The report claims that since at least 2013, China has been targeting the Federal Reserve to get information in exchange for money and other benefits.


New Delhi: In what should trigger alarm bells in the North Block and South Block in New Delhi and the Reserve Bank of India (RBI), a recently released report by United States lawmakers says that China, for the last 10 years, has been infiltrating the Federal Reserve System, the central banking system of the US, to obtain crucial information by recruiting employees working with the organisation.
The 48-page report titled, “China’s threat to the Fed: Chinese influence and information theft at US federal reserve banks”, which is a result of the investigation carried out by Republican members on the Senate Homeland Security Committee, states that investigation done by the Fed, too, had identified several employees with connections to Chinese talent recruiters, as well as efforts to gain insight into monetary policy and access to internal data.
The report falls short of detailing what information the Chinese were able to collect in this years-long process, which also included physically detaining an employee of the Fed while he was in Shanghai.
The report claims that since at least 2013, China has been targeting the Federal Reserve System to elicit information in exchange for money and other benefits.
According to it, a Federal Reserve counterintelligence analysis identified 13 persons of interest as having connections with known Chinese talent recruitment plan members or “having similar patterns of activity the [Federal Reserve] analysts deemed” of potential concern. Federal Reserve investigators dubbed these individuals as the “P-Network”.
One of the members of the “P-Network” was detained four times on a 2019 trip to Shanghai, and his family was threatened, according to the report. The phones, computers and contact information of this employee were hacked during his trip to China, with Chinese officials collecting contact information of other Federal Reserve officials.
This report comes even as different agencies of Government of India are tackling instances of Chinese telecom giants indulging in money laundering to the amount of thousands of crores, much of which is being done through active connivance of government officials and accounting professionals.
US-based Anders Corr, the founder of Corr Analytics Inc. a consultancy and also the publisher of the Journal of Political Risk, told The Sunday Guardian that the report was relevant to people not just in the US, but also in other countries that were facing threats from China.
The Sunday Guardian reached out to China’s Foreign Ministry for a response on this development, but none was received till the time the story went to press. “The Senate report should be taken with the utmost seriousness by not only the US Federal Reserve System, but by all central banks, academic institutions, and scientific establishments. It describes in minute detail the tactics used by China’s spies to gain access to confidential information through the carrots and sticks that can corrupt the best of men and women in all nations. Given Beijing’s goal of global hegemony, we need tougher controls on Chinese nationals, and those who engage with Chinese nationals for their own private benefit. Those who show weakness in the face of the CCP’s attempts to corrupt them, must be removed from leadership and staff positions in the most cherished institutions of our democracies,” said Corr.
Many of the observations of the US Senate committee is based on the analytical report that was prepared by the Federal Reserve’s counterintelligence analysis of the “P-Network” in 2020.
The Senate report further states that the Chinese officials attempted to coerce the Fed employee—under threat of imprisonment—to sign a letter that the individual would not discuss the interactions once he was back in the US. The Senate committee found multiple US Federal Reserve employees having close ties to the People’s Bank of China (PBOC), which is China’s central bank. One individual at a Federal Reserve Bank previously held a position with the PBOC for part of 2017 meant for those individuals who were “overseas, top performing talent with directly applicable, advanced modelling experience, and insight with China and US economic monetary policy”.
The investigation found that multiple Federal Reserve employees were maintaining close ties with Chinese academic organisations that were affiliated to China’s Thousand Talents Program, such as Shanghai Advanced Institute of Finance at Shanghai Jiao Tong University, Tsinghua University, Wuhan University, and Fanhai International School of Finance at Fudan University. One Federal Reserve Bank employee even acknowledged that he applied to the Thousand Talents Program in exchange for sponsorship by one of the universities.
Similarly, an employee at Federal Reserve Bank directly interacted with officials at China’s Xinhua News Agency—an “arm of Chinese Government with propaganda and intelligence collection functions—to share articles, offer assistance with press questions, and invite officials to visit Washington, D.C., and the city in which his home Bank is located”.
This individual also had connections with Chinese talent recruitment programs and had extensive and unusual travel patterns in China. The report states that one Federal Reserve Bank employee, with sensitive access to Federal Reserve Board data, provided modelling code to a Chinese university with ties to PBOC.
Another Federal Reserve Bank employee attempted to transfer large volumes of data from the Federal Reserve to an external site in at least two separate instances. The individual had continuous contacts with Chinese nationals and universities associated with talent recruitment programs as well as access to sensitive datasets “considered of high value to an adversary” and had previously received a request from an individual with ties to the Chinese government for non-public information on three Federal Reserve Bank presidents’ views on rate hikes.
Multiple Federal Reserve employees, the Senate investigation found, recommended Chinese contacts and known talent members for awards and academic positions. An individual at a Federal Reserve Bank nominated a dean at Peking University for a significant award, describing the dean as highly knowledgeable about the National Thousand Talents Program.
When the Senate committee confronted one of the said Fed employees about suspicious activity, he resorted to adversarial tradecraft—switching to different, unmonitored communications channels and changing email names.
The analysis of the internet browsing history of another Federal Reserve employee of a Federal Reserve Bank revealed that the employee had been searching for articles relating to individuals arrested for economic espionage and lying about providing Chinese intelligence agents with confidential information in exchange for financial compensation. The same employee used “xijinping” as a website password.
However, despite these actions by Chinese officials and Federal Reserve employees, the Senate investigation found that the Federal Reserve was unable to counter this threat effectively. “Compounding this was a lack of internal counterintelligence competency at the Federal Reserve or sufficient ongoing cooperation with Federal law enforcement and intelligence agencies. After the Committee initiated the investigation, the Federal Reserve implemented new policies prohibiting employees from accepting any compensation from a country of concern, including China. However, the Federal Reserve still has limited approval requirements for international collaborations or prohibitions on participating in a talent recruitment plan,” said the report.