The PRC’s strategic use of SOEs poses an existential threat to American economic sovereignty and security.
The Chinese Communist Party (CCP) has turned balance sheets into battlefields, reportedly stealing up to $600 billion per year in intellectual property. The Communist Party of China has implemented a strategy to dismantle the United States’ economic and technological leadership by targeting its center of gravity: private enterprise. Gen. (ret.) Keith Alexander described the looting as the largest wealth transfer in history.
In December 2024, Chinese state-sponsored hackers breached the U.S. Treasury Department’s systems, accessing the systems associated with the Committee on Foreign Investment in the United States (CFIUS), the government body responsible for preventing adversarial commercial investments. Earlier that year, the hacking group Volt Typhoon, linked to the Chinese government, infiltrated U.S. critical infrastructure networks, aiming to disrupt communications during a crisis. During the last presidential election, the public learned that Chinese hackers had breached numerous U.S. telecoms. These incidents underscore the CCP’s relentless cyber espionage campaign against U.S. governmental and commercial entities.
Beyond cyber intrusions, Chinese state-owned enterprises (SOEs) have an extensive history of intellectual property theft to bolster their technological capabilities. In 2016, the Aviation Industry Corporation of China (AVIC), a prominent SOE, was accused of stealing designs from American aerospace firms to enhance China’s military aviation technology. Such actions not only compromise U.S. economic interests but also pose significant national security risks. The CCP’s tactics extend beyond corporate espionage. Beijing frequently uses legal and financial pressure to intimidate foreign companies, as evidenced by the recent crackdown on Western consulting firms operating in China. These actions deter businesses from challenging SOEs and highlight the escalating risks for U.S. enterprises.
The Biden administration focused on dialogue and de-escalation. Dismissing compounding evidence that the CCP has no interest in either, Biden’s team failed to adopt an effective counter-strategy. Yet the reality is clear: the innovation and competitiveness of American companies, which developed the technology that helped win the Cold War, are under attack.
The Trump administration, building on its prior interactions with China’s economic statecraft, has a historic opportunity—indeed, an obligation—to expose CCP malicious activities. President Trump must augment U.S. defenses and support U.S. businesses as they work to protect U.S. jobs and strategic industries. By adopting a comprehensive strategy that addresses both systemic and tactical elements of CCP economic aggression, President Trump can shield U.S. businesses and secure their leadership in global innovation. The stakes are clear: inaction risks ceding the future of economic and technological dominance to an adversary intent on rewriting the rules.
The Strategic Threat
The CCP is executing a campaign to develop its own comprehensive national power while simultaneously undermining U.S. economic strengths. Beijing leverages all elements of state power—from its intelligence apparatus to academic institutions, judicial system, military, and state-owned enterprises (SOEs)—to advance its strategic goals. The U.S. government’s failure to recognize this interconnected strategy leaves American businesses to face the full weight of the world’s second-largest economy on their own.
The CCP’s control over SOEs grants them significant state-backed advantages: free money, legal immunity, and even access to state intelligence operations. Unlike private companies in free-market systems, China’s SOEs answer solely to the Communist Party, allowing them to evade accountability and manipulate markets without consequence.
The costs for U.S. businesses are severe. Take the example of Tang Energy Group, a Texas-based company co-owned by one of this essay’s authors, Patrick Jenevein. For years, Tang partnered with the Aviation Industry Corporation of China (AVIC) to develop wind turbine blade technology for use in the PRC. When Tang sought to expand operations into the United States, AVIC initially offered a $600 million investment to secure their collaboration. However, it never delivered the funds. Instead, AVIC used the promise of investment to keep Tang engaged, while an AVIC subsidiary poached Tang’s personnel and created a competing company pursuing the same business opportunities.
In 2014, Tang initiated arbitration against AVIC under the terms of their agreement. In 2015, after nearly eighteen months and $5 million in legal expenses, a Dallas-based arbitration panel awarded Tang $70 million. While this win validated Tang’s claims, the victory took extraordinary effort—for example, the Tang team secretly recorded an AVIC executive—to prove that AVIC and its subsidiaries operated as a single entity. This reality is well-known to PRC-focused analysts but is difficult to prove in court. Unlike the U.S. legal system that mandates evidence disclosure, the PRC shields its SOEs from scrutiny. When AVIC leadership decided to undermine Tang, PRC law ensured it would never have to admit culpability.
Early in the arbitration process, AVIC’s lawyers threatened Tang with endless litigation, backed by state-sponsored resources—and, speaking knowledgeably about his family, told Tang’s CEO that AVIC had more than enough money to make litigation last beyond his lifetime. Thus, with access to the PRC’s treasury, AVIC prolonged the case to exhaust Tang’s resolve. In 2020, AVIC petitioned the case to the U.S. Supreme Court, which, having no dissenting opinion to work from, declined to hear AVIC’s argument. Ultimately, after eight years in litigation, Tang secured a $24 million settlement—a fraction of the $100 million accrued judgment.
The Current Ineffective Approach
The Tang case exemplifies how the PRC’s SOEs exploit legal systems to their advantage. Similar stories of intellectual property theft, cyber espionage, and market manipulation highlight the need for a coordinated U.S. response. However, current U.S. policies move at the speed of government bureaucracy and are focused on targeting individual companies instead of confronting the CCP’s holistic strategy.
Export controls aim to restrict China’s access to critical technologies but are slow and reactive. Implementation often takes years, with advance notices allowing the PRC ample time to adapt or develop diversion strategies. When controls are finally in place, the SOEs have captured the technology or developed circumvention strategies. Moreover, the controls focus narrowly on individual technologies rather than addressing the systemic issue of PRC economic aggression.
The first Trump administration investigated the PRC’s unfair trading practices under the authority of Section 301 of the Trade Act of 1974. Its findings were damning for the PRC and ultimately led to a host of tariffs on PRC-origin products. However, such investigations are bureaucratic and time-consuming. They can take years, during which the PRC continues its economic predation. Furthermore, their focus on specific trade practices fails to address the CCP’s comprehensive strategy of using SOEs as instruments of economic domination.
The U.S. government maintains several lists targeting Chinese entities, such as the Department of Commerce’s Entity List, designed to prevent foreign companies from proliferating weapons of mass destruction, and the Military End-User List, intended to keep foreign companies from providing weapons to the militaries of U.S. adversaries. While these tools highlight individual bad actors, they do little to disrupt the CCP’s broader network of state-sponsored economic aggression. Additionally, the lack of coordination among these lists creates gaps that the PRC exploits.
Current measures fall short because they target specific actions or entities rather than addressing the structural advantages of PRC SOEs. They leave U.S. businesses vulnerable to ongoing assault and fail to counter the CCP’s integrated approach.
A Holistic Strategy for the Trump Administration
The Trump administration has the opportunity to adopt a comprehensive strategy to address the root causes of PRC economic aggression.
1) Enhance Government Support for Litigation: Publish detailed accounts of PRC-based businesses and their use of state resources to undermine competitors, highlight CCP-controlled practices such as intellectual property theft, contract violations, and unethical conduct, and file amicus briefs in judicial cases involving CCP-controlled entities that threaten national security.
2) Expose CCP Malfeasance: Declassify and disseminate information documenting CCP corruption and economic misconduct. A dedicated “PRC Malign Economic Activity Report” could complement the Department of Defense’s annual Chinese Military Power Report, offering a clearer picture of the economic threat posed by the PRC’s SOEs.
3) Expand Trade Enforcement Mechanisms: Strengthen trade enforcement to hold the PRC’s SOEs accountable for unfair practices and implement automatic sanctions, tariffs, and penalties for intellectual property theft and other violations. These mechanisms should be streamlined and coordinated across agencies to ensure timely action.
4) Establish Insurance Funds for U.S. Companies: Create specialized insurance markets to cover legal defenses, arbitrary detentions of employees, and asset seizure claims. These funds would help U.S. businesses navigate predatory actions by PRC SOEs and reduce financial risks.
5) Increase Regulatory Oversight of PRC Investments: Bolster scrutiny of PRC-based acquisitions and partnerships through the Committee on Foreign Investment in the United States. Additional resources and provisions that allow authorities to revisit approvals based on behaviors unknown before or undesirable behaviors undertaken after approval could ensure compliance and allow for asset seizures when violations occur.
The Path to Effective Leadership
The stakes for the United States could not be higher. The PRC’s strategic use of SOEs poses an existential threat to American economic sovereignty and security. Without decisive action, U.S. businesses will remain vulnerable to the CCP’s state-backed companies in a decidedly unfair competition.
By adopting a comprehensive approach that addresses both structural and tactical elements of PRC economic aggression, the Trump administration can act boldly and properly to safeguard American economic leadership and reaffirm America’s commitment to free and fair markets.
The future of U.S. national security depends on it.
Isaac Harris is a retired Navy Commander and served as an adjunct fellow at the Foundation for Defense of Democracies (FDD) and CEO of Prime Services and Consulting, a national security consulting firm.
Rear Adm. (Ret.) Mark Montgomery is a senior fellow and a senior director at FDD’s Center on Cyber and Technology Innovation.
Patrick Jenevein is the author of Dancing with the Dragon and CEO of Pointe Bello, a China-focused strategy design and implementation firm.
Image: Rustamxakim / Shutterstock.com.