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As China’s spy balloon drifted across the continental United States in February, American intelligence agencies learned that President Xi Jinping of China had become enraged with senior Chinese military generals.
The spy agencies had been trying to understand what Mr. Xi knew and what actions he would take as the balloon, originally aimed at U.S. military bases in Guam and Hawaii, was blown off course.
Mr. Xi was not opposed to risky spying operations against the United States, but American intelligence agencies concluded that the People’s Liberation Army had kept Mr. Xi in the dark until the balloon was over the United States.
American officials would not discuss how spy agencies gleaned this information. But in details reported here for the first time, they discovered that when Mr. Xi learned of the balloon’s trajectory and realized it was derailing planned talks with Secretary of State Antony J. Blinken, he berated senior generals for failing to tell him that the balloon had gone astray, according to American officials briefed on the intelligence.
The episode threw a spotlight on the expanding and highly secretive spy-versus-spy contest between the United States and China. The balloon crisis, a small part of a much larger Chinese espionage effort, reflects a brazen new aggressiveness by Beijing in gathering intelligence on the United States as well as Washington’s growing capabilities to collect its own information on China.
For Washington, the espionage efforts are a critical part of President Biden’s strategy to constrain the military and technological rise of China, in line with his thinking that the country poses the greatest long-term challenge to American power.
For Beijing, the new tolerance for bold action among Chinese spy agencies is driven by Mr. Xi, who has led his military to engage in aggressive moves along the nation’s borders and pushed his foreign intelligence agency to become more active in farther-flung locales.
The main efforts on both sides are aimed at answering the two most difficult questions: What are the intentions of leaders in the rival nation, and what military and technological capabilities do they command?
American officials, most of whom spoke on condition of anonymity to discuss espionage, have stressed in interviews throughout the year the magnitude of the challenge. The C.I.A. is focusing on Mr. Xi himself, and in particular his intentions regarding Taiwan. The F.B.I.’s counterintelligence task forces across the nation have intensified their hunt for Chinese efforts to recruit spies inside the United States. U.S. agents have identified a dozen penetrations by Chinese citizens of military bases on American soil in the last 12 months.
Both countries are racing to develop their artificial intelligence technology, which they believe is critical to maintaining a military and economic edge and will give their spy agencies new capabilities.
Taken together, U.S. officials say, China’s efforts reach across every facet of national security, diplomacy and advanced commercial technology in the United States and partner nations.
The C.I.A. and the Pentagon’s Defense Intelligence Agency have set up new centers focused on spying on China. U.S. officials have honed their capabilities to intercept electronic communications, including using spy planes off China’s coast.
The spy conflict with China is even more expansive than the one that played out between the Americans and the Soviets during the Cold War, said Christopher A. Wray, the F.B.I. director. China’s large population and economy enable it to build intelligence services that are bigger than those of the United States.
“The fact is that compared to the P.R.C., we’re vastly outnumbered on the ground, but it’s on us to defend the American people here at home,” Mr. Wray said in an interview, using the initials for the People’s Republic of China. “I view this as the challenge of our generation.”
China sees it differently. Wang Wenbin, a Chinese Foreign Ministry spokesman, has said that “it is the U.S. that is the No. 1 surveillance country and has the largest spy network in the world.”
‘Going After Everything’
Espionage can halt a slide into war or smooth the path of delicate negotiations, but it can also speed nations toward armed conflict or cause diplomatic rifts.
In late February, weeks after he canceled an important trip to Beijing over the balloon episode, Mr. Blinken confronted China’s top diplomat with a U.S. intelligence assessment that Beijing was considering giving weapons to Russia. That disclosure raised tensions, but also might be keeping China from sending the arms, U.S. officials say. And when Mr. Blinken finally went to Beijing in June, he raised the issue of Chinese intelligence activities in Cuba.
China’s vastly improved satellite reconnaissance and its cyberintrusions are its most important means of collecting intelligence, U.S. officials say. The fleet of spy balloons, though far less sophisticated, has allowed China to exploit the unregulated zone of “near space.” And the U.S. government is warning allies that China’s electronic surveillance capabilities could expand if the world’s nations use technology from Chinese communications companies.
Artificial intelligence is another battleground. The U.S. government sees its lead in A.I. as a way to help offset China’s strength in numbers. Chinese officials hope the technology will help them counter American military power, including by pinpointing U.S. submarines and establishing domination of space, U.S. officials say.
American officials are also more concerned than ever at Chinese agencies’ efforts to gather intelligence through personal contacts. They say China’s main intelligence agency, the Ministry of State Security, aims to place agents or recruit assets across the U.S. government, as well as in technology companies and the defense industry.
Chinese agents use social media sites — LinkedIn in particular — to lure potential recruits. Any time an American takes a publicly disclosed intelligence job, they can expect a barrage of outreach from Chinese citizens on social media, according to current and former officials.
Responding to that threat, federal agencies have quietly opened or expanded their in-house spy catching operations. And Mr. Wray said the F.B.I. has thousands of open Chinese intelligence investigations, and every one of its 56 field offices has active cases. All of those field offices now have counterintelligence and cyber task forces largely focused on the threat from Chinese intelligence.
Those investigations involve attempts by Chinese spies to recruit informants, steal information, hack into systems and monitor and harass Chinese dissidents in the United States, including using so-called police outposts.
“They’re going after everything,” Mr. Wray said. “What makes the P.R.C. intelligence apparatus so pernicious is the way it uses every means at its disposal against us all at once, blending cyber, human intelligence, corporate transactions and investments to achieve its strategic goals.”
But critics say some of the U.S. government’s counterintelligence efforts are racially biased and paranoid, amounting to a new Red Scare — a charge at least partly supported by the cases the Justice Department has had to drop and by its shutdown of the Trump-era China Initiative program.
China has undertaken its own expansive counterintelligence crusade, one that echoes Mao-era political campaigns. On July 1, China enacted a sweeping expansion of a counterespionage law. And in August, the Ministry of State Security announced that “all members of society” should help fight foreign spying, and offered rewards for anyone providing information.
The rival governments have also established new listening posts and secret intelligence-sharing agreements with other governments. American and Chinese agents have intensified their operations against each other in pivotal cities, from Brussels to Abu Dhabi to Singapore, with each side looking to influence foreign officials and recruit well-placed assets.
For American spy agencies, Mr. Xi’s decisions and intentions are arguably the most valuable intelligence they seek, but he is also the most elusive of targets.
U.S. agencies are now probing exactly why China’s defense minister, Gen. Li Shangfu, appears to have been placed under investigation for corruption, and why Mr. Xi ousted Qin Gang, his foreign minister. American diplomacy and policy depend on knowing the motivations behind these moves.
A decade ago, the United States’ network of informants in China was eliminated by Chinese counterintelligence officials after the informants’ identities were uncovered. Since then, the C.I.A. has faced a major challenge to rebuild its network. That is partly because China’s expanding webs of electronic surveillance have made it difficult for American case officers to move freely in China to meet contacts.
China even has artificial intelligence software that can recognize faces and detect the gait of an American spy, meaning traditional disguises are not enough to avoid detection, according to a former intelligence official. American operatives now must spend days rather than hours taking routes to spot any tailing Chinese agents before meeting a source or exchanging messages, former intelligence officials say.
And Mr. Xi, like other authoritarian leaders, limits his use of phones or electronic communications, for the very purpose of making it difficult for foreign intelligence agencies to intercept his orders.
But officials in the vast bureaucracy under Mr. Xi do use electronic devices, giving U.S. agencies a chance to intercept information — what spies call signals intelligence — to give them some insight into the internal discussions of their Chinese counterparts.
In the balloon incident, the C.I.A. began tracking the balloon in mid-January, when the Chinese army launched it from Hainan Island, officials said.
U.S. officials also determined that commanders on the Central Military Commission that Mr. Xi chairs were unaware of this particular flight until it was tipping into crisis, and they vented their frustration at the generals overseeing the surveillance program.
Since that crisis, China has paused the operations of its fleet of balloons, but American officials said they believe Beijing will likely restart the program later.
Under William J. Burns, the C.I.A. director since 2021, the agency has hired more China experts, increased spending on China-related efforts and created a new mission center on China. And while American officials refuse to discuss details of the agency’s network of informants, Mr. Burns said publicly in July that it had made progress on rebuilding a “strong human intelligence capability.”
While it is unclear how robust the new network is, some U.S. officials think Mr. Xi’s extremely authoritarian governance style gives intelligence agencies an opening to recruit disaffected Chinese citizens, including from among the political and business elite who had benefited in previous decades from less party control and a less ideological leadership.
Some prominent Chinese figures, including “princelings” of Communist Party elite families, say in private conversations that they disagree with the turn China has taken.
China has also poured resources into determining the thinking of top American officials. A Justice Department indictment unsealed in July suggests Chinese businesspeople tied to the government were trying to recruit James Woolsey, a former C.I.A. director who was in the running to be a Trump administration national security cabinet official right after the 2016 election.
More recently, a sophisticated, highly targeted penetration of Microsoft’s cloud computing platform gave China access to the emails of senior State Department diplomats, including the American ambassador in Beijing and Commerce Secretary Gina Raimondo.
American officials traveling to China take elaborate countermeasures to avoid having government secrets pilfered. They are issued burner cellphones and laptops and told to leave their regular devices at home.
Dennis Wilder, a former U.S. intelligence analyst on China and a senior fellow at Georgetown University, said that discerning the intentions of American leaders is one of the very top priorities for Chinese intelligence agencies.
“They look for senior planning and intentions,” he said. “What is the secretary of state really thinking? What is he really doing? What are the operations the C.I.A. is really running against you?”
Measuring Military Muscle
No issue in U.S.-China relations has loomed larger than Taiwan. It is the flashpoint likeliest to lead to war, analysts say. Mr. Xi has said China must take control of Taiwan, a de facto independent island, and has ordered his military to be capable of doing so by 2027. But so far, the United States and its allies do not appear to have concrete intelligence on whether Mr. Xi would be willing to order an invasion.
And China obsesses over the flip side of the question. Mr. Biden has declared four times that the U.S. military will defend Taiwan should China try to seize the island. But whether Mr. Biden really means that — and whether American leaders plan to permanently keep Taiwan out of China’s reach — are believed to be focal points of some of China’s intelligence efforts.
In the absence of real intelligence on intentions, American and Chinese officials are focused on gathering information on each other’s military capabilities. The United States, for instance, has stepped up its aerial surveillance of Chinese military bases.
Meanwhile, Chinese intelligence agents have penetrated many parts of the Taiwanese government over the decades, former U.S. intelligence officials say. Chinese agents are now trying to learn more about the Biden administration’s efforts to outfit Taiwan with certain weapons systems and provide secret training for Taiwanese troops. Chinese agents also seek more details on the growing military cooperation between the United States and Asian allies.
“What is it all for?” asked Representative Mike Gallagher, Republican of Wisconsin and chairman of the House’s new China committee, referring to Beijing’s espionage efforts. “My speculation, based on what we see around our military bases, based on their cyberhacks, is that it is all geared toward Taiwan.”
Other U.S. officials also say China’s desire to learn more about American armed readiness explains its attempts to surveil military bases around the United States. In the last 12 months, according to U.S. officials, they have tracked about a dozen attempts by Chinese citizens to sneak on to military bases to take photos or measure electromagnetic activity. Some of the recent efforts appear focused on bases that would play an important role in a Taiwan conflict, they say.
In August, the Justice Department charged two American sailors with providing military secrets to Chinese intelligence agents. The sailors pleaded not guilty.
But intelligence collection is not in itself a prelude to war. The espionage struggle actually could be a substitute for armed clashes, as it often was during the Cold War.
U.S. intelligence officials believe that China does not want to go to war now over Taiwan, Avril D. Haines, the director of national intelligence, told Congress in March.
“We assess that Beijing still believes it benefits most,” she said, “by preventing a spiraling of tensions and by preserving stability in its relationship with the United States.”
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