The U.S. administration has sprung another leak. Over the weekend, the New York Times reported on a successful Chinese counterintelligence effort from 2010 to 2012 to identify, arrest and in some cases kill Chinese informants who were allegedly working with the CIA. According to the unnamed officials cited in the report, the incident significantly reduced viable U.S. intelligence on the inner workings of Chinese politics. It also triggered accusations and recriminations within the United States’ intelligence services as they tried to find and stem the leaks that tipped off Beijing. And U.S. intelligence agencies are still not sure what led to the exposure and roll-up of its espionage network inside China.

Looking at the overall context of the Chinese counterintelligence operations offers some insight. At the time, China was just beginning to grapple with the implications of the global financial crisis. Beijing had increased domestic investment to make up for what it anticipated would be a temporary slump in exports. It was starting to realize, however, that its economic model had reached its limits after 30 years and that economic reforms could wait no longer. The revelation triggered internal competition and contention over the economic path forward — and over how to manage the social fallout of this course. China was also preparing for its 10-year transition of power, from former President Hu Jintao to his successor, Xi Jinping. These were particularly sensitive moments for China, marked by intense political infighting and struggles behind closed doors, and Beijing had doubtless stepped up its counterespionage operations to prevent leaks.

But China was also growing more aware of and concerned with the ways foreign intelligence services were infiltrating its leadership and society. Chinese counterintelligence had already uncovered what it was certain were outside information campaigns tied to ethnic and social movements in China ahead of the 2008 Summer Olympics, which Beijing hosted. Awareness was also growing that the sons and daughters of high-level Chinese officials, who were being granted admission to prestigious U.S. universities or positions at important U.S. companies, could become sources of leaked information, intentionally or otherwise. Finally, around this time, several senior-level Communist Party officials and corporate elites were arrested on suspicion of assisting foreign espionage activities. One of the most prominent arrests occurred in in 2010, when Chinese authorities detained Kang Rixin, a member of the Central Committee and head of China National Nuclear Corp., and sentenced him to life in prison, ostensibly for corruption. The real reason behind his detention, however, was rumored to be his alleged sale of secret information to a foreign government. Beijing realized that foreign intelligence services had likely made significant inroads into the upper echelons of the Chinese government.

The crackdown on the U.S. intelligence network also coincided with the rise and fall of then-Chongqing Party chief Bo Xilai. As the transition to Xi approached, Bo pitted his Chongqing Model against other recommendations for reform, a move that was seen as a challenge to the political order. Bo was adept at playing to both traditional and new media in China — far more so than the central Party leadership at the time — and a cult of personality began forming around him. This overt push for a prominent position in the Party leadership defied the quiet consensus politics of the time. By 2012, Bo had lost his clout; subsequent investigations linked him to an entire network, including then-Politburo Standing Committee member Zhou Yongkang that by some accounts was trying to block Xi’s path to the Party’s top post and the presidency.

The Chinese government was contending at once with internecine political struggles and with what was described as a robust and well-placed foreign intelligence network within the leadership. And at the same time, it was working to craft policies to address a weak global economy and a more aware and activist society. It is perhaps not coincidental that the final months of the Chinese crackdown on the U.S. espionage network coincided with the reported arrest of an aide to Lu Zhongwei, vice minister of the Ministry of State Security, in 2012. The aide’s detention was widely considered one of the most significant events in U.S.-China espionage since a department director in the Ministry of State Security defected to the United States in 1986. Following the arrest, the ministry reportedly underwent a major internal shake-up, likely similar to the one that rocked U.S. intelligence agencies’ China departments beginning in 2010. If the reports are true, China may have shut down a major U.S. network, but the United States had first penetrated the inner sanctum of Chinese state intelligence.

Upending a network of sources has compounding implications for the country whose network is undermined. It is not easy to replace sources; specific personalities often drive networks, and one person cannot easily replicate the types of information and access another individual can provide. As a network unravels, individuals not caught may either cease providing information or try to flee. Those detected by counterintelligence may also be used as double agents, feeding false or misleading information back into the system. The hunt for the leak leading to the broken network is also tumultuous and raises internal suspicions. The process requires a complete review of all agents and operatives connected to the intelligence operations. It stokes mistrust of existing sources and partners, and at times it leads to chaotic shake-ups of teams of agents. The trustworthiness of information becomes suspect, the ability to build new networks is further complicated, and mistrust within and between intelligence agencies adds to the friction.

Given that this is a five-year-old case, one wonders why the new information has been revealed. In light of the spate of leaks from U.S. intelligence and President Donald Trump’s administration in recent months, the revelation may be part of an information campaign aimed at compelling reform, tilting the balance in interagency rivalries or influencing personnel decisions in key intelligence departments. After all, the initial leak to the Chinese reportedly remains unresolved. It may also be intended to pressure the U.S. administration over its China policy, since the White House has taken a much softer tone on China than the president promised during his campaign. Whatever the reason, the leak to the New York Times will likely reinforce efforts in the administration and the U.S. intelligence community to find the source and slow the flow of information practically flooding out of Washington these days.

Source: Stratfor | May 23, 2017