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Sorry, but I only gave a cheer or a cheer-and-a-half upon learning on Friday that a Chinese national was convicted in a federal court of trying to steal “trade secrets” relating to a key aviation technology from General Electric (GE).

Don’t get me wrong – it’s great that this spy was caught. But anyone knowing anything about the relationship between way too many other U.S.-owned advanced manufacturing and information technology companies and China would surely be asking why Beijing even bothered to send him into the field. Because the amount of sophisticated technology – and even clearly defense-related knowhow – that such companies have transferred to China voluntarily has clearly been more than enough to help the People’s Republic narrow the military gap with the United States substantially. (See, e.g., this piece I wrote for Bloomberg.com from 2013.) 

And even though the Justice Department says GE was working with the FBI to catch Yanjun Xu, it’s been a prime culprit. Notably, as recounted by long-time U.S. trade official and Asia watcher Clyde Prestowitz in his outstanding recent study of Sino-American relations The World Turned Upside Down, in November, 2009, the company announced the merger of its avionics division with China’s Aviationcons Industry Corporation (AVIC) and headquartering the new entity in Shanghai.

As Prestowitz explained, the deal was bad enough from a U.S. economic standpoint because standard commercial considerations had nothing to do with the resulting offshoring of high value manufacturing and employment. Instead, GE recognized that it wouldn’t be selling much in the way of avionics to China unless it made lots of them in China. In other words, it was victimized by extortion.

But the national security implications were even worse. For avionics are the electronics systems used in aircraft and missiles, and AVIC isn’t just another aerospace company, but an organization owned and controlled lock, stock, and barrel by the Chinese state, and one that has a “monopoly on military aircraft manufacturing and maintenance.” So it had to be clear from the get-go that any breakthroughs in avionics generated by GE would ultimately be available to AVIC and deployed in weapons that could well be used against American soldiers, sailors, and pilots in a future conflict between the two countries. Yet good luck trying to find any federal government opposition to the transaction. You won’t.

Indeed, when the new arrangement was formalized in 2011, the signing ceremony was attended by Gary Locke, former President Obama’s Commerce Secretary – who apparently didn’t even blink an eye when GE proudly declared that the new venture “will develop and market integrated, open architecture avionics systems to the global commercial aerospace industry for new aircraft platforms. This system will be the central information system and backbone of the airplane’s networks and electronics and will host the airplane’s avionics, maintenance and utility functions.”

And apparently Locke – and Obama – were just fine with GE’s avowed aim of developing with AVIC “a world-class engineering organization” with “the JV itself…creating new IP [intellectual property] and new technology.”

I guess they thought that the technology for developing civilian avionics and military avionics are fundamentally different, and that AVIC’s interests are purely commercial.

The technology that Yanjun Xu was seeking isn’t avionics-related. It has to do with engine parts made from composite materials – which the Justice Department says “no other company in the world has been able to duplicate.” And GE’s cooperation obviously means that the company wants to maintain ths monopoly over all actual and potential competitors, including from China.

But since it succumbed to blackmail over avionics, it’s far from a sure bet that it will keep drawing a line in the sand on composites – or anything else. Indeed, as the company boasts, its cooperation with AVIC on “technical training, manufacturing, spare parts distribution, and…maintenance and overhaul” for engines is already substantial. As a result, it’s equally unlikely that American regulators will be able to keep this knowhow in American hands.

The American journalist Michael Kinsley once famously wrote that “the scandal isn’t what’s illegal, the scandal is what’s legal.” You don’t need to look much further than GE’s deep, longstanding, and officially sanctioned ties with China’s state-run aerospace industry to see how right he was.

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