Friend or Foe?
Canada Is A Target of Chinese Espionage
BY J. MICHAEL COLE
© 2011 FrontLine Security (Vol 6, No 3)

The scandal surrounding the flirtatious e-mails from MP Bob Dechert, a parliamentary secretary to Canadian Foreign Affairs Minister John Baird, to the Xinhua News Agency Toronto bureau chief appears to have awakened the Canadian public – and it is hoped, officials – to the risks of greater engagement with China. However...

... the risks associated with that bilateral relationship transcend political affiliation, and did not begin with Mr. Dechert’s first electronic indiscretion. Canada may not be China’s top priority for espionage activity, but as a highly industrialized economy with an abundance of natural resources, it nevertheless possesses a number of items that are of interest to Beijing. Only when those areas are identified will Canada’s counterintelligence authorities be able to determine the appropriate countermeasures that need to be implemented.

Risk areas
Canada is a close ally of the United States, part of NORAD, and a member of the North Atlantic Treaty Organization. Intelligence agencies seeking to penetrate organi­zations like NATO will often attempt to do so via the weakest link. With NATO spearheading a number of military interventions that, in Beijing’s view, violate the sacrosanct sovereignty of other countries, China likely has an interest in knowing what is going on in the war planners’ briefings. Also, NATO has offered to help India, a regional competitor of China with whom it has fought a number of border wars, develop a missile defense system.

Canada has a high-tech power base and technologies (optics, satellites, electronics) that China could want. Canadian customs officials regularly seize missile components bound for China. Such items are often sent via a third country to cover the final recipient. On other occasions, dual-use items are sent via China to a third country, such as North Korea and Iran, with cognizance of Chinese officials and Chinese firms.

Canada is also a participant in the consortium developing the F-35 aircraft, which has avionics, engines and electronics that China would love to access as it develops its J-20 stealth fighter and other platforms.

On the non-military side, Canada has abundant natural resources, and China, which faces severe scarcities in that department, needs those in increasing quantities to fuel economic growth and thereby ensure the legitimacy of the Chinese Communist Party. Business intelligence, as China competes with other countries to develop Canadian natural resources, offer an advantage. It could also seek to gain knowledge about Canadian projects abroad – in South America, for example – which is also a growing market for China, and where it has struck a number of strategic alliances.

It is well known that Chinese agents monitor, and on occasion will seek to intimidate, the Chinese Diaspora the world over, which includes Tibetans, Uighurs, Falun Gong practitioners, pro-democracy activists, and Taiwanese, among others. Every single one of those groups is present in Canada.

Scope of the threat
While it is impossible to accurately determine the scope of Chinese espionage in Canada, it is likely more serious than we think. Intelligence agencies like the Canadian Security Intelligence Service require a lot of time before moving into prosecution, as they tend to wait to assess the size of a ­network. Consequently, we get very little news about Chinese agents who are caught. If we never hear of arrests, prosecution or expulsions, we may believe that the problem doesn’t exist. But that isn’t always the case.

This is in sharp contrast with the U.S. which tends to be more aggressive on prosecution, probably because the stakes are higher. In the past decade or two, dozens of Chinese spies have been arrested in the United States, including American officials caught trying to pass on secrets or technology to China. Many of them are currently serving time in federal prisons.

The list of American officials and defense contractors who were caught working as double agents for China in the past two decades is impressive. It includes former PACOM commander James Fondren and businessman and former top salesman for Lockheed Martin in Asia, Bill Moo. Also included are Chi Mak, Gregg Bergerson, Tai Shen Kuo and Noshir Gowadia. All tried to pass on military technology to China, including information on C4ISR systems, submarines, F-16 engines, cruise missiles, the B-2 stealth bomber, the Patriot missile defense systems, and so on. In many instances, Chinese or Taiwanese businessmen acted as handlers or middlemen.

‘Honey traps’
Earlier this year, Taiwan sentenced General Lo Hsien-che to life in prison for spying for China against Taiwan. Lo was recruited in Thailand in 2003 or 2004 by a female PLA agent, who also became his handler. Indictment documents noted that Lo’s recruiters had blackmailed him using video surveillance of him frequenting prostitutes in Thailand. Taiwan referred to the incident as its worst spy case in the past 50 years.

Britain’s MI5 last year warned against Chinese “honey traps,” as did French intelligence, after it was discovered that a researcher at a top French pharmaceutical company was wined and dined by a Chinese girl who ended up sleeping with him.

While this technique is sometimes used within target countries, in most cases it is adopted when foreign officials or executives visit China. An aide to former British Prime Minister Gordon Brown was allegedly himself a victim of a Chinese honey trap in Shanghai.

The process is straightforward. Visiting officials are wined and dined, and gradually ways are found to compromise the target for potential blackmailing. This can start with gifts, then paid visits to China, where the official or business person is treated to nice meals and the inevitable karaoke, hostesses, and so on. Those places usually have cameras, and the footage is then used to blackmail the target and, in return, to extract information or instruct the recruited agent. Given the security and media attention that surrounds visits by senior officials at the minister level, this technique is usually reserved for mid-level officials.

The Chinese Communist Party (CCP) organized crime nexus also provides Beijing with opportunities to use sex for espionage purposes. It is believed, for example, that a large number of prostitutes in Taiwan are in the employ of Chinese intelligence and/or organized crime working together. Those prostitutes, unsurprisingly, tend to work close to military bases around Taiwan.

While China is not the only country to rely on such tactics to compromise and recruit agents, as the opportunities for ­contact increase, and as more and more officials and executives travel to China, so will the risk.

Money
China has also been known to use money to “turn” officials in targeted countries, often by promising serving government officials lucrative advisory or honorary positions in a Chinese firm after they retire from government. In return for providing some information, agreeing not to criticize China on its human rights record or encouraging the passage of policies that are favorable to Beijing, those officials are recompensed with cozy positions in Chinese firms or multinationals with operations in China. A number of former officials are believed to be currently enjoying such perks.

Xinhua
China’s principal news agency, which is owned by the State-owned Assets Supervision and Administration Commission under the State Council, has long had a deserved reputation as a front for Chinese espionage. Besides serving as one of the principal propaganda arms of the CCP, a large number of its “journalists” also prepare neibu cankao ziliao, or internal reference reports intended for limited consumption among CCP officials. In some cases, the CCP has reportedly ordered Xinhua to “hire” individuals with no journalistic training or experience. Prior to the handover of Hong Kong in 1997, the Xinhua bureau served as Beijing’s diplomatic office and a base for its spies operating in the British territory.

Some Western intelligence agencies operate on the assumption that every reporter working for Xinhua is an intelligence officer and take appropriate targeting measures.

Growing opportunities
The Harper government has indicated its intention to strengthen the bilateral relationship between Canada and China. While the benefits of such exchanges are beyond the scope of this article, there is no doubt that added contact will create new opportunities for China to engage in espionage against various sectors of Canadian society, from government to the business sector and academia. Any risk-based assessment points to that conclusion, and the past experiences of other countries that opened to China indicate that Chinese espionage will intensify rather than diminish, even as more cordial diplomatic relations develop.

China is not alone spying against other countries. Every country engages in espionage, even against allies. However, the nature of the authoritarian regime in Beijing, added to the tremendous pressure upon it to maintain domestic stability and sustain economic growth, mean that its espionage efforts abroad are increasingly aggressive. It would be naïve to think that Canada isn’t a target.

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J. Michael Cole, a former analyst at CSIS and a graduate of the War Studies master’s program at the Royal Military College of Canada, is deputy news chief at the Taipei Times newspaper in Taiwan, and a China/Taiwan correspondent for Jane’s Defence Weekly and Jane’s Intelligence Review.
© FrontLine Security 2011

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