Transcript: A Chinese spy in Europe’s midst

This is an audio transcript of the FT News Briefing podcast episode: ‘A Chinese spy in Europe’s midst’

Marc Filippino
Good morning from the Financial Times. Today is Monday, December 18th, and this is your FT News Briefing.

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A lot of companies are going belly up, thanks to higher borrowing costs. And pay inequality is still a huge threat in the United Kingdom. Plus, an FT investigation found that a European politician spied for China.

Henry Foy
I think it’s discernible from these conversations that it’s probably not the only asset in Europe that’s being run in this way.

Marc Filippino
I’m Marc Filippino and here’s the news you need to start your day.

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Corporate bankruptcies these days are up. In fact, they’re way up. In advanced economies, company insolvency is increasing at double-digit rates. In the US, they rose 30 per cent year on year, and this year they’re up 13 per cent across the European Union. That’s from January to September. The main culprit here is higher interest rates, the ones central banks put in place to fight inflation. And these bankruptcies could get worse. A lot of companies have to refinance their debt and they’re going to have to do it at a much higher cost over the next couple of months. The good news is that central banks last week indicated that interest rates have peaked and that cuts are coming some time — we don’t know exactly when — but sometime next year.

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A spy infiltrated European politics. Up until recently, Frank Creyelman was a Belgian senator. But at the same time, he was an intelligence asset for China. He tried to influence discussions on Hong Kong, Uyghur Muslims and energy security. That’s according to a new joint investigation by the FT, Der Spiegel and Le Monde. It all came out through leaked text messages between Creyelman and his Chinese government handler. Creyelman has been ejected from his party. Here to talk to me about the investigation is Henry Foy, the FT’s Brussels bureau chief. Hey, Henry.

Henry Foy
Hey.

Marc Filippino
Quite the story, Henry. So do we know what China wanted to accomplish by tapping Creyelman to act as a spy?

Henry Foy
Well, I mean, at one point in these conversations, which cover three and a half years, the Chinese handler says to Creyelman: “Our purpose is to divide the US-European relationship.” That is a topic that keeps coming up in the conversations. There’s discussions around European leaders visiting China, the German chancellor Olaf Scholz is one example, these of how rising energy prices in Europe can be blamed on sanctions against Russia, but also US energy imports, trying to portray China as a country that wants to help Europe while the US wants to just merely sell it more expensive energy. So this is sort of a theme that keeps coming up and the handler keeps saying to Creyelman, look, what other ways are there that your activities can sort of drive a wedge between Europe and the US?

Marc Filippino
So, yeah, tell me a little bit about these text messages, the ones between Creyelman and the Chinese handler that he’s been talking to.

Henry Foy
So these messages really give an incredible insight into how Chinese intelligence services are conducting these kind of influence operations in European states, using human assets in those states to try to influence the political debate. We really see how the handler in China is discussing what topics they like to be raised, what issues are politically sensitive in Belgium, in this case, how best Chinese interests can be advanced to that. But also, we get to see some of the mundane sides of it. You know, how the asset in Belgium was paid, that there’s discussions around the use of cryptocurrency, but also things like booking flights for this asset to come to China. So it’s a really quite candid and vivid evidence into how these operations are conducted.

Marc Filippino
Now, Henry, this is one case that you found through this investigation that you did. But do we have a sense of how widespread spy operations like this one are in Europe?

Henry Foy
There are references in the messages to certain activities in other European countries, and I think it’s discernible from these conversations that it’s probably not the only asset in Europe that’s being run in this way. It obviously shines a light on Belgium’s role as the headquarters of both the European Union and Nato, the military alliance. They’re both based here. It means you have a large number of very high, powerful European officials, either based or travelling through Brussels at any one moment. And that has in the past led to accusations that the Belgium intelligence agencies are under huge strain trying to protect both Belgian people, but also foreign officials who live and work here from these kinds of operations. So I think that’s another aspect of the investigation, sort of showing how China definitely sees Belgium as a place where its influence operations can have high impact.

Marc Filippino
OK. So what does this mean for the relationship between Europe and China and I guess more broadly, the west and China?

Henry Foy
I think it’s hard to say now what the impact this might have, but I think there is rising concern in European capitals, China’s intentions and its use of intelligence operations to try to influence them. Europe for a long time has tried to work out how best to respond to the rising rivalry between the US and China, not just becoming a sort of battleground, if you like, for those two superpowers to play, but trying to find a role in that triangle, if you like. And I think investigations like ours just sort of raise that spotlight on an issue that Europe needs to really make sure it knows exactly what it’s doing and make sure that it’s very well protected.

Marc Filippino
Henry Foy is the FT’s Brussels bureau chief. Thanks, Henry.

Henry Foy
Thanks a lot.

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Marc Filippino
Pay disparity in the UK is as widespread as ever. A new report out today shows that the cost of living crisis hasn’t really done anything to close the widest of pay gaps: the one between what chief executives make and the average earnings of their employees. Now, there was some hope for progress during the pandemic when pay gaps actually narrowed. But in 2022, the median ratio between CEOs and employees was 80 to 1 across the UK’s biggest listed firms.

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Next month, voters in Taiwan will head to the polls in what will be a closely watched presidential election. There are a lot of issues on the table, and one of them is a Taiwanese chipmaker, TSMC. Here to talk with me about it is the FT’s Kathrin Hille. Hey, Kathrin.

Kathrin Hille
Hi.

Marc Filippino
So, Kathrin, unpack this for me. Why has a chipmaker become an election issue in Taiwan?

Kathrin Hille
Well, Taiwan Semiconductor Manufacturing Company, TSMC, is not only the world’s largest manufacturer of advanced chips, it’s also a huge part of the Taiwanese economy and of the Taiwanese stock market. It is a large employer and it contributes a very large share to Taiwan’s exports. And although the Taiwanese are rightly proud of the company and its contributions to the global tech sector, the footprint of TSMC and other chipmakers on the local environment is worrying, especially some of the younger voters. The chip fabrication plants take up a lot of power, a lot of water and a lot of land which are all scarce resources and limited resources on this island.

Marc Filippino
Wow. And how did TSMC get to be such a big part of Taiwan’s economy?

Kathrin Hille
TSMC, is at the heart of Taiwan’s economic success story for the past, well, 30 or more years, partly because its founder had this idea that in order to keep achieving the gains in chip performance, it might be a good idea to have part of the industry focus on just that, on the engineering progress in manufacturing the chips and freeing up other engineering capacity to focus or to concentrate on the design of the chips, which is a very different kind of skill. So Taiwan kind of carved out this irreplaceable role, really, in the global technology supply chain by setting up that company. But of course, there are a lot of other industries here as well. And so the Taiwanese, or some of them, believe that maybe it might be a good idea to broaden Taiwan’s economic structure a bit and maybe even move some of the chip plants abroad.

Marc Filippino
OK. So voters are concerned about giving TSMC too much power, but the country is also super reliant on it as an economic engine. Is this the big picture issue that candidates are grappling with as Taiwan gets closer to election day?

Kathrin Hille
They all have policy proposals that include trying to broaden the range of high-tech industries that Taiwan should develop and strengthen, but not to the extent that they would suggest that TSMC move away. On the contrary, actually, because the chip industry is also an industry with geopolitical relevance. It’s many of the things that can contribute are key to national security sectors, to the defence industry and its technologies are closely guarded. So this entire industry has a political component to begin with, and that’s also for the Taiwanese government. Now a concern because they reckon that this will keep Taiwan’s importance to other countries and that maybe if China were one day to attack the country, all the nations whose companies need Taiwan’s chips will care more about defending the country.

Marc Filippino
Kathrin Hille is the FT’s Greater China correspondent. She’s based in Taipei. Thanks, Kathrin.

Kathrin Hille
Thank you very much.

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Marc Filippino
You can read more on all of these stories at FT.com for free when you click the links in our show notes. This has been your daily FT News Briefing. Make sure you check back tomorrow for the latest business news.

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