There's a new inmate at the federal prison in Otisville,
New York, a 42 year old convicted Chinese spy named
Xu Yanjun.
In October 2021, Xu sat across a federal courtroom
in Cincinnati from another career spy, a retired CIA
officer named Jim Olson, who was testifying for the
U.S. government.
When I looked at you in the court, it crossed my mind.
He and I are alike.
We both were serving our country, honorably, we
thought.
We both were schooled in tradecraft.
But there's a big difference between the two
of us.
What's that? You got caught, and I didn't.
The story of how Olson and Xu came to face each other
is a tale of modern espionage.
It's a saga that revealed Xu was just a small piece in
what U.S. officials say is a vast enterprise
orchestrated from Beijing with one goal in mind.
China ultimately wants to surpass the U.S.
as the dominant global superpower.
In this global shadow war, it can be difficult to tell
just who has the upper hand.
But the story of Xu Yanjun demonstrates just how this
game is played today.
And it's a game with millions of American jobs on
the line. What's the way for the United States to win
this espionage war?
We have to be more aggressive. We have to wake
up. What torments me is that we haven't caught them
all.
If catching spies is hard enough, prosecuting them is
almost unheard of.
In Cincinnati, Ohio, there are two U.S.
attorneys who've done it.
Tim Mangan and Emily Glatfelter.
Their case started in 2017 when a GE aviation engineer,
David Zhang, receives a seemingly innocuous message
from a university official in Nanjing, China.
The GE engineer gets an outreach over LinkedIn.
How come he doesn't just delete it and think, Oh,
this is just spam? What triggers him responding to
it?
Well, it was an invitation to come speak at a
university about his subject matter.
So that's prestigious.
I think he was flattered.
And as it turned out, they were willing to fund the
trip and it's paying for a flight back to China.
He was able to combine it with seeing his family.
The university that invited the engineer focuses on
aerospace science, and in 2017, Zhang is working on
GE's newest jet engine, the GE9X being built for
Boeing's 777X.
The GE engineer was one of less than ten people on a
team regarding this technology that they were
working on.
What was it that the Chinese were trying to get here?
GE's engine fan blades are made of a composite
material, which makes it very light, very strong.
That gives it a tremendous advantage over competitors
with respect to weight, fuel efficiency and so
forth. Other competitors have tried to develop this
on their own, and some are getting close.
But as far as engines that are up in the air right now,
the only ones with a composite fan blade and a
fan blade case are from GE.
David Zhang declined our interview request, but
prosecutors say that when he visits the university in
Nanjing in June 2017, he's being assessed.
During his trip, Zhang is introduced to a man who
claims to be part of a local science and tech
association.
The alias uses is Qu Wei, but it's Xu Yanjun, who
works for the Ministry of State Security.
It's essentially the main intelligence operation
within the Republic of China.
Xu Yanjun is a spy at the Ministry of State Security
or MSS.
In the spring of 2017, Xu is 36 years old and a mid-level
officer in one of its provincial bureaus.
He attempts to recruit the GE engineer as an agent,
using techniques known as tradecraft.
Jim Olson is a former chief of counterintelligence at
the CIA.
You have to pretend to be someone else.
That's your cover.
A decorated spy who was undercover in Paris, Vienna
and Moscow.
Olson made the difficult decision to come in from the
cold to teach the country's next generation of
intelligence officers at the Bush school at Texas A&M
University. As the prosecutor's expert witness
on tradecraft, Olson says, Xu Yanjun's wooing of the GE
engineer was textbook.
In LinkedIn, you're soliciting responses from
prospective employers.
And what the Chinese do is they respond.
And they do it under the guise of something that is
innocent sounding. Would you be available to come to
China at our expense to do a guest lecture?
It's aboveboard, it's unclassified, all expenses
paid. They wine them and dine them.
They flatter them.
So far, none of that sounds like spying.
That sounds like networking.
It's spying from the Chinese standpoint because they're
sizing this person up.
They've got designs on that person.
They're not satisfied with an unclassified lecture.
They want to get their hands on the goods.
They want to get into the classified realm, into the
trade secret realm.
Prosecutors say that while the GE engineer tells his
bosses he's going to visit his family, he leaves out
one crucial bit, which is against company policy.
He went on the trip and didn't tell the bosses that
he was going to give this presentation.
And that's what initially we were investigating.
GE and law enforcement discover the engineer had
taken company material to China to help him prepare
for the presentation.
His material so sensitive, that you need a license to
take it out of the country.
After the FBI confronts him in GE's offices, the
employee begins to cooperate.
So with the FBI, does is they take control of the
operation. They begin to respond as the employee to
the emails and the phone calls that are coming in
from the Chinese side.
And it is a classic double agent operation.
The FBI uses the GE engineer to connect with the man he
met in China.
Xu sitting over in China is encouraged because the
communications that are coming back from the FBI
posing as the employee are encouraging.
So Xu thinks the GE engineer is a spy for China.
He's moving in that direction.
But he's actually a double agent working for the FBI.
That's right.
Xu begins testing the boundaries, sending detailed
requests to the engineer to see what he'd be willing to
fork over.
One of the things that Xu sent to the GE engineer was
a shopping list of things that he was looking for.
This was a list of things that he obviously had gotten
from talking to other people in China, companies
and government officials.
So this is the wish list.
This is the wish list. So the top version is the
Chinese version and then the translation underneath.
And so this is the actual ask.
He's asking for the types of software programs they're
using. He's asking design and structure questions
about the composite material for fans and the
fan casing.
Was there a moment where you said, you know, we're over
the hump here, we have plenty of evidence and we're
going to be able to prosecute this case?
To me, it was the request for the laptop directory.
A laptop directory would list all the files that the
engineer had access to.
Files filled with GE's proprietary information and
possibly the secret sauce for its engine blades.
He attaches instructions on exactly how.
Here's how you do it. Step one: create a notepad
document. Step two: open it and enter in the following
content. So he's giving him literally step by step
instructions on how to send him GE information.
Yeah, and this is the type of document that should make
U.S. Companies nervous.
This is exactly the steps that you go through if you
want to copy your company computer and give it to
China.
China is one of the world's biggest markets for new
commercial aircraft, and it's relied on Boeing and
Airbus for most of its airplanes.
The country has a commercial airplane
manufacturer, Comac, but it hasn't exactly done well.
The Chinese have since the late '70s, tried to develop
their own aircraft first on their own, and then
collaboration with Western companies.
Almost all of those have failed.
Scott Kennedy of the Center for Strategic and
International Studies has been researching China since
he was a college student there 35 years ago.
The C919, which is supposed to compete with Boeing's
737, everything that's in that plane that keeps it in
the air is American or European.
So explain, if you could, how this Chinese spy, Xu
Yanjun, stealing this piece of technology from GE
Aviation fit into the larger goal of what China is
trying to do.
The Chinese have been trying to develop engine technology
on their own. There have been people in China who
have been looking for alternative means, so to
speak, to obtain this technology that they
couldn't develop regularly and legitimately.
And those are the spies.
Yes.
Creating their own commercial aircraft is
perhaps Xi Jinping's top commercial priority.
He has associated himself personally with achieving
this mission. The political incentive for anyone in
China in this sector is sky high.
And it's part of a larger plan called Made in China
2025. Unveiled in 2015 by the Beijing government, it
listed ten high tech or advanced industries that
China wanted to develop fast, first to supply their
own domestic market and then the global one.
What areas do the Chinese want to dominate?
Computers, phones, telecom equipment, new energy
vehicles, autonomous vehicles, commercial
aircraft, biotech.
Their wish list actually looks a lot like our wish
list.
That's a plan to dominate the global economy.
Certainly the Chinese, I think, believe that if they
are not at the top, they're going to be victim to
somebody else.
But commerce is also part of national power.
When China first opened up to the U.S.
and the West in the 1970s, the country became the
destination for low cost manufacturing, clothing,
toys and other consumer goods to the benefit of the
American shopper's wallet.
But as China's economy boomed, its middle class
did, too.
China has started to experience the same
transition that all countries eventually
experienced. Wages start to rise and industries start to
move.
Timothy Heath is a senior international and defense
researcher with the RAND Corporation.
The current path that China is on is unsustainable.
They cannot keep making these low wage products.
They are subsidizing them currently at such a heavy
rate that the losses are growing and growing and the
debt is growing.
If it fails to move up the value added chain, China
will be faced with a massive unemployment problem
and its prospects will be very bleak.
So if you can't develop it yourself, the strategy in
China is go out and steal it or go out and buy it.
Correct. And they have directed all elements of
state power from the commercial to the academic
to the government to the military to do their part in
acquiring the technology needed for China to succeed.
Senator Mark Warner, a Democrat, and Senator Marco
Rubio, a Republican, are the leaders of the Senate
Intelligence Committee.
They've been briefing U.S.
business leaders about the threat from China since
2018.
Today, the world we live in, the world we've all
benefited from, the world we still benefit from, to
some extent, was a world framed by an American led
order. Now, if they are dominant in these fields in
the 21st century, the entire world will be
responding to Chinese standards, which is leverage
in and of itself over geopolitics, over decisions
that policymakers can make over society.
The old notion of 20 years ago, what national security
was, who's got the most planes, tanks, ships and
guns is no longer the case.
Who controls these data flows?
Who has the most advanced wireless communications?
Who controls overhead satellites?
Who is going to make the most advances in synthetic
biology or controls next generation energy?
That is all within the gambit now of national
security.
And for some, like Xu Yanjun, it may mean taking
enormous risks to obtain that tech.
The FBI sends Xu a doctored laptop directory through the
GE employee.
And what did Xu say when he got the document?
Things changed pretty dramatically in a few
different respects.
One, Xu reached out and actually tried to call him
on the phone, which he had not done prior to this.
Secondly, he was much more interested in meeting again
with our GE employee.
Xu, sitting over there and he thinks this is terrific.
This is going to be a promotion. This is going to
be an intelligence coup.
I'm going to get the engine blades that we've been
looking for for a long time from GE Aviation.
So he's excited.
He's hungry.
So at that moment, the FBI has him sort of on the hook.
Yes. And their goal is to get him out of China because
they can't get him.
They can't get him in China.
The FBI sent a message saying, Look, it's too busy
at work. Things are too crazy.
I just can't get back to China right now.
They're sending me to Europe to do some work.
And that's when you're planting the seed in Xu's
head that he needs to come out and go to Europe.
Yes. And initially he didn't bite.
But when he sent the request for the directory
and we sent the directory back, suddenly Europe was on
the table for him.
There was some negotiation over where the GE engineer
would meet with Mr. Xu and they finally settled on
Belgium.
At the meet, the engineer is to bring his GE laptop which
Xu will copy.
But when Xu arrives at the designated location in
Brussels, he's arrested along with an associate.
In their possession, a phone that had some 200 photos
from the GE engineer's social media accounts,
including many of his family.
Xu is extradited to the United States and put on
trial in 2021.
What we tried to explain to the jury was he's not going
to use the word trade secret. When you target the
specific guy who works in this technology and you ask
him to bring the whole laptop and you plan on
copying it and you come with cash and pictures of
the guy's family.
Yeah, we know what your intent was.
You were trying to steal it.
And Xu made a critical mistake that helps the
prosecutor's case.
He used an iCloud account to back up his phones and
incredibly kept a diary in the phone's calendar that
the prosecutors were ultimately able to access.
They learn shoes having both professional and
personal issues.
A few weeks before the GE engineer visits, Xu writes
that work, relationships and money are not going in
the right direction.
And there was one more thing the investigators
found.
Nobody's even seen this form before.
That form there?
Yes, he had taken pictures of his cadre application
with the Communist Party.
Walked through his work history from college into
the MSS and all the different jobs that he had
with the MSS until he rose to the position of Deputy
Division Director.
So this is literally the resume of a Chinese spy.
That's exactly what it is.
The United States has never captured an MSS agent
before. Is that right?
That's correct.
He was not as professional as he could and should have
been, particularly when he was exposing himself to that
kind of risk.
What does that tell you?
It tells me that he was so confident that he became
reckless.
Or was he just a lousy spy?
I don't think he was a lousy spy because we believe that
his targeting and his development was
professional. And when the engineer went to China, he
did a really good job of winning his confidence and
playing him and moving him along in the right path.
There was other electronic evidence as well showing
that Xu had targeted employees at Honeywell,
Boeing and Safran, a French aviation company that has a
joint venture with GE.
While prosecutors didn't allege Xu Yanjun had
actually obtained GE's confidential information, he
was convicted on four counts of attempted economic
espionage and trade secret theft.
In November of 2022, he was sentenced to 20 years in
federal prison.
Xu's attorney declined our interview request.
The engineer, David Zhang, who Xu targeted, was fired
by GE in early 2018.
When asked to comment, China's embassy in
Washington, D.C. issued a statement to CNBC saying
"The Chinese government has never participated in or
supported anyone in any form in stealing commercial
secrets," and "We welcome U .S.
and other foreign companies to access the Chinese
market, share development dividends and work together
for a stronger world economy. We reached out to
GE Aerospace, Honeywell, Boeing and other aviation
companies. They either did not respond or declined our
request to comment.
Are American executives are afraid of the Chinese?
I don't think they're afraid of them.
I wish they were more afraid. Once you enter into
a relationship with a Chinese company, once you've
established a Chinese market, they will play that.
And so you become, unfortunately, in too many
cases, more obliging to the Chinese than you should.
We're not saying businesses can't do business in China
at all, but we are saying you really want to be
careful.
FBI Director Christopher Wray says there's evidence
Chinese spy agencies steal trade secrets with a larger
goal in mind.
When you look at what China is doing, here, is China's
goal to compete with American companies?
Or is China's goal here to eliminate American
companies?
Well, their definition of competing, I think, involves
embracing the idea of eliminating.
If you're basing what you t hink American policy should
be on the assumption that China's goal is just simply
to eliminate competition, I think that's alarmist and
it's going to lead you to adopt policies which are
actually self-defeating.
And I think you can come up with a relatively nuanced,
sophisticated, smart strategy that doesn't lead
you just simply to say what we need is fortress America.
We are in essentially one of the generational challenges
that we've experienced.
Are you confident we can win it?
Yes.
Why?
Ultimately, our values, our free market system, I think,
will prevail. But we need to not let our foot off the
gas.
What's the way for the United States to win this
espionage war?
We have to wake up.
We have to have a partnership between
corporate America and U.S.
counterintelligence. What torments me, and it should
torment every past or current counterintelligence
officer in the United States, is that we haven't
caught them all.