American companies doing business in China will face a continuing threat to their intellectual property under Chinese President Xi Jinping’s security policies, according to a State Department security report.

China’s large-scale information hacking is not limited to recent incidents like the theft of Office of Personnel Management records on 2.1 million federal workers, according to the report by department’s diplomatic security office produced for the Overseas Security Advisory Council. …

“Visitors to China should have no expectations of privacy. Taxis, hotel rooms, and meeting spaces are all subject to on-site and remote technical monitoring. Furthermore, the Chinese government’s access to infrastructure means that all forms of communication, including phone calls, faxes, emails and text messages, as well as Internet browsing history, are likely monitored.”

The threat is not limited to travelers and the information they are carrying, but could be used by Chinese hackers as an entry point into companies’ secured networks. “Upon successful intrusion, threat actors may enjoy continued network access long after the traveler has departed, facilitating the theft not only of trade secrets (e.g., formulas, designs and chemical compounds), but of any information that would give an organization a competitive advantage (e.g., contacts, finances and business models). Ultimately, this may leave U.S. companies faced with a difficult choice: comply and receive access to Chinese markets on the one hand, or refuse to comply and miss a potentially lucrative opportunity on the other.”

Censorship and curbs on press freedom are increasing under Mr. Xi. Company employees who violate repressive Chinese media restrictions face fines, lawsuits and arrest. Major foreign news sites also are blocked in China. Social media also are being blocked to prevent political change in China, with some 2 million Communist Party censors working to scrub blog posts and shut down controversial unofficial websites. … The report warns that Mr. Xi’s sweeping anti-corruption campaign that has netted tens of thousands of party officials is not aimed mainly at creating a more honest and open system. Instead, the campaign is based on fears the ruling Communist Party will be weakened or overthrown.

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