China tried to access US Federal Reserve data and even forcibly detained a Fed employee in Shanghai on four occasions, according to a report by Republican members of a Senate security panel.
The report, released Tuesday by Rob Portman, the ranking Republican on the Homeland Security Committee, claims that the US central bank is susceptible to infiltration and relies too much on collaboration with foreign economists and other experts. The Fed rejected its findings as “unfair, unsubstantiated, and unverified.”
The incidents cited in the document point to “a sustained effort by China, over more than a decade, to gain influence over the Federal Reserve, and a failure by the Federal Reserve to combat this threat effectively,” the report says. “China has made no secret of its goal to supplant the US as the global economic leader and end the US dollar’s status as the world’s primary reserve currency.”
The report detailed an incident in which a Fed employee was detained four times while on a visit to China, while agents threatened the employee’s family and bugged phones and computers.
The report relies on information provided by the US central bank dating back to a 2015 internal probe of 13 people at eight regional Fed banks whose patterns of “foreign travel, emails, details in curricula vitae and academic backgrounds” raised concern.
The committee report provided detailed case studies of five individuals and said that, despite their connections with Chinese officials and universities, the Fed found no instances where information had been shared in violation of policies.
Four of the five continue as Fed employees, according to the report.
“This investigation shows how China has used a variety of tactics to recruit US-based economists to provide China with knowledge and intellectual capital in exchange for monetary gain and other benefits,” the report said.
In a letter to Portman, Fed chair Jerome Powell said he had “strong concerns about assertions and implications in the report.”
Powell said the detailed background checks Fed staff undergo, and the technology used to prevent security breaches, would preclude such infiltration.
The US central bank’s Washington-based board of governors and 12 quasi-independent regional banks employ thousands of economists, including many from other countries, including China. That collaborative approach, the committee report agreed, enhances the Fed’s ability to understand the economy and make policy.
• George Russell, Reuters