chinese government and there have been instances around the world in which those institutes have quashed free-speech particularly regarding issues. >> we will take away the money, we would rather have the money rather than free-speech. >> there have been instances where those institutes appear to have quashed free-speech.
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>> do we have students from china who come here and our sense to steal our intellectual property? >> i don't know. >> the ad director says we do. >> students themselves decide they will come to the us to steal sensitive research. what i have seen is the chinese government, security services will utilize, lean on those students and say if you want tuition paid or continue the opportunity and continue your education at a higher education institute in the us you better not come home empty-handed. >> i am sorry. i have to take it back. >> senator harris.
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i don't want to take any more time. >> my question is for you, john demers. foreign entities are stealing american property. trade secrets, intellectual property, our ideas and there may be the intention, certainly the effect is to harm the economy, three examples in july 2018, a chinese national is arrested for stealing proprietary information about self driving cars or a chinese competitor. on october 2018 a chinese spy was arrested it is proprietary technology, a
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producer of computer memory chips on every gadget. this is a snapshot but it is rampant, some estimates just across the united states economy, $225 billion a year. one tool to combat these is the economic espionage act of 1996 which you are familiar with. and it is a deterrent mechanism, you have noted the threat of prosecution has raised the stakes for foreign intelligence officers so my question is would you agree if we are able to extend the statute of limitations for civil actions that we would enhance the deterrent effect? >> for criminal actions? that could be very useful. i would have to think it through.
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the reason i say that is these cases are complicated and take a long time. a number of cases we have charged recently are conduct that occurred 5, six, seven years ago. it could take a long time in the cyber context. >> extending the statute of limitations. >> i appreciate your feedback and i would like to help in that regard and would you agree that if we increase punitive damages that are available to victims that would enhance the deterrent effect? >> it may. that is not an issue i have looked at carefully. >> and looking at expanding the territorial scope of it to increase deterrent effects. i assume you haven't thought about that? >> that is something i mentioned in my testimony. we were lucky and the micron case that this occurred here. you can easily imagine a
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situation where the us company and technology is outside the us, we couldn't charge it. that is something to address. >> i'm introducing a bill that increase the punitive damages, 3 times the damages, and civil actions from 3 to 5 years and expand territorial scope of the ea. it would apply to offenses with substantial economic effects. let's follow up and get the doj to weigh in on that. >> i look forward to that. >> good to see you again. there is a may report you mentioned and a number of agencies are unable to dedicate personnel and resources to defending themselves with malicious cyber activity. would you agree the federal government does not have the
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cyber security experts we need to defend the systems? >> yes, that is an recent statement as well. >> and how significant is this talent shortage and what are the barriers you have experienced to hire the kind of talent you need and what can we do to address that? >> i will get back to you on specifics of the numbers we have. we need more opportunity. there is a big apps between private and government. we need to think through the creative strategy that doesn't only focus on getting people into jobs but how to reskill personnel, how can we make more creative use of search capacity forces, alumni networks and contractors and consolidate services so rather than compete across federal agencies how do we consolidate and move into a
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security service model? >> follow-up in terms of how the plan is coming along and how to support that and final question as relates to that report, you found 71 of 96 federal agencies, quote, have cybersecurity programs that are at risk or high risk and you address those risks. and and what is the recommendation to get that done. >> happy to follow up with more detailed briefing on that. and the significant amount of interest across federal cios which have their own challenges, staying enrolled and having persistence in those roles, i can't think of a single agency that has not embraced what needs to be done. >> you can follow up with a
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timeline and goals and deadlines for when we expect those agencies to comply with your recommendations. >> thank you, mister chairman and thanks to the three of you for being here, an important topic and i applaud chairman grassley and senator feinstein for this hearing. you made a number of startling and important comments. how does the chinese government think about this? how do they think of students abroad and corporate executives in silicon valley? >> they think of them as being beholden to them, they think of them as an extension of their power of their nation. >> what is the range of understanding chinese nationals who are getting huge fees in the us are working in tech companies, what is the
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differentiation of understanding how they are viewed as assets of the government? >> those individuals, based on fbi interaction with some of those individuals it really is a case-by-case basis. some are not knowledgeable in the least and are completely unwitting of doing anything in furtherance of government games and others who through direct or other pressure, understand they have obligations. it runs the gamut. >> is there clarity in the way we in the government communicate to folks who come into the us about laws and expectations about what is or isn't appropriate forms of statecraft and spy craft? >> great question and in my experience there doesn't seem to be consistency.
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we could do a much better job especially in regards to universities and research institutions, standards of research, what is acceptable behavior and what is not. is that spelled out for all the people studying, and people know from day one what is right and wrong, and there are consequences if they cross that line. >> appreciate your work and agree with congratulations on the new role. when you say there's coordination but not a coordinator how would you be responsible for what they said? and who is thinking through this issue of strategic communications, to the us, many of them not extending to break laws but pressure on them to
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break our laws, to economic espionage and who in the us government is communicating with the tech companies about the hiring they are doing. and the nefarious effects of the confucius institutes. >> that is counterintelligence and law enforcement. a substantial amount of coordination for the security counsel led in part by the director of national intelligence. my job is cyber security, to carry the message they develop and push through public-private partnerships whether it is industry or academia. >> an absolute critical question, not just across government but across business, across academia. there are pockets of great
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understanding of the threat we are facing and effective responses but in my opinion we have 2 net that together better. we have separate branches intentionally but if we are facing the whole of government, some call the whole of society, not every person in society is posing the threat but people from all walks of life, and combating that with ad hoc responses. we have more people in government, business and academia to combat this threat effectively. >> spy on spy, the chinese clearly understand this is not nearly a spy on spy initiative anymore. decentralization is the better system for human flourishing and innovation, but puts
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greater communication burdens on us to respond to the asymmetric disadvantages we face. anything we can learn from the 5 eyes partners, how they respond to these strategic threats? >> the only thing i would add, the fbi and my division coordinates closely with them. we need them. if we think we have a threat today and people are trying to steal things today, what we have to understand is they can't get it from the us, and the soft underbelly. we need as many allies as possible. >> i will send you a letter following up on important comments about the intention of the department to continue the china initiative, and ask some questions how many cases we are pursuing. thank you for your work.
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>> thank you to this panel for being here and thank you for your excellent work on a critical time. the chief financial officer is -- an effort to circumvent sanctions in iran. he would intervene in her case. perhaps for the sake of helping in a trade war. there are other means of ending the trade war and no doubt other impacts on whether we end it, but his suggestion that he
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would intervene to block access in that extradition and the underlying criminal action, extremely disturbing to me. and it may be to others in the law enforcement community that the president would intervene in a criminal prosecution for political purposes scenes something like that. let me ask you whether you think that kind of statement sends a dangerous message to law enforcement community. >> i really can't comment on a pending criminal proceeding, extradited or criminal case will continue. i won't comment on that
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specifically, but i will say, and law enforcement. and indicate violations of us law, and other countries understand that. we are not a tool of trade when we bring the case. >> that is the danger of the president's statement that makes it look like law enforcement is a tool of trade or other political or diplomatic ends of this country and that may be true on other countries, but not in this one. you are professionals who are
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doing this work professionally and seems to me the president does a disservice to the work as well as the image of our nation in terms of law enforcement, any other member of the panel have any comment? >> i would simply echo what john said. don't know if you are a new england patriots football fan but i have a son who is and from what i understand the new england patriots have this model, do your job. i want you to know from the fbi's end we will continue to do our job. >> why are you not a patriots fan? [laughter] >> i have another question.
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this is a supportive question. we often see announcements of indictments against cybercriminals or other criminals who are beyond reach of us law enforcement. generally speaking the doj knows it may be unlikely in china and russia. my guess is a lot of people wonder why the united states is spending resources to do this investigation and prosecution if we have only a small likelihood of bringing them to justice? this is a supportive question because i firmly believe that
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we should be doing these prosecutions but it is helpful to hear you explain it to us and to the american people why it is important to enforce the law, to do these prosecutions, to take the indictments to court, even though they may never be held accountable. >> we need to move on. i am sorry. we have a break, a vote at 12:15. maybe you can work your answers in in response to senator whitehouse's question that i will now call. >> thank you very much. >> i am happy to take your answer in writing. >> i didn't mean to be rude but we have another panel. i think we need to be out of here by 12:20 or so. >> welcome back, thank you for your work.
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your testimony mentions three prosecutions of chinese nationals. how many total are underway in the department of justice right now? >> with respect to investigations i really can't say. with respect to prosecutions, three and the testimony plus the micron case which is in the testimony but separately so we have those four pending right now. >> okay. one of them seems pretty minor, the extradition was great and the other one, but i go back to general alexander saying this is the largest illicit transfer of wealth in history of humankind, a phrase i contend he stole from me, but i love that he says it because i think it is true and i remember
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chasing the obama administration around to try to get them to be more aggressive and i ultimately applauded the indictments they brought against five chinese pla officers for fraud. it strikes me that with all this going on and with the threat levels as high as they are for this type of industrial espionage three doesn't seem like a lot of cases particularly when one of them barely counts. is there a problem with pursuing these cases? do you need additional investigative resources? that often push back by commerce and other players who didn't want to have their world disrupted and that had to be overcome to pursue the indictment of pla officers, what is the environment in your world that explains only three
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and by my standards only two cases? >> i think these cases are difficult and they take a long time and are resource intensive. they are cases based on investigations going on for a number of years. also difficult sometimes because they may involve intelligence information we ultimately may not be able to use in a criminal proceeding and that is something we have to do is balance all those equities. they are, what we are dealing with is covert intelligence activity aimed at private companies done by sophisticated actors who are good at covering their tracks. on the fiber sidebar despite his attribution, trying to
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figure out through technical means, who does best. it is something we're looking at. whether we need more resources dedicated to these efforts. >> with time running to let me drop in two more questions. when i ask you to do in writing. there has been at various times at various levels in the department of justice and effort using civil law to go into court and get permission to tear down bot nets which began with the case out of the us office in oregon. microsoft opened with a case of their own and they followed along. i know the fbi took a keen interest in pursuing this. get me a written answer about the status and structure in the operation that is denied on an ongoing basis to tear down bot nets because i think you will agree it is a threat to a
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chinese actor or any actor to use it to do mischief in the united states, correct? >> we have done a couple takedowns this year. >> give me an update how this works in the department. how many people there are, where they are and so forth? this should be an enduring project. the final thing is you close your testimony by saying we must work together with you in congress and i hope you see a welcome flag in this committee to work with us. senator graham and i have held hearings on this and asked people to urge cooperation. there was time when i looked at who i thought was a credible expert in this area in the white house and choice behind him seemed equally credible and
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a former senator who knew his way around a bubble of this and in the early days mike flynn was involved in cyber activities and helps coordinate a good naval war college conference on cyber so i saw things coming together for an opportunity to do some legislation with the administration on this. that turned into a great big nothing. i think there is a big legislative opportunity but no vehicle i am aware of for conversation between the trump administration and congress what that should look like. i encourage you to do this but i've had this conversation with attorney general sessions and director coats and your boss, mister krebs. at the moment there is deafening silence out of the administration on comprehensive legislative package to work through. it is very doable. there is bipartisan willingness here and we do have a problem
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as general alexander has to say, i have to answer to 130 committees that have jurisdiction over this. if there is not a catalyzing force of some kind, it is hard for us to get this going on our own and virtually impossible when we talk to the administration, we will get back to you and nobody does. do what you can to close that gap. there ought to be at least a working group between executive and legislative branches to figure out what needs to be done if we must work together with congress as a priority for you. >> the catalyzing senator. >> thank you, mister chairman. not sure what that means but i will take it. thank you for being here, thank you for your service.
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i am increasingly concerned that china is gaining access to american secrets using nontraditional all nation approaches to conduct espionage against our allies. it is a dominant position providing communication infrastructure across the globe including allies like canada. for each of the witnesses can you assess the risks by such practices as they relate? >> thank you for the question. chinese technology companies in terms of hardware and gear, the challenge is china, telecom, access to the data and how they access the data. i would say globally when you think about the exposure china
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has it is fairly broad. there is an awakening and i would not take away that accompany and the country has a deal with them as the country accepts the risk of working with them and the risk tolerance needle is shifting, section 889 of the defense authorization act which deals, a positive step forward, beyond the work we have already done. as we shifted to 5g, it is important we communicate the risks of advancing technology with our technology, as we talked about, we have increasing common understanding of those risks but there is work to be done.
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>> the chinese government does not share our government's values and a great example of that is there cyber security laws they have enacted in the last few years which provide government access to user data for many of their telecommunications or cyber companies. when they want and whatever they do they can do and exploit the data however they want. with china, with wave's global position and other telecommunications, we have to understand that means the user data that those companies possess can be utilized by the chinese government in whatever manner possible and to chinese
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nationals being paid by the chinese government working at that institution, sensitive research projects and they discover projects they are in the midst of working and filing us patent applications and seeking to get us intellectual property in the midst of the research. how widespread is this problem, the threat of industrial espionage, theft of intellectual property by chinese nationals in the united states and what are we doing about it and what should we be doing about it? >> i can't quantify for you. i wish i could, the levels of
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threat. i can tell you this, waiting for the time somebody reports to me, comes into my office and says we have concerns about activity relating to china, they might be engaged for nefarious purposes. my permission to take a look. we then go take a look. i'm waiting for the time they come back. they looked and didn't exist. every rock we turn over and every time you look for it is not only their but worse than we anticipated. >> give us an order of magnitude. how widespread are these complaints? are we talking a hand for dozens, hundreds? what is the breadth of complaints and investigations? >> extremely voluminous.
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>> hundreds? thousands? an order of magnitude in terms of how broad this challenges. >> thousands. >> senator feinstein has another question. >> yesterday the new york times, david sankar wrote an article about a data breach traced to chinese hackers as us raised crackdown on beijing. i gather they hacked into marriott's starwood chain, discovered in september, revealed last month. it is not expected to be part of coming indictments. government official said there was added urgency to this crackdown because marriott is a top-level provider for american government and military personnel. to my understanding, this
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breach is really huge in terms of numbers and data. what can you tell us about that? >> my department, my agency doesn't do attribution. i look at events like marriott. i tried to take away what network the vendors can do to ensure that is not another marriott. i take a couple things away, when is data retention policies and passport numbers, how are they securing it. >> can you give us that information on this data breach? >> i follow-up working with law enforcement but the other thing i would add is we need to look at the risk associated with mergers and acquisitions and bring in the starwood chain and inherited risk associated with that so what is the due diligence process companies go through when they bring it in? i hope network defenders stop the next event.
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>> give us that information. i would like to give you an example. okay? i went to thank all three of you. you have very impressive backgrounds and i want to share your time with us. did i read that bill priestap is retiring? >> yes. >> thank you for your service. after you get bored i hope you will come back. i mean that. you had an extraordinary career and the american people thank you. thank you, gentlemen. the second panel could come forward please? >> the second panel.
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[inaudible conversations] >> thank you for joining us today. if i mispronounced your name i apologize in advance, mister dean chang, senior research fellow at the american heritage foundation's davis institute for national security and foreign policy, an expert in china's military and foreign policy, welcome, mister peter harrell is an adjunct senior fellow at the center for a new american security and the energy, economics and security program. he's an expert in economic state craft sanctions and energy and doctor james
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malvernin is general manager of the special program division at sos international. he is an expert on the chinese military and chinese cyberissues. would you like to go first? >> good morning. ranking member feinstein, i am dean chang for security affairs at the heritage foundation, my comments this morning on my own. this is intended to provide context for better understanding the nontraditional chinese approach to espionage in terms of information gathering and foreign audiences. chinese espionage is nontraditional in terms of methods and the targets and this nontraditional aspect is rooted in a different context
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based on china's views on national security. this is rooted on several key points. what is the issue of coverage of national power, the wheel of doom displayed for the previous panel, the desire to catch up to the west to ensure there is no repeat of the center of humiliation and the extensive breach of the chinese communist party throughout chinese society. conference of national power as the chinese conceive it is how they measure themselves against other countries whether brazil, bolivia or botswana. it includes not only military capability but economic capacity, diplomatic respect, cultural security, also scientific and technological capacity. china is trying to build up all these elements in order to catch up with the west and avoid a situation where china
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finds itself strategically disadvantaged in the competition they see themselves already in with the united states and the west in general. to support their effort to build comprehensive national power and to catch up with the west the chinese communist party has the ability to apply all these terms of national power. the previous panel spoke about whole of government, it is more useful to think of china as employing whole of society where it is not only military entities and intelligence entities but industrial, financial and corporate entities. and even aspects of what we would consider civil society, academia, journalism, even tourist groups because there is no real civil society in china as far as nowhere under the purview or operating under the shadow of the chinese communist
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party. when thinking of nontraditional methods the prc employs not just military and intelligence entities to gather information and influence others but they employ financial entities. the recent case involving global ip which was trying to acquire boeing satellite, the chinese position themselves by assuming a non-majority position on the board for global ip in order to be able to review contracts which in turn included technical data. it includes gathering in formation via academia and visiting professors. gathering information by routing the internet. china telecom has routed the gateway protocol, entire lines of traffic into china for review, recording and presumably access to information, they do so selectively, not wholesale. the chinese also engage
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nontraditional targets because they see their security as comprehensive, multiple cases of chinese going after plants, literally crops because in 2016 they went after corn seeds. in 2018 they went after bioscience, rice. >> what do you mean they went after them? >> multiple cases people were stopped at us airports, luggage was examined and they acquired seeds, seedlings, plants. the chinese seafood security as part of comprehensive national power and comprehensive national security. we don't think about food security, they do. the issue of influence operations, nontraditional methods and targets can be
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highlighted, the chinese, we heard about confucius institutes, it is a rare day the heritage foundation all agree with each other, but on the issue of confucius institutes there is a across-the-board view that these institutions do not serve freedom of expression. the chinese engaged in weapon iced tourism based on the decision to deploy that, we have seen them target epidemic publishers. and the premier journal of the china studies seal, covering topics like tm and square and to bed. and when the chinese engage in nontraditional espionage we
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need to recognize it covers both methods and targets. >> thank you. mister harold. >> honorable members of the committee, thank you for inviting me to testify today. earlier charts make clear, during the first panel, chinese economic espionage is only one element to promote china as a world leader in a range of technology. china's approach includes purchasing innovative companies through overseas investments, requiring them to transfer cutting-edge technology to china, subsidized and financing training for top chinese students and researchers overseas. in your opening remarks you fully addressed the scale and challenge of chinese espionage. i will not belabor the remarks you made.
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i will simply add that much of china's economic espionage is directed at economic sectors identified in china's made in china 2025 industrial strategy. in recent years chinese spies targeted firms as diverse as cloud computing, semi conductors, robotics, energy and agriculture as mister chang mentioned and others. important to remember china does not only steal trade secrets and other crown jewels of us intellectual property but also try to steal important commercial information like pricing strategies so they can help their own companies develop pricing strategies. the department of justice even indicted chinese spies for strategy information from us labor union that was strongly opposing chinese trade practices. in terms of us government
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response to date, i think it can be broken up into 3 parts, better defense, prosecuting spies and increasing costs to china. first better defense, director krebs describes many initiatives currently underway by the us government to harden us government networks and private sector networks and other networks by private institutions and other entities to protect themselves from chinese espionage. there's been an important focus on restricting the ability of chinese telecommunications companies to sell network infrastructure to us telecommunication network and allies and there's been remarkable success. the second major response has been to prosecute spies and assistant attorney general john
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demers describe this in some detail. this should continue going forward. the third major line of responses increase cost to china over espionage program to take action against specific chinese companies profiting from a stolen id. the obama administration used criminal prosecutions and the threat of sanctions to convince chinese president xi to an agreement that they would not submit to commercial gain. there is some evidence that agreement at least temporarily reduced economic espionage in the united states but as we heard earlier today. has been renewed significant increase in chinese economic espionage. the trump administration expanded efforts, ip theft has been primary rationale for tariffs on china as part of the trade war.
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importantly the trump administration has begun to deploy targeted measures against chinese beneficiaries of ip theft including trade restrictions on a semiconductor firm that stole technology from micron technologies. so what are a couple recommendations going forward? it is important to keep in mind this is a whole of society defensive effort, not just whole of government effort. institutions including companies and universities keep hardening their defenses. for us government leaders i need some specific recommendations. we should extend use of sanctions and targeted trade control measures to punish chinese companies that benefit from economic espionage. second, recommends congress look at ways to expand prohibition on importing into the united states chinese products use in ip. there are authorities at the international trade commission
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to do this and do so in a number of cases that need to expand authorities and resourcing those efforts. i recommend congress look at ways to expand the economic espionage act, for american victims of ip theft to sue companies that attack them. i should recommend congress, and and expanding foreign, fully covers what china engages in in the united states. thank you for the opportunity to testify. i look forward to your questions. >> thank you, doctor. >> senator kennedy, ranking member feinstein, i am a chinese linguist, spent the last 25 years building teams of chinese linguist supporting
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government on issues like cyber espionage. i had a 20 year session with a little company called wave and illegal text transfer. my comments do not represent the views of my wise and generous government sponsors. .. our research documented in almost infrastructure of organizations both in china and the united states and a professional cadre dedicated to the informal tech transfer from the united states to china. they required via against the requirements the state and such a planet level we discussed made in china 25 that would highlight
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the 2006-2020 mid to long range plan. as overseen by ministries, coordinated through leading groups, and executed by a wide range of state organizations such as the state administration of foreign experts expert affa. there are over 90 cooperation organizations in the united states that coordinate closely with government text transfer offices, facilitation companies as well as thousands of translator cadre that locate study and disseminate foreign journals, , patents, proceedings and dissertations. the information itself is acquired through nearly 200 tablet programs including vanessa might famous the house and tells programs which is only one of 200. and the participants in those programs travel from the united states at chinese government expense, the most technical knowledge and scripted venues and then returned what the chinese documents go there u.s.
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base, gd. the same term is used for military bases. that technology and information is converted as 180 pioneering parks for overseas chinese scholars in china. 160 innovation service centers and 276 national technology model transfer organizations and those only the ones we found. the dynamics of the actual acquisition of the technology itself which the chinese described in that mid to long range s.a.t. plan is being through quote the verse means which is one of the many euphemisms for espionage and illegal tech transfer. official documents from the chinese and say organizations on usada must serve the motherland. the tablet program recipients quote serve china while in place end quote end quote operate from two bases, note the united states and china. the tech transfers are given euphemistically described as exchanges when, in fact, and
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really having read descriptions of them in chinese media a u.s. expert will show up at episode will be five or six of his peer calling to within spent hours debating them at one of these transfer centers. the scale of this activity continues to amaze me as we dig deeper on it but i would offer a number of policy recommendation recommendations. i'm a strong supporter of the doj china initiative. i registered my organization had some small part in the creation of the wheel of doom, but that being said we need to do more. i was a public supporter of senator feinstein. a blue bows only person at the senate banking committee panel who supported the bill. but i believe the implementation of it will require the mystery resourcing of the additional person to ever going to expand the scope of the cases, i know from discussion with department officials that the concert will not have the resources to build
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a handle the greater workload. i also support the strengthening of a deterrent effect. one thing we discovered on the public websites of the chinese thousand tell programs lists over 300 euros government researchers by name of the accepted thousand talent money. i believe those researchers know to do that at the very least ought to register speedy say that again. >> on the thousand talent website lists over c300 300 eurs government researchers with the u.s. affiliation is have accepted thousand talisman. it is unclear to me whether those individuals ever receive permission from their the agen. i know there is a criminal statute 18 usc 209 this has u.s. government was not allowed to accept financial compensation for the same thing to do is use government employee. the same websites also list more than c600 corporate personnel including the company affiliations. whoever accepted money in the
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thousand talent program. again no details about the specifics of what was exchange but the openness with which the chinese listed that material on this website i think really goes to the heart of someone, chen guangcheng regards its language as its first layer of cryptology. my organization exist because some exists in the public domain in chinese but also because of the skill of the effort and the brazenness of it. that being said, at the very least individuals should have to register under ferra. thank you, senator. >> thank you, gentlemen. senator feinstein. >> what additional policy policies, would you recommend? we are very interested and you might go them briefly and then i would very much appreciate a letter to us from each of you on
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your recommendations as to where you believe we should go with respect to legislation. >> yes, i'd like that, too. >> one additional recommendatio recommendation, almost a decade ago the department of commerce put out a notice in the federal register that i thought was very sensible and that the time was shouted down by u.s. university presidents and, frankly, i think the current environment would be much more amenable to it. what it said was that at prc nationals was a grad student and art sites is broken and the united states operating in a a lab, if everybody is a piece of equipment, an instrument that would have required deemed export license if it and the jews go and use it at a u.s. lab located in a prc, that universities hard sciences department should also have to obtain a deemed export license for the individual to use it in a lab in the united states.
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>> doctor, doctor, could you go over that one more time? pretend i'm a tenth grader. >> understood. under u.s. export control laws, is for instance, is companies operating a lab in china and that lab was using a piece of equipment that what it used an export, record an export license to be sold to a chinese company transfer to university and a foreign individual was going use a piece of equipment as an output of that use company, the company would have to place was called a deemed export license. in other words, the technology itself was only transfer to a foreign entity but is being used by foreign nationals within the confines of that use company. my recommendation is the exact same request needs to be made if a prc national, for instance, in hard sciences lab at a u.s. university is using a piece of equipment that would've required a deemed export license if it a bit and you'll abroad. there's a reciprocity that seems
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logical to me, yet when of proposed the last time by the commerce department it was shouted down. >> can you send us that in writing, explanation? >> yes, senator. >> that would be wonderful. >> i to set a couple of questions. this has been, i hope we will do this again. this has been very informative. i want to go back to the confucius institutes. i don't want to curtail free speech. if somebody in society, including but not limited to a university, once advance an argument that the political and economic structure of china is best for the world, i don't happen to agree with that but i think they should be allowed to advocate.
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that's not what i'm talking about. what i'm trying to understand here is to what extent, if any, the confucius institutes are doing more than that, and in particular to what extent the institutes are curtailing speech critical of china, and to what extent the universities are giving him because they want the money -- giving in. >> the confucius institutes are themselves relatively speaking to a university, they are not funding the entire university. they are funding protect your program. >> day meeting? >> the confucius institute serving as a conduit of course the chinese government because speedy they pay for the institute. >> that's right. the chinese government as a
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pass-through to this institute provides money to university and the university finds free money to be moderately to very addictive. and as a result they are prepared to curtail or discourage inviting tibetan speakers or allowing input into certain areas. but it is important to note the confucius institute is only one of the mechanisms the chinese use as part of a broader effort. >> i understand that but i'm trying to focus on a specific example. >> so what is and since it is the university that pulls the trigger. it is the confucius institute that is whispering in the ear of the university saying that's a lot of money we are giving you. you really want to put that in jeopardy? >> do you know of instances, specific instances, what that is happen? >> i don't have that in front of me. >> do you have it? >> i can get that for you. >> senator, , there was a very
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company to report, bipartisan report, just two weeks ago by the hoover institute out in california in the asia society -- >> at stanford? >> at stanford. a look in great detail at a bunch of chinese influence operations including the issue of the confucius institutes. and i'll send that to your staff. >> thank you. >> absolutely. one of the things they found, recommended, the very least, is confucius institutes are going to remain in the united states,, they should be complete transparency around what they are doing, the operating structure they are operating under, and the university should have complete operational control over what the institute is pixel if these became something was purely a language training program with no other strings attached, it could remain that you would need a lot more transparency than you tend to see today. >> senator, i was proud to be a member of the task force to
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produce the hoover institute report, specific on that issue and also proud that my alma mater michigan yesterday kicked the confucius institute off the campus. >> really? >> which is a think the six or seven confucius institute that's been kicked off. >> wife? >> because of the threat to academic freedom. one aspect of the issue has been mentioned thus far is restrictions on hiring, so litmus testing a firing of personal for the institute. there are people who have controversial from beijing's perspective views on tibet, taiwan, and speedy who makes the higher institutes, is at the university? >> usually the institute director. one of the of the reasons they had been controversial is because often when you any faculty about the confucius institute, my organization has done extensive research on it, often faculty can figure where it came from people wasn't a transparent process by which it was set up, people were not offered the opportunity to object to it.
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but if you simply go back to the beginning of the confucius institutes, one of my analysts who looks at this issue very closely has uncovered documents that instead of being set up as a chinese claimed by the ministry of education, that, in fact, it was set up by the united front work department which we been reading about in the last month or so staying at the heart of chinese influence operations. i think the united front work partnership and duration of the confucius institutes is all we need to know about what the true intent is. but it's part of the broader sort of array of pressure the chinese are putting on american universities, whether it's demanding they said settlor campuses in china. one of the issues i'm looking at is are the entry university technology transfers that are occurring between university of the united states and the satellite campus in china that are so motivating our export control reviews?
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and then frankly when you talk to deans at the schools, these schools are now financial addicted to full freight chinese student tuition. so the financial leverage is a huge part of the pressure. as an alternative, all of its is other countries that operate similar organizations in the united states like the german institute that studies for german language, the french have a similar one, none of them are affiliated with university they are completely standalone institutions and so china wants to of those fine. my daughter benefited from the confucius institute at her elementary school terms of teachers and books. i have no problem with that but i don't want them impingement academic freedom on university campuses. >> senator feinstein's, i'd like to come back to question your post about additional recommendations and i will submit a letter with several. tubac additional recommendations to mention briefly. the first i'd like to echo one
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of the doctoral boatbuilding on -- dr. mulvenon spoke on. as the trump administration of the months firrma going forward are both resource issues and also regulatory issues that they should be thinking through about how to maximize the efficacy of firrma going forward. and the second, as we look at chinese hacking of use citizen personal data, we talked about, came up on a first-come, things like the hack in the marriott hotel, stealing the personal data of 500 million americans. i think we also need to think about the ability of the chinese to simply purchase a lot of american personal data. you may have seen a recent "new york times" study for the new times actually purchased real-time location cell phone data of millions of americans and was able to identify
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specifically where many contents of thousands of americans move throughout the day. the "new york times" can purchase it. i'm sure the chinese camp and that's another every we need to be thinking about. >> two other recommendations and has this only because this would burden the previous panel and their respective agencies. the first is insofar as companies found to be using stolen id, that would seem to constitute a violation of already existing federal statutes regarding interstate commerce and exportation of stolen goods. on not sure why a stolen stereo would be treated as a problem for stolen ip would not. that should allow the united states to think about prosecuting companies that exploit stolen ip. that requires demonstrating the ip was stolen. the other issue is rico statutes be given all the discussions placed by this panel by previous panels, by other hearings, it
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would seem fairly evident that there is, in fact, a conspiracy at least the legal definition of conspiracy, and let me know if i'm not trained as as a lawyerd i should probably not be using legal terms like that but assuming it is a conspiracy, and presumably rico would be applicable also to any company that was involved in the use, and exportation of stolen material that was transferred across state lines. >> gentlemen, this is been fascinating. thank you for your time. we will do this again. the record will be open for two weeks. we are going to go vote now. i hope you will, i know you're all busy, but if you could give us information in writing we asked for, i know i will and i think i speak for senator feinstein's we will read it with interest. thank you again for your time. this meeting is adjourned. [inaudible conversations]
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>> today white house national security adviser john bolton talks for the trump administration strategy in africa. that is life from heritage foundation at 9:30 a.m. eastern on c-span3. later, an oversight hearing on the political activities of nonprofit organizations including the new york-based clinton foundation. that is live at 2 p.m. eastern on c-span3. you can also watch online at or listen on the c-span radio app. >> when the new congress takes office in january, it will have
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the youngest most diverse freshman class in recent history. new congress, new leaders. watch it live on c-span starting january 3. >> the senate returns today to consider amendments to measure that would end u.s. military assistance in yemen. next, a look at some of the debate from yesterday on the senate floor. >> mr. president, i i come to e floor today to talk about one of the great humanitarian crises facing our planet, and that is the horrific war in yemen. in march of 2015 under the leadership of mohammad bin salman who was then the saudi arabian defense minister and is now of course the crown prince, saudi arabia and


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