Summary of "To Catch a Thief: China’s Rise to Cyber Supremacy"
Episode 3: The Most Dangerous Time in American History

Release Date: March 24, 2025
Produced by Rubrik in partnership with Pod People
Host: Nicole Perlroth

1. Introduction: The Kate Machine and Welding Incident

The episode opens in Belleville, Wisconsin, at Kate Machine and Welding, a long-standing family-owned machine shop. In 2015, the shop became an unwitting pawn in a sophisticated Chinese cyber espionage operation.

• Nicole Perlroth describes the setting:
  "[00:04] Drive past the dairy farms, corn fields and horse pastures and you'll eventually arrive at Kate Machine and Welding in Belleville, Wisconsin."

• Steve Category, the third-generation owner, recounts the intrusion:
  "[00:34] We had probably 15 people working at our shop... all of a sudden someone shows up and they're ripping apart the server room..."

2. The Evolution of Chinese Cyber Espionage

Initially, Chinese hackers focused on stealing American trade and defense secrets by infiltrating servers abroad. However, as the Chinese shifted their operations domestically—where the NSA couldn’t monitor without court orders—the scale and audacity of their attacks grew.

• Nicole Perlroth explains the strategic shift:
  "[00:58] The Chinese were moving their operations to the United States... vulnerable servers like this one at Kate's shop became staging grounds for attacks."

• Steve Category reflects on the shop being used as a funnel:
  "[03:38] They were trying to get to the big ones... we were just a funnel for them."

3. Economic Reforms and IP Theft under Deng Xiaoping

The transformation began with Deng Xiaoping’s 1978 policies, which aimed to modernize China’s economy through "reform and opening." This period marked the beginning of systematic intellectual property (IP) theft to accelerate China's technological and economic advancements.

• Jim Lewis provides historical context:
  "[08:47] Deng inherited a China that was a mess... he started a gigantic espionage campaign to steal intellectual property."

• Evan Medeiros discusses China’s economic priorities:
  "[09:28] The most important story of China over the last 40 years is the period of reform and opening that started in late 1978."

• Nicole Perlroth highlights the joint venture requirements:
  "[12:11] Western companies had to enter joint ventures with Chinese counterparts, leading to forced technology transfer."

4. Systematic Impact on US Businesses

American companies like DuPont and McDonnell Douglas became targets of relentless IP theft. These breaches weren’t limited to high-tech industries but spanned various sectors, undermining entire business lines and facilitating the rise of Chinese competitors.

• Matt Turpin shares his experience with DuPont:
  "[22:22] Germplasm is just plant DNA... China kept everything, including proprietary technology and training."

• John Bedbrook comments on Shenzhen’s transformation:
  "[13:23] Shenzhen, widely known as the Silicon Valley of China, is the engine room of the country's technology and innovation."

• Nicole Perlroth notes the economic gamble by American companies:
  "[28:11] Why American companies like DuPont and McDonnell Douglas turned a blind eye was simple: the financial incentives outweighed the risks."

5. The Internet’s Role in Espionage

The advent of the Internet in the early 2000s provided Chinese hackers with unprecedented access and opportunities to conduct large-scale IP theft. The lack of initial cybersecurity measures allowed for rapid and unchecked exfiltration of data.

• Jim Lewis discusses the impact of the Internet:
  "[29:23] They connected to the Internet and found it was like letting a pig into a candy store."

• Nicole Perlroth emphasizes the lack of initial security:
  "[29:55] The Internet was brand new technology, and the Chinese exploited its vulnerabilities from the start."

6. Notable Cyber Espionage Campaigns

Several major cyber espionage campaigns highlighted the breadth and depth of Chinese cyber operations:

• Operation Aurora: Targeted Google and other tech giants.

• Shady Rat: Spanned over 30 industries, stealing diverse data from multinationals to nonprofits.
  "[39:27] Shady Rat's targets ranged from giant multinationals to tiny nonprofits across more than 30 industries."

• Night Dragon: Focused on the oil and gas sector, targeting bidding data and field information to outbid Western companies.
  "[39:58] Night Dragon hit more than 70 organizations, including several oil and gas multinationals."

• Nicole Perlroth highlights the systematic nature:
  "[37:10] This maps directly to their national priorities, made in China 2025 and their five year plans."

7. Consequences and Current State

The cumulative effect of these cyber espionage activities has been the hollowing out of American industries and the meteoric rise of Chinese corporations like Huawei. The theft of IP has enabled China to leapfrog in technological advancements, posing significant national security threats.

• Jim Lewis links IP theft to the rise of Chinese powerhouses:
  "[33:17] Nortel's IP was raided by Chinese hackers, leading to Huawei becoming the world's biggest telecom."

• Steve Stone illustrates the complete takeover of a plant’s operations:
  "[38:02] We saw a US company's plant in China mimicked exactly by their Chinese counterpart, effectively stealing the business."

• John Holtquist underscores the broader impact:
  "[40:35] Chinese IP theft has enabled China to replicate and surpass American technological advancements, weakening US industry."

Notable Quotes

• Steve Category:
  "[03:58] They would never think twice about little old Kate Machin and welding trying to access their server, apparently."

• Kevin Mandia:
  "[06:53] Theft of IP was a game changer. Chinese hackers weren't there for state secrets. They were there for commercial gain."

• Evan Medeiros:
  "[07:06] Regular espionage... does not involve picking winners, but China's approach was different—stealing IP to bolster their economy."

• Jim Lewis:
  "[15:49] When we steal technology, we are building our economic base. We are building our national security."

• Dmitri Alperovich:
  "[30:49] This is the greatest transfer of wealth in history that is impacting us."

• Kevin Mandia:
  "[32:41] They didn't alter log files or delete files. They let you know they were there, stealing terabytes of data."

Conclusion

Episode 3 of "To Catch a Thief" delves deep into the systematic and economically motivated cyber espionage orchestrated by China against the United States. Through personal stories, expert insights, and historical context, the podcast underscores the profound impact of IP theft on American industries and national security, painting a sobering picture of the digital battlefield in the age of cyber supremacy.

For more detailed insights and firsthand accounts, listeners are encouraged to tune into the full episode.