IT Reshoring News

October 05, 2017

What Chinese Intellectual Property Theft Really Does to the U.S. Economy

China steals billions worth of Intellectual Property from foreign businesses each year, especially the U.S. Here’s how they do it, and how it damages the U.S. economy.

Let’s say you make a product called “Widget X.”  Business is good.  Then you wake up one morning and find out a Chinese company started selling “Widget Y” – a product that looks and acts just like yours—for half the price.

How did that happen? What do you do?

Welcome to the world of international IP theft. China does this on an industrial scale . . . and it causes extreme pain within Western economies.

Why is IP Theft a Danger?

IP Theft is the term for a form of corporate espionage.

  1. An IP thief finds out how a business does something (makes a product, creates a material, etc.).
  2. The thief copies the idea/process, either by outright stealing the necessary data, or by copying it surreptitiously.
  3. The thief makes a near-identical product.
  4. The thief begins selling the “knockoff” at a lower price than the business does.

IP Theft steals more than just data. You’re stealing a person or business’ creativity, development time, investment, and right to profit from their own work. It’s dangerous because it can damage entire industries. In China’s case, they create whole product lines that look exactly like the products of Western corporations, “on their own.”

Here’s just one example: U.S. Steel. One of our major steel producers, U.S. Steel found out in 2014 that its computers had been hacked. A Chinese company, Baosteel, then began selling high-quality steel in America—a type suspiciously similar to U.S. Steel’s—at such a low rate U.S. Steel couldn’t compete.

Since China didn’t have to spend any money on R&D, they’re able to make knockoff steel & sell it for much less than U.S. Steel. Essentially, it means U.S. companies now have to compete with themselves!

This can, and often does, cause Western businesses to fold. China takes their customers with far cheaper pricing.

How Does IP Theft Happen?

China uses every method they can get away with to commit IP theft. Some of the documented methods include:

  • Chinese nationals work at U.S. corporations, steal data, and head back to China
  • Phishing/malware attacks siphon data off computers
  • Tech Transfers. The Chinese government demands Western corporations (especially U.S. corporations) hand over their IP if they want to use Chinese factories & personnel to make their products. “Hand over your IP or you don’t get any product.”

    Which essentially starts a countdown until a Chinese version of their product hits stores (for much cheaper).

Why Does China Do This? How are they Getting Away with It?

A recent article reported that China says they deserve a break on IP regulations since they’re still a developing country. Now, this is obviously not true. The real reason has more to do with pride.

According to sources like “Sold Out,” China believes it is “owed” every advantage it can take, legal or not. They believe they are the rightful center of all global affairs, and every foreign company’s IP is theirs for the picking.

As long as the world allows it, they will continue.

IP Theft Cuts Deep. It Needs to Stop.

Intellectual Property theft costs the U.S. up to $600 billion a year, according to the New York Times. China accounts for the lion’s share of this tremendous loss.

Losing billions to foreign knockoffs harms American jobs. If a corporation can’t compete with Chinese products made from their own stolen IP, they can’t pay workers. Thus Chinese IP theft damages all aspects of the U.S. economy.

In August, President Trump announced an inquiry into China’s IP theft. China said it would “tighten controls” in response. Let’s hope this actually produces change.

What do you think about IP theft? Send your thoughts to