A number of the nation’s media outlets are highlighting Senator Portman’s new report from the Senate Homeland Security and Governmental Affairs Committee where he serves as Ranking Member. The report, titled China’s Threat to the Fed: Chinese Influence and Information Theft at U.S. Federal Reserve Banks, details 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 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.
Excerpts of the coverage can be found below.
“The U.S. Federal Reserve’s security policies aren’t tough enough to counter Chinese intelligence operatives’ efforts to steal the American central bank’s non-public economic information, according to a new Senate report produced by Ohio Sen. Rob Portman.”
“The report from Sen. Rob Portman of Ohio, the top GOP lawmaker on the Homeland Security committee, detailed what Senate investigators called ‘long-running and brazen actions by Chinese officials and certain Federal Reserve employees’ to replicate the playbook China has used to infiltrate the science and technology sectors. It involves recruiting industry experts to provide proprietary information or research in exchange for monetary benefits or other incentives, it said.”
“The investigation by Republican staff members of the Senate’s Committee on Homeland Security and Governmental Affairs found that Fed employees were offered contracts with Chinese talent-recruitment programs, which often include cash payments, and asked to provide information on the U.S. economy, interest-rate changes and policies, according to a report of the findings released Tuesday.”
“Since at least 2013, the report found, China has targeted the Federal Reserve System and sought to recruit U.S.-based economists to share information in exchange for money and other benefits. Thirteen Federal Reserve employees working across eight of the Fed’s 12 locations were identified as the “P-Network” by a Federal Reserve analysis that deemed them to be of potential concern, according to the report.”
“The report’s content relied heavily on information provided by the U.S. central bank itself, dating back to a 2015 internal probe of what came to be known as the “P-Network” – a group of 13 people at eight regional Fed banks whose patterns of “foreign travel, emails, details in curricula vitae, and academic backgrounds” raised concerns.”
“The report said that the incidents are part of a broader campaign by China to ‘target, influence, and undermine the US Federal Reserve’ since at least 2013. It took aim at Beijing for its ‘long-running and brazen actions’ that target ‘certain Federal Reserve employees.’”
“‘China’s targeting of Federal Reserve officials appears rarely aimed at fostering legitimate collaboration, business arrangements, or research exchanges,’ reads the report led by Sen. Rob Portman (R-Ohio). ‘Rather, China’s efforts seem aimed at malicious, undisclosed, and illegal transfers of information that seek to undermine the United States.’”
“The report, led by Sen. Rob Portman (R-OH), found that China preyed on employees who were open to collaborate academically, at times using threats to try and extract secret policy information from them. The report alleges that Chinese officials also used job offers at Chinese universities in a bid to obtain information.”
“The investigation also ‘found multiple U.S. Federal Reserve employees with close ties to the People’s Bank of China,’ while one Federal Reserve bank employee held a position in 2017 with the Chinese central bank, which was meant for ‘overseas, top performing talent with directly applicable, advanced modeling experience, and insight with China and U.S. economic monetary policy.’
“The congressional report outlines a few incidents concerning some of the 13 individuals, including one who received a request from someone linked to the Chinese government for confidential information about three regional Fed bank presidents’ views on interest rate increases.”
“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.”
“Federal Reserve officials told committee staff that they reported the incident to both the FBI and the Department of State after they were alerted to it by the employee, but ‘neither the FBI nor State Department advised the Federal Reserve regarding what to do to prevent and mitigate these incidents going forward.’”
“The report accused the Fed of failing to effectively counter the threat from China, saying it ‘lacks sufficient counter-intelligence expertise’ and was slow to respond to intelligence threats.”
“Portman said that he hoped the probe, which is based on the Fed’s own documents and corresponds with assessments made by the Federal Bureau of Investigation, ‘wakes the Fed up to the broad threat from China to our monetary policy.’”
“’As our investigation reveals, the Chinese government is using every tool at its disposal to infiltrate and steal valuable information,’ Portman said. ‘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.’”
“’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,’ Portman said in a statement. ‘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.’”
“The report’s recommendations include the Fed implementing a robust foreign contact, travel, financial support, conflict of interest and conflict of commitment reporting requirements for employees with access to confidential information. Moreover, the Fed should enhance its relationship with federal law enforcement agencies and members of the intelligence community so it could more effectively share information, according to the report.”
“The report recommended that Congress should swiftly enact the Safeguarding American Innovation Act (SAIA), which will ‘protect American taxpayer-funded economic and financial research and intellectual property from foreign threats.’ The Fed should also develop a comprehensive plan to combat transfers of U.S. intellectual property and research, given that China’s primary targets include U.S. financial institutions like the Fed, the report said.”