United States Targeted by Red Chinese Spies

Intelligence documents confirm longtime espionage activities aimed at the U.S. Experts say Red China's grab for control of Panama ports and Long Beach base are part of these efforts.

In August a Chinese spy visited the Hong Kong branch of the Bank of China to open an account and obtain a loan. The spy had been in Beijing for about 10 months and recently had attended what American intelligence agents call an "orientation course."

Beijing's man was a name dropper. He inadvertently told an undercover American agent that he had access to several political leaders and kept a large sum on deposit at the Bank of China. "The accounts were not personal wealth" he explained, "but rather official funds of the Chinese Communist and North Korean governments that had been appropriated to finance intelligence and propaganda activities"
Sound familiar? Could this be Charlie Trie, the Little Rock restaurateur who dumped thousands of dollars into the Democratic National Committee shortly after conducting transactions at the Bank of China? Could be, but it's not.

This incident occurred 41 years ago and is documented in recently unclassified military-intelligence records released by the U.S. Army covering more than three decades of Chinese espionage beginning in the 1940s.

Insight has obtained hundreds of these onetime "secret" records that include documents from the Defense Intelligence Agency, U.S. Naval Intelligence, Army Intelligence and the Office of Special Investigations for the U.S. Air Force. Most of the documents are reports by American field agents to various U.S. intelligence agencies detailing Red Chinese espionage operations aimed at penetrating U.S. military installations, smuggling narcotics, obtaining economic information and funneling money to worldwide Red Chinese operations through banking institutions.

For example, records detail covert escape operations in 1971, some sponsored officially by Beijing, in which mainland dissidents were helped by "in-border" contacts who sneaked them through the People's Liberation Army's sentry line and left them to try to swim to Macao at night. "They are given no guarantee of success in their venture," a U.S. agent wrote in a report. "A great number drown before they reach Macao."

The state-run smuggling ring involved the Kwangtung Provincial Public Security Department and the Canton City Public Security Bureau. They also smuggled Mao's agents directly into Macao where a Communist cadre provided documents to enter Hong Kong. Young women fluent in English frequently were moved via this route to work as agents in dance halls, restaurants and bars, according to counterintelligence reports.

Records obtained by Insight contain grainy photographs of suspected agents with their names blacked out as well as notes on suspected business fronts that included tailor shops, gift stores, hotels and clubs.

For example, in 1948 a large number of Chinese seamen frequented the Chinese Seamen's Club in Japan, which turned out to be a secret meeting place for Red Chinese agents and local hotel managers to plot smuggling and illegal activities, according to military intelligence records. The club went "bankrupt" and was closed in 1951, during the Korean War.

The records identify Red Chinese fronts for intelligence activities in Japan during the Korean conflict, including the Shu, Shi Tei Agency, a spy operation; O, Bun Sei Agency, which procured war materials for Chinese communists, operating mainly in Osaka and Kobe; and the Central Statistics Bureau, which collected funds in Japan for Beijing's intelligence operations.

Counterintelligence expert Thomas Pickard, assistant director in charge at the Washington bureau of the FBI, explains to Insight why spies frequently are kept under surveillance rather than being rounded up. "By not arresting them, you can recruit them, give them false information and neutralize them." By monitoring their activities, he says, you identify their other connections.

The records indicate a strong presence of Chinese espionage activities in Japan and an attempt to penetrate American universities. Other records show Chinese spies trained in Moscow in 1957 penetrating Italy under the pretense of being cloth salesmen. The records suggest Panama may have been penetrated by Beijing's military spies holding political posts near U.S. military bases, while West Germany and Austria consistently were targets of Beijing's espionage activities.

However, by far the largest identifiable penetration was in Japan, according to the records Insight obtained. One American intelligence agent, alone, identified 27 Chinese spies operating in Japan. Some of these posed as students to gather information about American troop "strength, movements, bases and equipment," according to declassified intelligence documents.

Wall Street Journal reporter John J. Fialka says in his book War by Other Means that using students to conduct economic espionage activities continues. He notes the increasing number of mainland Chinese students enrolling in science and engineering at prestigious U.S. graduate schools. They are called acheng di yu, or fish at the bottom of the sea. "The little fish are sent to the United States to grow, to be activated years, maybe decades later," Fialka writes.

Declassified intelligence records also note that Beijing long has been active in attempts "to gather information of intelligence, economic and scientific value from publication of doctoral dissertations submitted by students and accepted by American colleges and universities when granting degrees." One document says University Microfilms, Inc., an Ann Arbor, Mich., subsidiary of Xerox Corp., had just shipped more than 100 doctoral theses to Red China. Themes of these theses included code analysis, control and guidance systems, computer data, radar, missile failures and qualities of gases and fluids.

Recruiting spies for Red China also has been conducted at international meetings. Beijing recruited 150 spies from the 21st World Overseas Chinese Conference held in Taiwan, according to one of the declassified intelligence reports. Their training consisted of political indoctrination concerning current communist activities on the China mainland and review of alleged Chinese Nationalist failures. They targeted plans for the Taiwan central government and future Nationalist Chinese plans and policies concerning matters military, political and economic.

Beijing's espionage activities consistently have focused on U.S. military installations. A 1957 American intelligence operation called "Project Male Train" uncovered evidence that Red Chinese spies had found employment with businesses near U.S. military installations. The records show that many such spies in fact did obtain employment as tailors, salesmen, bar waitresses and bar hostesses to contact U.S. military personnel.

Japan was a top target, but the schemes were worked worldwide. As one American agent warned in his report, "While working for these tailor shops [Chinese Spy X] had access to various U.S. military installations under the guise of soliciting tailoring business from the U.S. Security Forces personnel. Because of the ability to speak English and his well-rounded knowledge of photography he has been successful in gathering intelligence information relative to United States Security Forces.... This information has been sent, in code, to Communist China via Hong Kong, disguised as measurements for different tailored garments. He is highly regarded as an intelligence agent by the Chinese Communist authorities because he is able to answer desired leads rapidly."

U.S. intelligence experts tell Insight the Chinese spies now have traded in the tailor-type jobs for high-tech studies and careers to conduct economic-espionage activities on American soil. Targets still include military installations. That is why some intelligence experts remain deeply concerned about the Red Chinese taking over key ports including the Long Beach Naval Base in California and at both ends of the Panama Canal.

Retired Lt. Gen. Gordon Sumner Jr., former chairman of the Inter-American Defense Board, warns that control of the Long Beach port would provide an excellent opportunity for the Chinese Communists to conduct espionage operations because of its proximity to a defense industrial zone filled with significant military installations.

President Clinton announced withdrawal of the U.S. military presence in Panama shortly after the Bank of China extended a 15-year, $120 million loan to Panama at 3 percent interest. A Chinese company then grabbed the contracts to run the Panama ports.

"We have given them the capability of controlling the canal" says Sumner, who would like to see at least 5,000 troops remain but believes they most likely will depart this month. "We have created a vacuum and it's being filled by the Red Chinese. We need to keep the [military] communications facility open. Panama is going to become the proxy battleground between Red China and the U.S."

The Clinton administration repeatedly has downplayed the potential threat of Chinese espionage at these ports. So has Navy Secretary John Dalton.

This downplaying of the threat is not new. In 1960 a U.S. Naval Intelligence report downplayed the threat of tailors suspected of being Chinese spies having access to U.S. Navy installations in Europe and Asia. "The potential security threat appears somewhat exaggerated," the report claimed. Hundreds of pages of documented evidence in Insight's hands show not only that this was false but that U.S. intelligence agencies knew it was false. In fact, the intelligence professionals were very concerned about those agents and had reason to be.

Such information is tightly held, which is why it is so unusual that senior U.S. intelligence agents are warning Congress that Chinese agents not only tried to influence the American political elections but are laying the groundwork to penetrate the key U.S. installations at Long Beach and Panama.