China has carried out a sustained, decade-long economic espionage operation to infiltrate the U.S. Federal Reserve, according to a report released Tuesday by the Republican staff of the Senate Homeland Security and Governmental Affairs Committee.
Chinese operatives have employed both bribery and coercion to garner influence with employees of the Federal Reserve system in attempts to get them to provide sensitive information about the U.S. economy to the Chinese Communist Party (CCP), the report shows. At least 13 individuals across eight of the Fed’s 12 locations were identified as persons of interest in the report for having ties with Chinese government institutions and talent recruitment programs.
In one instance a Fed employee was detained no less than four times during a 2019 trip to Shanghai, and Chinese officials threatened his family to coerce him to give them sensitive macroeconomic data on the U.S. economy, according to the report. Chinese officials allegedly also tapped the employee’s computer, copied his coworkers’ contacts and forced him to sign a letter that he wouldn’t discuss their engagements at threat of imprisonment.
Another Fed employee reportedly shared sensitive financial modeling code with a Chinese university linked to the People’s Bank of China.
Much of the behavior of concern to the committee was related to connections between Fed employees and Chinese talent recruitment programs, where foreign academics, scientists, engineers, finance experts or others with valuable technical know-how are offered lucrative postings in China, The Wall Street Journal reported. Once in China, researchers are ultimately encouraged to share intellectual property and sensitive information with Chinese government-aligned entities, the WSJ added.
At least one Fed employee had applied for this type of program, while a number of others had close ties with Chinese universities known to be affiliated with such talent recruitment programs, the report found. (RELATED: China’s Wealthy Elite Are Fleeing The Country In Droves Thanks To CCP’s ‘Zero-COVID’ Policy)
The Fed’s counterintelligence capabilities at present are not sufficient to prevent China from gaining access to sensitive information, the report concluded.
“Despite these long-running and brazen actions by Chinese officials, the investigation found the Fed unable to counter this threat effectively,” the report asserted.
— Rob Portman (@senrobportman) July 26, 2022
But Federal Reserve Chair Jerome Powell pushed back against claims that Fed practices are insecure in a letter he sent to Republican Sen. Rob Portman of Ohio that the Federal Reserve shared with the Daily Caller News Foundation.
“‘We are confident that Federal Reserve staff understand their obligations and are committed to maintaining both the confidentiality of sensitive information and the integrity of our workforce. Because we understand that some actors aim to exploit any vulnerabilities, our processes, controls, and technology are robust and updated regularly. We respectfully reject any suggestions to the contrary,” Powell wrote.
Neither the Chinese Embassy, Senate Homeland Security and Governmental Affairs Committee, nor Portman immediately responded to the Daily Caller News Foundation’s request for comment. The Federal Reserve did not comment beyond providing Chairman Powell’s letter.
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