China has targeted the Fed for more than a decade, the Senate report alleges

“This investigation makes clear that China’s nefarious efforts to influence and steal information are not limited to the fields of science and technology — U.S. economic and financial policy is also being targeted by the Chinese government,” Portman said in a statement. Is.”

“The Chinese government is using every tool at its disposal to infiltrate and steal valuable information,” he added. “We cannot allow American taxpayers to unwittingly continue to fund China’s military and economic rise, which is why our report makes strong recommendations to shore up and protect our Federal Reserve.”

In a letter to Portman, Fed Chair Jerome Powell said he was “deeply concerned about the claims and implications” of the report and insisted that “everything we do at the Federal Reserve is important to American households, businesses and and in service of our public mission to communities.”

“We are confident that Federal Reserve staff understand their responsibilities and are committed to maintaining both the confidentiality of sensitive information and the integrity of our workforce,” Powell wrote in a letter Monday. “Because we understand that some actors may aim to exploit any vulnerability, our processes, controls and technology are robust and regularly updated. We respectfully reject any suggestions to the contrary.”

The report comes as U.S. officials grapple with how to counter China’s efforts to become the world’s dominant economic and military superpower, while at the same time addressing climate change and global public health issues. Diplomatic relations should be maintained for cooperation in such fields.

Its release comes as the Fed plays a more important role in U.S. economic policymaking than any other government agency, trying to avoid recession in the world’s largest economy and rein in the worst inflation in four decades. is trying

A spokesman for the Chinese embassy in Washington did not immediately respond to a request for comment.

According to the report, the Fed’s own counterintelligence investigators found “dangerous” actions or connections by more than a dozen Fed system employees as part of an investigation that began in 2015. The employees had similar travel patterns and professional backgrounds, as well as close ties to Chinese government institutions or programs, including the Central Bank of China, and prominent members of China’s talent recruitment programs.

The report states that China uses a variety of tactics to target FED employees, “from mere threats and coercion to softer tactics, such as talent recruitment programs, professors at Chinese universities, speaking at conferences and research collaborations.” Paid travel to do.”

“However, the motivation remains the same: China is gaining access to sensitive economic and fiscal policy information,” the report said.

In one incident in 2019, Chinese authorities detained a Fed employee four separate times during a visit to Shanghai and threatened his family unless he provided them with economic information and support, according to the report. .

The employee’s phones were allegedly tapped, and Chinese authorities copied contact information for other Fed officials from the employee’s WeChat account. The employee notified the Feds, who contacted the FBI.

A senior Fed economist at a regional Fed bank, who also had close ties to members of the talent recruitment plan, spoke directly to China’s Xinhua News Agency – the US foreign agent and China’s main propaganda outlet. The arm states. The report said to share articles, offer help with press inquiries and invite officials to visit Washington and the city where their Fed bank was based.

According to the report, another senior economist at a regional Fed bank attempted to transfer large amounts of data to an external site on at least two occasions with access to highly sensitive information. In 2015, the employee also received an email from a Chinese government official seeking non-public insight into the views of three regional Fed presidents on interest rate hikes. The employee shared the views of his home bank president, a move that Fed officials said was “inappropriate and worrisome.”

In his letter to Portman, Powell said the Fed takes any alleged violation of its information security policies seriously and would be concerned about “any substantiated allegation of wrongdoing.”

“On the contrary, we are deeply troubled by the report’s unfair, unsubstantiated and unsubstantiated insinuations, particularly about individual staff members,” he added.

He also defended the Fed’s culture of collaborating with scholars from around the world “with the goal of deepening and broadening our understanding of important issues.”

Yet even after receiving recommendations from the FBI on how to investigate the aforementioned incidents and counter China’s campaign, the report states that the Fed “did not allow China until the committee began its investigation.” took no steps to update its policies to account for the threats posed by

The Fed has since improved its policies to prevent employees from accepting payments from certain restricted countries, including China, but the report says the policies are insufficient because they require employees to use their own resources in talent recruitment plans. No need to show membership.

Thus, some employees with known ties to such programs still retain access to sensitive information, according to the report.

The report says the Fed should develop comprehensive plans to protect U.S. intellectual property and classified information and enhance its relationship with law enforcement and the intelligence community.

“Timely and robust exchanges of information — including classified intelligence products — between law enforcement and intelligence agencies and the Federal Reserve are essential to ensure that threat information is accessible and actionable,” the report said. Act.”