China has repeatedly targeted the Federal Reserve to undermine American economic and monetary policy since at least 2013, according to a report issued Tuesday from Sen. Rob Portman, R-Ohio.
The Fed has been the target of an extended and effective Chinese negative influence and information theft campaign, according to the report titled "China's Threat to the Fed: Chinese Influence and Information Theft at U.S. Federal Reserve Banks".
The 48-page report outlines examples in which the Chinese government has attempted to gain access to sensitive internal information and influence the Fed, including personnel recruitment, offers of academic positions and — in at least one instance — forcible detainment and threats of imprisonment of a Fed employee.
The report outlines a 2019 incident when Chinese officials "forcibly detained" a Fed employee on four separate occasions and threatened the individual's family unless the individual provided them with economic information and assistance, according to the report.
The report also found that multiple Fed employees have "close ties" to China's central bank — the People's Bank of China — and one employee "with sensitive access to Federal Reserve Board data provided modeling code to a Chinese university with ties to PBOC."
The investigation preceding the report found that the Fed "lacks sufficient counterintelligence expertise and cooperation with U.S. law enforcement and the U.S. intelligence community." As a result, the Fed is unable to obtain timely and sufficient intelligence or identify intelligence threats quickly, hindering investigations into potential personnel recruitment activities, the report said.
"As our investigation reveals, the Chinese government is using every tool at its disposal to infiltrate and steal valuable information," said Mr. Portman, ranking member of the Senate Homeland Security and Governmental Affairs Committee, in a news release. "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."
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.
In a letter sent Monday to Mr. Portman, Fed Chairman Jerome H. Powell pushed back on the assertions and implications reached in the report.
“I assure you that everything we do at the Federal Reserve is in service to our public mission to American households, businesses and communities,” Mr. Powell said. “We therefore have robust policies, protections and controls in place to safeguard all confidential and sensitive information and to ensure the integrity of our workforce.”
Mr. Powell added, “Because we understand that some actors aim to exploit any vulnerabilities, our processes, controls and technology are robust and updated regularly. We respectfully reject any suggestions to the contrary.”
