New Portman Report Details China’s Efforts to Target, Influence, and Undermine U.S. Federal Reserve Banks

WASHINGTON, DC – Today, U.S. Senator Rob Portman (R-OH), Ranking Member of the Senate Homeland Security and Governmental Affairs Committee, released a new report detailing China’s malign efforts to target, influence, and undermine the U.S. Federal Reserve. Based on a Federal Reserve counterintelligence analysis and unheeded FBI recommendations to change the Federal Reserve’s policies and procedures, this report finds the Federal Reserve has been the target of an extended and effective Chinese malign influence and information theft campaign. 

The report, titled China’s Threat to the Fed: Chinese Influence and Information Theft at U.S. Federal Reserve Banks, reveals that China has targeted the U.S. Federal Reserve System to undermine American economic and monetary policy since at least 2013. Portman, as then Chairman of the Permanent Subcommittee on Investigations documented in a 2019 bipartisan report how China utilizes talent recruitment programs, like the Thousand Talents Plan, to target science and technology sectors. This investigation of the U.S. Federal Reserve shows how China has used a variety of tactics to recruit U.S.-based economists to provide them with knowledge and intellectual capital in exchange for monetary gain and other benefits. 

“This investigation makes clear that China’s malign efforts at influence and information theft are not limited to science and technology fields — American economic and monetary policy is also being targeted by the Chinese government,” Portman said. “As our investigation reveals, the Chinese government is using every tool at its disposal to infiltrate and steal valuable information. We cannot let the American taxpayer continue to unwittingly fund China’s military and economic rise which is why our report makes strong recommendations to enhance and protect our Federal Reserve. This report shows that we cannot make any American taxpayer-funded investment in science, technology, or economic policy without including safeguarding and security protections like my Safeguarding American Innovation Act. 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 risk is clear, I urge the Fed to do more, working with the FBI, to counter this threat from one of our foremost foreign adversaries.”

Based on documents provided by the Federal Reserve, the report details five selected case studies that showcase previously undisclosed examples of the ways in which the Chinese Government has attempted to influence and gain access to sensitive internal information on U.S. monetary policy. 

For example: 

  • Individual Forcibly Detained in China. Chinese officials forcibly detained a Federal Reserve employee on four occasions, threatening his family and imprisonment if he did not assist them with economic information.
  • Ties to Chinese Universities Linked to Talent Programs. Multiple Federal Reserve employees maintain close ties to Chinese academic organizations known to be affiliated with China’s Thousand Talents Program.
  • Connections to Chinese Media Outlets. A Federal Reserve Bank employee directly interacted with officials at China’s Xinhua News Agency—an arm of the Chinese Government with propaganda and intelligence collection functions.
  • Attempts at Subterfuge and Tradecraft. When confronted about suspicious activity, at least one Federal Reserve employee resorted to adversarial tradecraft—switching to different, unmonitored communications channels and changing email names.

The report’s key findings include: 

  • For over a decade, China has engaged in a sustained malign influence and information theft campaign against the U.S. Federal Reserve System, taking advantage of America’s open and collaborative research practices. Efforts by Beijing include talent plan recruitment, offers of academic positions, and—in at least one instance—forcible detainment and threats of imprisonment of a Federal Reserve employee.
  • The Federal Reserve has been unable to counter China’s malign influence and collection campaign effectively. The investigation found that the Federal Reserve lacks sufficient counterintelligence expertise and cooperation with U.S. law enforcement and the U.S. Intelligence Community.  As a result, the Federal Reserve is unable to obtain timely and fulsome intelligence or identify intelligence threats quickly, hindering investigations into potential talent recruitment activities.
  • The Federal Reserve lacks policies and procedures sufficient to prevent many of these malign influences and collection attempts.  Similar to many other science and technology research ventures in the U.S. Government, the Federal Reserve appropriately relies on foreign collaboration to “share their thinking, compare analyses, and stay informed of developments around the world.” After the initiation of this investigation, the Federal Reserve took steps to address this by prohibiting officials from accepting compensation from restricted countries, including China. However, these new policies are insufficient because they do not require Federal Reserve employees to disclose membership in a talent recruitment plan.
  • Despite known ties to talent recruitment plans, Federal Reserve employees retain access to confidential information. The Federal Reserve maintains a program meant to protect its most sensitive nonpublic information, Federal Open Market Committee restricted controlled information.  Continued access requires that employees adhere to Federal Reserve ethics and other code of conduct policies. Despite known ties to talent plans or relationships with known members, the Committee found that certain Federal Reserve employees retain access to this confidential information.

The report makes the following recommendations: 

  • Congress should promptly enact the bipartisan Safeguarding American Innovation Act (SAIA). At present, America lacks the ability to counter foreign threats to American research and intellectual property. Some Federal Reserve employees receive external funding for research, such as through academic institutions or the National Science Foundation. Enactment of SAIA would help protect that American taxpayer-funded economic and financial research and intellectual property from foreign threats.
  • The Federal Reserve System should develop a comprehensive strategy to combat both illegal and extralegal transfers of U.S. intellectual property and research. This report shows that Chinese efforts at influence and collection are not confined to scientific research—U.S. financial institutions, including the Federal Reserve, are primary targets.
  • The Federal Reserve System should enhance its relationship with Federal law enforcement agencies and members of the intelligence community. The timely and robust sharing of information—including classified intelligence products—is needed between law enforcement and intelligence agencies and the Federal Reserve to ensure that threat information is accessible and actionable. 
  • The Federal Reserve must improve the protection of confidential information. The Federal Reserve System should implement robust foreign contact, travel, financial support, conflict of interest, and conflict of commitment reporting requirements for Federal Reserve employees with access to confidential information, such as Class I, II, and III Federal Open Market Committee Restricted Controlled information. This should include a compliance and auditing program with penalties for failures to disclose including potential termination or denial of continued access to confidential Federal Reserve information.
  • The Federal Reserve System should implement a “Know Your Collaborator” culture. The Federal Reserve should establish best practices in monitoring economic research collaboration with foreign nationals and determining whether such collaboration adheres to security requirements.