In risky hunt for secrets, US and China expand global spy operations

WASHINGTON – As China’s spy balloon drifted across the continental United States in February, American intelligence agencies learnt that Chinese President Xi Jinping had become enraged with senior Chinese military generals.

The spy agencies had been trying to understand what Mr Xi knew and what actions he would take as

the balloon, originally aimed at US military bases in Guam and Hawaii,

was blown off course.

Mr Xi was not opposed to risky spying operations against the United States, but US intelligence agencies concluded that the People’s Liberation Army had kept the Chinese President in the dark until the balloon was over the United States.

US officials would not discuss how spy agencies gleaned this information. But in details reported for the first time, they discovered that when Mr Xi learnt of the balloon’s trajectory and realised

it was derailing planned talks with US Secretary of State Antony Blinken,

he berated senior generals for failing to tell him that the balloon had gone astray, according to US officials briefed on the intelligence.

The episode threw a spotlight on the expanding and highly secretive spy-versus-spy contest between the US and China. The balloon crisis, a small part of a much larger Chinese espionage effort, reflects a brazen new aggressiveness by Beijing in gathering intelligence on the US, as well as Washington’s growing capabilities to collect its own information on China.

For Washington, the espionage efforts are a critical part of President Joe Biden’s strategy to constrain the military and technological rise of China, in line with his thinking that the country poses the greatest long-term challenge to American power.

For Beijing, the new tolerance for bold action among Chinese spy agencies is driven by Mr Xi, who has led his military to engage in aggressive moves along the nation’s borders and pushed his foreign intelligence agency to become more active in farther-flung locales.

The main efforts on both sides are aimed at answering the two most difficult questions: What are the intentions of leaders in the rival nation? And what military and technological capabilities do they command?

US officials, most of whom spoke on condition of anonymity to discuss espionage, have stressed in interviews throughout 2023 the magnitude of the challenge. The Central Intelligence Agency (CIA) is focusing on Mr Xi and, in particular, his intentions regarding Taiwan. The Federal Bureau of Investigation’s counter-intelligence task forces across the US have intensified their hunt for Chinese efforts to recruit spies inside the United States. US agents have identified a dozen penetrations by Chinese citizens of military bases on American soil in the past 12 months.

Both countries are racing to develop their artificial intelligence (AI) technology, which they believe is critical to maintaining a military and economic edge and will give their spy agencies new capabilities.

The spy conflict with China is even more expansive than the one that played out between the Americans and the Soviets during the Cold War, said FBI director Christopher Wray. China’s large population and economy enable it to build intelligence services that are bigger than those of the US.

“The fact is that compared to the PRC, we’re vastly outnumbered on the ground, but it’s on us to defend the American people here at home,” Mr Wray said in an interview, using the initials for the People’s Republic of China. “I view this as the challenge of our generation.”

China sees it differently. Mr Wang Wenbin, a Chinese Foreign Ministry spokesman, has said that “it is the US that is the No. 1 surveillance country and has the largest spy network in the world”.

‘Going after everything’

Espionage can halt a slide into war or smooth the path of delicate negotiations, but it can also speed nations toward armed conflict or cause diplomatic rifts.

China’s vastly improved satellite reconnaissance and its cyber-intrusions are its most important means of collecting intelligence, US officials say. The fleet of spy balloons, though far less sophisticated, has allowed China to exploit the unregulated zone of “near space”. And the US government is warning allies that China’s electronic surveillance capabilities could expand if the world’s nations use technology from Chinese communications companies.

AI is another battleground. The US government sees

its lead in AI as a way to help offset China’s strength in numbers.

Chinese officials hope the technology will help them to counter American military power, including by pinpointing US submarines and establishing domination of space, US officials say.

US officials are also more concerned than ever by Chinese agencies’ efforts to gather intelligence through personal contacts. They say China’s main intelligence agency, the Ministry of State Security, aims to place agents or recruit assets across the US government, as well as in technology companies and the defence industry.

Chinese agents use social media sites – LinkedIn, in particular – to lure potential recruits. Any time Americans take publicly disclosed intelligence jobs, they can expect a barrage of outreach from Chinese citizens on social media, according to current and former officials.

Responding to that threat, federal agencies have quietly opened or expanded their in-house spy-catching operations. Mr Wray added that the FBI has thousands of open Chinese intelligence investigations, and every one of its 56 field offices has active cases. All of those field offices have counter-intelligence and cyber task forces largely focused on the threat from Chinese intelligence.

Those investigations involve attempts by Chinese spies to recruit informants, steal information, hack into systems, and monitor and harass Chinese dissidents in the US, including using so-called police outposts.

“They’re going after everything,” Mr Wray said. “What makes the PRC intelligence apparatus so pernicious is the way it uses every means at its disposal against us all at once, blending cyber and human intelligence, corporate transactions and investments to achieve its strategic goals.”

But critics say some of the US government’s counter-intelligence efforts are racially biased and paranoid, amounting to a new Red Scare – a charge at least partly supported by the cases the Justice Department has had to drop and by its shutdown of the Trump-era China Initiative programme.

China has undertaken its own expansive counter-intelligence crusade, one that echoes Mao-era political campaigns. On July 1, it enacted a sweeping expansion of a counter-espionage law. And in August, the Ministry of State Security announced that “all members of society” should help fight foreign spying, and offered rewards for anyone providing information.

The rival governments have also established new listening posts and secret intelligence-sharing agreements with other governments. US and Chinese agents have intensified their operations against each other in pivotal cities, from Brussels to Abu Dhabi to Singapore, with each side looking to influence foreign officials and recruit well-placed assets.

The art of mind-reading

For US spy agencies, Mr Xi’s decisions and intentions are arguably the most valuable intelligence they seek, but he is also the most elusive of targets.

US agencies are probing exactly why China’s Defence Minister,

General Li Shangfu, appears to have been placed under investigation for corruption,

and why Mr Xi ousted then Foreign Minister Qin Gang. US diplomacy and policy depend on knowing the motivations behind these moves.

A decade ago, the United States’ network of informants in China was eliminated by Chinese counter-intelligence officials after the informants’ identities were uncovered. Since then, the CIA has faced a major challenge to rebuild its network. That is partly because China’s expanding webs of electronic surveillance have made it difficult for American case officers to move freely in China to meet contacts.

China even has AI software that can recognise faces and detect the gait of an American spy, meaning that traditional disguises are not enough to avoid detection, according to a former intelligence official. American operatives now must spend days rather than hours taking routes to spot any tailing Chinese agents before meeting a source or exchanging messages, former intelligence officials say.

And Mr Xi, like other authoritarian leaders, limits his use of phones and electronic communications, for the very purpose of making it difficult for foreign intelligence agencies to intercept his orders.

But officials in the vast bureaucracy under Mr Xi do use electronic devices, giving US agencies a chance to intercept information – what spies call signals intelligence – to give them some insight into the internal discussions of their Chinese counterparts.

In the balloon incident, the CIA began tracking the balloon in mid-January, when the Chinese army launched it from Hainan island, officials said.

US officials also determined that commanders on the Central Military Commission that Mr Xi chairs were unaware of this particular flight until it was tipping into crisis, and they vented their frustration at the generals overseeing the surveillance programme.

Since that crisis, China has paused the operations of its fleet of balloons, but US officials said they believe Beijing will probably restart the programme later.

Under Mr William Burns, director of the CIA since 2021, the agency has hired more China experts, increased spending on China-related efforts and created a new mission centre on China. And although US officials refuse to discuss details of the agency’s network of informants, Mr Burns said publicly in July that it had made progress on rebuilding a “strong human intelligence capability”.

Although it is unclear how robust the new network is, some US officials think Mr Xi’s extremely authoritarian governance style gives intelligence agencies an opening to recruit disaffected Chinese citizens, including from among the political and business elites who had benefited in previous decades from less party control and a less ideological leadership.

Some prominent Chinese figures, including “princelings” of Communist Party elite families, say in private conversations that they disagree with the turn China has taken.

China has also poured resources into determining the thinking of top American officials. A Justice Department indictment unsealed in July suggests Chinese business people tied to the government were trying to recruit Mr James Woolsey, a former CIA director who was in the running to be a Trump administration national security Cabinet official right after the 2016 election.

More recently, a sophisticated, highly targeted penetration of Microsoft’s cloud computing platform gave China access to the e-mails of senior State Department diplomats, including the US ambassador in Beijing and Commerce Secretary Gina Raimondo.

US officials travelling to China take elaborate countermeasures to avoid having government secrets pilfered. They are issued burner cellphones and laptops and told to leave their regular devices at home.

Mr Dennis Wilder, a former US intelligence analyst on China and a senior fellow at Georgetown University, said that discerning the intentions of US leaders is one of the very top priorities for Chinese intelligence agencies.

“They look for senior planning and intentions,” he said. “What is the secretary of state really thinking? What is he really doing? What are the operations the CIA is really running against you?”

Measuring military muscle

No issue in US-China relations has loomed larger than Taiwan. It is the flashpoint likeliest to lead to war, analysts say. Mr Xi has said

China must take control of Taiwan,

a de facto independent island, and has ordered his military to be capable of doing so by 2027. But so far, the US and its allies do not appear to have concrete intelligence on whether he would be willing to order an invasion.

And China obsesses over the flip side of the question. Mr Biden has declared four times that the US military will defend Taiwan should China try to seize the island. But whether he really means that – and whether US leaders plan to permanently keep Taiwan out of China’s reach – are believed to be focal points of some of China’s intelligence efforts.

In the absence of real intelligence on intentions, US and Chinese officials are focused on gathering information on each other’s military capabilities. For instance, the US has stepped up its aerial surveillance of Chinese military bases.

Meanwhile, Chinese intelligence agents have penetrated many parts of the Taiwanese government over the decades, former US intelligence officials say. Chinese agents are now trying to learn more about the Biden administration’s efforts to outfit Taiwan with certain weapons systems and provide secret training for Taiwanese troops. Chinese agents also seek more details on the growing military cooperation between the United States and Asian allies.

US intelligence officials believe that China does not want to go to war now over Taiwan, director of national intelligence Avril Haines told Congress in March.

“We assess that Beijing still believes it benefits most”, she said, “by preventing a spiralling of tensions and by preserving stability in its relationship with the United States”. NYTIMES