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China scoffs at charge in Cincinnati against intelligence officer over aviation company spying

WASHINGTON — A Chinese intelligence official was arrested in Belgium and extradited to the United States to face espionage charges, Justice Department officials said Wednesday, a major escalation of the Trump administration’s effort to crack down on Chinese spying.

The extradition on Tuesday of the officer, Yanjun Xu, a deputy division director in China’s main spy agency, the Ministry of State Security, is the first time that a Chinese intelligence official has been brought to the U.S. to be prosecuted and tried in open court. Law enforcement officials said that Xu tried to steal trade secrets from companies including GE Aviation outside Cincinnati, in Evendale, Ohio, one of the world’s top jet engine suppliers for commercial and military aircraft.

China was critical of the arrest in remarks Thursday, according to the Associated Press. Foreign ministry spokesman Lu Kang dismissed the allegations and called on the U.S. to deal with the matter “fairly in accordance with law” and ensure Xu’s “legitimate rights and interests.”

“The U.S. accusation is something made out of thin air,” Lu told reporters at a daily news briefing.

A 16-page indictment details what appears to be a dramatic international sting operation to lure Xu to what he believed was a meeting in Belgium to obtain proprietary information about jet fan blade designs from a GE Aviation employee, only to be met by Belgian authorities and put on a plane to the U.S.

China has for years used spycraft and cyberattacks to steal U.S. corporate, academic and military information to bolster its growing economic power and political influence. But apprehending an accused Chinese spy — others charged by the U.S. government are still at large — is an extraordinary development and a sign of the Trump administration’s continued crackdown on the Chinese theft of trade secrets.

The administration also outlined on Wednesday new restrictions on foreign investment aimed at keeping China from gaining access to U.S. companies.

The arrest of Xu “shows that federal law enforcement authorities can not only detect and disrupt such espionage, but can also catch its perpetrators,” Benjamin C. Glassman, the U.S. attorney for the Southern District of Ohio, said in a statement.

The coming trial, in federal court in Cincinnati, could further expose China’s methods for stealing trade secrets and embarrass officials in Beijing — part of what current and former administration officials said was a long-term strategy to make stealing secrets costly and shameful for China. Federal prosecutors will have to present additional evidence to prove their case, which could include intercepted communications between government officials or even testimony from cooperating witnesses.

“If you can make it less expensive in terms of money and reputation to instead invest in R&D, the country’s behavior can and will change,” said John Carlin, the former head of the Justice Department’s National Security Division, referring to research and development.

In the short term, the Justice Department’s aggressive move is likely to worsen tensions as the United States and China engage in a tit-for-tat trade war. Should China respond to the arrest, current and former administration officials said, it was possible that the Chinese government would expel U.S. diplomats or intelligence officers from Beijing.

The indictment outlines China’s courting of the GE Aviation employee starting in March 2017. The company, a subsidiary of General Electric, was a ripe target because it builds airplane and helicopter engines for the Pentagon.

An individual identified as an unindicted co-conspirator invited the GE Aviation employee on an all-expense trip to China to meet with scientists at Nanjing University of Aeronautics and Astronautics. Once there, the employee was introduced to Xu, who continued to be in touch by email after the trip.

In January, Xu invited the employee back to China and told him he should bring with him information about GE Aviation’s “system specification, design process.” Over the next two months, Xu asked the employee for more information, including what the indictment said was proprietary information about fan blade design.

Xu and the GE Aviation employee discussed increasingly detailed pieces of data that Xu wanted, and the employee even sent Xu a file directory of documents on the employee’s company-issued laptop.

The two never met again in China, but set up a meeting in Belgium for the employee to pass more secrets to Xu. In preparation for the employee’s trip to Europe, Xu asked the employee if he would use an external thumb drive to transfer information from the employee’s work computer when they met in person.

It is unclear from the indictment if the employee at this point was cooperating with the FBI as part of the sting operation, and it is unclear if the employee ever traveled to Belgium. On Wednesday, the Justice Department praised GE Aviation for its cooperation in the investigation and internal controls that the department said “protected GE Aviation’s proprietary information.’’

Xu was arrested on April 1 in Belgium and remained in custody there until Tuesday. He is now being held in Cincinnati.

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Employees of large U.S. corporations traveling to countries like China are often targets for information theft because their devices can be hacked remotely and because they can speak too revealingly of their work while being wined and dined, said Joseph Campbell, the former head of the FBI’s criminal investigative division who is now a director at Navigant Consulting.

“Employees who think they’re sharing unimportant information don’t realize that they’re adding to a broad matrix of knowledge,” Campbell said. “Even with unclassified information, China can put together a fuller picture of a company’s sensitive information.

The government indictment against Xu leaves open the possibility that the government investigation is continuing. The document says that an unindicted co-conspirator referred to as CF brokered the meeting between Xu and the GE Aviation employee; it mentions that Xu was communicating with other Ministry of State Security agents about the spy operation.

The Justice Department is pursuing other thefts of trade secrets for prosecution, said John C. Demers, the head of the Justice Department’s National Security Division. Together, he said, they show that China has a policy of developing its economy “at America’s expense.”

“This case is not an isolated incident,” Demers said. “It is part of an overall economic policy of developing China at American expense. We cannot tolerate a nation’s stealing our firepower and the fruits of our brainpower.”

China has also been targeting General Electric’s turbine technology. The FBI in August arrested a dual citizen of the United States and China who worked at General Electric, charging him with stealing the company’s technology for the purpose of helping Chinese companies.

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