Across the world everybody wants to know why is China so openly so explicitly provoking America by flying these giant balloons across America (with equipment inside the balloon whose end use is not clear). This long read in the FT says these balloons are a sign of escalating tensions between US and China: “The appearance of what the US calls a spy balloon with intelligence-collecting gear over North American soil exacerbated concerns that China is stepping up surveillance activity in near space. Charlie “Tuna” Moore, a retired F-16 pilot who was deputy head of US Cyber Command, says the high altitude balloon potentially had capabilities ranging from the ability to take high-resolution images, to sensors that do everything from enabling eavesdropping on conversations to seeing how US weapons systems communicate with each other….The Ministry of State Security, the main Chinese intelligence agency, has become increasingly active abroad over the past 10 to 15 years, while the People’s Liberation Army has expanded its surveillance capabilities. In November, the Pentagon said China had more than 260 intelligence-related satellites, a doubling from 2018.”
The article says that the balloons are the latest chapter of simmering cold war between US and China. In the preceding chapters of this tussle, the US banned Huawei. Then the US authorities sounded the alarm on TikTok (which incidentally is banned in India) saying that the app can be used to collect data on Americans. It appears that the Chinese authorities are adapting to these setbacks: “In an interview with the FT last year, FBI director Chris Wray said the Chinese government was “getting by necessity more clever about how to obscure and conceal some of its activities” as the US pushes back.
The balloon may be a highly visible manifestation of China’s espionage efforts, but its more covert operations have been evolving for years.”
The article then details how hostilities have amped up between the two great powers over the past decade with the Chinese either imprisoning or executing CIA agents in China and thus destroying the CIA’s network in China: “…six people with knowledge of the situation tell the FT the best explanation for how China took down the spy network was that it discovered how CIA operatives communicated with spies using “covcom”, or covert communications.
“We started to see a crackdown on our operatives,” says one former US official. “They got lucky and that allowed them to start pulling the threads on the sweater, and it started to unravel from there.”
A former senior intelligence official says there had been a “major security screwup” that led to the decimation of the spy network. “It was the compromise of the covcom systems that gave the Chinese the leads.””
With the CIA’s intelligence gathering capabilities decimated, it seems that China hit the fast forward button on its intelligence gathering capabilities in USA with the balloon being a continuation of that plan: “China was ramping up its technical counter-intelligence capabilities, says another person familiar with the situation — everything from surveillance cameras and computers that detect licence plates, to the tracing of “digital dust” created by smartphones and internet use.
“The Chinese technical surveillance far exceeded what we thought they were capable of,” says the person, adding that the combination of this capability with Lee’s information and the breach of the covcom was a “perfect storm”
In specific, it appears that the Chinese are seeking to steal cutting edge American IP and using big data analytics to make further inroads into the CIA’s intelligence gathering network: “…experts say one of the areas where China has been the most active is in stealing intellectual property for everything from genetically modified corn seed to jet engines….
Another area where China has been very aggressive is cyber espionage. The US has accused China of everything from the theft of government employee information from the Office of Personnel Management in 2015 to an attack on the Marriott hotel group.
One person who follows China’s cyber activity says it can triangulate data in clever ways. For example, if you find data in an OPM file for someone who does not have a public government profile but stays at Marriott hotels — where US government employees frequently stay — and has many credit card receipts over a period of time from Williamsburg, Virginia where the CIA has its training facility, it could suggest that the person is a covert operative.”
If you want to read our other published material, please visit https://marcellus.in/blog/
Note: The above material is neither investment research, nor financial advice. Marcellus does not seek payment for or business from this publication in any shape or form. The information provided is intended for educational purposes only. Marcellus Investment Managers is regulated by the Securities and Exchange Board of India (SEBI) and is also an FME (Non-Retail) with the International Financial Services Centres Authority (IFSCA) as a provider of Portfolio Management Services. Additionally, Marcellus is also registered with US Securities and Exchange Commission (“US SEC”) as an Investment Advisor.
