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China’s Spies Are Catching Up

He told a story to the C.I.A. that was so bizarre it might just be true.
He said that he worked in China’s nuclear program and had access to the
archive where classified documents were stored. He went there after
hours one night, scooped up hundreds of documents and stuffed them into a
duffel bag, which he then tossed out a second-story window to evade
security guards. Unfortunately, the bag broke and the papers scattered.

Outside, he collected the files and stuffed them back into the torn bag.
Although many of the documents were of interest for their intelligence
content, it was the one about the W-88 that roiled American
counterintelligence most because it contained highly classified details
about a cutting-edge warhead design. 

The United States had been producing small nuclear warheads for decades,
and the Chinese were desperate to find out how to build miniaturized
warheads themselves. China’s military was, and still is, playing
catch-up to the United States. 

China’s success in obtaining the secret design of the W-88 is the most
dramatic example of a fact that United States counterintelligence
agencies have been slow to recognize: just as China has become a global
economic power, it has developed a world-class espionage service — one
that rivals the C.I.A. 

During the cold war, dozens of counterintelligence agents in the F.B.I.
and the C.I.A. pursued Soviet and then Russian spies. The K.G.B. was
seen as the enemy; China took a back seat. Only a handful of F.B.I.
agents specialized in Chinese spy cases, and their work was not regarded
as career-enhancing. Washington’s ongoing failure to make Chinese
espionage a priority has allowed China to score a number of successes in
its espionage efforts against the United States. 

China’s foreign intelligence service and its military intelligence
agency actively spy on the American defense industry, our nuclear
weapons labs, Silicon Valley, our intelligence agencies and other
sensitive targets.

In January, when Robert M. Gates, then the defense secretary, was visiting China, Beijing unveiled a stealth fighter jet,
the J-20. The disclosure demonstrated that China had achieved a stealth
capability, allowing it to conceal its planes, ships and missiles from
radar — similar to the American stealth technology that China has been
seeking to acquire by clandestine means for years. 

Later that month, an engineer who worked on the B-2 stealth bomber for Northrop Grumman was sentenced to 32 years in prison
for passing defense secrets to China. In exchange for more than
$100,000, he had helped design a stealth exhaust system for China’s
cruise missiles to make it difficult to detect and destroy them. 

And in August, reports attributed to American intelligence officials asserted
that Pakistan had allowed Chinese experts to inspect the remains of the
stealth helicopter that crashed during the May mission to kill Osama
bin Laden. Although Pakistan and China denied the reports, Beijing would
have a great interest in examining the tail of the Black Hawk
helicopter, the part of the aircraft that was not destroyed by the Navy
Seals team, to learn more secret details of American stealth technology. 

Meanwhile, the mystery of the leaked W-88 warhead design remains
unsolved. At first, the American government suspected that Wen Ho Lee, a
Los Alamos nuclear scientist, had leaked the W-88, but it produced no
evidence that he had done so. He was held in solitary confinement for
nine months, eventually pleaded guilty to one count of mishandling
classified information and won an extraordinary apology from the federal judge who presided over the case. 

by the Energy Department, the F.B.I. had chased the wrong person for
three years. Finally, in 1999, Robert Bryant, then the bureau’s deputy
director, enlisted Stephen Dillard, a veteran counterintelligence agent,
to head a major investigation of how China had acquired the design of
the W-88. 

The inquiry was led by the F.B.I. and run by a task force of 300
investigators from 11 federal agencies, including the Defense
Department, the C.I.A., the National Security Agency and the Defense
Intelligence Agency. On Sept. 11, 2001, some of the investigators were
killed when American Airlines Flight 77 was flown by terrorists into the

But the investigation went on. Mr. Dillard’s task force, operating out
of public view, looked at the nuclear weapons laboratories, government
agencies and defense contractors in California and several other states
who had manufactured parts of the warhead. The F.B.I. interviewed the
walk-in, who was by now living in the United States, but he could shed
no light on the source of the document. 

Finally, after four years, the investigation ended with American
intelligence agencies no closer to knowing how China obtained the secret
design of the nuclear warhead. The answer remains locked up in Beijing. 

More than a decade later, China’s spies continue to conduct espionage against military targets. Last year, a Pentagon official was sentenced
to prison, the last of 10 people rounded up by the F.B.I., all members
of a loosely connected Chinese spy network on the West and East Coasts
that was run by Lin Hong, a spymaster in Beijing. The data that made its
way to China included information on the Navy’s Quiet Electric Drive,
designed to make submarines harder to detect, the B-1 bomber and
projected American arms sales to Taiwan. 

China has even penetrated the F.B.I. In 2003, Katrina Leung, an F.B.I. informant for two decades, was found to be working as a double agent for Beijing. Astonishingly, the two top F.B.I. agents
in California responsible for Chinese counterintelligence were having
affairs with Ms. Leung at the same time, allowing her to help herself to
classified documents that were brought to her home by one of the

China’s success in stealing American secrets will provide a continuing
challenge to the spy catchers. And Washington’s counterintelligence
agents, accustomed to the comfortable parameters of the cold war and
more recent battles against Al Qaeda, must rethink their priorities and
shift their focus, resources and energy eastward to counter China’s

If not, more secrets like the W-88 nuclear warhead will continue to find their way to Beijing.