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.
