Bill Overholt has written a valuable piece in the Harvard University journal Prism putting US-China rivalry into historical context. It is a reminder of how important an understanding of historical context is enabling individuals and governments to make good decisions.
The original can be accessed here.
Or else the article can be downloaded as a PDF document here:
What a great story this is from the FT. It turns out that Lex Greensill, sleazebag Ozzie founder of recently collapsed Greensill Capital, former British Prime Minister ‘Brave’ Dave Cameron, and murderous Saudi tyrant-in-waiting Mohammed bin Salman went on a camping holiday together in the desert last year. It must have been tremendous fun.
More recently, Brave Dave, a highly-paid adviser (with a potential US$70 million of share options) of the delightful Lex Greensill, sent numerous text messages to the private number of British Chancellor Rishi Sunak urging him to extend special Covid loans to Greensill. Unfortunately, the phone reception in Oxfordshire is so poor that Dave has been unable to respond to journalists’ enquiries.
It is reassuring to see, in the wake of the Global Financial Crisis, that almost nothing has changed in the nexus between amoral financial services ‘professionals’ in the City of London and on Wall Street and Establishment politicians who fill their boots with the sector’s cash flows after leaving office. Greed is still good.
Also breaking since late last week is the story of Archegos Capital Management, founded by Bill Hwang, who was fined US$44m by US securities regulators in 2012 for trading on insider information about Chinese banks, but managed since then to borrow of the order of US$40 billion from global investment banks. Bill built an investment portfolio of around US$50 billion at its peak with as little as US$1 of equity for every US$8 of debt. He used derivative, total-return swap contracts as the basis for his portfolio, which meant no one could track the huge positions he was taking in the market (well done regulators — who are those mugs who said you’d learned your lesson?). Actual ownership of the stocks stayed with the prime brokerage units of the investment banks, which held them as collateral against the loans they extended to Bill.
What a great plan. The only, small oversight came with the recent sell-off of the kinds of growth stocks Bill liked to buy. When the investment banks asked Bill to put up more margin, it turned out he couldn’t or wouldn’t. Last Friday, the investment banks panicked and dumped an estimated US$20 billion of stock in a handful of firms into the market, with a predictable impact on prices. Credit Suisse (which was also a lead financier for Greensill and for the unfortunately named 2020 long-firm fraud Luckin Coffee) is headed for a hit of US$3-4bn, Nomura one of up to US$2bn.
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Robert Smith, Arash Massoudi, Cynthia O’Murchu and Jim Pickard in London. 29 March 2021
Lex Greensill had penetrated the British establishment, forging close links with the country’s highest-ranking civil servants and ministers and lobbying for lucrative government contracts.
Now the Australian financier had a new sovereign client in mind, where wealth and power were more concentrated and the right relationships could transform his business: Saudi Arabia.
Before Greensill Capital collapsed this month, one of Lex Greensill’s favourite anecdotes was a camping trip he said he had taken with David Cameron and Saudi Crown Prince Mohammed bin Salman. Accompanied by the former UK prime minister, who was now his paid adviser, Greensill visited the desert with Prince Mohammed, the kingdom’s de facto leader, according to three people who heard his account of the journey.
One of the people placed the trip during January or February 2020, shortly before the spread of coronavirus largely halted international travel. Flight records for Greensill Capital’s four private planes show a series of trips to Saudi Arabia in the first three months of last year.
A second person who heard Greensill’s account of the trip said the Australian financier explained he bonded under the night sky with the Saudi royal, commonly known as MBS, over the fact the two men had both studied law at university.
Greensill Capital declined to comment. The Saudi embassy in London declined to comment. The Financial Times has attempted to ask Cameron about the account of the desert camping trip several times, but the former prime minister has ignored the inquiries.
His role in the company’s downfall has come under growing scrutiny, after the FT revealed he lobbied former colleagues for greater access to emergency government Covid loan schemes.
Cameron, who once stood to make tens of millions of pounds from Greensill share options before the company’s collapse rendered them worthless, visited Saudi Arabia publicly in October 2019, attending the so-called “Davos in the Desert” summit in Riyadh.
The trip — a year after the murder of journalist Jamal Khashoggi by Saudi agents — was criticised at the time by Amnesty International, which said the former prime minister’s attendance would be “interpreted as showing support for the Saudi regime” despite its “appalling human rights record”.
Cameron, who charges at least £120,000 per hour for speaking engagements, frequently used Greensill’s corporate jets to travel around the world, according to several people familiar with the matter.
The FT has also seen a photograph of him aboard one of these plushly furnished aeroplanes. Flight records for one of Greensill’s aircraft show numerous trips to and from Newquay airport, which is around half an hour’s drive from Cameron’s holiday home in Cornwall.
Greensill’s fleet of aircraft, an unusual luxury even for the largest multinational companies, came in useful during another visit to Saudi Arabia. In August 2019, SoftBank chief executive Masayoshi Son and his top lieutenant Rajeev Misra had been holding meetings in the commercial centre of Jeddah when they were invited to visit Yasir al-Rumayyan in the capital Riyadh.
Rumayyan was head of the country’s Public Investment Fund, which is in turn the largest investor in SoftBank’s $100bn Vision Fund, which has backed valuable start-ups from Uber to DoorDash.
As the men looked to change flight plans, Greensill spoke up to offer them a ride on his private jet. Some of those present were amazed the unassuming Australian had his own plane.
But Greensill, then 42, had recently cemented his status as a billionaire thanks to SoftBank’s investment in his eponymous finance company. He explained he had not one, but multiple aircraft. “We need it for clients,” one attendee recalls him explaining. “We need an air force.”
Greensill’s engagement with Saudi Arabia was multi-faceted. Last June, senior Greensill executive John Luu spoke at the “UK-Saudi Virtual Fintech Week”, an event hosted by the UK’s Department of International Trade and the British embassy in Riyadh.
The event’s marketing material touted the UK’s “progressive regulators” and Saudi Arabia’s “young and tech-savvy population”. “We are a firm that not many people have probably heard of,” Luu said at the event. “And yet, at the same time, our reach is pretty broad.”
He went on to explain that Greensill Capital was not only “part of the family” of Saudi’s PIF due to the company’s backing from SoftBank, but also that the finance firm had “just penned an agreement to become joint-venture partners” with the sovereign wealth fund. “As part of that, we’re establishing offices in Riyadh,” he added.
PIF did not respond to a request for comment. Luu, whose LinkedIn profile described his role as “spearheading Greensill’s expansion into Saudi Arabia”, also said at the event that his company had contracts with “some of the largest companies in the Kingdom”, but declined to name any of them.
The one company that seemed to be the target of a multiyear charm offensive in the country was state-controlled oil company Saudi Aramco. Greensill frequently touted that his company was in line to win a lucrative contract to offer so-called supply-chain finance to Aramco, according to people familiar with the matter.
Also known as reverse factoring, Greensill’s signature financing technique involves paying a company’s suppliers upfront at a discount and is known for its ability to flatter corporate balance sheets. The finance company never actually ended up providing any supply-chain finance to the oil company, however. Aramco, which also counts Rumayyan as its chair, declined to comment.
Greensill was also involved in some even more speculative financing proposals in Saudi Arabia. During the 2019 trip to Jeddah, SoftBank executives were examining how they could help the desert kingdom modernise the holy city of Mecca, which draws millions of visitors each year during the Islamic pilgrimage known as the hajj.
Different companies in the Vision Fund could play a role: US construction start-up Katerra to build new structures, Hong Kong artificial intelligence specialist SenseTime to offer facial recognition, while India’s Oyo could help set up hotels for visiting pilgrims. And Greensill would package all this up into investment products to finance the project.
Son at this time believed the Australian financier was capable of funding increasingly grand schemes, according to people who know the SoftBank founder. He even frequently introduced Lex Greensill by a pithy nickname: “the money guy”.
“He was part of the overall solution for a smart city for Mecca,” said a person involved in the talks. “That’s why Lex was down there. He was doing the financing.” The grand vision, again, never came to fruition.
Additional reporting by Anjli Raval
Below is an excellent piece from The Atlantic about the recent US-China high-level meeting in Anchorage, which may come to be seen as the moment the US, and its allies, began to deal effectively with Xi Jinping’s regime.
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The original is here.
The U.S. and China Finally Get Real With Each Other
The exchange in Alaska may have seemed like a debacle, but it was actually a necessary step to a more stable relationship between the two countries.
MARCH 21, 2021
Senior fellow at the Brookings Institution
Thursday night’s very public dustup between United States and Chinese officials in Anchorage, Alaska, during the Biden administration’s first official meeting with China, may have seemed like a debacle, but the exchange was actually a necessary step to a more stable relationship between the two countries.
In his brief opening remarks before the press, Secretary of State Antony Blinken said that he and National Security Adviser Jake Sullivan would discuss “our deep concerns with actions by China, including in Xinjiang, Hong Kong, Taiwan, cyber attacks on the United States, and economic coercion toward our allies. Each of these actions threaten the rules-based order that maintains global stability. That’s why they’re not merely internal matters and why we feel an obligation to raise these issues here today.”
Blinken’s comments seemed to catch the Chinese off guard. The last Strategic & Economic Dialogue of the Obama administration, in 2016, began with a conciliatory message from then–Secretary of State John Kerry and resulted in a declaration identifying 120 different areas of cooperation.
In response to Blinken, China’s top diplomat, Yang Jiechi, said that because Blinken had “delivered some quite different opening remarks, mine will be slightly different as well.” He spoke for 16 minutes, blowing through the two-minute limit agreed upon in torturous pre-meeting negotiations over protocol. “Many people within the United States,” he said, “actually have little confidence in the democracy of the United States.” He went on to say that “China has made steady progress in human rights, and the fact is that there are many problems within the United States regarding human rights.” He also took aim at U.S. foreign policy: “I think the problem is that the United States has exercised long-arm jurisdiction and suppression and overstretched the national security through the use of force or financial hegemony, and this has created obstacles for normal trade activities, and the United States has also been persuading some countries to launch attacks on China.”
As the press began to leave, assuming that the opening remarks were over and to make way for the private discussions, Blinken and Sullivan ushered them back in and challenged Yang, telling him that “it’s never a good bet to bet against America.” Determined to have the last word, Yang and China’s foreign minister, Wang Yi, responded again. Yang began by saying, sarcastically, “Well, it was my bad. When I entered this room, I should have reminded the U.S. side of paying attention to its tone in our respective opening remarks, but I didn’t.”
The opening exchange did not appear to materially affect the rest of the meeting. A senior administration official told me that the moment the cameras left, the Chinese side went back to business as usual, working through the list of issues on the agenda, including nonproliferation and Iran. The official told me that the U.S. delegation believed Yang’s opening gambit had been preplanned and was not an off-the-cuff response. The Chinese delegation had come, the official said, with the intention of delivering a public message, which they did in dramatic fashion. China believes that the balance of power has shifted in its favor over the past 10 years, especially during the pandemic, and wanted to play to the audience at home.
For an astonished press, witnessing the exchange was like being present at the dawn of a new cold war and seemed to sum up just how bad the U.S.-China relationship had become. Writing in The New York Times, Ian Johnson warned, “These harsh exchanges will only contribute to the dangerous decay in relations between the world’s two most powerful countries. Both sides seem to be trapped by a need to look and sound tough.”
But this view misunderstands what is needed in U.S.-China diplomacy right now. The meeting would have been a failure if it had resulted in general declarations to cooperate while minimizing competition, a common U.S. strategy when China’s intentions were not as clear. Organizing the relationship around cooperation is theoretically desirable as an end goal but will be unattainable for the foreseeable future, given the unfolding reality of an assertive, repressive China and a defiant America.
Last year, as it anticipated a win for Joe Biden in the U.S. election and then during the transition, China signaled that it wanted to effectively reset the relationship regarding cooperation on climate change and the pandemic. The Biden team saw these overtures for what they were: a trap to get the U.S. to pull back from competing with China in exchange for cooperation that would never really materialize. Biden officials told me that any reset would have been rhetorical only; China would have continued to push forward on all other fronts, including its quest for technological supremacy, its economic coercion of Australia, and its pressure on Taiwan.
Had the Biden administration embraced China’s offer, any agreement would have collapsed beneath the weight of Beijing’s actual behavior, as well as opposition in Washington. Biden would have been forced to adjust course and take a more competitive approach anyway, under less favorable conditions, including nervous allies and an emboldened China.
By skipping this step in favor of a strategy of competitive engagement—meeting with China but seeing it through the lens of competition—the Biden team not only saved time, but it flushed Beijing’s true intentions out into the open for the world to see. In his remarks, contrasting “Chinese-style democracy,” as he called it, with “U.S.-style democracy,” Yang implicitly acknowledged that the U.S.-China relationship is, and will continue to be, defined by a competition between different government systems: authoritarianism and liberal democracy.
The Biden administration understands that a more assertive U.S. approach is jarring to many in the American foreign-policy establishment, which is accustomed to decades of cautious and cooperative engagement in high-level meetings. But friction is necessary, given China’s play for dominance over the past several years. “It is increasingly difficult to argue that we don’t know what China wants,” said the senior administration official, who asked for anonymity so as to speak freely about the meeting. “They are playing for keeps.”
Biden’s priority rightly seems to be creating a greater common cause with allies against China, especially on technology and economics. Sullivan refers to this approach as building a situation of strength, echoing the famous formulation by Truman’s secretary of state Dean Acheson, who made clear that strengthening the Western alliance was a necessary precondition for any talks with the Soviet Union. The U.S. has had considerable success with the Quad, the informal strategic alliance among the United States, Japan, Australia, and India, although the U.S. needs to be far more imaginative and ambitious in getting European nations on board with its efforts to compete with China.
The question after Anchorage is what role should bilateral diplomacy with Beijing play in America’s overall strategy to deal with China. Now that the dramatic public exchange has set a more honest approach for a competitive era, the two sides can progress to a much harder next phase.
The rules-based international order is over. Beijing and Moscow concluded long ago that a world in which China and Russia generally acquiesced to U.S. leadership, as they did in the 1990s and 2000s, was untenable, a Western trap designed, in part, to undermine authoritarianism. They were not entirely wrong about that—many Americans saw globalization and multilateralism as having the desirable side effect of encouraging political liberalization around the world.
The truth is that the United States does pose a threat to the Chinese Communist Party’s interests (although not necessarily those of the Chinese people), while the CCP surely poses a threat to liberal democracy and U.S. interests. Ultimately, Washington and Beijing will have to acknowledge this to each other. That will be difficult for the Biden administration, which is accustomed to assuming that American interests are not a threat to any other government, but broadly benefit all major world powers. It will be even harder for Beijing, which goes to great lengths to conceal its revisionism behind a shield of insincere platitudes.
Such an acknowledgment will allow a truly frank strategic conversation to occur about how these two countries’ systems will relate to each other as they compete. These systems are incompatible in many respects, but they are also intertwined in a myriad of ways. The goals of U.S.-China diplomacy should initially be modest, to avoid unintentional provocations and to facilitate transactional cooperation on shared interests. Eventually, if China’s behavior and the geopolitical conditions are favorable, the two sides could explore broader cooperation and even the possibility of a détente—a general thawing of tensions—but that is a long way off.
Historically, the most volatile periods of rivalry between major powers is in the early stages; think of the late 1940s and the 1950s in the Cold War. The red lines become apparent only through interactions in crises. The greatest risk is for either side to miscalculate the resolve or intentions of the other. By getting real in Anchorage, both sides have taken the important first step toward a more stable relationship by acknowledging the true nature of their relationship.
THOMAS WRIGHT is a contributing writer at The Atlantic, a senior fellow at the Brookings Institution, and the author of All Measures Short of War: The Contest for the 21st Century and the Future of American Power.
Five thousand arrested in Moscow. Is there no end to ugly news? As if Covid were not enough, every feckin’ dictator in the world is doing their worst.
We will see you in hell, Xi Jinping. And we will see you in hell, Vladimir Putin.
The pair of you will burn in my lifetime. Because the world is not what you think it is.
Some brave photographer in Moscow got another image for the ages:
He’s gone. They’re gone.
They played My Way as Trump boarded Air Force 1 for the last time. But it wasn’t really his way. It was the way of a long list of tedious, criminal, populist, anti-democratic, deeply selfish characters in history. I’m not sure what Trump added to the recipe beyond Twitter and his ridiculous hair.
So sense has returned. Along with its good friend democracy. However, thinking about appropriate songs-of-the-day, I’d say that democracy should be Back in Black, the appropriate, sombre, funereal colour for four years that brought the United States uncomfortably close to catastrophe.
If old Joe Biden can remember every day that Trump and his crew were really just a symptom of very real problems in America, we may be in for a better future. As someone deeply pro-American, I do hope so.
You cannot beat a great tale of spooks fighting a covert war and Foreign Policy has one. Kudos to the reporter. This is as good as anything about Sino-US relations that I have read in recent times. Here is the original piece, with graphics — as good an invitation to subscribe to the venerable FP as you will get. Parts 2 and 3 are pending in the next couple of days.
BY ZACH DORFMANDECEMBER 21, 2020, 6:00 AM
Around 2013, U.S. intelligence began noticing an alarming pattern: Undercover CIA personnel, flying into countries in Africa and Europe for sensitive work, were being rapidly and successfully identified by Chinese intelligence, according to three former U.S. officials. The surveillance by Chinese operatives began in some cases as soon as the CIA officers had cleared passport control. Sometimes, the surveillance was so overt that U.S. intelligence officials speculated that the Chinese wanted the U.S. side to know they had identified the CIA operatives, disrupting their missions; other times, however, it was much more subtle and only detected through U.S. spy agencies’ own sophisticated technical countersurveillance capabilities.
The CIA had been taking advantage of China’s own growing presence overseas to meet or recruit sources, according to one of these former officials. “We can’t get to them in Beijing, but can in Djibouti. Heat map Belt and Road”—China’s trillion-dollar infrastructure and influence initiative—“and you’d see our activity happening. It’s where the targets are.” The CIA recruits “Russians and Chinese hard in Africa,” said a former agency official. “And they know that.” China’s new aggressive moves to track U.S. operatives were likely a response to these U.S. efforts.
This series, based on interviews with over three dozen current and former U.S. intelligence and national security officials, tells the story of China’s assault on U.S. personal data over the last decade—and its consequences.
Part 2: Beijing Ransacked Data as U.S. Sources Went Dark in China
Coming Tuesday, Dec. 22
Part 3: As Trump’s Trade War Raged, Chinese Spy Agencies Enlisted Private Firms
Coming Wednesday, Dec. 23
At the CIA, these anomalies “alarmed chiefs of station and division leadership,” said the first former intelligence official. The Chinese “never should have known” who or where these undercover CIA personnel were. U.S. officials, lacking a smoking gun, puzzled over how China had managed to expose their spies. In a previous age, they might have begun a mole hunt, looking for a single traitor in a position to share this critical information with the other side, or perhaps scoured their records for a breach in a secret communications platform.
But instead, CIA officials believed the answer was likely data-driven—and related to a Chinese cyberespionage campaign devoted to stealing vast troves of sensitive personal private information, like travel and health data, as well as U.S. government personnel records. U.S. officials believed Chinese intelligence operatives had likely combed through and synthesized information from these massive, stolen caches to identify the undercover U.S. intelligence officials. It was very likely a “suave and professional utilization” of these datasets, said the same former intelligence official. This “was not random or generic,” this source said. “It’s a big-data problem.”
The battle over data—who controls it, who secures it, who can steal it, and how it can be used for economic and security objectives—is defining the global conflict between Washington and Beijing. Data has already critically shaped the course of Chinese politics, and it is altering the course of U.S. foreign policy and intelligence gathering around the globe. Just as China has sought to wield data as a sword and shield against the United States, America’s spy agencies have tried to penetrate Chinese data streams and to use their own big-data capabilities to try to pinpoint exactly what China knows about U.S. personnel and operations.
This series, based on extensive interviews with over three dozen current and former U.S. intelligence and national security officials, tells the story of that battle between the United States and China—a conflict in which many believe China possesses critical advantages, because of Beijing’s panopticon-like digital penetration of its own citizens and Chinese companies’ networks; its world-spanning cyberspying, which has included the successful theft of multiple huge U.S. datasets; and China’s ability to rapidly synthesize—and potentially weaponize—all this vast information from diverse sources.
China is “one of the leading collectors of bulk personal data around the globe, using both illegal and legal means,” William Evanina, the United States’ top counterintelligence official, told Foreign Policy. “Just through its cyberattacks alone, the PRC has vacuumed up the personal data of much of the American population, including data on our health, finances, travel and other sensitive information.”
This war over data has taken on particularly critical importance for the United States’—and China’s—spy agencies. In the intelligence world, “information is king, and the more information, the better,” said Steve Ryan, who served until 2016 as deputy director of the National Security Agency’s Threat Operations Center and is now the CEO of the cybersecurity service Trinity Cyber. In the U.S.-Soviet Cold War, intelligence largely came in piecemeal and partial form: an electronic intercept here, a report from a secret human source there. Today, the data-driven nature of everyday life creates vast clusters of information that can be snatched in a single move—and then potentially used by Beijing to fuel everything from targeting individual American intelligence officers to bolstering Chinese state-backed businesses.
Fundamentally, current and former U.S. officials say, China believes data provides security: It ensures regime stability in the face of internal and external threats to the Chinese Communist Party (CCP). It was a combination of those threats that created the impetus for China’s most aggressive counterintelligence campaign against the United States yet.
The CIA declined to comment for this story. The Chinese Embassy in Washington, D.C., did not respond to multiple requests for comment.
In 2010, a new decade was dawning, and Chinese officials were furious. The CIA, they had discovered, had systematically penetrated their government over the course of years, with U.S. assets embedded in the military, the CCP, the intelligence apparatus, and elsewhere. The anger radiated upward to “the highest levels of the Chinese government,” recalled a former senior counterintelligence executive.
Exploiting a flaw in the online system CIA operatives used to secretly communicate with their agents—a flaw first identified in Iran, which Tehran likely shared with Beijing—from 2010 to roughly 2012, Chinese intelligence officials ruthlessly uprooted the CIA’s human source network in China, imprisoning and killing dozens of people.
Within the CIA, China’s seething, retaliatory response wasn’t entirely surprising, said a former senior agency official. “We often had [a] conversation internally, on how U.S. policymakers would react to the degree of penetration CIA had of China”—that is, how angry U.S. officials would have been if they discovered, as the Chinese did, that a global adversary had so thoroughly infiltrated their ranks.
The anger in Beijing wasn’t just because of the penetration by the CIA but because of what it exposed about the degree of corruption in China. When the CIA recruits an asset, the further this asset rises within a county’s power structure, the better. During the Cold War it had been hard to guarantee the rise of the CIA’s Soviet agents; the very factors that made them vulnerable to recruitment—greed, ideology, blackmailable habits, and ego—often impeded their career prospects. And there was only so much that money could buy in the Soviet Union, especially with no sign of where it had come from.
But in the newly rich China of the 2000s, dirty money was flowing freely. The average income remained under 2,000 yuan a month (approximately $240 at contemporary exchange rates), but officials’ informal earnings vastly exceeded their formal salaries. An official who wasn’t participating in corruption was deemed a fool or a risk by his colleagues. Cash could buy anything, including careers, and the CIA had plenty of it.
At the time, CIA assets were often handsomely compensated. “In the 2000s, if you were a chief of station”—that is, the top spy in a foreign diplomatic facility—“for certain hard target services, you could make a million a year for working for us,” said a former agency official. (“Hard target services” generally refers to Chinese, Russia, Iranian, and North Korean intelligence agencies.)
Over the course of their investigation into the CIA’s China-based agent network, Chinese officials learned that the agency was secretly paying the “promotion fees” —in other words, the bribes—regularly required to rise up within the Chinese bureaucracy, according to four current and former officials. It was how the CIA got “disaffected people up in the ranks. But this was not done once, and wasn’t done just in the [Chinese military],” recalled a current Capitol Hill staffer. “Paying their bribes was an example of long-term thinking that was extraordinary for us,” said a former senior counterintelligence official. “Recruiting foreign military officers is nearly impossible. It was a way to exploit the corruption to our advantage.” At the time, “promotion fees” sometimes ran into the millions of dollars, according to a former senior CIA official: “It was quite amazing the level of corruption that was going on.” The compensation sometimes included paying tuition and board for children studying at expensive foreign universities, according to another CIA officer.
Chinese officials took notice. “They were forced to see their problems, and our mistakes helped them see what their problems were,” recalled a former CIA executive. “We helped bring to fruition what they theoretically were scared of,” said the Capitol Hill staffer. “We scared the shit out of them.” Corruption was increasingly seen as the chief threat to the regime at home; as then-Party Secretary Hu Jintao told the Party Congress in 2012, “If we fail to handle this issue well, it could … even cause the collapse of the party and the fall of the state,” he said. Even in China’s heavily controlled media environment, corruption scandals were breaking daily, tainting the image of the CCP among the Chinese people. Party corruption was becoming a public problem, acknowledged by the CCP leadership itself.
But privately, U.S. officials believe, Chinese leaders also feared the degree to which corruption had allowed the CIA to penetrate its inner circles. The CIA’s incredible recruiting successes “showed the institutional rot of the party,” said the former senior CIA official. “They ought to [have been] upset.” The leadership realized that unchecked corruption wasn’t just an existential threat for the party at home; it was also a major counterintelligence threat, providing a window for enemy intelligence services like the CIA to crawl through.
This was a global problem for the CCP. Corrupt officials, even if they hadn’t been recruited by the CIA while in office, also often sought refuge overseas—where they could then be tapped for information by enterprising spy services. In late 2012, party head Xi Jinping announced a new anti-corruption campaign that would lead to the prosecution of hundreds of thousands of Chinese officials. Thousands were subject to extreme coercive pressure, bordering on kidnapping, to return from living abroad. “The anti-corruption drive was about consolidating power—but also about how Americans could take advantage of [the corruption]. And that had to do with the bribe and promotion process,” said the former senior counterintelligence official.
The 2013 leaks from Edward Snowden, which revealed the NSA’s deep penetration of the telecommunications company Huawei’s China-based servers, also jarred Chinese officials, according to a former senior intelligence analyst. “Chinese officials were just beginning to learn how the internet and technology has been so thoroughly used against them, in ways they didn’t conceptualize until then,” the former analyst said. “At the intelligence level, it was driven by this fundamental [revelation] that, ‘This is what we’ve been missing: This internet system we didn’t create is being weaponized against us.’”
There were other ripple effects. By the late 2000s, U.S. intelligence officials had observed a notable professionalizing of the Ministry of State Security, China’s main civilian intelligence agency. Before Xi’s purges, petty corruption within the agency was ubiquitous, former U.S. intelligence officials say, with China’s spies sometimes funneling money from operations into their own “nest eggs”; Chinese government-affiliated hackers operating under the protection of the Ministry of State Security would also sometimes moonlight as cybercriminals, passing a cut of their work to their bosses at the intelligence agency.
Under Xi’s crackdown, these activities became increasingly untenable. But the discovery of the CIA networks in China helped supercharge this process, said current and former officials—and caused China to place a greater focus on external counterespionage work. “As they learned these things,” the Chinese realized they “needed to start defending themselves,” said the former CIA executive.
By about 2010, two former CIA officials recalled, the Chinese security services had instituted a sophisticated travel intelligence program, developing databases that tracked flights and passenger lists for espionage purposes. “We looked at it very carefully,” said the former senior CIA official. China’s spies “were actively using that for counterintelligence and offensive intelligence. The capability was there and was being utilized.” China had also stepped up its hacking efforts targeting biometric and passenger data from transit hubs, former intelligence officials say—including a successful hack by Chinese intelligence of biometric data from Bangkok’s international airport.
To be sure, China had stolen plenty of data before discovering how deeply infiltrated it was by U.S. intelligence agencies. However, the shake-up between 2010 and 2012 gave Beijing an impetus not only to go after bigger, riskier targets, but also to put together the infrastructure needed to process the purloined information. It was around this time, said a former senior NSA official, that Chinese intelligence agencies transitioned from merely being able to steal large datasets en masse to actually rapidly sifting through information from within them for use. U.S. officials also began to observe that intelligence facilities within China were being physically co-located near language and data processing centers, said this person.
For U.S. intelligence personnel, these new capabilities made China’s successful hack of the U.S. Office of Personnel Management (OPM) that much more chilling. During the OPM breach, Chinese hackers stole detailed, often highly sensitive personnel data from 21.5 million current and former U.S. officials, their spouses, and job applicants, including health, residency, employment, fingerprint, and financial data. In some cases, details from background investigations tied to the granting of security clearances—investigations that can delve deeply into individuals’ mental health records, their sexual histories and proclivities, and whether a person’s relatives abroad may be subject to government blackmail—were stolen as well. Though the United States did not disclose the breach until 2015, U.S. intelligence officials became aware of the initial OPM hack in 2012, said the former counterintelligence executive. (It’s not clear precisely when the compromise actually happened.)
When paired with travel details and other purloined data, information from the OPM breach likely provided Chinese intelligence potent clues about unusual behavior patterns, biographical information, or career milestones that marked individuals as likely U.S. spies, officials say. Now, these officials feared, China could search for when suspected U.S. spies were in certain locations—and potentially also meeting secretly with their Chinese sources. China “collects bulk personal data to help it track dissidents or other perceived enemies of China around the world,” Evanina, the top U.S. counterintelligence official, said.
Many felt the ground give way immediately. For some at the CIA, recalled Gail Helt, a former CIA China analyst, the reaction to the OPM breach was, “Oh my God, what is this going to mean for everybody who had ever traveled to China? But also what is it going to mean for people who we had formally recruited, people who might be suspected of talking to us, people who had family members there? And what will this mean for agency efforts to recruit people in the future? It was terrifying. Absolutely terrifying.” Many feared the aftershocks would be widespread. “The concern just wasn’t that [the OPM hack] would curtail info inside China,” said a former senior national security official. “The U.S. and China bump up against each other around the world. It opened up a global Pandora’s box of problems.”
Others were more resigned, if no less disturbed. “You operate under the assumption that good tradecraft”—and not the secrecy provided, in theory, by cover—“will protect your assets and operations,” said Duyane Norman, a former senior CIA official. “So OPM wasn’t some kind of eye-opener. It was confirmation of new threats we already knew existed.”
There were other bad omens. During this same period, U.S. officials concluded that Russian intelligence officials, likely exploiting a difference in payroll payments between real State Department employees and undercover CIA officers, had identified some of the CIA personnel working at the U.S. Embassy in Moscow. Officials thought that this insight may have come from data derived from the OPM hack, provided by the Chinese to their Russian counterparts. U.S. officials also wondered whether the OPM hack could be related to an uptick in attempted recruitments by Chinese intelligence of Chinese American translators working for U.S. intelligence agencies when they visited family in China. “We also thought they were trying to get Mandarin speakers to apply for jobs as translators” within the U.S. intelligence community, recalled the former senior counterintelligence official. U.S. officials believed that Chinese intelligence was giving their agents “instructions on how to pass a polygraph.”
But after the OPM breach, anomalies began to multiply. In 2012, senior U.S. spy hunters began to puzzle over some “head-scratchers”: In a few cases, spouses of U.S. officials whose sensitive work should have been difficult to discern were being approached by Chinese and Russian intelligence operatives abroad, according to the former counterintelligence executive. In one case, Chinese operatives tried to harass and entrap a U.S. official’s wife while she accompanied her children on a school field trip to China. “The MO is that, usually at the end of the trip, the lightbulb goes on [and the foreign intelligence service identifies potential persons of interest]. But these were from day one, from the airport onward,” the former official said.
Worries about what the Chinese now knew precipitated an intelligence community-wide damage assessment surrounding the OPM and other hacks, recalled Douglas Wise, a former senior CIA official who served deputy director of the Defense Intelligence Agency from 2014 to 2016. Some worried that China might have purposefully secretly altered data in individuals’ OPM files to later use as leverage in recruitment attempts. Officials also believed that the Chinese might sift through the OPM data to try and craft the most ideal profiles for Chinese intelligence assets seeking to infiltrate the U.S. government—since they now had granular knowledge of what the U.S. government looked for, and what it didn’t, while considering applicants for sensitive positions. U.S. intelligence agencies altered their screening procedures to anticipate new, more finely tuned Chinese attempts at human spying, Wise said.
The Chinese now had unprecedented insight into the workings of the U.S. system. The United States, meanwhile, was flying with one eye closed when dealing with China. With the CIA’s carefully built network of Chinese agents utterly destroyed, the debate over how to handle China would become increasingly contentious—even as China’s ambitions grew.
Editor’s Note: This is the first in a three-part series. The second part, to be published Dec. 22, covers how U.S. intelligence under Barack Obama struggled as Xi Jinping consolidated his power. The third part, to be published on Dec. 23, covers the Donald Trump era and the growing cooperation between Chinese intelligence and tech giants. Zach Dorfman is a senior staff writer on national security and cybersecurity for Aspen Digital, a program of the Aspen Institute, and a senior fellow at Carnegie Council for Ethics in International Affairs. Twitter: @zachsdorfman
Ezra Vogel, a remarkable East Asia scholar, author of the best biography of Deng Xiaoping, and all round generous, decent man, has passed away. Below is an obituary posted by his son. If you work on developing countries, the takeaway for me is the breadth of intellectual tools that Ezra Vogel applied during his life to produce outstanding scholarship. This was no one-trick pony.
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Ezra F. Vogel, 90, one of the country’s leading experts on East Asia through a career that spanned six decades, passed away in Cambridge, MA, December 20 due to complications from surgery.
Vogel studied an extraordinary range of substantive topics in multiple countries from the perspectives of various academic disciplines, retooling himself as a scholar many times over in his academic career. He was originally trained as a sociologist studying the family in the United States. He devoted two years to language study and field research in Japan in 1958-60, emerging as a specialist on Japanese society. He then embarked on Chinese-language study in the 1960s, before it was possible to travel to mainland China, and became an accomplished scholar of Chinese society as well. His scholarship spanned from family issues, to social welfare, industrial policy, international relations, and history. He served as the National Intelligence Officer for East Asia with the National Intelligence Council from 1993 to 1995, and maintained a strong interest in U.S. foreign and security policy in Asia from that time. He turned to history in his later years, producing magisterial works on Deng Xiaoping and Sino-Japanese relations.
Vogel’s scholarship was not restricted to any single methodology, but rather reflected his drive to get the story right through whatever means necessary. For his research on the Japanese family, he engaged in intensive ethnographic research with his first wife, Suzanne Hall Vogel, interviewing six families about once a week for a year. He kept up with some of the families over the years, and the family friendships now span three generations. For his first book on China, he relied primarily on interviews in Hong Kong with refugees who had escaped from the Guangzhou region. He was a passionate life-long student of language, and he mastered both Japanese and Chinese. He took pride in his ability to conduct research and give public lectures in both languages.
Vogel will be most remembered for his boundless good cheer and boyish enthusiasm. He grew up in the small town of Delaware, Ohio, the son of Jewish immigrants, Joe and Edith Vogel. His father ran a men’s and boys’ clothing store in the center of town, the People’s Store, and he often helped out. He managed to transfer the effusive friendliness of a small-town shoe salesman to the unlikely corridors of Harvard University and Washington D.C. He had an irrepressible ability to see the good in every person and every nation, while recognizing nonetheless that many of us fall short of our ideals. He sustained a network of Japanese graduate students and young scholars at Harvard, the “juku” (study group), which met regularly at his home in Cambridge until the Coronovirus pandemic intervened. He hosted smaller groups of students working on China as well. He participated in a reunion of former students, colleagues, and “juku” members almost every summer in Tokyo.
Vogel was a devoted husband and father, who hosted a celebration for his extended family at his home every holiday season for the past 25 years. The 2020 reunion was to be via Zoom on the day he passed away. He loved keeping up with friends, family and colleagues. Undeterred by COVID-19, he raved about his ability to talk to family and colleagues in Japan, China, and other parts of the world with Zoom. He and his wife Charlotte were supportive companions. Among other activities, they enjoyed running daily for twenty years. When his knees began to falter, they turned to biking for the last twenty years. He even biked four miles one day shortly before he died. He maintained long-term friendships, regularly going back for high school and college reunions in his hometown. He made a major gift to his hometown alma mater, Ohio Wesleyan, of the entire royalties from the mainland Chinese edition of his biography of Deng Xiaoping.
Vogel was the Henry Ford II Professor of the Social Sciences Emeritus at Harvard. After graduating from Ohio Wesleyan in 1950 and serving two years in the U.S. Army, he studied sociology in the Department of Social Relations at Harvard, receiving his Ph.D. in 1958. In 1960-1961 he was assistant professor at Yale University and from 1961-1964 a post-doctoral fellow at Harvard, studying Chinese language and history. He remained at Harvard, becoming a lecturer in 1964 and a professor in 1967. He retired from teaching in 2000.
Vogel was also an institution builder at Harvard. He succeeded John Fairbank to become the second Director (1972-1977) of Harvard’s East Asian Research Center and Chairman of the Council for East Asian Studies (1977-1980). He co-founded the Program on U.S.-Japan Relations at the Center for International Affairs and served as its first Director (1980-1987) and as Honorary Director ever since. He was Chairman of the undergraduate concentration in East Asian Studies from its inception in 1972 until 1991. He was Director of the Fairbank Center (1995-1999) and the first Director of the Asia Center (1997-1999). He was Chairman of the Harvard Committee to Welcome President Jiang Zemin (1998). He also served as Co-Director of the Asia Foundation Task Force on East Asian Policy Recommendations for the New Administration (2001).
Drawing on his original field work in Japan, he wrote Japan’s New Middle Class (1963). A book based on several years of interviewing and reading materials from China, Canton Under Communism (1969), won the Harvard University Press faculty book of the year award. The Japanese edition of his book Japan as Number One: Lessons for America (1979) was a breakaway best-seller in Japan. In Comeback (1988), he suggested things America might do to respond to the Japanese challenge. He spent eight months in 1987, at the invitation of the Guangdong Provincial Government, studying the economic and social progress of the province since it took the lead in pioneering economic reform in 1978. The results are reported in One Step Ahead in China: Guangdong Under Reform (1989). His Reischauer Lectures were published as The Four Little Dragons: The Spread of Industrialization in East Asia (1991). He visited East Asia every year after 1958 and spent a total of over six years in the region. He returned from his most recent trip to China in January, just as word was first coming out about the COVID-19 pandemic.
At the age of 81, Vogel published the definitive biography of Deng Xiaoping, Deng Xiaoping and the Transformation of China (2011). The book won: the 2012 Lionel Gelber Prize, Lionel Gelber Foundation, Munk School of Global Affairs at the University of Toronto; Honorable Mention 2012 for the Bernard Schwartz Book Award, Asia Society; Finalist 2011 for the National Book Critics Circle Award for Biography; a Bloomberg News Favorite Book of 2014; and Esquire China Book of the Year 2012; a Gates Notes Top Read of 2012; an Economist Best Book of 2011; a Financial Times Best Book of 2011; a New York Times Book Review Editor’s Choice 2011; a Wall Street Journal Book of the Year 2011, and a Washington Post Best Book of 2011. The book became a bestseller in China.
At the age of 89, he published China and Japan: Facing History (2019), which reviews the history of political and cultural ties between the two nations over 1500 years. Vogel hoped that the book would offer an accurate portrayal of how the two countries learned from each other over the centuries, but also serve to encourage the Chinese and Japanese leaders to forge a more constructive relationship going forward. Vogel was also concerned about the state of U.S.-China relations.
Vogel received honorary degrees from Kwansei Gakuin (Japan), the Monterrey Institute, the Universities of Maryland, Massachusetts (Lowell), Wittenberg, Bowling Green, Albion, Ohio Wesleyan, Chinese University (Hong Kong) and Yamaguchi University (Japan). He received the Japan Foundation Prize in 1996 and the Japan Society Prize in 1998.
Vogel is survived by his wife of 41 years, Charlotte Ikels; son David Vogel of Cambridge, MA; son Steven Vogel of Berkeley, CA; daughter Eve Vogel of Amherst, MA; sister Fay Bussgang of Dedham, MA; and five grandchildren.
Resource links
Scholar profile here.
Harvard Fairbank Center profile here.
Wikipedia page here.
Amazon book page here.
YouTube videos here.
New York Times interviews here.
The curiosity for me is that with all Trump’s antics, in recent days, and ongoing, and indeed in the context of the death of George Perry Floyd Jr. six months ago, no one that I have seen in the media has mentioned Joseph McCarthy, US Senator for George Floyd’s state from 1947-57.
I remember the subject of McCarthyism coming up in a conversation with a clever American when I was in China and him saying: ‘Yeah, that was our Cultural Revolution.’ Well, America may just have avoided another Cultural Revolution. So here’s something uplifting from the estimable Chuck D.
Followed by Obama springing a Presidential Medal with Distinction on Joseph Biden. Biden couldn’t stop crying…
The last 24 hours have taken about two years off my life. A long walk this morning trying to understand how, after four years of watching Trump, more people would vote for him than in 2016. Piketty was a name that came to mind as I ruminated.
In the end, it seems that, like the Blues Brothers, Joe Biden has charmed just about enough north-eastern white Boomer males to keep the tour on the road.
In the morning, if we are lucky, we will find that the proto-fascists are once again in the river.
Welcome to Tuesday 3 November 2020.