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China has investments in over 600 high-technology assets worth USD 20 billion in the US, the White House has said, asserting that it is part of the Chinese effort to capture emerging industries that will drive future economic growth.
The White House Office of Trade and Manufacturing Policy (OTMP), in its 20-page report released on Tuesday, alleged that the Chinese government has institutionalised the industrial policy of inducing investment in "encouraged" high-technology sectors using the financial resources and regulatory instruments of the state.
China's government has a multi-billion dollar set of state-backed funds that contribute to technology investment and uses an array of state actors to implement its strategies of acquiring foreign technologies and intellectual property, it said.
Since 2012, China-based investors have invested into "more than 600 high-technology" assets worth close to USD 20 billion into areas like artificial intelligence, augmented and virtual reality, and robotics receiving particular focus, the report said.
China's biggest sovereign wealth fund, the China Investment Corporation, has used a significant fraction of the USD 800 billion of assets under management for a venture fund focusing on Silicon Valley, said the report, outlining how China's policies threaten the economic and national security of the US.
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The report documents the two major strategies and various acts, policies, and practices, Chinese industrial policy uses in seeking to acquire the intellectual property and technologies of the world and to capture the emerging high-technology industries that will drive future economic growth.
Given the size of China's economy, the demonstrable extent of its market-distorting policies, and China's stated intent to dominate the industries of the future, China's acts, policies, and practices of economic aggression now targeting the technologies and IP of the world threaten not only the US economy but also the global innovation system as a whole, it said.
China, it said, has experienced rapid economic growth to become the world's second largest economy while modernising its industrial base and moving up the global value chain.
However, much of this growth has been achieved in significant part through aggressive acts, policies, and practices that fall outside of global norms and rules (collectively, "economic aggression"), the report said.
"Given the size of China's economy and the extent of its market distorting policies, China's economic aggression now threatens not only the US economy but also the global economy as a whole," the White House said.
"In some respects, China has been transparent about its aggressive acts, policies and practices. They are revealed in Chinese government documents, through behaviours of Chinese state actors, and from reports produced by business organisations, think tanks, and government agencies," it said.
According to the report, physical theft through economic espionage by company insiders or others who have trusted access to trade secrets and confidential business information provides China with a significant means to acquire US technologies and intellectual property.
Open source reporting indicates China's Ministry of State Security deploys no less than 40,000 intelligence officers abroad and maintains more than 50,000 intelligence officers in mainland China.
This force is bolstered by hundreds of thousands of People's Liberation Army staff and scientists, it said.
Further, China engages in widespread cyber-economic campaigns involving cyber-enabled espionage to infiltrate foreign companies for the purpose of stealing intellectual property, trade secrets, business processes, and technologies.
Estimates of the cost of trade secret theft alone range "between USD 180 billion and USD 540 billion annually".
In a 2012 study of cyber intrusions, Verizon, in cooperation with 19 contributing private organisations and government agencies, analysed over 47,000 security incidents that resulted in 621 confirmed data disclosures and at least 44 million compromised records.
Of the data disclosures that focused on economic espionage (as opposed to financially motivated incidents), 96 per cent of the cases were attributable to "threat actors in China," the report said.
The White House said reverse engineering in China is widespread and entails the process of disassembling and examining or analysing a product or component for the purpose of cloning or producing something similar without authorisation from the rights holder.
"Reverse engineering allows Chinese engineers and scientists to recreate the products of non-Chinese companies and thereby forego the time and cost of research and development.
"The practice of reverse engineering is consistent with China's industrial policy goal to introduce, digest, and absorb a foreign technology and re-innovate that technology with improvements," the report added.
