An indictment was unsealed on July 10 by the Federal Bureau of Investigation (FBI), charging Xudong Yao with nine counts of theft of trade secrets.
Yao, a naturalized citizen of the United States, made it to the FBI’s Most Wanted list after he allegedly left to China, his country of birth, with 3,000 unique electronic files he stole from his former employer in 2014: an Illinois-based rail company.
This case comes amid rising concerns regarding national security risks in awarding federally-funded contracts to Chinese state-owned-enterprises in the United States, such as the China Railway Rolling Stock Corp (CRRC).
The Chinese Communist Party (CCP), which owns the CRRC, can collect information through the technology the trains are equipped with, explained Vice President Erik Olson of the Rail Security Alliance in an interview with NTD News. According to its website, the Rail Security Alliance exists to “promote the security of the railroads and railroad system of the United States of America.”
“They want to gather as much data on the movement of people … and people ride trains every day,” Olsen said. “The Metro system in D.C. carries members of Congress, defense personnel, there’s a stop at the Pentagon—it goes under most federal buildings.”
Sen. Warner of Virginia (D), Rep. Harley Roda (D-CA), and other lawmakers have all raised the same concern.
.@SenSchumer is asking the federal gov't to investigate if a plan for new subway cars in #NewYorkCity—designed by #Chinese state-owned firm CRRC—could pose a #NationalSecurityThreat. https://t.co/BL1dIm3Kzz
— The Epoch Times – China Insider (@EpochTimesChina) May 20, 2019
“Many of these technologies could be entirely susceptible to hacking, or other forms of interference, if adequate protections are not in place to ensure they are sourced from safe and reliable suppliers,” stated senators in a letter to the Washington Metropolitan Area Transit Authority in January.
After Yao was terminated from the Illinois rail company in 2015 for reasons unrelated to the alleged theft, he left the United States to start working for an automotive telematics company in China.
Later that year, he returned to the United States carrying copies of information he previously stole in hand, the FBI alleges. He was also said to have copied explanations on how the stolen technical documents and software codes worked.
Yao at some point returned to China where he remains at large.
Australia Serves as Case-Study
Olson said that this is not only about security risks—China has laid out a blueprint for dominating the world’s high-tech industries in the next six years: “Made in China 2025.”
A now-deleted tweet from CRRC captured by Olsen confirmed the state-owned enterprise’s very public intention of “conquering” the rail industry worldwide.
Australia provides a good case-study of how China has been working to do so, said Olson, referring to the country’s rail industry that was completely taken over by the CCP over the course of nine years, after CRRC moved in and drove out domestic competitors.
Oxford Economics reported that “for each U.S. job created by a Chinese SOE, the U.S. loses between 3.5 to 5.4 jobs when factoring in the direct, indirect, and induced economic impact.”
The Rail Security Alliance also warned of parallels between Australia and the United States for railroad security risks. In Australia, CRRC entered the industry by winning transit contracts. CRRC has already won four federally-funded transit contracts in the United States in four years.
Following the alliance’s warnings, lawmakers devised plans to introduce a Transit Infrastructure Vehicle Security Act. The act would ban tax-payer dollars from funding Chinese state-owned-enterprises.
“Our core deep belief is that U.S. tax-payer dollars should not be going back to China, they should be staying here in the United States,” Olsen said, adding that “CRRC is trying to produce as much as possible in China and ship it here.”
Today, a bill for such an act was passed by the House of Representatives. It will now go to the Senate.
Thanks to leadership from @RepHarley @RepKayGranger @EleanorNorton @RepTimRyan @RepGaramendi @RepRickCrawford @RepScottPerry @TXRandy14 the U.S. does not have to put its national and economic security in the hands of foreign SOEs like #CRRC. #RailSecurity #TIVSA
— Rail Security Alliance (@railcarsecurity) July 15, 2019
