China attempted to create "network of confidants" among Federal Reserve employees, according to the findings of a Senate report. The dictatorial regime offered high-paying jobs in exchange for Fed employees advancing the regulator's monetary policy intentions to the Chinese government.
A "sustained effort"
The text notes that there has been "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". China's programme ended in 2019.
However, it does not record whether the attempts by the regime were successful. It does not mention that the regime accessed sensitive information about central bank policy, but neither does it disprove it. However, the fact that the policy of bribery and espionage by China lasted for a decade suggests that, at least for a time, it may have paid off for the dictatorship.
Another conclusion is that the monetary policy regulator was unaware of attempts to learn about its decisions for a long time. Finally, a source outside the Federal Reserve warned it that there was an attempt by countries that were enemies of the United States to gain first-hand knowledge of the Fed's decisions. It was then that the institution launched an internal investigation.
A network of 13 Fed employees
One part of the investigation by the Senate Homeland Security Committee focuses on a Fed employee who had ties to a Chinese government-backed talent recruitment program. The employee attempted to lure a network of up to 13 researchers employed at 8 Fed member banks.
At times, the methods followed by the Asian dictatorship were more expeditious. For example, the report records the case of a Federal Reserve economist who traveled to Shanghai in 2019. The Chinese authorities demanded that he provide information on the economic decisions to be taken by the Trump Administration. They asked him about tariff policy, in a context of a trade war between the two economic powers. The Chinese government threatened him with imprisonment if he did not provide information, but the employee refused. Harassment by the regime was constant, as he was detained four times during the trip.
Criticism from Jerome Powell
However, the governor of the Federal Reserve, Jerome Powell, has rejected the main conclusions of the report. Thus, in a letter sent to Senator Rob Portman (R) of Ohio, Powell says: "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".
For its part, the Chinese government has rejected the contents of the report, without expressly denying it. Spokesman Liu Pengyu, in remarks reported by the Wall Street Journal, said, "The cooperation between China and the U.S. in economic, financial and other fields is open and aboveboard, which has played an important role in enhancing mutual understanding and mutual trust between the two countries".
According to an analysis by Peter Schweitzer for the Gatestone Institute, the Biden Administration has failed to put the interests of Americans ahead of its own in the country's relationship with China.