Deceiving the Sky: Inside Communist China’s Drive for Global Supremacy
(Bill Gertz, October 2, 2019)
Transcript available below
About the topic
The United States’ approach to China since the Communist regime in Beijing began the period of reform and opening in the 1980s was based on a promise that trade and engagement with China would result in a peaceful, democratic state. Forty years later the hope of producing a benign People’s Republic of China has evaporated. The Communist Party of China deceived the West into believing that its system and the Party-ruled People’s Liberation Army were peaceful and posed no threat. In fact, these misguided policies produced the emergence of a 21st century challenge that may be as dangerous to the United States and its allies as the Soviet Union was. How can it meet this challenge?
About the speaker
Bill Gertz is an award-winning national security journalist and author of seven books, including Breakdown: How America’s Intelligence Failures Led to September 11 and The China Threat: How the People’s Republic Targets America. He last spoke at the Westminster Institute on his 2017 book, iWar: War and Peace in the Information Age. He is currently senior editor of The Washington Free Beacon, an online news outlet, and national security columnist for The Washington Times.
Gertz has an international reputation. Vyachaslav Trubnikov, head of the Russian Foreign Intelligence Service, once called him a “tool of the CIA” after he wrote an article exposing Russian intelligence operations in the Balkans. A senior CIA official once threatened to have a cruise missile fired at his desk at The Washington Times after he wrote a column critical of the CIA’s analysis of China. China’s communist government also has criticized him for his news reports exposing China’s weapons and missile sales to rogues states.
Robert R. Reilly:
I needn’t tell you about Bill Gertz’s book because it’s almost disappeared. Bill will be available to sign some copies after his presentation. Now you all know that he’s an award-winning national security journalist and author of seven or now eight books?
Robert R. Reilly:
Eight books. This is number eight, including Breakdown: How America’s Intelligence Failures Led to September 11. Apropos of tonight, another book, The China Threat: How the People’s Republic Targets America. The last time Bill spoke at Westminster it was at the debut of another book of his, that one called i-War: War and Peace in the Information Age. I won’t include other information. You already received the invitation, but simply remind you of these two wonderful stories that Bill was called by a member of the Russian Foreign Intelligence service a quote, “took of the CIA,” which sounds even nastier today. However, a senior CIA official once threatened to have a cruise missile fired at his desk at The Washington Times after he wrote a column critical of the CIA’s analysis of China, so Bill has all the right enemies. His topic tonight is “Deceiving the Sky: Inside Communist China’s Drive for Global Supremacy.”
What I’m going to talk about tonight is the threat from China. I often start out by explaining how I kind of got into this China study business. It goes back to around 1999. I was writing a story on the Chinese military, the PLA, for The Washington Times. Back then the Pentagon was much more press friendly and they used to give you background briefings, so I went for a background briefing and at the end of the briefing, a colonel came in and said, “The General would like to see you,” somewhat ominous. Well the general turned out to be the Director of the DIA and he sat down at the end of the conference table and said, “Bill, China is not a threat,” and my first response was, “Well, why do you think that?” And he said, paraphrasing, because they said they’re not a threat.
So I realize that this level of deception – I kept hearing this phrase, China’s not a threat, China’s not a threat – it’s part of Chinese deception, and that’s a big part of understanding the threat from China is understanding their deception. Fast forward a couple years later, and Bob mentioned my book The China Threat, which was a play on the Chinese phrase ‘the China threat theory’. That’s where the diplomats and intelligence personnel are tasked to mind the China threat theory around the world to measure how opposition to Beijing’s advancement will hinder or promote it. So basically, in The China Threat I feel that there turned out to be a Chinese spy working for the DIA. His name was Ron Montaperto. He was convicted of lesser espionage charges, essentially passing Top Secret information to Chinese military attaches, and so I realized that there was a major problem in not just the U.S. government but significantly within the U.S. intelligence community. That’s kind of the opening to my book.
U.S. Policy Toward China
I’d like to touch on a little bit about U.S. policy. In the past it has been consolation and engagement. I like to describe it as a 40-year gamble by business, academic, and policy people that if we just trade with China, if we’re just nice to China, if we don’t treat China as an enemy, that this will have a moderating influence, and the market will have this miracle transformation and turn a nuclear-armed Communist dictatorship into a benign, normal power. Well, guess what? It was an utter failure. It didn’t work.
And Trump is one of the first presidents in forty years to really take a look at what is going on in the China threat and how did he come upon that? Well, very early when he was president-elect, he held a meeting at Trump Tower in early 2017 where he brought in all the top executives from Google and all these top titans of industry, and asked them what was on their mind. And basically all of them said the threat from China, they’re stealing our intellectual property, so Trump has done something which is fairly unique in that he more than any other president he has linked U.S. economic security more directly to U.S. national security, overall national security, and that has had an effect of impacting every facet of the U.S. government.
It’s truly a radical shift in policy, so the military now understands more about the China threat, the law enforcement community is cracking down on Chinese spying. I mean just earlier this week they arrested a Chinese espionage agent. He was a courier out in California and so we’re seeing a major crackdown on espionage. The intelligence community is still a challenge and I’ll get into that in a little bit.
Okay, so the outline of China was described as a challenge, a strategic competitor and the challenge from China, and that was kind of a compromise between the forces in government who want to continue the conciliatory policy towards China and others who say look, this is really a significant strategic problem for the United States. They didn’t call it an enemy or an adversary. The reason is simple. China over the past forty years has drawn the U.S. economically into its system in a very inextricable way, that we are totally wedded to their economy, and if we were to automatically declare them an enemy, it would be economically detrimental to us, but it’s a good first step in the sense that we can now begin to what I call decouple from China.
So here’s what the new strategy says. It said that Chinese are against American power, influence, and interests. They’re attempting to erode American security sand prosperity. They’re making economies around the world less free and less fair. They’re growing their militarily and they’re controlling information and data to repress their society and expand their influence. This then changed to the National Defense Strategy. First was the National Security Strategy, White House and then the Pentagon. That’s where they describe China as a strategic competitor, using predatory economics to intimidate its neighbors while militarizing features in the South China Sea, that’s the new flashpoint. China wants to shape the world consistent with their authoritarian model–gaining veto authority over other nations’ economic, diplomatic, and security decisions.
And here’s the payoff pitch: they have an all-of-nation, long-term strategy seeking Indo-Pacific regional hegemony in the near-term and displacement of the United States to achieve global preeminence. This is really significant because for forty years the intelligence community told us again that China wasn’t a threat and that their only ambitions were to create a military capable of taking over Taiwan. Now for the first time we understand that it’s not just a regional threat, it’s a global threat. They’re still fighting over this internally in government. As I said, if anyone has government experience, they know the strength of bureaucratic resistance to change, but I’m really optimistic that things are starting to change.
Vice President Mike Pence gave a speech in October. This was really a landmark speech. I don’t know why Trump didn’t give it. Trump began with a much greater strategic outlook on various things. He’s The Art of the Deal, he’s working to make a trade deal. So it fell to Pence to outline this strategic threat and I’ve been covering this issue as a journalist for many, many years, and I’ve never heard a more succinct, clear and defined explanation for what China was doing.
So here are some of the things that he talked about. China is using economic, diplomatic, military efforts to expand their influence in much more proactive ways, and Trump is seeking a new approach, he said. It’s based on fairness, reciprocity, and respect for sovereignty, so he’s saying look, we want to have a fair relationship, we want to do business with you, but we can’t do it the way it’s been done.
Since ’91, Pence said that the U.S. has been making trade concessions under the assumption that a free China would be inevitable. Well, guess what? It’s a hope unfulfilled. And then he mentioned one of the programs. That’s just one of them. It’s called Made in China 2025, and this is China’s blueprint for cornering world economic markets, to use its economic power as a means to expand its global dominance. It’s interesting that after the White House exposed this Made in China 2025 strategy, the Chinese propaganda outlet said oops, we tipped our hand, and they put out a directive: no more mention of Made in China 2025. And then he also said there was greater repression and expanding the military.
And then he talked about election meddling, which has been – I guess if you’re aware, it’s been a major subject in Washington for the last couple of years – and it was Pence’s assessment that China clearly wants a different American President. They are working to get rid of Trump, and again, this is not getting the kind of attention that the Russia meddling got. There’s almost no attention to it and I think that this is a testament to China’s influence and information power, that they can squelch this kind of discussion.
Pence then quoted from a leaked propaganda and censorship notice, which said how China was going to go about its information operations attacking the United States, “Strike accurately and carefully, splitting apart different domestic groups” in the U.S. Well, clearly that’s having a very big effect if you look at how divided we are. He then quoted a senior U.S. intelligence official who said, ‘Russian influence ops pale in comparison to what China is doing’.
I want to talk about Chinese ideology because I spend a lot of time in the book talking about this because it’s clear that this is one of the major deceptions used by China. It is to convince the world that they are not really Communist, and I encountered this probably about fifteen years ago. I was in New York for a debate with a group called Intelligence Squared and I was on the ‘China is a threat’ side and there was a Stapleton Roy, one of Kissinger’s proteges, was on the pro-China side, and there was a businessman. And afterwards, the businessman came up to me and said, “I’ve been doing business in China for twenty years and I’ve never met a communist,” and I literally laughed. And I told him, “Well, I think you should go visit the PLA Museum in Beijing,” which I was able to do, and inside the PLA Museum, you will see statues of Marx, Engels, Lenin, Stalin and other communist founders. China has not abandoned its communist ideology. It’s a myth to think that they have.
So their ideology is derived from Soviet Marxism-Leninism and it has a blend of some historical Chinese elements, as well as what they call ‘socialism with Chinese characteristics’. That’s a euphemism. It’s interesting to note that the current leader, Xi Jinping, who I’ll talk about a little bit more. He did his doctorate on scientific socialism., which is the euphemism for communism. And Xi Jinping has emerged as an unparalleled leader, the strongest Chinese leader since Mao Zedong, the founder, and he has put out what’s known as the ‘China Dream’, which I describe as a Communist Party of China nightmare, and this is their blueprint for China to become a global hegemon, the sole superpower, to dominate the world. And he equates this to Chinese history as if this is the inevitable end of history, that China will assume its rightful place as the dominant power in the world.
In reality, the PRC is a revolutionary communist state engaged in enemy politics towards the United States. This is a key feature of the Chinese system that is constantly overlooked: extensive use of lies and deception, and now we’re seeing the Hong Kong protests, which is a battle for democracy. I visited Hong Kong many, many years ago and I felt that this enclave, this former British colony, was a democratic dagger pointed at the heart of Beijing and it is, and it’s continuing to be that. These democratic protestors in Hong Kong are very serious people and they’re very seriously committed to promoting democracy in Hong Kong. And of course, the Chinese are trying to gradually squeeze Hong Kong and turn it into a Marxist-Leninist state.
This is a quote from Miles Yu, who is a Naval Academy professor of Chinese military history, and it’s worth reading. He says, “To sustain a communist system such as the PRC’s and to enhance internal unity under the CCP, Chinese supreme leaders after Mao Zedong, from Deng Xiaoping and Jiang Zemin to Hu Jintao and Xi Jinping, all diligently campaigned to create an image of the US government as the monstrous superpower determined to ‘contain’ China in each and every way. Chinese supreme leaders use this theory of a US-led capitalist conspiracy to destroy socialist China as the most potent justification for maintaining a draconian totalitarian social order and an increasingly technologically sophisticated, authoritarian and omnipotent national security state.” This sums up the Chinese ideology for sure.
And there he is. You can see what’s happening today. This a propaganda poster from Beijing within the last five years, and you can see that they’re venerating Xi as a new Mao. And I report in the book that for many years Mao’s residence in the leadership compound known as Zhongnanhai was a museum. Well, Xi Jinping has moved into that. He lives there now. Again, this has been unreported.
Since he came to power in 2012, I think the way to describe his rule has been purge. He has instituted under the ostensible guise of anti-corruption, he has instituted a purge that has gotten rid of thousands of mid-level officials and some of the most senior communist party leaders, anyone perceived as a potential threat, especially in the military, is immediately ousted, and this has created a very unstable situation. Of course, it’s hard to measure that, but clearly if you understand the system there, these top communist party leaders are kind of like mafia families like the Sopranos, and they have business interests and its money interests, and they’re all interconnected, and so that when one of these crime families is ousted in a purge, they’re out of luck, and they’re not happy about it, so you’re starting to see this growing instability. On the outside of course, you’re not able to see it.
He’s also expanded what is known as United Front Work. This is an old Soviet phrase. United Front Work department was liason with foreign Communist parties. Under Xi Jinping, this has become the key influence tool, so all of the influence operations and intelligence operations designed to influence foreign audiences are under this United Front Work department. And then again at the 19th Party Congress he fully assumed power. He put his thought in the Constitution. This is the first step to ultimate power is getting your particular brand of communism codified in the constitution, and he extended his term so he’s now party leader for life, and there’s a reason for that as well. After Mao died in ’76, there was a power struggle. Mao’s wife and a group called the Gang of Four were trying to take power and resume Mao’s insane, murderous policies. Deng Xiaoping took over and his changed ideology was it doesn’t matter if a cat is black or white as long as it catches mice, so he instituted a more pragmatic approach. Under Deng Xiaoping, the watch phrase in China was buy our time, build our capabilities, but under Xi Jinping, it is now the China Dream, the Belt and Road Initiative and China is on the March, and they’re using every means possible to do that.
This is an interesting set of pictures. This is an event that took place in 2012, which really I think was the first time we saw some of the instability. This is an armored vehicle coming from Chongqing to Chengdu, and what had happened was a regional party chief named Bo Xilai who had become kind of a neo-Maoist – he used to have big rallies where everybody would rave, have flags and everything. His top deputy was a guy named Wang LiJun, and he defected to the United States dressed up as a woman, snuck off to the U.S. Consulate in Chengdu, was able to sneak into the building, and he brought a tremendous number of secrets to the United States.
But guess what? He was turned back. Under Secretary of State Hillary Clinton, he was regarded as someone who had a bad human rights record because as police chief he was as brutal as other Chinese police chiefs. So a tremendous opportunity to get inside information, which again is a hard target in China, and Hillary Clinton wrote about it in her book. She said basically that they didn’t want to embarrass the Chinese by keeping a defector, so that shows you what a problem it was.
So what happened was he got in the embassy and Bo Xi Lai then sent Peoples Armed Police forces and they encircled the entire U.S. consulate in Chengdu, and there was a major standoff until a party official from Beijing came down and met with a party official from Chongqing and they worked it out, and because the United States wasn’t supporting the defector, he was turned over, and now he’s in prison or he’s probably dead.
Here is the architect of American engagement in China. That’s Henry Kissinger. And it’s an interesting thing, Kissinger developed what became known as the China card, and this was a strategic gambit to align with Beijing against Moscow. And you could argue it was effective for its time, but after the collapse of the Soviet Union in December of 1991, the policy was never reevaluated. The pro-China alignment with Beijing was kind of on autopilot and that led us to even greater problems.
Engagement with China
And now we’re coming up to this debate. This is the esteemed journal Foreign Affairs and they had a debate: did America get China wrong? The answer: yes. And so this was really one of the first times we were even seeing in academic circles that this unfettered engagement policy was a mistake.
I said it began with Kissinger, continued, accelerated during the Clinton administration. We granted WTO status even though it wasn’t a market economy. And I like to point out, perhaps the most serious disaster from the engagement policy took place during the ’90s when the Clinton administration decided that we were going to do nuclear cooperation with China. So our nuclear weapons laboratories, Los Alamos, sent scientists to China and China would send its scientists here. Well, in a very few years, the assessment of the CIA – this is a public assessment – was that China through espionage had obtained secrets on every single deployed warhead in the U.S. arsenal, including the W-88 warhead. So that’s pretty much a major catastrophe from our security standpoint. The FBI has never resolved the case. There was the case of Wen Ho Lee; the FBI botched the investigation. They never prosecuted him even though he was convicted for passing classified defense secrets.
But then it gets worse. The Chinese then proliferated warhead technology to Pakistan, which developed its own small warheads from missiles and has them today. Then the AQ-Khan nuclear supplier network proliferated that technology to North Korea, to Iran, to Syria, and to Libya. And we learned about this in 2003 when Libya gave up its nascent nuclear program and we found in the documents they turned over, which are now in Tennessee at one of the laboratories there. They were Chinese language documents on how to design a small warhead. So I mean when you think about the grand scheme of things, this is what engagement has brought us. We’re still dealing with nuclear threats, growing nuclear threats, from Iran and North Korea not to mention China itself.
So Trump initiated this shift after that Trump Tower meeting, and the trade war really is just an outward sign of the new policy, it’s couched in trade terms because that’s Trump’s expertise. I recently talked to a senior U.S. official who told me about the status of the trade negotiations. In May, the United States drafted with China a very detailed, 150-page agreement that was designed to really come to terms on the trade issues, and the document included dealing with things like cyber attacks, currency manipulation, the support for state industries, other unfair trade practices, and even China’s export of opioid fentanyl into the United States. And so here they had worked hard and long on this agreement, and then at the very last minute, the senior Communist Party officials said uh-uh, we’re not doing this deal because if we sign this agreement, it’s going to acknowledge we did all of these things, and so that’s where we are right now with the trade talks. I don’t think there’s going to be much of a trade agreement. There’s a big battle over trying to make concessions, trying to separate out some of those things that are in the agreement, and to try to fashion some deal that they could sign and declare that we’ve now resolved the trade issue.
I also should mention space cooperation. There was space launch cooperation with China, and that really was another disaster as a lot of U.S. companies helped fix the Chinese missiles which were blowing up on the launchpad. And in China, it’s not like here, NASA is a civilian organization. The Air Force does our nuclear missiles. Well in China, the PLA does everything, so by improperly and illegally providing the technology that helped to fix their civilian space launchers, we effectively helped them to figure out how to design effective long-range missiles, and we’re now seeing the results of that. We just saw it in the parade this week.
Chinese Intelligence “Storm”
I’m going to talk a little bit about what I call the Chinese Intelligence “Storm.” And this is a quote from Mark Kelton. Until 2015, he was head of CIA counterintelligence, and he described the Chinese counterintelligence storm as a “secret assault on America that is without parallel since that mounted by Moscow in the 1930s and 40s. Beijing’s ongoing intelligence campaign has garnered no more than episodic public attention, and then only when a spy is arrested or a high-profile cyber-attack detected.”
To put it bluntly, in the intelligence front, China is killing us. This was what I call the CIA’s disaster. Beginning around 2010 [during the] Obama Administration, China began arresting and recruiting CIA assets, and within a few years, at least 27 and as many as 30 recruited CIA agents were caught by the Ministry of State Security. They were imprisoned or executed. In one case, one of our recruited agents was brought out in a courtyard and publicly executed in front of all his comrades. They launched obviously a major counterintelligence investigation, FBI and CIA, and they couldn’t even determine for years how it happened. It was either traitors within the CIA or it was a breach in the secret communications system used to communicate with agents or a combination of both, which is even more alarming.
I’ll elaborate on that a little bit. In the grand scheme of the intelligence community, the CIA does a lot of things. It does technical work and it does analysis, shall or may, that kind of stuff. But their main mission is they are the HUMINT manager. In other words, they are in charge of recruiting people as spies around the world, and its been an unmitigated disaster because they lack good counterintelligence.
So here’s the list. We start with the Soviet Union and Russia with Aldrich Ames and Robert Hanssen. The CIA lost all of its agents in Russia. Move eastward in Eastern Europe, all of the agents there were doubled or compromised. Further east to Cuba, we lost all of our agents in Cuba. They were paraded before TV cameras in Cuba. Just recently, an Air Force counterintelligence officer, a woman, converted to Islam and defected to Iran, and disclosed the existence of at least forty CIA assets in Iran. And now we have China.
Is there any other place in the world where the CIA has had another disaster? We don’t know, but the question I have is who would spy for the United States? People are volunteering to help our country, they love our country, but how could you spy for this country when all of your agents are captured or killed?
Okay, so, here are a few of the headlines. These are some stories, the targeting of the Internet of Things, the recent arrests, influence operations, funding of think tanks in Washington. This is a landmark study that was put out by the White House.
China’s Economic Aggression
There was a big fight in the White House with the traditionalists saying ‘you can’t say economic aggression’. Well, they said economic aggression. Why? Because they did the statistics and they measured that every year the United States is losing between $250 billion and $600 billion in lost intellectual property and technology. No nation can survive with that kind of loss, especially when the economy is based on high technology and intellectual property, so we are seriously in big trouble if we don’t stop this and we are starting to stop that. And this was a report in June 2018 that outlined that.
Now I’ll go through some pictures. This is their electronic surveillance. They have created what I call in the book ‘high tech totalitarianism’. They have created a social credit system, which is similar to what you have as a financial credit score. And it’s such an issue now that people in Beijing are afraid to cross the street or jaywalk without being identified by facial recognition or gait recognition technology and losing social credit. When you lose social credit, you become a regime opponent, you can’t buy or rent rooms or houses, you can’t travel on air travel. It’s truly a very effective tool and it’s growing.
Back in the Clinton administration, we welcomed, we said oh, let’s give them all the internet technology, let’s get them wired up. Bill Clinton said the Chinese won’t be able to control the internet. He said trying to control the internet is like trying to nail jello to the wall. Well, they’re very close to nailing jello to the wall. I was in Beijing in June of 2018 with then-Defense Secretary Jim Mattis and you could really feel that this is an information desert. And it’s an information desert at a time when the entire world is exploding with information technology.
We’re using social media in a way that we never thought we would do. I think this is a real vulnerability for the Chinese, that they’re going to try to control this information and there’s going to be an explosion or a revolt against that control, but they’re doing it, they’re controlling it. This is some of their surveillance technology, facial recognition. This is the United Front Work Department, which I mentioned earlier. I wanted to show this is where our enemies are attacking us from. They put out these inserts that are appearing as part of their influence operations. Here is the headline here: “Book tells of Xi’s fun days in Iowa.” So they inserted this into The Des Moines Register in order to generate opposition to Trump’s reelection or just Trump generally from farm states, which may be having a problem with the tariffs.
This is an MPS, Ministry of Public Security, official who was arrested in Key West. I mention this because the traditional spies for China are the Ministry of State Security, and the Second Department of the General Staff, which probably has a new name under a new strategic support force, but this guy worked for the Ministry of Public Security, which is actually the national police and intelligence force, and that has become kind of an uber political police and security organization à la the KGB or the FSB in Russia.
This is MPS headquarters. This is a convicted spy. There have been three spy prosecutions under the Trump administration, the first time in probably twenty years that a spy for China has been arrested and successfully prosecuted. He is a former DIA officer. This is another convicted Chinese spy, CIA officer Kevin Mallory. And this is Jerry Chun Shing Lee. He was not convicted of compromising those twenty-seven or thirty agents, but the prosecutors clearly suggested in their case that this was one of the cause for those. When they searched his hotel room in Hawaii on his way back from Hong Kong, he was a CIA officer that was allowed to go back to Hong Kong where he was originally from, and there he was recruited by the MSS. And they found a notebook, and in the notebook were names and identities of clandestine, CIA-recruited agents, so he just plead guilty to spying and is probably going to spend a lot of time in prison.
MSS headquarters: this is their spy operations center. I threw this in because this is kind of interesting. This is called 4PLA, the fourth department, which is their electronic warfare and they operate out of a hotel in Beijing. It is kind of interesting. There are some PLA hackers.
Chinese cyber attacks is probably one of the most serious problems facing our country. As Mark Kelton told me, Sun Tzu’s maxim that secrets can only be obtained from men deserves a cyber corollary. In other words, it’s a combination of both, and China is doing both. They’re recruiting our intelligence people and they’re attacking us mercilessly through cyber [warfare]. It’s been a massive, twenty year program, and they’re going through everything. It’s not just government secrets, which they’ve done, it’s economic secrets in every way possible. And for years, the U.S. wouldn’t disclose it. They wouldn’t talk about it, so it was allowed to continue unstopped. Their cyber operations are their most secret program.
China’s leaders have promised to stop doing cyber economic espionage. Guess what? They lied. Obama sought to do norms, and there were no results. Trump is using tariffs, pressure, and indictments. And industry, again, they want a much more muscular response.
This is a special PLA hacker unit known as 61398, and they’re famous for doing a number of major cyber attacks.
Here we have Huawei Technologies. Now, I could spend a whole hour talking about Huawei, so I’m going to go through quickly, but Huawei is state-run telecommunications company masquerading as a private company. Their CFO was arrested in Canada on U.S. charges of illegal trade and communications with Iran. We basically have laws that say if your company does business with [Iran], you can be prosecuted. Well, they’re trying to prosecute her. The Chinese – as they have in the past – have kidnapped some Canadian citizens as kind of hostages to try to force her to be released. She’s the daughter of the founder of Huawei Technologies, but she’s the CFO. There’s Huawei’s building.
The PLA’s made cyber warfare a priority. They use civilian hackers. They’ve done massive attacks. They use what are known as digital sleeper agents. For example, the U.S. intelligence community has detected Chinese cyber attacks within our critical infrastructure, including the electrical grid, so that if there is a conflict or even a crisis with China, there are real fears that they could use that mapping of those networks to basically shut down our electric grids.
Now, think about it: we have sixteen critical infrastructures: transportation, finance, communications, water, and all these things. But when it comes down to it, there’s really only one critical infrastructure, and that’s the electrical grid. They have recognized that strategic vulnerability and they’re preparing to attack it in the future.
This is an indictment of Chinese hackers, again, the first part of the legal crackdown on Chinese cyber attacks.
I had so much information on cyber that I focused on one case and this is called Su Bing. He was a Canadian based PLA hacker masquerading as an aerospace businessman. He set up a team, and the FBI learned this through intercepting communication between the team and Beijing, where they boasted about how it cost about $345,000 to steal $3.7 billion in research from Boeing. They got into Boeing’s networks and they basically took the designs for the C-17. It’s a pretty amazing story. Not only did they take the design for the C-17, but they then built their own transport based on the C-17.
They also stole secrets from the F-22, specifically the bomb bay, which again is a high tech bomb bay that has to be radar-evading. And they also stole secrets from the F-35, which is our frontline fighter bomber. And there’s the J-20, which was built with U.S. technology.
There was an Anthem hack. I didn’t mention that, but 60 million health records – in the beginning, people were scratching their heads, ‘Why would China steal millions of healthcare records?’ Well, it’s part of their large scale intelligence operation to target people. If you can get information about medical records of people, you can use it recruit them. Then there was the OPM hack where they broke in and stole 22 million records of people who hold security clearances. This was a goldmine for them because not only would it help them with their HUMINT operations to find people who are vulnerable or are even their neighbors who provided testimony to security investigators or say network administrators. If you wanted to get into a specific network, you’d have detailed information on that person, and you could spy on him and do other things, and find out, and get those credentials to break into those networks.
This week we had the big parade and the big reveal was this, a DF-17, a Hypersonic missile. It can defeat all of our missile defenses, the ground-based interceptors in Alaska and California, our THAAD ground-based system which is very effective regional system, and the Navy’s missiles. We have no defense against it and they just unveiled it. I’ve been writing about this. I wrote about the very first flight test of this hypersonic missile. What it is is a glider. It’s put on top of a ballistic missile and it’s fired just below the space and the atmosphere. And it releases this hypersonic missile, which travels at about seven thousand miles per hour. And the thing that’s unique about it is it can maneuver, and that’s a huge physics problem; to be able to go that fast and to be able to maneuver. And what that means is you can’t detect it, and if you can’t detect it, you can’t shoot it down.
This was another one that was rolled out yesterday in the parade. It’s a DF-41 multi-warhead missile, the multiple launch satellite technology that was compromised under the Clinton administration is now on the top of those missiles with up to ten nuclear warheads.
Now, they even showed off their new GJ-11 stealth attack drone, so they’ve got some new equipment here. That’s their new drone.
This is a supersonic High Speed Reconnaissance Drone, which again if you’re targeting things, this is what you want to have, something that’s a speed high weapon.
They also showed an unmanned, unwater vehicle. This has been in the underwater warfare scene. The Chinese don’t have the quiet submarines that we do, but they’re rapidly getting closer to it. This is a Long March 11 Rocket with an anti-satellite. I have a whole chapter on their satellite weaponry, which again is one of their Assassin’s Mace weapons. If they knock down about 24 of our satellites, we’re in real trouble because we won’t be able to communicate, the military won’t be able to navigate, they won’t be able to guide their precision-guided missiles.
This is some other hardware. I’m going to zoom ahead.
Strategic Nuclear Forces
These are underground facilities. This is a simulated nuclear strike on Los Angeles that they published. It shows that they are really getting ready for nuclear war in the future.
I’m going to leave some time for questions. I wanted to touch on some of the new policies.
So what should we do? These are some of my policy recommendations. We need to go beyond declaring China as just a strategic competitor. We need to begin to recognize them as an enemy that does not wish us well, which is working to destroy and undermine our country. We should use the same type of financial warfare that they have been using against us. In the chapter on financial warfare, I highlight what the Chinese are doing, penetrating and influencing our capital markets, pension funds and stocks like that. So let’s say the California pension fund – if they’re so invested in Chinese companies, then they’ll say to the U.S. government, well, you can’t sanction China because our retirement funds are attached. And so there’s a major effort to get in and influence these funds, and it’s an unregulated market.
And just within the past two weeks, the Trump administration announced that they’re focusing on it and they’re looking for ways to regulate it. Now, Wall Street’s going to scream bloody murder. They’re going to say, ‘You’re going to influence the free market’, but it’s something that has to be done because it’s a real strategic vulnerability.
New U.S. Policy Toward China
More aggressive information operations: strict reciprocity, say on media for example. We allow Chinese media free rein here, and a good percentage of them are intelligence people, and the rest are propagandists working against the United States and to promote Chinese lies. We should say that any Chinese reporter here must be contingent on an American reporter being allowed free access, the same free access that’s allowed these reporters here, and if they disagree with that, we should kick them all out.
Increased intelligence, especially counterintelligence, better diplomacy, and the other thing I call for is a new democratic alliance in Asia. In the past we were not able to do this because there were a lot of non-Communist, authoritarian states, but for now there is kind of an emergence of more democratic states. There are still some authoritarian states like Vietnam, but I think we could organize a democratic alliance like NATO: India, if they would do it, Australia, Japan, all of these places. Let us work with them and get them together.
And also, we will create a free parliament in exile. This was an idea that was first promoted by the late Constantine Menges, who was a Reagan administration official. The idea is to bring pro-democracy Chinese overseas together once a year, have them develop democratic reform policies for China, and then disseminate those electronically inside China.
And then last, play the Russia card like we played the China card. This is doable. It is not going to be easy, and it certainly cannot be done as long as Vladimir Putin is in power, but I interviewed Mikhail Khordorkovsky, a billionaire dissident, in 2017, and he has a plan to try and buy Putin off, perhaps by using cyber means to steal his estimated $20 billion in wealth, and then offering it back to him if he leaves power and go lives somewhere else. Maybe it will work, I do not know.
Just to some up, and I will leave a few minutes for questions, this book I think is really one of the most important in crystallizing the China threat, and I think it is a valuable contribution to the debate. Thank you very much.
Communism and business are like fire and ice. They are incompatible, so the more communist China is, the less it is going to be good for Chinese business. Basically, my question is when do you believe these two concepts will clash and will stop the growth of the Chinese economy?
Yeah, well, I think [there is] this decoupling process. like I said, the Chinese are trying to wait Trump out, and I have real fears that they could try and trigger some type of economic recession in October of 2020 right before the election, and do it. I really urge that Congress or the administration needs to do a really serious effort to look at that kind of election meddling rather than just Russian meddling.
Could you explain the Belt and Road Initiative, what China’s design is with that? What is the overall strategy ten, twenty years out?
Yeah. The China dream has actually morphed into the Belt and Road Initiative, which is a multi-trillion-dollar investment plan. I call it kind of a trojan horse of Chinese expansionism, and the idea behind it is to basically buy off the developing world. The way it works is Chinese will go into a poor country and they will say, hey, we would like to build a railroad for you, and we will even finance it for you. But then all of a sudden, they put exorbitant interest rates on the money. And when the country cannot pay the loan, the Chinese come in and say, well, sorry, that railroad is now ours.
This is happening around the world. It is done in a very stealthy fashion, and it is a serious problem. My own view is I think the Chinese are trying to buy up the developing world as a way to attack the developed world with the United States as the main target for that.
Bill, can you comment on the Confucius Institutes?
Sure, this is part of the United Front Work Department. Confucius Institutes are, quote, ‘Chinese cultural centers that are on universities,’ and it has been a very effective tool for the Chinese influence operation. They are using it to influence universities. Once these institutes are on base [in] universities, they influence the universities because they are giving the universities money. And they are bringing in Chinese students. Along with that, they are influencing the universities’ policies. They are not teaching courses about what the Chinese are doing. They are teaching courses that portray China improperly. There are about a hundred of them.
Marco Rubio has been in the lead to try and get pressure, and a lot of universities, especially in Florida, have closed them. And just recently, there was an indictment. Again, this is the legal crackdown. There was an indictment of a Chinese national who was identified as a recruiter for something called the Thousand Talents Program. This is China’s effort. I tell you they have an awful lot of programs with those names. Thousand Talents looks for researchers, largely Asian American, and they bring them back to China, and pay them for their expertise. And in that indictment, it noted that this official was working with one of the Confucius Institutes’ presidents in an unidentified Massachusetts university, which was probably MIT.
Bill, to what extent would you say that Beijing really controls North Korea, Pyongyang policy, not just economically, which is pretty obvious, but militarily, the nuclear, the ballistic program?
Yeah, the North Korean problem has been a duplicitous exchange. The Chinese, just like they said they were not a threat, now their other deception is, well, we cannot control this rogue state. They absolutely can control it. And they have a defense agreement. There is a China-North Korea defense agreement that basically binds them together in an alliance, and yet the Chinese promote this fiction that cannot do anything to stop North Korea and its nuclear development.
When the dust settles, hopefully peacefully, and we finally get rid of this rogue regime, you are going to find out that China was intimately involved in all of those missile and nuclear programs, going back to the W88 theft in the ’90s. We already have seen rogue mobile launchers for North Korea’s ICBMs, which came from China, and the fiction put out by China was, oh, well, we had nothing to do with this. We sold these as lumber haulers, and they converted them into missiles. Again, total BS, but deception again designed to take pressure off Beijing to have something to do. If China wanted to, they could end the North Korean regime in one day. Alright, time for one more.
Thank you for writing about my case. It is very interesting. Anyway, the question here is that you talk about espionage. How about dealing with the people in the U.S. power positions who try to make money from China? I will give you one example, Susan Thornton, who almost became the Secretary in charge of East Asia. Soon after she left the State Department, she went to China to Shanghai and gave a speech, and she said, well, the Chinese, do not worry. You wait until Trump is gone. Trump is not normal. Nobody has reported this except the South China Morning Post. And I think another example is [unintelligible], head the federal government agency whose family is having hundreds of millions of dollars of business inside China, working with the Chinese parties. What do you suggest our government do?
Well, I think, yeah, we have to start from the premise that these are no longer benign institutions and benign relationships. That has really been the problem. For many, many decades the government has said do not worry about the China threat, go invest in China. And we are starting to see that change, and this is one area where we have to. I also know it is very interesting in Washington, we have a lot of think tanks. But there are almost none that are devoted to looking at this problem of China. It is really amazing. There needs to be much greater scrutiny of business interests.
Again, Congress has taken steps. We have created a stronger Committee on Foreign Investment in the United States, which is looking at how China is trying to penetrate. But in terms of officials, I think there has been some action on the area known as the Foreign Agents Registration Act. And I think they are looking at ways to tighten up that law so that if people are foreign agents, technically or implicitly, that this could be some way to limit influence operations because the Chinese are known to literally buy off American officials. I mean they just buy off foreign officials. Case in point: Joe Lieberman is now a top lobbyist for the Chinese telecommunications company ZTE, so that is an example.
One more [question] sort of following up on that, when they joined the ZTE, there were almost no conditions for entry. They were given waivers on currency manipulation, reciprocity, all kinds of things because American and European companies lobbied [the] U.S. and Europe to let them in early because they are salivating over this huge market, and that is true right until today, so you have got the Chinese government trying to influence U.S. and European politicians, and you have got U.S. companies. Now, I am sure there is never any money that changes hands between those three groups, but how do you change policy if you have got American and European companies lobbying the opposite of what we need to do?
Yeah, I mean it is an uphill battle. It is not going to be easy. I mean even within the Trump administration, the bureaucracy that is wedded to the old policies is going to be very difficult to change. They are waiting Trump out, and whether they can succeed is another question. I am not sure that it is actually possible, but I am optimistic that if we continue on the path, we will. That will create a momentum for some major change.
Hi, I wanted to thank you for mentioning Constantine Menges. He was a great man, and he covered this terrain in his last book as it existed in his time. You have covered it as it exists today. Listening to you, I feel like I hear him, too. And as he lives on through you, thank you.
I would note that I wrote the forward to his last book.
If I understood you correctly, you are saying that our technology industries are very frustrated with China stealing their technology, basically, their secrets, but I understood it very, very differently. What I kept hearing was a lot of our technology industries, because they want markets in China, they go in, and the deal is China will let them in, but they have to give up all of their technology. And then the only that I really heard who was really putting up a fight over this was Oracle, but then basically everyone else was going all in. Is that incorrect?
Well, it is hard to say. Like I said, they had this meeting at the Trump Tower. And I also point out – and this was brought out in Pence’s October speech last year, Google, for example, was secretly working with China to develop a censored search engine called Dragonfly, and basically the company was pressured to stop doing it, but it is already too late. I mean China has probably hired the people that were working with that censored search engine program. No, clearly Silicon Valley is looking at this, again, the 1.4 billion people market.
But I think that is changing. A lot of businesses are saying, hey, we have got to look for different markets. There is a saying that money is a coward. If there is pressure from the government to identify the China threat, [then] the businesses will often follow suit. We will have to see how it plays out. I am not sure how it will play out.
Let me add to the ‘thank you for Constantine Menges,’ thank you for the collective work that you have done, Bill, over the years. I had a conversation the other day with a guy who responded to my point that we are being told, yeah, this is all a problem, but the great thing is that China has raised hundreds of millions of people out of poverty. And this fellow was a serious student [unintelligible]. We raised them out of poverty. The Chinese had the money, and we propped up the regime.
As you know, Bill, I think one of the things that is playing out right now is the question about what do we do about this? It is a teaching moment. The Chinese government has put companies into our capital markets. We have been getting a lot of money out of [unintelligible] a lot of money out of them. Now there is an opportunity for them to get money out of the retirement funds of military and government employees, past and present, through the Thrift Savings Plan. And I wonder whether you might want to comment on whether that is advisable.
Yeah, well, like I say, the financial warfare is hard to say. Obviously, that is a bad idea for the Chinese to get into military pension funds, but the bigger problem is that we have just got to be able to declare them an enemy. I mean that has got to be the starting point. And one of the things to do that that I recommend [is] that the U.S. government needs to publish a book-length white paper on the Chinese Communist Party because that is really the core issue, it is not the Chinese people. I dedicate this book to the Chinese people. They want to get rid of this system. They do not want to live under that system.
This is an open and free communications environment. Although it is constrained in China, they know what it is like in free societies, and they do not want to live there [in constrained China], so something like a book-length white paper that would really carry out in great detail what the problem is, I think is the most important first step because I always believe if you cannot clearly define the problem or the threat, then you will never be able to develop policies, so it would be an important first step, and it could be a great contribution from the Trump Administration. I think they are doing this, and I hope that, again, that it is not classified. That is how the government tries to influence policy, by classifying things and releasing only a little taste of what it is. It should be a completely public document, detailing all of the threats from China as I outlined them tonight; financial, diplomatic, intelligence, military. And it should not pull any punches. It should not pretend that it does not want to defend the Chinese. We need to identify this enemy that is really going after us.
Robert R. Reilly:
They, meaning the Chinese Communist Party, had a winning strategy. They could have waited just another decade or two, and it would have been too late for us to do anything. Why do you think Xi tipped their mitt?
I think it was basically because he has this Mao-like view of himself, that this is hit time, and I think he is taking a very calculated step-by-step approach. 2025 is part of the plan. They definitely did tip their hand, again, they have set off a reaction. Again, this is their monitoring of the China threat theory. I guess we will have to wait and see, although today, this week, when they had their seventieth anniversary parade, for the first time the state media and their propagandists are beginning to talk openly about the global reach, and the global influence, and the global aspirations that they have. I think maybe they felt that perhaps they have weakened our system enough that they have helped divide us, and we have helped divide ourselves so that perhaps they can exploit that and go on the march with their programs.