CHINA WATCHChina Tried to Infiltrate Federal Reserve: Senate Report
Fed Chair Jerome Powell and a senior member of Congress are at odds over a report issued Tuesday by Senate Republicans alleging that China is trying to infiltrate the Federal Reserve and that the central bank has done too little to stop it. China’s goal, according to the report, is to “supplant the U.S. as the global economic leader and end the U.S. dollar’s status as the world’s primary reserve currency.”
Fed Chair Jerome Powell and a senior member of Congress are at odds over a report issued Tuesday by Senate Republicans alleging that China is trying to infiltrate the Federal Reserve and that the central bank has done too little to stop it.
The report by members of the Republican minority of the Senate Homeland Security and Governmental Affairs Committee alleges that China has used promises of lucrative teaching and research contracts to try to entice economists working at more than half of the system’s 12 Federal Reserve Banks to share nonpublic information about economic forecasts and monetary policy decisions with Chinese officials.
China’s goal, according to the report, is to “supplant the U.S. as the global economic leader and end the U.S. dollar’s status as the world’s primary reserve currency.”
In one case, the report alleges that a Fed economist was detained while traveling in China and threatened with arrest and retaliation against his family if he did not cooperate.
Variety of Contacts
While the report paints an alarming picture, many of the details provided about Fed officials’ contact with Chinese officials are not obviously nefarious. The central bank’s researchers and officials regularly correspond and meet with their counterparts around the world, often exchanging information when they do so.
However, some of the activity described is clearly suspicious, including one Fed employee who was found to be researching articles on the prosecution of economic espionage, and who used a modified version of the name of Chinese President Xi Jinping as one of his computer passwords.
The report lays out five “case studies” that go into detail about unnamed Fed officials’ contacts with China. The report notes that the Fed investigated the activities of the individuals involved to determine whether any information was provided to China in violation of Fed policy. In all five cases, the investigation “did not identify any policy violations.”
Nevertheless, the report alleges that the central bank has fallen short in responding to China’s alleged efforts at infiltration, saying that the Fed “lacks sufficient counterintelligence expertise and cooperation with U.S. law enforcement and the U.S. Intelligence Community.”
It also claims that the Fed’s policies and procedures are insufficient to counter the threat of Chinese infiltration, and criticizes the central bank for allowing employees to retain access to sensitive information after learning of their connections with Chinese organizations.
