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Federal Reserve’s top officials have known China ties: Senate GOP report

President of China Xi Jinping. (Kremlin/Released)
July 29, 2022

People with known ties to the Chinese government still hold top positions in the U.S. Federal Reserve, according to a new report by Senate Republicans released this week.

This week, Sen. Rob Portman (R-OH) alleged that the Chinese government has been trying to recruit employees within the Federal Reserve system to spy for them. In a new report out Tuesday, Portman and other Republicans on the Senate Homeland Security and Governmental Affairs Committee, said multiple senior Federal Reserve employees still have jobs despite concerning ties to China.

The 48-page Republican minority report is based on findings from a 2015 Federal Reserve internal investigation. The 2015 investigation identified 13 people of interest identified as having connections with known Chinese talent recruiting programs.

The new report provides additional insights on apparently ongoing Chinese efforts to gain access to Federal Reserve information.

The report states a senior economist currently working at a Federal Reserve Bank (FRB) maintains ties to the People’s Bank of China (PBOC). The economist reportedly assisted PBOC with important economic modeling and held a short-term professorship at Wuhan University.

This same senior Federal Reserve economist, identified as Individual C, has also held various positions on Chinese conference organizing committees. The individual has also done speaking engagements with the PBOC and the National Bureau of Statistics of China.

“The Federal Reserve flagged Individual C because of his connections to another individual then under investigation,” the Senate report states. “An analysis of Individual C’s contacts and work patterns revealed a number of red flags, including that Individual C was ‘observed communicating with Chinese State Council affiliated research center [and] assisting Chinese Government news agencies with publications . . . .'”

Individual C allegedly communicated repeatedly with the official Chinese government press agency Xinhua and “did not include Federal Reserve public affairs officials in most of these communications.”

Another FRB employee, identified as Individual B, allegedly “provided modeling code to a non-FRB employee to assist with
academic research at Peking University’s National School of Development.” The report said Individual B also proposed a “longer-term relationship” between the Federal Reserve Bank he works at and PBOC.

The report said Individual B also has access to sensitive (Class II FOMC) FRB information.

Another FRB employee, referred to as Individual D, did not disclose any ties to the Chinese government “but documents suggest that Individual D has been a member of the Thousand Talents Program since at least 2017.”

The Thousand Talents Program is a Chinese government program to recruit people with science, technology and entrepreneurship skills from around the world to help China.

Individual D received emails from a Thousand Talents-related email account that referred to the Federal Reserve employee as a “Thousand Talents Plan Expert” and “high-level expert.”

The report described Chinese officials often using “softer tactics” to recruit Federal Reserve employees, but also found at least one instance of Chinese officials using direct threats and coercion to get sensitive Federal Reserve information.

In 2019, a senior FRB employee referred to as Individual A was visiting China with his family. Chinese agents forcibly detained him four separate times, threatened his family, tapped his phone and laptop and copied contact information of other FRB employees he knew.

Federal Reserve Chairman Jerome Powell has disputed the allegations raised in Portman’s report this week.

“We are deeply troubled by what we believe to be the report’s unfair, unsubstantiated, and unverified insinuations about particular individual staff members,” Powell said in response to the new allegations, CNN reported.

Powell insisted the Federal Reserve has “robust policies, protections, and controls in place to safeguard all confidential and sensitive information and to ensure the integrity of our workforce.”

“We are confident that Federal Reserve staff understand their obligations and are committed to maintaining both the confidentiality of sensitive information and the integrity of our workforce,” Powell added.

Powell also defended some level of interaction between Federal Reserve employees and foreign organizations, arguing that international collaboration serves the U.S. monetary policy mission by broadening the central banking entity’s understanding of economic issues.

“We encourage and support staff participation in multilateral organizations, and sponsor conferences together with other central banks,” Powell said.