‘Unfair, Unsubstantiated, And Unverified’: Federal Reserve Dismisses Bombshell Claims Of Chinese Breaches
Jerome Powell, chairman of the US Federal Reserve, listens during a House Financial Services Committee hearing in Washington, D.C., U.S., on Thursday, June 23, 2022.
Eric Lee/Bloomberg via Getty Images

Federal Reserve Chair Jerome Powell responded to a report from Senate Republicans claiming that the central bank failed to combat a Chinese government information theft campaign by calling it “unfair, unsubstantiated, and unverified.”

The Federal Reserve, charged with executing a dual mandate of maximum employment and stable prices, is presently determining policy to navigate the United States economy through the highest inflation rates in four decades. Yet the report found that China, which holds nearly $1 trillion in Treasury securities, has used talent recruitment plans and promises of academic positions in an effort to glean classified information from central bank employees.

Powell disputed the findings in a Monday letter to Sen. Rob Portman (R-OH), the lawmaker who spearheaded the report. “We are deeply troubled by what we believe to be the report’s unfair, unsubstantiated, and unverified insinuations about particular individual staff members,” Powell wrote, per CNN.

The report detailed that various Federal Reserve officials — some of whom still have their jobs at the central bank — maintained close ties with Chinese officials and known links to the Thousand Talents Program, through which Western academics are drawn to China such that nationals can access their innovations for economic and military advancements. Powell, however, expressed confidence in the central bank’s officials and their ability to safeguard their work.

“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 continued. “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.”

The report also revealed that Chinese officials forcibly detained a Federal Reserve employee on four separate occasions during a trip to Shanghai in 2019. In addition to threatening the individual’s family, the Chinese officials claimed that the person had committed crimes against China and needed to “share sensitive, non-public economic data” with the nation’s government or else face imprisonment.

The report argued that the Federal Reserve “has been unable to counter China’s malign influence and collection campaign effectively,” revealing that employees with known ties to talent recruitment programs “retain access to confidential information.”

Powell nevertheless encouraged Federal Reserve officials to continue dealing with foreign counterparts. “We encourage and support staff participation in multilateral organizations, and sponsor conferences together with other central banks,” he wrote, adding that “information security considerations also shape this engagement.”

Recruitment plans like the Thousand Talents Program have created various high-level security breaches at American universities and corporations conducting classified, government-funded research.

Earlier this year, the Department of Justice announced that Xiaoqing Zheng — who worked at GE Power from 2008 to 2018 — was convicted of conspiring to “steal GE’s trade secrets surrounding GE’s steam and gas turbine technologies, knowing or intending to benefit the People’s Republic of China and one or more foreign instrumentalities, including China-based companies that research, develop, and manufacture parts for turbines.”

Last year, Harvard University chemistry and engineering professor Charles Lieber was indicted and convicted of making false statements to federal authorities about his participation in the Thousand Talents Program. Lieber had overseen nanotechnology research with more than $15 million in grants from the National Institutes of Health and the Department of Defense, yet earned $50,000 per month as a “Strategic Scientist” at the Wuhan Institute of Technology.

RELATED: Top Federal Reserve Officials With Known Links To China Still Have Their Jobs, Senat Republican Report Says

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