US intelligence names Chinese AI and chip firms as espionage targets; Beijing counters with threats to US companies under China's espionage law.

China's Ministry of Commerce formally threatened legal action against American companies on Friday, invoking the Counter-Espionage Law in direct response to CIA Deputy Director Michael Ellis's public declaration that Chinese companies in artificial intelligence, semiconductors, and biotechnology are now legitimate CIA intelligence targets. The confrontation arrives with the September 24 White House summit between President Donald Trump and Chinese President Xi Jinping now twelve days away, adding a sharp intelligence-community dimension to an already complicated diplomatic agenda.

Ellis made the declaration at the Billington Cybersecurity Summit in Washington on September 8 in remarks unusually direct for a serving intelligence official. His core argument rests on structural grounds: because China lacks a genuinely independent private sector — the Communist Party can absorb or direct any Chinese company at will — commercial Chinese firms in strategically important industries are not meaningfully different from state actors for intelligence purposes.

"Our economy is intertwined with theirs," Ellis told the conference, framing the interdependence as a security vulnerability rather than a shared stake in stability. "The CIA has to respond differently." He argued that intelligence about AI, semiconductors, and biotechnology requires different collection expertise and workforce skills from traditional military and political intelligence.

What distinguishes Ellis's remarks is not their content—CIA directors have called for deeper economic intelligence since Robert Gates raised the subject in 1991 and James Woolsey committed to it in 1993—but their candor. Previous officials carefully avoided naming commercial firms as explicit intelligence targets, rather than state entities. Ellis named sectors and justified the targeting publicly, stripping away what China's Ministry of Commerce would later call the "fig leaf" of plausible deniability.

The declaration also reflects a documented institutional shift. CIA Director John Ratcliffe announced a "fundamental reshaping" of the agency's entire technology approach at an Amazon Web Services summit on June 30, creating a new Directorate of Mission Systems, cutting acquisition timelines from two years to six months, and completing roughly 400 technology contracting deals in six months. Ellis's September remarks articulate the collection mandate underlying a reorganization already underway.

China's Ministry of Commerce responded Friday with a formal statement notably blunter than standard diplomatic protests. The ministry characterized the CIA's declaration as exposing "the bandit logic of hegemony in broad daylight," accusing the United States of "deliberately undermining fair competition" and "openly trampling on the norms of international trade." It invoked "Cold War mentality"—a formulation Beijing reserves for what it characterizes as US actions framing economic rivalry as security threat rather than legitimate competition.

The ministry explicitly invoked the Counter-Espionage Law and "other regulations" as the basis for potential retaliation. China possesses "the firm resolve and sufficient means to take necessary measures" against US espionage activities targeting Chinese companies, the spokesperson declared. China's foreign ministry separately characterized US intelligence actions as interfering in "normal economic competition," warning that such interference "severely damages the expectations of businesses worldwide."

For American companies with employees, assets, or operations in China, that language signals potential reframing of ordinary business activities—data collection for due diligence, market research, financial analysis—as espionage-related conduct justifying enforcement under a legal framework already deployed against foreign firms.

China's Counter-Espionage Law, first enacted in November 2014 and substantially revised in April 2023 with revisions taking effect July 1, 2023, is not a narrow instrument. The 2023 expansion removed definitional floors. Under the original law, exposure depended on whether a firm touched classified information. Under the revised law, the question is whether information relates to "national security and interests"—a category Chinese authorities can define broadly. Legal analysts at Crowell & Moring, De Brauw Blackstone Westbroek, and the Library of Congress all noted that ordinary commercial due diligence could theoretically fall within the revised law's scope.

The revised law expanded enforcement powers directly. Article 28 allows state security bodies to summon individuals for questioning; Article 8 requires all organizations and citizens to support counter-espionage efforts. Authorities may access electronic devices, personal data, documents, and financial information during investigation. When the revision passed in 2023, China's state security ministry broadcast enforcement actions against US-linked consultancy and due diligence firms nationally—demonstrating that the new powers would be used. Named firms affected included Mintz Group and Bain & Company.

The Counter-Espionage Law is not Beijing's only available instrument. Over the past eighteen months, China has constructed a layered retaliatory legal framework that, when fully deployed, could subject US companies to simultaneous enforcement actions across multiple regulatory regimes. Two State Council instruments enacted in spring 2026 are particularly significant. State Council Decree No. 834—the Regulations on the Security of Industrial and Supply Chains, effective March 31, 2026—established formal supply-chain risk authority. State Council Decree No. 835—the Regulations on Countering Improper Extraterritorial Jurisdiction by Foreign States, effective April 7, 2026—created a Malicious Entity List targeting foreign entities that "promote" or implement foreign sanctions affecting Chinese companies.

Both decrees complement Beijing's Anti-Foreign Sanctions Law, which China's Ministry of Commerce invoked in August 2026 to place six US entities on a Countermeasure List. As of August 7, 2026, that list had grown to cover 78 individuals, senior management at nine entities, and 89 organizations total. Linklaters and Jones Day have both published guidance warning multinational companies that a single corporate action—terminating a Chinese supplier to comply with US export controls—can now simultaneously trigger supply-chain investigations under Decree 834, counter-extraterritoriality measures under Decree 835, Anti-Foreign Sanctions Law designation, and potential Unreliable Entity List action. What previously required deliberate escalation by Beijing is now a multifront compliance exposure built into legal structure.

Ellis's core argument—that Chinese companies cannot be treated as genuinely private because the Communist Party can direct them at will—carries a structural consequence that diplomatic framing tends to underplay.