The Federal Reserve economists have been targets of the Chinese Communist Party (CCP) for years, a report (pdf) made available on July 26 by the Senate Committee on Homeland Security and Governmental Affairs indicates.
“China considers financial knowledge and economic capability to be a lynchpin to its military modernization efforts,” the report said.
The report revealed how the regime attracted American professionals throughout its decades of espionage. Certain identifying information of individuals had been removed, “At the request of the Federal Reserve Board, to avoid interfering with any ongoing investigations, and in keeping with the Committee’s practice,” the report said.
The CCP uses a number of tactics to target Federal Reserve officials, ranging from outright threats and coercion, to softer tactics, such as sponsorship. “The motivation, however, is the same: China obtaining access to sensitive economic and monetary policy information,” the report said.
The cases reported in the investigation show that the specific Federal Reserve officials the CCP targets are the ones who have access to the security data used by the Federal Reserve Open Market Committee (FOMC) who implements U.S. monetary policy, and oversees market operations.
The Soft Tactics
Individual A, for instance, is a senior official at the Federal Reserve Bank, with Class III FOMC information access eligibility.
In 2010, he was first lured with joining the recruitment plan of the Thousand Talents Program, a CCP program designed to attract distinguished Chinese experts abroad to facilitate the transfer of Western research and technology to China.
Individual A acknowledged that he joined the Thousand Talents Program in exchange for sponsorship by a Chinese university.
The connection won him visiting professorship at Chinese state-run academic institutions, a collaborative research agreement and employment contract for a professorship related with the People’s Bank of China (PBOC), and ties to a senior university administrator affiliated with the CCP’s Organization Department, a highly influential department within the CCP’s Central Committee that oversees nearly every senior position in the country and administers China’s talents programs, according to the report.
However, the CCP forcibly detained him on four occasions during a trip to China in 2019.
During the forced meetings, he was asked to sign non-disclosure documents about the meetings.
The Chinese officials threatened Individual A’s family, tapped his phones and computers, accused him of crimes against China, and demanded that he “say good things about China” while in the United States.
On two subsequent occasions, Chinese officials interrogated Individual A about his position with the Federal Reserve—as well as his views on the trade war and China’s economy.
The Chinese officials demanded that he cooperate with the regime and share sensitive, non-public economic data to which he has access as a Federal Reserve economist, and to advise CCP senior officials on sensitive economic issues, including trade tariffs and FOMC information.
Lack of Protection
The Federal Reserve reported the incident to the FBI and the Department of State after receiving Individual A’s account of what he experienced. The FBI then interviewed Individual A, the report said.
Following the notification and interview, neither the FBI nor State Department advised the Federal Reserve regarding what to do to prevent and mitigate such incidents going forward. Without assistance, the Federal Reserve was not “sure what else could be done to protect [its] people,” said the report.
According to the report, on July 18, 2019, the Federal Reserve issued a general warning to all economists about travel to China.
Zhang Ting contributed to this report.