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China's Intelligence Services and Espionage Operations, Hearing CHINA'S INTELLIGENCE SERVICES AND ESPIONAGE OPERATIONS HEARING BEFORE THE U.S.-CHINA ECONOMIC AND SECURITY REVIEW COMMISSION ONE HUNDRED FOURTEENTH CONGRESS SECOND SESSION THURSDAY, JUNE 09, 2016 Printed for use of the United States-China Economic and Security Review Commission Available via the World Wide Web: www.uscc.gov UNITED STATES-CHINA ECONOMIC AND SECURITY REVIEW COMMISSION WASHINGTON: 2016 U.S.-CHINA ECONOMIC AND SECURITY REVIEW COMMISSION HON. DENNIS C. SHEA, Chairman CAROLYN BARTHOLOMEW, Vice Chairman Commissioners: PETER BROOKES DANIEL M. SLANE ROBIN CLEVELAND HON. JAMES TALENT HON. BYRON L. DORGAN DR. KATHERINE C. TOB IN JEFFREY L. FIEDLER MICHAEL R. WESSEL HON. CARTE P. GOODWIN DR. LARRY M. WORTZEL MICHAEL R. DANIS, Executive Director The Commission was created on October 30, 2000 by the Floyd D. Spence National Defense Authorization Act for 2001 § 1238, Public Law No. 106-398, 114 STAT. 1654A-334 (2000) (codified at 22 U.S.C. § 7002 (2001), as amended by the Treasury and General Government Appropriations Act for 2002 § 645 (regarding employment status of staff) & § 648 (regarding changing annual report due date from March to June), Public Law No. 107-67, 115 STAT. 514 (Nov. 12, 2001); as amended by Division P of the “Consolidated Appropriations Resolution, 2003,” Pub L. No. 108-7 (Feb. 20, 2003) (regarding Commission name change, terms of Commissioners, and responsibilities of the Commission); as amended by Public Law No. 109- 108 (H.R. 2862) (Nov. 22, 2005) (regarding responsibilities of Commission and applicability of FACA); as amended by Division J of the “Consolidated Appropriations Act, 2008,” Public Law Nol. 110-161 (December 26, 2007) (regarding responsibilities of the Commission, and changing the Annual Report due date from June to December); as amended by the Carl Levin and Howard P. “Buck” McKeon National Defense Authorization Act for Fiscal Year 2015, P.L. 113-291 (December 19, 2014) (regarding responsibilities of the Commission). The Commission’s full charter is available at www.uscc.gov. ii August 11, 2016 The Honorable Orrin Hatch President Pro Tempore of the Senate, Washington, D.C. 20510 The Honorable Paul Ryan Speaker of the House of Representatives, Washington, D.C. 20515 DEAR SENATOR HATCH AND SPEAKER RYAN: We are pleased to notify you of the Commission’s June 09, 2016 public hearing on “Chinese Intelligence Services and Espionage Operations.” The Floyd D. Spence National Defense Authorization Act (amended by Pub. L. No. 113-291) provides the basis for this hearing. At the hearing, the Commissioners received testimony from the following witnesses: Mr. Peter Mattis, Fellow, Jamestown Foundation; Mr. John Costello, Congressional Innovation Fellow, New America; Mr. Mark Stokes, Executive Director, Project 2049 Institute; Ms. Michelle Van Cleave, Former National Counterintelligence Executive; and Mr. David Major, Founder and President, CI Centre. This hearing examined the structure, capabilities, and recent reforms of Chinese intelligence services. It described how China conducts espionage and other forms of intelligence collection. It also assessed the implications for U.S. national security of Chinese espionage operations in the United States and abroad that target U.S. national security organizations and actors, including U.S. defense industrial chains, military forces, and leading national security decision makers. Panelists discussed recommendations for congressional action to address the threat of Chinese intelligence collection against the United States. We note that prepared statements for the hearing, the hearing transcript, and supporting documents submitted by the witnesses are available on the Commission’s website at www.USCC.gov. Members and the staff of the Commission are available to provide more detailed briefings. We hope these materials will be helpful to the Congress as it continues its assessment of U.S. - China relations and their impact on U.S. security. The Commission will examine in greater depth these issues, and the other issues enumerated in its statutory mandate, in its 2016 Annual Report that will be submitted to Congress in November 2016. Should you have any questions regarding this hearing or any other issue related to China, please do not hesitate to have your staff contact the Commission at (202) 624-1407 or via email at [email protected]. Sincerely yours, Hon. Dennis C. Shea Carolyn Bartholomew Chairman Vice Chairman iii CONTENTS THURSDAY, JUNE 09, 2016 CHINA'S INTELLIGENCE SERVICES AND ESPIONAGE OPERATIONS Opening Statement of Senator Byron Dorgan (Hearing Co-Chair) .......................................................................................................01 Prepared Statement .........................................................................................................02 Opening Statement of Commissioner Peter Brookes (Hearing Co-Chair) .......................................................................................................03 Prepared Statement .........................................................................................................04 Panel I: Structure, Reforms, and Capabilities of Chinese Intelligence Services Panel I Introduction by Commissioner Peter Brookes (Hearing Co-Chair) .......................................................................................................05 Statement of Mr. John Costello Congressional Innovation Fellow, New America ..........................................................06 Prepared Statement .........................................................................................................09 Statement of Mr. Mark Stokes Executive Director, Project 2049 Institute .....................................................................20 Prepared Statement .........................................................................................................23 Statement of Mr. Peter Mattis Fellow, Jamestown Foundation ......................................................................................28 Prepared Statement .........................................................................................................31 Panel I: Question and Answer............................................................................................41 Panel II: Chinese Intelligence Collection Operations and Implications For U.S. National Security Panel II Introduction by Senator Byron Dorgan (Hearing Co-Chair) .......................................................................................................60 Statement of Ms. Michelle Van Cleave Former National Counterintelligence Executive ............................................................61 Prepared Statement .........................................................................................................64 Statement of Mr. David Major Founder and President, CI Centre ..................................................................................74 Prepared Statement .........................................................................................................77 Panel II: Question and Answer ..........................................................................................94 iv CHINA'S INTELLIGENCE SERVICES AND ESPIONAGE OPERATIONS THURSDAY, JUNE 09, 2016 U.S.-CHINA ECONOMIC AND SECURITY REVIEW COMMISSION Washington, D.C. The Commission met in Room 285 of the Hall of the States Building, Washington, DC at 9:00 a.m. Senator Byron Dorgan and Commissioner Peter Brookes (Hearing Co-Chairs), presiding. OPENING STATEMENT OF COMMISSIONER BYRON DORGAN HEARING CO-CHAIR HEARING CO-CHAIR DORGAN: We'll begin the hearing today. This is the U.S.-China Economic and Security Review Commission, and today the hearing is on Chinese intelligence services and espionage operations. We welcome all of you, and this is the sixth hearing of the Commission in the 2016 Annual Report cycle. Today's hearing is going to consider Chinese intelligence collection operations affecting U.S. national security. The hearing comes amidst many reports of actors affiliated with the Chinese government extracting or attempting to extract sensitive information from the national defense, from U.S. military forces, defense contractors, government organizations and more. These infiltrations have not been limited to cyber attacks. In many cases, human agents operating in the United States were responsible. So to understand our vulnerability to Chinese espionage and to raise public awareness of the threat to U.S. national security, it's crucial to defend against it. To this end, this hearing will investigate which U.S. national security entities China targets, how China attempts to infiltrate these targets, and how successful China is in extracting information from these targets. The hearing will also examine the effectiveness of U.S. actors in deterring, tracking, preventing, and mitigating these operations. We look forward to exploring these issues with some excellent witnesses and hope to find creative ways the United States can respond to the intelligence threat from China. Now I'll turn the floor over to my co-chair for this hearing, Commissioner Peter Brookes. 1 PREPARED STATEMENT OF COMMISSIONER BYRON DORGAN HEARING CO-CHAIR Hearing on “Chinese Intelligence Services and Espionage Operations” Opening Statement of Senator Byron Dorgan June 9, 2016 Washington, DC Good morning, and welcome to the sixth hearing of the U.S.-China Economic and Security Review Commission’s 2016 Annual Report cycle.
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