The UK is just waking up to the scale of Chinese espionage

The scene could have come straight out of a spy novel. An ornate Chinese garden with temples and pavilions, built at one of the highest points in Washington DC – a gift from the Chinese government. At its heart, a 70-foot high white pagoda – perfectly positioned and equipped to eavesdrop on communications at the heart of the American government below.

China offered to spend $100 million to build the garden at the National Arboretum. But the project never got off the drawing board. It was quietly killed off by US counter-intelligence after they discovered that Chinese officials wanted to build the pagoda with materials shipped to the US in diplomatic pouches, meaning they could not be examined by US customs officials.

The pagoda plot is one of a number of alleged Chinese espionage operations to have come to light as US officials step up their warnings about a dramatic escalation of spying by the Chinese Communist Party (CCP) – on both sides of the Atlantic.

The White House has also ordered an investigation into Huawei, the Chinese telecoms giant, over concerns that cell towers fitted with its equipment could harvest sensitive information from military bases and nuclear missile silos. The probe was reportedly opened by the Commerce Department shortly after Joe Biden took office. Investigators are said to be particularly concerned about the possibility of sensitive data being transmitted to China during software updates.

Huawei is already banned from US government contracts, and federal employees are barred from using its products. The company has been indicted by the justice department on charges of racketeering and conspiracy to steal trade secrets, charges which it denies.

The government has sought to exclude Chinese-made equipment from telecoms networks, and it is shunned by most major carriers. However, Chinese tech is still widely used in rural areas, and officials were alarmed that Huawei was routinely selling cheap equipment to rural telecoms firms in deals that appeared to be unprofitable, but which placed its gear near military bases. Particularly alarming to security experts were deployments close to America’s intercontinental ballistic missile bases. For its part, Huawei has strongly rejected the allegations, denying that it could spy on customers or pose a risk to national security.

FBI Director Christopher Wray has accused the CCP of attempting to ‘ransack’ western companies of their innovations. He says his agency opens a new China-related counterespionage investigation every 12 hours and now has around 2,000 that are active. ‘They have a bigger hacking program than that of every other major nation combined, and have stolen more of Americans' personal and corporate data than every nation combined,’ he said in a recent interview with the American broadcaster CNN.

The acquisition of foreign know-how by all means possible has driven China’s economic and military development ever since Deng Xiaoping opened the country to the outside world. It ranges from cyberspace to university labs by way of pagodas and cell phone towers. It is the sheer scale it has now reached that rattles Western intelligence agencies.

The word Qingbao in Chinese means both ‘intelligence’ and ‘information’ – it neatly encapsulates the unique nature and breadth of a vast system that combines formal and informal techniques, both the overt and covert. There is often a fine line between theft and the voluntary transfer of know-how, and China has pushed the latter to the limit. Over the years, the CCP has built a comprehensive system for spotting and acquiring foreign technologies by multiple means.

‘We’ve even caught people affiliated with Chinese companies out in the U.S. heartland, sneaking into fields to dig up proprietary, genetically modified seeds which would have cost them nearly a decade and billions in research to develop themselves,’ said Wray earlier this month, during an extraordinary appearance in London alongside MI5 director-general Ken McCallum.

For his part, McCallum revealed that MI5 has seen a sevenfold increase in China-related investigations since 2018. In its 2021 annual review, the National Cyber Security Centre (NCSC), part of HCHQ, says it defended the UK against a record number of what it describes as ‘cyber security incidents’, a fifth of which targeted health care and vaccine development.

McCallum said that in May this year, his spies disrupted a ‘sophisticated threat’ targeting critical aerospace companies. He also revealed that MI5 intervened after a British aviation expert was lured twice to China after receiving what appeared to be an attractive job offer online. After much wining and dining, the job seeker was asked – and was then paid - for detailed technical information on military aircraft. McCallum didn’t give details of the initial online approach, but LinkedIn, the social network that focuses on professional networking and career development, has become a prime hunting ground for Chinese intelligence officers.

It was the first time the heads of the FBI and MI5 had shared a public platform, a sign of their growing concern about the threat from the CCP. Their audience was also significant – business and academic leaders, key targets of Chinese intelligence activities, who have been especially slow to grasp the scale of what they are facing. ‘The Chinese government is set on stealing your technology – whatever it is that makes your industry tick – and using it to undercut your business and dominate your market. And they’re set on using every tool at their disposal to do it,’ Wray warned them.

It was against this background that China this week intruded on the Conservative party leadership contest. Rishi Sunak said the country represented the largest threat to British and world security this century. ‘For too long, politicians in Britain and across the West have rolled out the red carpet and turned a blind eye to China’s nefarious activity and ambitions,’ he said. It was an abrupt change of tone. As Chancellor, Sunak had argued for a reset of relations and the resumption of regular trade summits. ‘Too often, the debate on China lacks nuance,’ he said last year. ‘We need a mature and balanced relationship.’ As Foreign Secretary Liz Truss took a more robust line on China, though at times it has been hard to see the substance behind the rhetoric. It is not clear that either has fully grasped the scale of what the new prime minister will have to deal with.

Last year, the government they both belonged to ignored warnings from UK intelligence chiefs that ‘smart cities’ technology supplied by China could facilitate surveillance, espionage, sabotage or the theft of sensitive data. ‘Smart cities’ is the umbrella term used for the cameras, sensors and other ‘intelligent’ systems that will supposedly keep our future cities ticking over – but collect a chilling amount of data in the process. In a blog post highlighting the potential dangers, Ian Levy, the technical director of the NCSC, invoked The Italian Job to make his point about the vulnerabilities. In the 1969 film, Michael Caine stars as the leader of a cockney gang who rob a lorry full of gold bullion by shutting down Turin’s traffic control system and causing gridlock.

The government has resisted demands to ban the use in Britain of surveillance equipment made by the Chinese companies Hikvision and Dahua, both accused of abetting human rights abuses in Xinjiang. Both companies deny those allegations. According to Big Brother Watch, 73 per cent of UK councils, 57 per cent of secondary schools in England, and six out of 10 NHS trusts, as well as UK universities and police forces use equipment supplied by these companies.

Huawei, in spite of being excluded from Britain’s next generation 5G telecoms network, remains deeply embedded in existing networks, and in British academia more widely with multiple research tie-ups. Cambridge University has accepted millions of pounds from the Chinese government to set up a ‘smart cities’ research centre in the city of Nanjing, which it describes as its ‘most ambitious’ Chinese collaboration to date, and its first overseas enterprise of this scale.

Earlier this year, MI5 issued an ‘interference alert’ about the alleged activities of Christine Lee, a London-based solicitor it accused of being a Communist party agent, funnelling money to MPs. Her face was just one of a vast influence operation in Britain, through which the CPP promotes its interests and attempts to shape opinion in its favour, and which has largely been allowed free rein. It is also indicative of the extraordinary breadth of Chinese intelligence operations.

Wray has been accused of paranoia – and the Chinese embassy in London predictably said he and McCallum were guilty of ‘pure shadow-chasing’. China’s approach to espionage has been called the ‘thousand grains of sand’ or ‘vacuum cleaner’ approach. Their tradecraft has not always been good, but it is improving, while the scale is so vast there have been doubts about their ability to make sense of the vast amount of data they gather.

The UK is belatedly bolstering its defences, with tighter scrutiny of investment and academic tie-ups. Last week, the UK government used new national security legislation to prevent Manchester University from licensing vision-sensing technology to a Chinese company. This is an important start, but the UK has hardly begun to come to terms with the scale of what it is up against.

Ian Williams’s new book, The Fire of the Dragon – China’s New Cold War, is published on 4 August by Birlinn.