Briefing With Senior U.S. Government Officials On Closure of Chinese Consulate in Houston, Texas

MODERATOR: Hey, good morning, everyone. Thanks, it's [Moderator] here. Thank you for joining us for this background briefing by senior U.S. Government officials on the closure of the Chinese consulate general in Houston, Texas.

Yesterday, in a landmark speech at the Nixon Library, Secretary Pompeo talked about the need to demand fairness and reciprocity in our relationship with China, and the imperative to focus on Beijing's actions vice words as a gauge of its intent. Indeed, it's its action - the actions of the PRC government that led us to take the decision to close the Houston consulate that we intend to highlight today.

For your awareness but not for reporting, our briefers this morning are [Senior State Department Official], [Senior Justice Department Official], and [Senior United States Intelligence Official].

As a reminder, the content of this briefing is embargoed until the end of the call. Our briefers - we'll have two briefers who will begin with short introductory remarks, and then we'll have time for your questions.

To begin with a framing of the behaviors we were observing that led us to the decision to close this consulate, we'll start with our senior Justice Department official.

[Senior Justice Department Official], please, go ahead.

SENIOR JUSTICE DEPARTMENT OFFICIAL: Thank you, and good morning to all of you. Thank you for joining us this morning. By their very nature, consulates are a base of operations for foreign governments in the United States, including their intelligence services. And it's understood that there will be some activity here by those services. But because of their location within the United States and their status as sovereign[1] territory of a foreign country, they can be exploited. And the espionage and influence activities run out of a consulate can rise ultimately to a level that threatens our national security.

Let me give you a few examples of that in the context of the consulate closure in Houston. Yesterday we issued - we being the Department of Justice - a press release highlighting a network of PLA associates who concealed their military affiliation when applying for student visas here. One of those individuals was a fugitive from justice until last night, having received sanctuary in the San Francisco consulate. That press release and the individuals charged there are a microcosm, we believe, of a broader network of individuals in more than 25 cities. That network is supported through the consulates here. Consulates have been giving individuals in that network guidance on how to evade and obstruct our investigation, and you can infer from that the ability to task that network of associates nationwide.

The Houston consulate was also implicated in an investigation of grant fraud at a Texas research institution. Consulate officials directly involved - were directly involved in communications with researchers and guided them on what information to collect. The consulates in Houston - including Houston promoted talent plan memberships. Memberships in talent plans can create the incentives to steal intellectual property and otherwise create conflicts of interest.

Last year we convicted a Houston businessman, Shan Shi, of trade secret theft. He was a Houston area businessman who had established a front company and subsidiary of a Chinese firm and poached local talent and IP from a Houston business for the purpose of developing a dual-use technology that China has wanted to become self-sufficient in.

Consulates are also bases of operations for Fox Hunt teams. These are teams of agents sent from China here to coerce economic fugitives - meaning political rivals of President Xi, the Communist Party critics, and refugees - coercing them, that is, to return to the PRC. Consulates enabled the activities of those teams. Consulates also enabled direct lobbying of state and local officials, as well as business people, to favor Chinese interests. And while that's to be expected by diplomats, when it takes a turn towards the coercive or the covert, that becomes a national security problem.

And finally, we've seen consulates publicly criticize pro-Hong Kong democracy activists on campus and support nationalist counter-demonstrators, sometimes leading to violence, in the case of Australia. And I suspect the consulates here have networks of watchers on campus that report on fellow students and undermine the free expression that every student on an American campus should enjoy.

The sum total of the Houston consulate's activities went well over the line of what we are willing to accept, and unless we disrupted it, it threatened to become even more aggressive in Houston and at other Chinese consulates nationwide. Our focus is on disrupting this activity out of Houston as well as deterring similar activity by Chinese officials at other consulates. Closing the Houston consulate and preventing relocation of those officials accomplishes both of those goals.

The activity we are concerned with, while illegal, is not necessarily amenable to criminal charges, among other reasons, because of the diplomatic immunity that consulate officials enjoy. So you're not necessarily going to see many prosecutions tied specifically to the Houston consulate as a means of disrupting that activity. That tool just isn't as available to us in this context as it would be elsewhere. And the public examples and what I'm discussing here today are merely the tip of the iceberg at Houston.

We shared this information and obviously much more detail with the State Department, which ultimately has to decide when enough is enough and what response is justified. But we applaud State Department's leadership in this necessary and justified response.

I'll stop there.

MODERATOR: Thank you. We appreciate that. And just as a reminder, his remarks will be attributed to a senior Justice Department official.

Our next briefer will be referred to as a senior State Department official. [Senior State Department Official], please, go ahead.

SENIOR STATE DEPARTMENT OFFICIAL: Thank you for that and thank you for the (inaudible) that are there. Let me just frame the relationship in the broadest possible terms and then work down into details.

So, with the National Security Strategy, this administration finally acknowledged after 40-plus years that this relationship is characterized by strategic competition. That's not to fault anybody that went before. The - we tried - this has worked in many cases with other countries, the fact that engagement has led to positive outcomes. But the Trump administration acknowledged early on in the National Security Strategy that this is a strategic competition, and now the relationship is going to have to reflect that one acknowledgement and to the reality as described.

And so the decision to close the consulate in Houston reflects our longstanding concerns, but also patient U.S. diplomacy. Look, we're positive, optimistic people, but there comes a time when you just have to say enough is enough. For years, we've been asking the PRC to stop these malign and criminal activities. We've been talking to them, explaining. We traveled to meet them in Hawaii in June, as you've heard, New York City last August. And still, Beijing continues to act egregiously and criminally. Beijing's actions warranted a strong response as well as countermeasures, as you heard from Justice, to defend American security and American interests, and that's what we did in Houston.

In terms of reciprocal treatment, again, in a higher-level relationship, you don't have to work down to the foundations of reciprocity, but if you're not getting mutual respect and mutual benefit, which is language you hear from Beijing - if their actions don't match those words, then you have to get down to the basics. And so for years, the President has emphasized the need to establish reciprocity in this relationship on trade, in diplomatic engagement, on just about everything. So Beijing has enjoyed free and open access to U.S. society, but at the same time, they've denied that same access to U.S. diplomats in China and foreigners just in general. Beijing has also egregiously abused its free and open access to the U.S. as demonstrated by the actions in Houston as described by Justice, but in other PRC diplomatic missions across U.S. universities, businesses, other institutions. And so we've been very clear this - going into this, this lack of reciprocity is unacceptable. We've encouraged them to change their behavior and to at least acknowledge our concerns without success. And so Houston is a firm demonstration that we are serious.

It's not just the U.S. This is going on pretty much everywhere, so these malign and criminal activities are a worldwide problem. This is how the PRC diplomats and agents - that's how they operate, both overtly and undercover. We note that the Houston consulate general was previously posted in Australia. The trouble that PRC agents have been causing here in the U.S. isn't just limited to the U.S. It truly is global.

Australia, by the way, has done some really good things to combat this covert, coercive, and/or corrupting interference. The Australian Government has taken a range of measures and Australian civil society and journalists have helped educate the world on the problem. I commend Clive Hamilton's book Silent Invasion to you if you want to look at the background that goes to that.

And so with each indictment that's exposed, we learn just how much China has relied on illegal, covert, coercive, corrupt behavior to try to impose its will on the world as well as to gain unfair advantage in normal relationships, whether they're economic, diplomatic, or others. This is part of the problem that Secretary Pompeo highlighted in his speech yesterday.

And so I'll conclude by noting that this is part of a deliberate effort by the U.S. Government to put this relationship on solid footing - footing that's balanced, footing that respects the interests of both countries, of both sides, and acknowledges that the Chinese Communist Party has been getting away with this for too long. Time is now to act, and that's what we have done.

Let me conclude with one last point: I note the Chinese Communist Party - this is about their government system; this is not about the people in the country. There are hundreds of thousands of Chinese students. There is far more Chinese people of - who are native - are Americans or who are visitors of all sorts that are just like you and me - they're doing the right thing and they're trying to get by. This is not about them, so we need to be very careful how we address this. That concludes my comments.

MODERATOR: Right. Now we have time for your questions. During the question and answer period, if we go to our third briefer, he will be referred to as a senior U.S. Intelligence official. Moderator, if you could give the instructions for getting into the question queue.

OPERATOR: Certainly. Ladies and gentlemen, if you wish to ask a question, please press 1 then 0 on your telephone keypad. You may withdraw your question at any time by repeating the 1, 0 command. If you are using a speaker phone, please pick up your handset before pressing the numbers. Once again, please press 1 then 0 at this time.

MODERATOR: Okay. For our first question, can we go to the line of Carol Morello?

QUESTION: I'd like to ask you what you might do if the Chinese don't close the embassy or the consulate on Friday, which they haven't yet committed to. And do you expect them to send the diplomats back to Beijing or to some other consulate? And just broader, you seem to be using the same strategy here that you've used with Iran, Venezuela, Cuba, and to some degree with Russia on Ukraine to make demands and keep turning the screws tighter, but nothing ever seems to change. Why do you think this same strategy might work this time? Thank you very much.

SENIOR STATE DEPARTMENT OFFICIAL: Thank you for (inaudible) question, and I'll just point to my earlier statement about putting this relationship in a context that addresses the interests of both parties. I'm not going to speculate about how this rolls out in Houston, but I will note that - and your points about distributing and all that stuff, those are details that will be worked and addressed should they come up. But it is about taking a strong stand. And we can deal with the second and third-order effects as we go, but the point is, as our Justice briefer said, that this had just become too big to ignore, and so we are taking positive steps. Over.

MODERATOR: Great. If you have a particular - when you ask questions, if you have a particular briefer you'd like to hear from, please identify them when you ask your question. For our second question, let's go to - let's go to Yuichi from Washington Free Beacon.

QUESTION: So obviously, there's a lot of - there's several consulates in the United States, Chinese consulates in the United States.

MODERATOR: (Inaudible) cut off at the beginning.

QUESTION: Sorry, what did you say?

MODERATOR: Can you start over, please?

QUESTION: Oh, yeah, of course, yeah. So obviously, there's several Chinese consulates in the United States. Was there something in particular about the activities at the Houston consulate that was particularly concerning? I assume all the consulates to an extent are doing some stuff - some shady stuff. Would it have anything to do with the fact that there was extensive recruiting of Texas A&M and the University of Texas researchers for the Thousand Talents Program? Was there just anything in particular that really stood out about the Houston consulate?

SENIOR STATE DEPARTMENT OFFICIAL: Okay, I'll - from State I'll just lead off on that one. How we picked it - I think Justice laid out a pretty good case. But from where I sit, and if you look at what happened with the corona outbreak in China in 2019, they have been very clear about their intent to be the first to the - to market with a vaccine and the medical connections here aren't lost on me. And as the briefer noted, the medical connection in Houston is also pretty specific. Over.

SENIOR JUSTICE DEPARTMENT OFFICIAL: And from Justice, you - the activities I've described are not by any means exclusive to Houston, but Houston was not a random selection either. I think - the way I think about it, and I encourage State Department to correct me if I'm wrong, once you decide that this pattern activity is unacceptable and you're going to respond, you're probably going to respond by closing one facility as opposed to every facility, and the point of that is to send a message to the remaining officials that they've got to knock it off. And so it is certainly not random that we picked Houston. But the - I don't think, from the way I look at it, that you could point to one moment that was the straw that broke the camel's back. It has been an increase in malign activity, intelligence activity over time, and at some point you say enough is enough, and then you decide who is a - like one of the worst offenders, or the best offender if you're looking at it from the Chinese point of view, and that is the way I think of the decision having been made. Over.

SENIOR UNITED STATES INTELLIGENCE OFFICIAL: Hi, this is [Senior United States Intelligence Official]. Just one last bit to add there to what [Senior Justice Department Official] said. I think from our perspective, when this was discussed, our biggest concern is the theft of intellectual property and a lot of our technology. And when we look across the board at the activities of the consulates, [Senior Justice Department Official] is actually absolutely right: We see this kind of behavior across the board. Houston in particular, though, was - their S&T[2] collectors were particularly aggressive and particularly successful, so I think that is the reason why we tended towards Houston as well.

MODERATOR: Okay, thank you. For our next question, can we go to the line of Owen Churchill from The South China Morning Post?

QUESTION: Yeah, hi. Appreciate this. Thanks a lot. First question for State: So Pompeo said yesterday - he spoke in very explicit terms about the need to kind of engage and empower the Chinese people, but, I mean, with Beijing's closure of the Chengdu consulate, I'm assuming that the task will become more difficult for U.S. diplomats there to do outreach, to connect directly with Chinese people on the ground. So, I'm just wondering whether you had anticipated that retaliation and whether you have any concerns about its impact on the administration's ability to engage directly with the Chinese people.

And then just a follow-up question on the first briefer's comments about the fugitive in San Francisco: Could you just clarify? It sounded like you said they're no longer a fugitive. Does that mean that they've been apprehended or that they've given themselves up? What's the latest with that? Thank you.

SENIOR STATE DEPARTMENT OFFICIAL: So [Senior State Department Official] to answer your question. You're exactly right. The intent, the whole point of this is to understand China better, is to engage with the Chinese people better as diplomats, not as foreign - not as media. We can talk about designations of foreign media here in the U.S. if you like. But it's to actually start up a conversation and build a relationship and mutual understanding.

Here's the problem, though: I mean, you're seeing it firsthand or the people of Hong Kong are seeing that - is that ability is nowhere near balanced. The things that Justice described where folks are pretty much spreading out and interacting in a good way and a not-so-good way is not reflected in the PRC. My experience as a diplomat in China reflects this entirely - is that I had to ask for permission to have meetings and those were generally denied.

And so this is about making things right. I keep using the word "housekeeping." Forty years of broken glass needs to be swept up and put back in order, and given the National Security Strategy, finally acknowledging that this really is a strategic competition, we're going to do that.

Now, the second or third-order effects, I think we can mitigate those. I think in an honest negotiation with the PRC we can get back to where we need to be, but we'll see. So over.

SENIOR JUSTICE DEPARTMENT OFFICIAL: And as to your second question, yes, the defendant's in custody and I expect she'll make her initial appearance in court later today. Over.

MODERATOR: Great. For our next question, can we go to the line of Luis Martinez from ABC?

QUESTION: (Inaudible) Francisco, was that voluntary, or was that something to do with a waiver of —

MODERATOR: Can you start again?

QUESTION: Sure. With regards to the San Francisco apprehension, was that because of a waiver of diplomatic immunity, or how was that possible?

And also, just to go - a question for the senior State Department official about the situation with Chengdu, the PRC now ordering a closure of that consulate, can you provide confirmation of that and additional information about it?

SENIOR JUSTICE DEPARTMENT OFFICIAL: On your first question, I won't discuss the circumstances of arrest, but just a terminology issue: as I understand it, "diplomatic immunity" refers to the status a person might have that would make it impossible to prosecute them, and I don't think this individual had that status because, of course, they were not declared as a diplomatic official. In fact, that's the issue here, is that their true status wasn't disclosed on their visa application. That's the essence of the charge. But as to how they came to be arrested, I'm just going to defer to whatever is said in court later today if that comes up.

I also should make clear that the charges in that case lie in Sacramento, the Eastern District of California, even though, of course, the alleged individual was a fugitive in San Francisco, which is the Northern District. So just to be clear that the arrest happened in one district, but the charges and the prosecution will move forward in the Eastern District of California. Over.

SENIOR STATE DEPARTMENT OFFICIAL: And to your second question about the announcement last night about Chengdu, these are two totally different things. The arrest that we just described in Houston[3] and the closure of that consulate [4]are about nefarious activity inside the U.S. Their decision to close Chengdu, you're going to have to ask them about how they picked that, but I will note that activity in Chengdu is - to the previous question, it's about understanding and messaging the Chinese people and especially the people in that district, which include Tibet. And I will note that in all this time, the ambassador there has had one - been permitted to travel to Tibet one time. It's not like the U.S., and people need to understand that. The diplomatic presence, access, and all those things in the PRC - from firsthand experiences of many of the people that work for me it's just not the same and we need to get at reciprocity. It's important. Reciprocity creates balance and balance is stability, and we need to get back to that. Over.

MODERATOR: Great. For our next question, can we go to the line of Aruna from The Wall Street Journal? Aruna, are you there?

QUESTION: Yes, sorry. I was on mute. Thanks for doing this. So, two quick questions for the DOJ and [Intelligence] folks. Can you provide more detail about the contacts between the consulate and the researchers in the area and how that went beyond normal consular contact sort of with their nationals in the area? How specific was the direction? What types of communications were they having? And also on - in a similar vein, you mentioned the coercive methods in dealing with state and local officials. Is that referring to pressures on the officials about not getting - not visiting Taiwan and things like that? Or was there something more - can you provide examples of what that kind of contact looked like?

SENIOR UNITED STATES INTELLIGENCE OFFICIAL: So this is [Senior United States Intelligence Official]. So I can tell you - Houston, the behavior was again not unlike what we've seen throughout the country. We have I think over 50 examples over the last 10 years of the Houston consulate supporting talent plan members and recruitments in the area targeting the various research centers down there. In addition, I'll give you another example: We had, for the Fox Hunt program where China's trying to lure back dissidents or, as they call them, "economic fugitives," we have one instance where the Houston consulate representative delivered a letter to a person in the South, allegedly from his father, imploring the person to come back to the United States - I'm sorry, come back to China. So, these folks are - the folks in Houston were very much active participants in all the various efforts of collection and influence that the Chinese Government and the Chinese Communist Party is doing here in the U.S. Over.

MODERATOR: Okay. We'll move onto our next question, if we could go to the line of Nick Schifrin from PBS NewsHour.

QUESTION: [Senior State Department Official], if I could ask you to respond to Chengdu, I know you want to make the point that the two consulates are not similar and the two actions are not similar, but could you just take on the idea out there that this is a reciprocal response by China as an effort not to escalate further?

And if I could ask the senior Intelligence official: We've seen more indictments, more spotlight on Chinese actions over the last couple years. Can you talk about whether that is an indication of more Chinese activity or greater U.S. ability and/or willingness to go after that activity? Thanks.

SENIOR STATE DEPARTMENT OFFICIAL: Hey, Nick, thank you for that. And I don't mean to be glib or trite, but I would say that - have your counterpart in Beijing ask that to the MFA and help them explain the thought process behind that. You might actually get an answer, but I don't think so, and this is one of those differences we've been talking about in access and all those that we are trying to rectify. Over.

MODERATOR: Yeah, and the second part of your question? Can you open the line - Nick's line again so he can ask the second part of his question again?

OPERATOR: Nick, please press 1 then 0. Your line is open, Nick.

(No response.)

MODERATOR: Okay. Sorry about that. We'll have to move on. Let's go to the line of David Brunnstrom from Reuters. We may have time for one more question after that.

QUESTION: Can you hear me okay?

MODERATOR: Yeah. Go ahead, David.

QUESTION: Yeah, I just wanted - we had a report yesterday about returning of a U.S. diplomat to China. I understand that a flight left bound for Shanghai the night before last. Is that process going to be affected at all? Will that go ahead? Has that flight arrived? Do you have assurances from the Chinese that that process will go ahead?

And just on a couple of practical details, what time is the Chinese consulate supposed to close by? And is it reasonable that the Chinese have given the Chengdu consulate only until Monday, including the weekend, in that 72 hours? Thank you.

SENIOR STATE DEPARTMENT OFFICIAL: Thanks for that. As far as our - returning our folks to China, that continues. We still have a job to do out there. This is not - this is not related. We - for fear of the initial transparency issues we saw where it was really unclear exactly what was happening, we did the prudent thing and moved folks out of Wuhan and the rest of Mission China. So, we will continue moving them back. The Chinese side has been cooperative in that; they understand the need to get back to balance. And as far as the rest, I'm not going to comment on details on the relationship. Over.

MODERATOR: Okay. For our last question can we go to Laura Kelly from The Hill? Laura, go ahead.

QUESTION: Thanks. I'll just - I'll re-ask Nick's question because I wanted to hear the answer to that for the - for the Justice Department and maybe [Intelligence] as well. Is the - the recent indictments coming out, are they - Nick said, is there an indication of more Chinese activity or is it a greater U.S. ability and willingness to go after perpetrators?

SENIOR JUSTICE DEPARTMENT OFFICIAL: So, this is [Senior Justice Department Official]. I'll start and then I'll turn it over to the Intelligence official. From my perspective, we've been charging a lot of this activity, including economic espionage and traditional espionage, for years. So same process, same threshold, same willingness to bring those charges. Other areas, such as the talent plans, have more recently been a focus of enforcement effort. And so, there's - the answer to your question is, I think all, of the above. Part of it is… we are seeing more because victims, particularly in the private sector, are more willing to call us and work with us. I think maybe they're more alert to threats, and so they are getting to us before their employees, for example, take the IP and get to the airport. So we are able to bring that case now whereas before, if they had waited or not spotted red flags, we might not have been able to bring it before.

In the academic context, we have increased our outreach and our threat briefings to academics and security officers at universities, and that has led us - along with work by the federal funding agencies, the IGs there who are exploring talent plan memberships that weren't disclosed - that has led to more cases. As to whether Chinese activity has changed, increased, decreased, or the like, that's a question I would defer to my Intelligence Community colleague to answer. Over.

SENIOR UNITED STATES INTELLIGENCE OFFICIAL: Yeah, thanks, [Senior Justice Department Official]. So this is [Senior United States Intelligence Official]. So I think [Senior Justice Department Official] hit the nail on the head there. So, we have seen - we've got about a 1,300 percent increase in cases related to economic espionage and China over the last 10 years, and I attribute a lot of that to enhanced communication and understanding of the threat. China has always been doing this, but I would say that their efforts in talent plan recruitment are something that we are probably just fully understanding the depth and breadth of in the last, I'd say, three years or so.

We've focused a lot of our effort on - so I'd say - the phrase we use is we're not going to arrest our way out of this. The problem posed by China is too large, so we've changed our tack to focus on a communication understanding. We're trying to communicate as much as we can about the problem. That gives people the understanding to know when to interact with us, when we get the FBI involved and when they can handle it themselves, and as [Senior Justice Department Official] said, we have a lot of people coming to us now talking about the issues that they're seeing either in academia, some institution, or whether it be a politician that - with some foreign influence.

So, it's probably not so much that China is markedly increasing their efforts. We've always been a focus of their collection and their intelligence efforts. I think it's a - what we're seeing is the rise, the reflection of us getting the news out that, hey, this is a problem, it needs to be addressed, and it's a recognition by everybody, I think now, that they could play a part in fixing this problem. Over.

SENIOR JUSTICE DEPARTMENT OFFICIAL: This is [Senior Justice Department Official] again. Let me just give you what quantitative data I can. Of all the cases we bring and have brought over time alleging the theft of trade secrets, about 60 percent of those cases have some connection to China, whether it's a Chinese company that's the intended beneficiary or the like. Of that - of that group of cases, the cases where we have the unclassified proof that allows us to allege that the crime was intended to benefit a government, that's about 80 percent of economic espionage cases. So, we have over time seen consistently that China, meaning the People's Republic of China Government, as well as the companies doing business there, represent a disproportionate share of our trade secret theft and economic espionage prosecutions. Over.

SENIOR UNITED STATES INTELLIGENCE OFFICIAL: And this is - this is [Senior United States Intelligence Official] one more time. Since [Senior Justice Department Official] threw out some stats, I don't want to - I don't want to leave you without any stats from the bureau's standpoint. And I think the director said this in his speech last - or two weeks ago, but I'll reiterate it. So, we have about 2,000 active counterintelligence investigations tied to the - to China, and we open a new case about every 10 hours, just to give you a perspective on how much work we have here.

MODERATOR: All right, thank you to our briefers today. As a reminder to everyone on the call, this - the contents of the briefing were provided on background to a senior State Department official, a senior DOJ official, and a senior U.S. Intelligence official. And as this is the end of the call, the embargo on the contents is lifted. Thank you all for joining today.