The system China is using, called a thousand grains of sand, is nothing new. Other nations have used similar systems for centuries. What is unusual is the scale of the Chinese effort. The Chinese intelligence bureaucracy inside China is huge, with nearly 100,000 people working just to keep track of the many Chinese overseas, and what they could, or should, to trying to grab for the motherland.
Chinese intelligence officials try to have a talk with Chinese students and business people before they leave the country to study or do business, and after they come back. The people going to the West are asked to bring back anything that might help the motherland. Most of these people were not asked to actually act as spies, but simply to share, with Chinese government officials (who were not always identified as intelligence personnel) whatever information they obtained. Of course, it soon became open knowledge in China, and in American intelligence agencies, what was going on.
China has never been energetic at enforcing intellectual property laws. If a Chinese student came back with valuable technical information (obtained in a classroom, in a job, or simply while socializing), the data was often passed on to Chinese companies, or military organizations, that could use it. Since there were few individual Chinese bringing back a lot of data, or material (CDs full of technical data, or actual components or devices), it was difficult for the foreign counterintelligence agencies to catch Chinese spies. There were thousands of them, and most were simply going back to China with secrets in their heads. How do you stop that?
Some of the more ambitious of these spies have been caught red handed with actual objects. But most of the swarm moved back to China unhindered. Naturally, the Chinese pushed their system as far as they could. Why not? There was little risk. The Chinese offered large cash rewards for Chinese who could get particularly valuable stuff back to China. Chinese intelligence looked on these "purchases" as strictly commercial transactions. If the Chinese spies got caught, they were on their own. The Chinese involved knew the rules. If they were successful, they won favor with the government, or even made a pile of money, and the Chinese government was agreeable to whatever business deals these "patriotic" Chinese tried to put together back in China. This kind of clout is important in China, where a friend in the government is more valuable than in the United States. But more and more of these ambitious Chinese agents are increasingly getting caught because it is becoming known, to the Western business and academic community, what is going on.
Two Chinese diplomats, Chen Yonglin and Hao Fengjun, who are trying to obtain political asylum in Australia, have provided details of Chinas international espionage effort. Nothing surprising in what they described. The Chinese use three types of spies. They have a few hundred professional spies, the James Bond types, but use them sparingly. They have a much larger number of part timers, semi-professionals, actually. These are usually business people who are willing to obtain information or items that the government wants, and will do it legally, or otherwise. If the latter, they expect the payoff to be commensurate with the risk. Lastly, there are hundreds of thousands of Chinese citizens overseas who have been approached by the government and urged to try and bring back something useful. This group is not encouraged to do anything illegal, but is made to realize that the government will repay a favor (a valuable find) with a favor from the government. In China, with its corrupt bureaucracy, and communist officials still running the place, such favors can be more valuable than money.
The Chinese are feeling the heat, not that they are in any danger of being cut off from opportunities to steal foreign technology. But the Chinese system has reached its limits, and is being pushed back in some areas. It is thought that the Chinese are responding by trying to terrorize overseas Chinese, at least those with family back in China, by threatening to make life uncomfortable for family members back in the old country if overseas Chinese if they do not assist the spying, or any other Chinese government activities. The Chinese have been discreet with this. The last thing they want is a lot of stories of heavy handed pressure on overseas Chinese. This is particularly the case when the pressure is on overseas Chinese who are anti-communist or simply opposed to polices of the Chinese government. Now that the public know more about Chinese espionage, the Chinese will probably adapt to the new environment as best they can.