Chinese Checkers: How CCP-Linked Commercial Entities In India Are Indulging In Espionage

The Chinese mobile manufacturer Vivo is being investigated by the Enforcement Directorate (ED) in a money laundering case.

A total of 44 locations have been raided by the ED under the provision of Prevention of Money Laundering Act.

According to a report in the Economic Times, "the development comes amidst government action against Chinese smartphone brands over the last two years."

The ED has already passed an order freezing Xiaomi India's bank assets worth over Rs 5,500 crore.

The activities of Chinese corporations isn't limited to money laundering. Evidence suggests that Chinese corporations are being used as arms of the Chinese state, for the purpose of espionage.

They are profiling 'high value' individuals, exfiltrating bulk data and engaging in large scale tax evasion.

The government has been busting spy rings, studying incoming Chinese investments into India, carrying out tax raids on major Chinese telecom companies, cracking down on Chinese mobile apps, since 2020.

Their goal seems to be to gain a strategic advantage over India's economic and security systems.

There are hundreds of small Chinese companies, a web, controlled by Chinese nationals with dummy Indian directors and managers, to provide a veil of legitimacy, as per a report from the ET.

The government has cracked down on hundreds of such companies. It is unknown how many web of companies like these exists.

A probe into the Registrar of Companies (RoC) revealed that these companies did not physically exist at their registered offices, although the bank accounts were active. They were being operated from abroad.

One such company was used to influence Tibetan monks living in India.

Luo Sang, a Chinese national, was arrested in 2020. He was sending money in packets to Tibetan monks.

According to the report, "the web of these companies is believed to have laundered over Rs 1,000 crore, with some of the proceeds used to gather intelligence in India."

The government suspects that money was provided to Tibetan monks to gather information about the Dalai Lama and the Tibetan government in exile.

Agencies have also examined the pricing model of major Chinese corporations. Raids have been carried out on firms like ZTE, Huawei, apart from Vivo and Xiaomi.

The cheap and sometimes even below production cost pricing model of these firms have given them control of significant chunk of market in India.

Senior employees of some of these companies are members of the Chinese Communist Party.

According to reports, in one case, it was discovered that the CEO of a major telecom firm possessed sensitive documents. In another, a deep profile of an Indian business leader of interest to China was discovered.

In investigations it was also discovered that Chinese origin mobile phones have a seamless data link with China. The data of Indians that is collected via these devices, such as, fingerprints, selfies, etc, has helped China acquire biometric details of millions of Indians.

Government's action since 2020 has somewhat stalled Chinese investments into India. The investments were done mostly through companies like Alibaba, Tencent and ByteDance.

Agencies suspect that, "large-scale buy in was planned to gain control of Indian entities that were in control of large sets of data — from companies running financial apps to betting platforms and shopping apps."

China's activities aren't limited to India. The Federal Bureau of Investigation of the US currently describes China’s intelligence activities as “the greatest long-term threat.”

"China’s intelligence agencies have stolen a significant volume of U.S. military secrets in recent years, including aircraft designs. They have penetrated U.S. political campaigns to gain insight into future American policymaking. And they have compromised America’s own espionage networks, reportedly helping to expose and disrupt U.S. intelligence activities in China — a top American collection priority — and elsewhere," read an assessment published by the Carnegie Endowment for International Peace.

In more recent times, according to multiple reports by FT, China has been relying on research students in American universities to gain access to research in critical areas such as biotechnology, soil science, quantum computing and artificial intelligence.

It was recently revealed that China has been using graduate school students to target the Physics Department of Johns Hopkins University.

However, the craft that the Chinese practise doesn't rely merely on students. China has also used employees in American firms to acquire trade secrets.

The US Department of Justice revealed a few months ago that, Xiang Haitao, 44, a Chinese national formerly residing in Chesterfield, Missouri, pleaded guilty to committing economic espionage.

His target was the American firm Monsanto.

According to court documents, Xiang conspired to steal a trade secret from Monsanto, for the purpose of benefitting a foreign government, namely the People’s Republic of China.

“Despite Xiang’s agreements to protect Monsanto’s intellectual property and repeated training on his obligations to do so, Xiang has now admitted that he stole a trade secret from Monsanto, transferred it to a memory card and attempted to take it to the People’s Republic of China for the benefit of Chinese government,” said Assistant Attorney General Matthew G Olsen of the Justice Department’s National Security Division. “With his guilty plea, Xiang is now being held accountable for this unlawful conduct.”

The FBI has reached an assessment that the Chinese are targeting companies producing everything from proprietary rice and corn seeds to software for wind turbines to high-end medical devices. And they’re not just targeting innovation and R&D. They’re going after cost and pricing information, internal strategy documents, bulk PII — anything that can give them a competitive advantage.

Large Chinese businesses are state-owned enterprises — literally owned by the government, and thus the party.

It is pertinent to remember that even where not formally owned, they are legally and practically beholden to the government in a very tangible way. China has national security laws that compel Chinese companies to provide the government with information and access at their government’s request.

And virtually all Chinese companies of any size are required to have Communist Party “cells” inside them, to make sure the companies stay in line with the party’s principles and policies.

"Part of what makes this threat so challenging is that the Chinese are using an expanding set of non-traditional methods — both lawful and unlawful — blending things like foreign investments and corporate acquisitions with things like cyber intrusions and espionage by corporate insiders.

"Their intelligence services also increasingly hire hacking contractors, who do the government’s bidding, to try to obfuscate the connection between the Chinese government and the theft of our data. The Chinese government is clearly taking the long view here — and that’s an understatement. They’ve made the long view an art form. They’re calculating. They’re persistent. They’re patient," reads a chilling assessment of the FBI, on Chinese espionage.