China is trying to recruit U.S.-based economists to feed information back to Chinese officials and has even managed to place cooperating sources inside the Federal Reserve banking system, according to a Senate report released Tuesday.
One employee provided information on the Fed’s economic modeling to a Chinese university. Another, who had connections with China’s international recruitment network, tried to send large sets of data from the Fed to an external site, according to the report by Republicans on the Senate Homeland Security and Governmental Affairs Committee.
Yet another employee kept tabs on arrests of accused Chinese collaborators and used “xijinping” — the name of China’s president — as a website password.
Investigators said the Fed identified 13 people of “potential concern” in eight of the reserve’s 12 banks.
Sen. Rob Portman of Ohio, the top Republican on the committee, said the report follows an investigation that exposed China’s efforts to burrow operatives in the heart of America’s science and technology communities.
His investigators turned up one incident in which a Federal Reserve employee traveling to China was detained by Chinese officials on four occasions. The person’s family was threatened if the employee didn’t start leaking economic information.
“I am concerned by the threat to the Fed and hope our investigation, which is based on the Fed’s own documents and corresponds with assessments and recommendations made by the FBI, wakes the Fed up to the broad threat from China to our monetary policy,” the Ohio Republican said in announcing the report.
He said the Fed lacked the wherewithal to track and respond to China’s attempts.
Federal Reserve Chair Jerome Powell vehemently disputed the findings. He said the system has “robust” safeguards to protect its information and that employees are required to affirm they are following the rules.
“I assure you that everything we do at the Federal Reserve is in service to our public mission to American households, businesses and communities,” Mr. Powell wrote in a letter Monday to Mr. Portman.
He said the Fed shares modeling information and works with experts around the world. Still, he said, technology guards against unauthorized data releases.
Mr. Portman released the report amid rising tensions between the U.S. and China.
House Speaker Nancy Pelosi, California Democrat, is planning a visit to Taiwan, although the Biden administration says China is threatening retaliation if she makes the trip. U.S. officials believe China is building its military capability for an attempt to capture Taiwan.
The Chinese Foreign Ministry said this month that the communist country will take “resolute and strong measures” if Mrs. Pelosi visits the island.
Meanwhile, Mr. Portman and other U.S. officials are shining a spotlight on Chinese efforts to tunnel into America’s research industry.
The focus has chiefly been on China’s Confucius Institutes and its Thousand Talents Plan. The institutes were cultural education centers that American officials saw as propaganda machines. The talent program recruited American researchers to siphon information and technology to China, according to a 2019 investigation led by Mr. Portman and Sen. Thomas R. Carper, Delaware Democrat.
In the Senate report, Mr. Portman’s investigators say China’s interests run deep into America’s economy, too.
Most pointed was the attempt to pressure a senior bank official who was part of China’s Thousand Talents Plan. In 2019, the man was detained while traveling in China, where interrogators demanded he share secret Fed data.
The man told investigators that his handlers tried to get him drunk to pry more information from him.
Yet another Fed employee provided economic modeling code to Peking University.
The Federal Reserve flagged the employees’ behavior but concluded that it didn’t break policy.
A 2020 attempt by the FBI to suggest better practices for weeding out foreign influence fell on deaf ears, investigators said.
• Stephen Dinan can be reached at sdinan@washingtontimes.com.
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