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UNTIL RECENTLY, Tim Hawk was among America's top spy masters. The four-star general spent 33 years in Air Force intelligence and rose to lead America's largest and most advanced intelligence agency. Hawk was also in charge of defending America from computer threats. In his first television interview since retirement, General Hawk is here to warn that China has hacked into US computer networks to An astonishing degree. And he believes he knows why. The surprise, Tim Hawk told us, is that China is targeting not just the US military and industry, but also Americans in their homes. I think initially

we were surprised that China would target every American with these capabilities. That goes against every norm of international law. That certainly goes against how the United States military would approach targeting in a crisis or A conflict. That the fact that they would go after basic services as part of their effort that they have identified as unrestricted warfare is unconscionable. >> And what did they target? >> They targeted water. They targeted electrical power infrastructure. Transportation are examples of the types of things that were targeted. And in many cases, they're vulnerable. Multiple intrusions at utilities were discovered

In 2023 and China had been on some of their computer networks at least 5 years. You're saying that the Chinese today are in American power plants, water treatment plants, other parts of the electrical grid, maybe even hospitals, telecommunications, all of that. So there is a daily contest that is going on to be able to deny China those accesses. But they are certainly attempting every single day to be able to target telecommunications to be able To target critical infrastructure both in the United States and in other countries and they are doing that to try to ensure

that they have an advantage in a crisis or a conflict. Is China preparing for war? There was no other reason to target those systems. There was no advantage to be gained economically. There was no foreign intelligence collection value. The only value would be for use in a crisis or a conflict. >> In 2024, Tim Hawk rose to lead both the National Security Agency, America's largest spy agency, plus US Cyber Command, the military defense in cyberspace. Hawk took over just as the scope of China's hacking of utilities was becoming clear in a place no one would

have imagined. Is Littleton a major supplier of some kind to the federal government? >> We are not >> major supplier to a military base? >> No. >> Nick Lawler is general manager of the Littleton, Massachusetts Electric and Water Utility. His town has 10,000 residents. Can you think of any reason that China would target your little community? >> That's the exact question I had for the FBI when they visited me on that first day, and I I still can't answer that question. No, I can't think of one reason. >> The FBI visited in November 2023 to

tell Lawler that China had access to his utilities computer network. He says the feds told him he was one of 200. How much of all of this is controlled remotely by computer? All of it. >> In his water treatment plant, Lawler showed us tanks of dangerous chemicals that are precisely controlled to deliver clean water. If you had control of these tanks, you've got control of Littleton, Massachusetts. You can poison the water. >> You can poison the water. >> But China was caught before it had operational control. With Lawler's permission, the feds watched what China was

doing. And what they learned was part of an awakening for American security. If you are willing to go after a small water provider in Littleton, Massachusetts, what other target is off the list? So From that perspective, this is a national threat. It's one that needs to be addressed, but it's also one that every American should understand because if they're willing to go after that small provider that doesn't have a national security connection, that means every target is on the list. >> So help me understand why Littleton. If we are involved in something in the Indo-acific

that is is becoming a challenge between the United States and China, the more that that China could get us to focus at home means now our resources are focused in the homeland. That would distract us, distract resources, make it more difficult for us to mobilize in a crisis. Littleton may not be a very large place, but if the Chinese took its water offline, the entire country would be focused on it. >> And if there were three to four other examples simultaneously, plus an information campaign, it could seem much Larger than it is, or it could

be done in critical places that would have a greater effect. Other critical places believed to have been targeted by China over years include New York City's Metropolitan Transportation Authority, 13 gas pipeline operators, the Port of Houston, and major phone companies. >> But here's the bottom line on this. They have gotten to be very, very good at cyber operations. >> Mike Rounds thinks he knows why China is Doing this. The Republican senator of South Dakota is chair of the Armed Services Cyber Security Subcommittee. He believes China intends to deter the US from standing up in a

fight by hacking our most sensitive industries. But all it takes is a blip on the financial markets to delay certain trades by just milliseconds to put the market into an entirely different attitude about the security and the soundness of being able to make Those transactions happen. >> You're talking about causing chaos on Wall Street. >> Threatening to be able to cause chaos on Wall Street would be something that they would love to do. >> And turning the lights on and off >> most certainly or to start out with whether or not you can get an

airline reservation. And uh so those are areas that they would love to do just so that when the time comes, in my opinion, they Can look at it and simply say, "We know where you're at. Don't mess with us. Uh we're capable of causing real problems for you long term." >> China is causing those problems by exploiting vulnerabilities in network equipment. In Littleton, Massachusetts, China found a weakness in a network firewall. That's not unusual when software vulnerabilities go unpatched or when outo-fdate equipment is no longer supported with security updates. Once Inside, China did not install

malware, which could be a red flag. Instead, it stole login credentials and masqueraded as a legitimate employee. >> They are just gaining access to that system and then attempting to lay dormant. They're not spending more time collecting intelligence or taking other activities. >> It's there if they need it later. >> Exactly. Do we even know how extensively the Chinese are into our systems? >> I I don't think we have a a a perfect knowledge of that. >> How many Chinese attacks are there on US systems in a day? Uh I I would expect that automated

activity are happening at scans at the the millions of devices throughout every single day. >> China denies the hacking. The White House told us it is working to assess exposure and mitigate the damage. In Littleton, the damage forced Nick Lawler to completely rebuild his network at a Cost of more than $50,000. It is much more consuming to try to get somebody out of a network than to deny them access. Which is why it's so critically important that we get the basics right in our critical infrastructure and in these subsidive networks so that we aren't expending

more resource to try to root them out. >> Tell me we're good at this. >> We are definitely good at this. >> Really? >> Uh but the scale is a challenge. Very few understood the scale or the challenge as well as General Hawk. In the first Trump administration, he was promoted to twostar general, then three star, but later with a fourth star. He led the National Security Agency for only a little over a year. >> I got a phone call from a senior official in the Department of Defense uh that told me that the president

had made a decision to remove me. He was fired in April after a far-right activist named Laura Loomer met with the president online. She explained that Hawk was disloyal and had been referred for firing. The evidence she pointed to publicly was Hawk's appointment by President Biden. She called Hawk's firing a blessing for the American people. >> That has got to be gling after your career. I I know in my heart that every day I wanted to achieve the things for Our nation that would make us more secure and make every American safe and that continued

to my last day of service. Uh so uh from that perspective um it it certainly was impactful to me and my family but at the end of the day it's about our nation and it's about our nation security. >> You're sitting there with four stars on your shoulder. You have spent your entire life in the Air Force and you've been accused of being disloyal. Your Reaction is what? That every day I woke up committed to our national security and to meeting the expectations of the president. >> Not disloyal. >> Absolutely not. >> The White House

did not answer our questions about Hawk's firing from the National Security Agency. Later, Hawk retired from the Air Force. We do not have enough of these types of leaders and a loss of any one of them without Strong justification is disappointing. >> A new acting head of the National Security Agency was appointed. But the week after the firing, Republican Mike Rounds, chair of the Senate Cyber Security Subcommittee, saw Hawk's sudden termination this way. The departure of General Hawk is a loss for our nation, but will be a tremendous gain for any private or public entity

where he decides to lend his expertise and Leadership. I wish him Godspeed. That said, as our adversaries watch this hearing, it will be clear that no matter the scenario, our cyber mission forces are ready. The National Security Agency and US Cyber Command are consequential organizations. Uh the the second I was no longer the leader, focus shifts to them. They have consequential missions to do. And for my family, it shifts to how do we serve in different ways. Today, Tim Hawk serves by teaching at Yale and consulting private industry, but sidelined in government as China expands

its aggressive hacking, spying, and theft of intellectual property. There have been resignations and firings of other people focused on America's cyber defense. What does that mean for our national security? Our overall capacity is getting smaller. While we know China's continues to grow, there is still immense capability in the US government and now it will be up the up To the administration to be able to to be able to use that and build partnerships with industry uh to be able to ensure that we're countering these threats. >> If the United States does not dominate in this

space, what is at stake? >> First, I'm always confident in our nation. But if we don't dominate in this space, China gains advantage with the ability to continue to steal intellectual property, which impacts our Economy. They could gain increased intelligence collection, which would help them every day and also in a crisis and conflict. And they could preposition in critical networks both in the United States and with allies and partners that could give them advantage in a crisis. We can't let that happen. According to the latest assessment from America's intelligence agencies, China remains the most active

and persistent cyber threat To the US. Its hackers have infiltrated the US government, the private sector, and critical infrastructure like water systems and power grids. Hacking, however, has not replaced Beijing's pursuit of old-fashioned human intelligence. As we first reported in May, China's Communist Party remains intent on leveraging a worldwide network of covert agents to monitor and influence events outside its own borders and to surveil and intimidate Chinese Dissident right here in America. Tonight you'll hear about why China spies are on the rise and what happens when one gets caught. >> This is in scale and

in scope and in brazeness the biggest espionage operation against the US in its history. >> Jim Lewis is a former US diplomat whose direct experience with China's intelligence agencies spans more than 30 years. Oh, >> he says since President Xiinping came to power in 2012, China's spies no longer seem to fear the US. Why do China's espionage efforts appear to be growing so big so fast under Xiinping? >> Xiinping thinks it's China's time to move to the center of the world stage. Xiinping looks at the West and at the US and says, "These people are

feeble-minded and I'm going to be able to beat them." It may not be a household name in the US, but according to Lewis, China's Ministry of State Security or MSS is now the largest and most active spy agency in the world. >> In a propaganda video the spy agency posted last year on China's largest social network, a voiceover boasts that the MSS senses things before they happen and fights against evil. The slick production is a public message to both foreign adversaries and China's own citizens about the ministry's growing Power. >> It's sort of the equivalent

of the CIA, but it has much greater powers. One estimate says the MSS might have 600,000 employees and they are committed to going after the United States. We are target number two for them. >> Who's target number one? >> Target number one is China's own people. When Xiinping wakes up screaming in the middle of the night, he's really worried that the Chinese Communist Party was on The path that the Soviet Communist Party was on. >> Lewis says to maintain absolute power at home, President Xi looks abroad. >> Xiinping probably remembers that a lot of revolutions

start outside the home country and he doesn't want that to happen to China. So, there's a huge effort to pay attention to the expatriate population. One way Beijing paid attention, according to the FBI, was to secretly open an overseas Chinese Police station right in the middle of New York City. It was discovered in 2022, hidden among businesses in a commercial building in Manhattan's Chinatown. While Chinese expats could renew government documents there, like driver's licenses, federal prosecutors said the main purpose of the outpost was to target and harass Chinese dissident. >> They've done it in the

Netherlands. They've done it in Canada. But the idea that you'd open a police station in Another country, that's a signal disrespect of the sovereignty of that nation. After the station was shut down, two Chinese Americans who allegedly opened it were charged with conspiracy to act as unregistered foreign agents of China. In total, over the last 5 years, the Department of Justice has indicted more than 140 people for felonies related to harassment, hacking, and spying for China within the US. and one of the accused worked for the governor Of New York. Federal prosecutors allege a former

top aid to Kathy Hokll named Linda Sun accepted millions of dollars to influence who the governor met with and what she said about China. Sun and her husband, who have plead not guilty, owned a multi-million dollar home on Long Island and a condo in Hawaii. Having a Ferrari in two multi-million dollar houses is a bad idea, but >> for a government employee, >> everyone leaves a record. Uh, some Records are more flamboyant than others. >> Flamboyant is not a word that comes to mind when you meet Shu Jun Wong. The 76-year-old retired historian came to

the US from China in 1994 as a visiting scholar at Columbia University in New York, home to more exiled Chinese activists than any other city in the world. Wong helped found a group that met regularly and was dedicated to democracy in China. In the 2010s, the overseas democracy Movement was gaining momentum, and I was eager to be a part of it and promote democracy. >> What was your specific role in the pro-democracy community in Flushing, Queens? >> I was assigned the role of vice president, secretary general for publicity and events, all kinds of events. While

Shu Jun Wong became a trusted member of the Chinese dissident Community here in New York, he kept another role secret. For almost 20 years, he was spying for China's Ministry of State Security. Did you take notes about who attended these meetings and what they said? >> Yes. >> When did you start sharing that information with China's largest intelligence group? That is a very big misunderstanding. >> In 2022, Shuun Wong was indicted by the US Department of Justice for sharing dissident names, contact information, and private conversations at the direction of the MSS for 17 years. >>

When we spoke with him in February through an interpreter, he was at times combative and disputed basic facts of his case. So, we eventually asked Mr. Wong, point blank. Were you spying for the Chinese government? >> May you? >> No. Throughout the entire trial, they were very careful. They never use the word spy. Just look at the record and you'll see that >> we did. And while lying to 60 Minutes may not be a crime, lying to the FBI is. Mr. Wong repeatedly told federal agents he had no contact with the Ministry of State Security.

But according to federal prosecutors, he met with these MSS officers in China, and they offered him plane tickets and helped his family with A business dispute. In 2021, someone claiming to be from the MSS showed up at Mr. Wong's door to help delete communications from his computer that might incriminate him. Video from the encounter showed he welcomed the man's help. Unfortunately for Mr. Wong, the Chinese operative, was actually an undercover FBI agent. Mr. Wong had plead not guilty. Last August, he was convicted of making false statements, illegally possessing Democracy activists identification and acting as an

unregistered foreign agent of China. >> Our position has always been that he never had the intent to be an agent of the Chinese government. >> Mr. Wong's lawyers, Zachary Margalus Ona and Kevin Tong, admit their client was in touch with Chinese intelligence, but they argue he didn't break the law and claim FBI agents went after him once they were unable to recruit him for the US. They were hoping he would roll over and identify handlers higher up the food chain. He did not do so. and they felt a little vindictive and angry and frustrated about

their inability to stop higher up actual espionage and they they turned him into this fall guy. >> But when you look at the reality, he didn't have any access to secret top secret information. All he passed over is the attendance sheet and of the democracy movement. Those information Are available in public. So >> people's names that attend a private event are not public. They're only made public. Can we home in on that? There's no evidence of any harm to the United States interests or to dem democracy movement interests from anything that he did. >> DEMOCRACY

>> Anna Young Chun disagrees. She testified against Mr. Wong in court. The Pro-democracy activist name and contact information along with 63 others was found in Mr. for Wong's luggage when he returned to New York from a trip to China in 2019. Did you ever imagine that Mr. Wong was one of the people who was reporting what you were doing and others back to China? >> Not at all. >> Did you lose sleep over it? >> Yeah. And I also make sure my door chain was on all the time at night >> because you never know.

>> Born in Hong Kong, Ms. Yong Chong is now a US citizen and professor of biology. She organizes demonstrations for the Hong Kong democracy movement in the US where she's become increasingly wary of who might be watching. >> I believe they are collecting information, >> what kind of information >> like what are we doing? What exactly what we are seeing in the protest and How many people are showing up there? Things like that >> and collecting that information for whom? for Beijing. >> Why do you think China goes to such lengths to spy on pro-democracy

activists here in the US? >> This is their tactics, right? They try to silence you, harass you, or intimidate you so that you stop what you're doing. They want to me and my ability to advocate for Hong Kong. Anna Quac now runs the pro-democracy organization that Anna Yong Chong co-founded because of her outspoken activism. The Hong Kong government has placed a $130,000 bounty on her head. So, every single day I wake up, I open my social media and then I would see people talking about how if I keep talking uh here in the United States,

they will come kidnap me and uh take my body to the Chinese Consulate. so that they can send me back to China. >> How are you viewed by the Chinese government? >> If I do go back to Hong Kong, it's going to be life imprisonment. Uh so basically they see me as a traitor, as someone who betrays um the Chinese government and the Hong Kong government. >> And what's the crime you've committed? >> They think that fighting for democracy. Wanting a say in our own future is a Crime. The United States is known as the

land of the free. Do you feel free here? Honestly, with China's long arm repression, it's difficult to feel free anywhere in the world. The thing about the Chinese government is that you can leave the country, you can leave the territory, but you can never actually leave their governance. >> After we met her, Anaquac's father and brother were arrested in Hong Kong. She is currently seeking political asylum in The US. In March, the Trump administration announced sanctions against officials in Hong Kong who have targeted her and 18 other prominent activists living abroad. As for Shu Jun

Wong, on April 14th, a federal judge sentenced him to three years supervised release. He spared Mr. Wong prison time because of health problems, including cognitive decline. But the judge reiterated he had committed serious crimes against the US. He was an agent. He worked with the Chinese government to identify targets for them to surveil and compromise. >> According to China analyst Jim Lewis, there's still no substitute for on the ground human intelligence, even if Mr. Wong was an expendable asset for China's top spy agency. >> Not exactly James Bond. >> Definitely not James Bond. Definitely not.

Uh that's the scary part though is that the Chinese are very good and so he Was not number one on the list of assets to protect. That means there are other assets who are being protected. If there's going to be a military conflict between the United States and China, the thinking in Washington goes it will most likely happen if China tries to invade Taiwan. But over the past 2 years, tensions have escalated precariously in another part of the South China Sea, the waters off the western coast of the Philippines, where An international tribunal ruled the

Philippines has exclusive economic rights. But China claims almost all of the South China Sea, one of the world's most vital waterways through which trillions of dollars in goods flow each year. To assert its claims, China has been using tactics just short of war, leading to violent confrontations. The United States has a mutual defense treaty with the Philippines, which could mean American intervention. It's been Called the most dangerous conflict no one is talking about. And last year we saw for ourselves just how dangerous it can be. >> 134 of 134. >> When we boarded the Philippine

Coast Guard ship Capeo in August 2024 ahead, >> it was supposed to be for a routine mission resupplying ships and stations in the South China Sea. But in the middle of our first night, Sirens raged. Crew members rushed between decks. >> It's 4 in the morning. We've all been sound asleep. This alarm just went on on the ship. We were told to wake up and put our life jackets on because we've just been rammed by a Chinese boat. There was confusion, fear. Our team was told to stay inside the cabin for safety. It was unclear

if we would take on water or if the Chinese would try to force their way on board. Philippine Crew members prepared for that possibility and stood by the hatch holding clubs in case they had to fend off the Chinese. This cell phone video taken by the Filipinos shows the moment just after impact. The Chinese Coast Guard ship 269 ft long and nearly twice the size of the Cape and Gano jammed into the Philippines starboard quarter, the rear right side of the ship. When the Chinese pulled away, The Filipinos found a three and a half foot

hole. An officer told us we were lucky the damage was above the water line. There are, you can't see here in the dark about four or five different Chinese boats surrounding us at the moment. And the crew tells me they can see on the radar that more are coming. Right now, this happened about 60 nautical miles off the coast of the Philippines and about 660 nautical miles from China on the way to a place called Sabina Shaw. Manila and Beijing had stationed Coast Guard vessels around the Shaw in recent months with the Philippines fearing China

would take control. In 2016, an international tribunal at the HEG ruled the Philippines has exclusive economic rights in a 200 mile zone that includes Sabina Schaw and the area where the Cape Gao was rammed. China does not recognize the ruling and says the South China Sea has been its Territory since ancient times. We're just getting our first light and now we have a much better sense of just how surrounded we are by Chinese vessels. You can see these two right here actually say China Coast Guard. We're at a complete standoff. We've been here for going

on two hours now, not moving. It's unclear whether we can even turn around and go back uh if we wanted to. We're just completely surrounded by Chinese ships. 14 in all, including a militia of Large fishing vessels used to help occupy territory and block ships like the one we were on. The Filipinos tried to negotiate a way out, but ultimately were forced to abandon the first stop of their mission. He >> said, "We're not going to Sabina." >> In their damaged boat, they had to take a long detour to their next supply drop as Chinese

ships followed closely. By this time, the Chinese had already Publicized their version of the incident, accusing the Filipinos of instigating the conflict and highlighting our team's faces, accusing us of being part of a propaganda campaign. >> The Philippines has turned the South China Sea into its theater, deliberately ramming a Chinese Coast Guard ship with Western journalists [music] right there to capture the drama. >> They're saying that this is your fault, This collision. >> Yes. If you do the ramming, the other ship would have the damage, not your ship. >> Can they fix that? >> Captain

Daniel Labai, the top ranking officer on the Cape and Gano, took us below deck to survey the damage. He told us it would not stop them from continuing on. >> This is our place. This is our exclusive economic zone. It's uh this is the Philippines. Over the past two years, the Chinese have turned the South China Sea into a demolition derby, repeatedly ramming Philippine ships and blasting them with water cannons. But what we saw on the Cape and Go represented a significant escalation, bringing the battle lines closer than ever to the Philippine shore. Within hours

of the collision, the Biden administration condemned China for what It called dangerous and destabilizing conduct. >> This has become an international incident. What happened on your ship this morning? >> I've been assigned here for 2 years and uh this is just what we deal with every day. >> Is it getting worse now? >> Yes, it's it's getting worse. >> What's behind this uptick in tension? What changed? I think what changed is The determination of the Philippines to say no. >> You're standing up to China. >> Oh yes. Yes. And they don't like it. >> Gilberto

Teodoro is the Philippine Secretary of National Defense. >> The proverbial schoolyard bully is the best example of what China is. You know, it just muscles you over. >> For example, he says the aptly named Mischief Reef in the Philippines economic zone once looked like this. It Now looks like this. In the 1990s, the Chinese took it over and started turning the reef into a military base. >> Speed. Yes, sir. 6.5 knots. >> As the Cape and Go passed near Mischief Reef, a Chinese Navy destroyer appeared. >> China Navy warship 105, this MRV 4411. >> The

Filipinos repeatedly asked for safe passage. Please keep clear of our passage and maintain safe distance. Over. >> Each time there was no response. In a Game of cat and mouse, the destroyer edged forward. The Filipinos forced to come to a stop and adjust course to avoid another collision. >> China has decided that at this point in their history, they are large enough so that they can buck the law. >> In Manila, we met retired US Air Force Colonel Ray Powell, who runs the nonprofit Sealite. You see these ships going down, >> which tracks China's actions

in the South China Sea, but how do they get away with this? >> There's a law and there's a judge, but there's no there's no enforcer. There's no prosecutor. There's nobody to put him in jail. Yeah. >> Unless, I suppose, the US decides to intervene, which then becomes the world policeman. >> You know, that's the problem. >> The US is bound by treaty to defend the Philippines if it comes under armed Attack. >> I want to understand a scenario in which that red line could be crossed. You were just involved in a situation where you

were hit by a larger ship. Imagine if that ship had sunk your ship and several people had died. What would the Philippines then feel compelled to do? They probably wouldn't go instantly to war, but they might instantly get onto a war footing. They might go to the United States and say, "This looks a lot like an armed attack to us. We were hit by a ship and people died." And in a scenario like that, would the United States be obligated to intervene? >> Look, every treaty in in the end depends on the political will of

the parties. What I will say is if the United States fails or appears to fail to meet its treaty obligations, the entire US treaty and alliance and treaty structure is built on credibility. >> Your word means nothing. >> If it means nothing to the Philippines, what does it mean to Japan? What does it mean to Australia? What does it mean to NATO? The United States has not had a permanent military presence in the Philippines since 1992, though it does conduct regular joint exercises and last year committed $500 million in military aid to Manila and another

128 million to upgrade Bases. We met General Romeo Bronner, the military chief of staff at one of those bases after he landed in his fighter jet following an aerial reconnaissance flight over the South China Sea. >> How much time do you spend focused on China? >> Almost the whole day. In 2023, General Bronner visited the Philippines equivalent of the Alamo, a grounded World War II battleship called the Sierra Madre, manned by soldiers and used to hold down Manila's claim to a disputed area in the South China Sea. It was the scene of the most violent

incident to date. >> In June 2024, when the Philippine Navy tried to resupply those troops, the Chinese blocked the delivery. Hey. Hey. >> It was near hand-to-hand combat. [screaming] >> What was surprising was that they had bladed weapons with them. They had Spears with them. >> You had never seen that before. >> We have not seen that before. And they began attacking our boats. They started puncturing our boats with their spears. >> A Filipino Navy Seal lost [music] his right thumb after the Chinese rammed his boat. They stole our equipment. They destroyed our equipment. They

hurt our personnel. And these are the doings of pirates. I warned our personnel. If this happens Again, you have the right to defend yourselves. >> If the Chinese were to fire upon your men and your men fire back, sir, that sounds like the makings of the beginning of a war. >> Yes. Yes. Indeed. Indeed. if if you were attacked. >> Defense Secretary Teodoro told us there are ongoing conversations between Washington and Manila about which scenarios would trigger US involvement. >> Do you worry that perhaps some unpredictable incident at sea could cause tensions to escalate and

then you know suddenly the Philippines not Taiwan becomes the flash point in the South China Sea. >> Oh yes. Oh yes definitely. If China were to take the Sierra Madre, would that merit America's intervention? >> If China were to take an uh the Sierra Madre, that is a clear act of war on a Philippine vessel. >> And you would expect American intervention. >> We will react and uh naturally we would expect it. >> You're talking about a rusty old warship. How realistic is it to expect the United States to intervene over the fate of a

warship like that? >> There are people in there. That is an outpost of Philippine sovereignty. So we're not talking about a rusty old vessels only. We're talking about a Piece of Philippine territory in there. >> President Biden invited Philippine President Ferdinand Marcos Jr. to the White House twice during his term and assured him of America's support. >> I want to be very clear, the United States defense commitment to the Philippines is ironclad. Last year, Washington sent the Philippines a powerful weapon during joint exercises, a mid-range missile system capable of Reaching mainland China. >> That clearly

angered China and a none of their business. This is for Philippine defense. >> It's none of China's business that you have a missile that could reach their shores. >> What happens within our territory? It is for our defense. We follow international law. What's the fuss? Do you plan to keep mid-range missiles capable of reaching mainland China at some of your Bases? >> Uh I I can neither confirm nor deny uh if there is such a plan. >> You say what's the fuss? China says that you've brought the risk of war into the region by doing

this. >> That's what they always say. Everything the world does that they don't like is the fault of the world. >> Like how do you think this ends though? You don't expect China to pack up and leave, do you? >> I I really don't know the the end state. All I know is that we cannot let them get away with what they're doing. >> Since our story aired, the Trump administration has continued to support the Philippines in its dispute with China. Defense Secretary Pete Hegth visited the Philippines in March. Both he and Secretary of State

Marco Rubio have assured the Filipinos that the US commitment to their country's defense remains ironclad. American CEOs used to swoon over China. Its vast pool of consumers has been a magnetic draw for decades. But doing business there has become so fraught and risky with intellectual property theft and an expanded espionage law used to intimidate the business community that US companies have pressed the pause button. On top of that, the US China relationship has become contentious due partly to China's belligerent activity toward Taiwan and in the South China Sea. the balloon spy incident of last year,

and the list goes on. Making matters worse, the Chinese economy has hit a wall. Export growth is slowing. The country's drowning in debt, and youth unemployment has soared. Getting into China to tell that story is all but impossible for most Western journalists. But as we first reported in February, when the US ambassador Nicholas Burns invited us to come for a visit and an interview, we were granted visas. We Spoke with him at his residence in Beijing. >> More money is leaving China for the first time in 40 years than is coming in from American, Japanese,

European, Korean investors. >> Now, why is that? And how much of a problem is that for them? >> That's a real problem for this economy. They have 1.4 billion people here. They've got to keep it growing and foreign capital is important. You ask Why. I think there's been a contradiction in the messaging from the government here in China to the rest of the world. On the one hand, they say we're open for business. We want American ch uh Japanese businesses here. But on the other hand, they've raided six or seven American businesses since last March.

>> Raided. >> Raided. >> They've gone into American companies and Shut them down and made accusations we believe are very much unwarranted. >> The American companies include Bayon Company and the Mintz Group, a company that does due diligence for other companies that might want to invest here, was raided last year. Five of its Chinese employees were taken into custody and they're still there. Another firm, Cat Vision, was raided. Less the message wasn't loud and clear, a report about it was put on state-run Television. It accused Western consulting firms of espionage and stealing national security and

military secrets. >> They want the investment to come back and they're raiding American companies and they're They've passed an amendment to their counter espionage law and it's written in such a general way that it could be that American business people could be accused of espionage for engaging in practices that are perfectly Legal and acceptable everywhere else in the world collecting data to do due diligence so that you can decide whether you want to invest in a company or form a joint venture. Right. What do you think the Chinese are afraid that these companies are going

to find out? These due diligence companies, what are they worrying about? >> You know, I think they want to control data about the Chinese people, about Chinese companies. And so, um, that I Think is at the heart of the problem with those American companies operating in that sphere. >> Ambassador Burns told us that's just one of the concerns he hears about. There is still intellectual property theft from American companies here. >> Is every American company afraid of that? >> Yes. All kinds of US companies began flocking to China in the early 1980s after the country

opened to the west Under then leader Dang Xiaoping. And now US banks operate here. Walmart has nearly 300 stores across the country. Shoppers here in Shanghai can buy Levis's, browse in an Apple store, and get a caramel frappuccino. >> Starbucks has 6,000 stores in China, a thousand stores in Shanghai, and they want to keep building because coffee, this was a tea culture for hundreds of years. It's now becoming, at least with The young Chinese, a coffee culture. >> And they love Starbucks. >> They love Starbucks. And I'll buy you a cappuccino. I'll take one. Thank

you. >> Boeing's here. So is Tesla, Fizer, Chevron, Intel. But while some businesses are thriving, many of the foreign companies are worried about the business climate under President Xi Jinping. >> If you track China from the death of Mao to the opening of China to the world, We've seen a closing of sorts. We've seen a centralization of power of the party. We've seen increased repression of the people of China here. That's a very significant trend just over the last decade with Shei >> under his leadership. >> Part of that trend includes President Xi's reversing many

of the market reforms that unleashed China's economic miracle. >> They've been growing over 40 years the Fastest growth rate in recorded economic history. 8 9 10 11% growth rates. They've lifted 800 million people out of poverty. But what's happening is that growth rate is slowing down. Most economists are now projecting they'll be at two, three, 4% growth, maybe even lower in the next >> support their society if it's that low. >> That's going to be difficult for them. >> If there was so much explosive growth, if so many people were lifted out of Poverty, why

is he turning away from what worked? >> Well, I think they've got maybe competing priorities. The government here in China certainly wants the economy to grow, but they also have a national security mindset. They want to control data. >> They want more important the control, right, than economic growth. It seems that way. >> I think it's open for debate. You're Hearing we are hearing both messages. >> It sounds as if you yourself don't know the direction it's going. What I perceive here is that the greater energy is with those on the national security side of

the government of China. >> Good morning. How are you? On a train trip from Beijing to Shanghai, the ambassador pointed out that in the decades before President Xi, China powered its economy by investing in these high-speed trains, Roads, factories, and skyscrapers that light up Shanghai, the financial capital of China. But under President Xi, China lost more than $120 billion dollars worth of long-term foreign investments last year because of the weakening economy and the harsh government tactics which have left American companies uncertain of the future there. >> There are a lot of American companies here. Have

a lot of them just picked up and left because of this current Business environment. >> You know that's interesting. Not many. >> Not many. >> Not many. >> Why not? China is the second largest economy in the world. It's a big market. So, a few American companies have left, but most have stayed. >> Some American companies are moving at least some of their operations to Singapore, Vietnam, Mexico, but they're Not leaving China. The market is irresistible to American business people. It's gigantic. >> Maybe they're not leaving, but they're not investing. They're not making major investments

until they can see exactly where the government is headed. >> Yet, because of the 1.4 billion potential consumers, some companies like Disney are increasing their investment. >> Welcome to Shanghai Disney Resort. >> It recently expanded its Shanghai Disneyland that they told us is thriving. Aptar, a 9 billion company headquartered in Crystal Lake, Illinois. is another American firm bucking the trend of capital flight. President of Aptar Asia, Shangi Gong, a Chineseborn US citizen, showed us around one of their five manufacturing sites in China. >> We are manufacturing for some of the largest US brands, actually the

US consumer brands. This factory makes the Packaging and dispensing devices for food, pharmaceutical and beauty products sold in Asia. >> All our customers like PNG, Lauria as they all here doing business. >> Abar in China for nearly 30 years recently invested $60 million in a new factory. Shane Wei Gong says even in a slowing economy, the company is doing well. >> American companies here, as the ambassador well knows, are pausing or Cutting back on investment, but not this firm. You're expanding. Well, um because we are here for the long term and we believe in the

consumption power of the rising middle class. It's 1.4 four billion people here and um imagine for for example healthcare and the same with um cosmetics and beauty and um beverage all all those sectors packaged foods these are really the biggest markets and so so we are very confident about uh the long term >> what does it say about the confidence really in the US China relationship it it seems to say you believe that that things will what I'm asking get better. [laughter] >> That's a great question for the ambassador. I believe so. I hope so.

>> You know, we'll see. >> Actually, Burn says he's wary of the future as the fundamental rivalry and mistrust between the US and China is Shaking the confidence of the business world and has pushed our relationship to its lowest point in half a century. Is it our most competitive relationship in the world right now? >> This is the most important, most competitive and most dangerous relationship that the United States has in the world right now and will I think for the next decade or so. >> I want to quote you back to you and tell

us what you meant. You have said divorce Is not an option, >> right? Our two countries have to live together. And this I think is the greatest tension in the USChina relationship. China's our most significant competitor. And at the same time, China is our third largest trade partner. 750,000 American jobs at stake. Agriculture. China's the largest market for US agriculture. 15th of all of our export products from agriculture are sent to China. That was $40.9 billion Last year. So we can't afford really to have a real break here. Jobs would >> it's complicated. Some people

are saying, "Well, we're so competitive with China. We should end the economic relationship." Well, the consequence of that would be 750,000 American families wouldn't be able to put dinner on the table. And so this makes for an extraordinarily difficult balancing act in my job. >> You're a Winda brother. I've never Thought of myself that way, but you're up highire, right? Well, we have competing interests here and balancing those interests is the reality in the USChina relationship. We're going to compete. We have to compete responsibly and keep the peace between our countries. But we also have

to engage. >> More about the balancing act and the biggest economic problem in China today when we come back. One in every five people in the world is Chinese. China's population is four times that of the US. And the country is vast, 3.7 million square miles. It overlooks the Taiwan Strait where half the world's trade flows every day and is located about a 100 miles away from Taiwan. President Xi likes to say that the East is rising, the West is declining, but economically the US is thriving compared to China. In December, Moody's, the credit rating

agency, cut its outlook For China to negative, and it's facing a long-term demographic bind, a decline in the birth rate that experts say is irreversible, meaning the country is both aging and shrinking. Ambassador Nicholas Burns took us on a tour starting in Beijing. The ambassador and his wife Libby like to take early morning walks through a park near [music] their residence. [singing] [music] >> This is a 600-year-old Ming Dynasty Park called Ritan Park. It's a place for a lot of retirees and a lot of young people and it's tremendously active. It's where the locals come

for their early morning routines like tai chi, yo-yoing, and pingpong. >> Oops. You couldn't tell from these scenes >> that China, where the COVID pandemic began, is still emerging from the trauma Of President Xi Jinping's oppressive zerocoid policy. Burns, 68, a career diplomat who has served in both Republican and Democratic administrations, got to China at the height of the zerocoid lockdowns and quarantines. >> When my wife Libby and I arrived here in early March of 2022, we were quarantined in this house for 21 days, for 3 weeks. Shanghai, a city of 26 million people, was

completely locked down for 63 days. What was that like in the city? >> We had women who needed to give birth and we had to find a way to get them to the hospital. We had Americans who wanted to get out but had to find a way out of their locked compounds to the airport. So zero co worked for a while in 20 and 21. They had very low or relatively lower infection rates but by 2022 it had really divided this society. >> It set off rare widespread protests. Then in December of 2022, President Xi

Ended the policy abruptly. >> The last thing this government is going to accept here is volatility. >> Volatility is something Yorg Wood Whitka, a German businessman who's lived and worked in China for over 30 years, hadn't seen since the Tanaman Square uprising in 1989. He represents BASF, the world's largest chemical producer. You have said this is a PTSD country, post-traumatic stress disorder country. What what do you mean? >> Well, everybody has been traumatized by the lockdowns that took place in many cities across China and the kind of messaging that came out of the leadership. It's

for your own safety and then the lockdown was lifted. Actually, it was more a capitulation from the government. The lockdown basically left and like >> we're wrong. We're going to lift it. >> They never said they were wrong. That's not the system. just admit that they did Something wrong and then you basically like a tsunami co was rolling across the country >> after they lifted it >> uh December January I would say a billion people were infected and certainly lots of people died >> independent analysts say that an estimated 1.4 4 million people died. >>

This kind of environment really changes your attitude towards life and then business we thought we're going to have A comeback story and we had a good couple of weeks and then the economy basically has been flat since >> you know after co in the west in the United States particularly we did have a huge quick rebound. Why didn't it happen here? Well, I think that CO also has covered up a couple of long-term problems that China has been building up. For example, in the real estate sector, >> we reported on the real estate sector 10

Years ago with astonishing sites like this of empty buildings in city after city across the country. This is today similar hollowedout wastelands of unoccupied and unfinished apartments known as ghost cities. When I was here 10 years ago, I never expected to see these buildings still here. >> Yeah. >> What was a housing bubble back then grew and finally exploded. This real estate crisis lies at the Heart of China's economic decline. >> Has anybody counted up the number of empty units? I mean, across the whole country? >> Well, the whole of Germany, we have 82 million

people could move in here right away. 80 80 to 90 million apartments are empty. >> 80 to 90 million apartments are empty. >> Right. Unfinished. >> Over the years, Chinese banks readily loan money to the developers as the Building boom created millions of jobs and propelled China's growth. But in 2020, the government under President Xi clamped down on the rampant borrowing, causing the major developers to default on their loans and run out of money. >> Look at that. The facade isn't even finished. >> He says they couldn't even afford to take down the cranes. In

January, Everrand, once China's largest developer, was ordered to liquidate its Remaining assets. Left in the lurch are millions of Chinese citizens who bought these apartments before they were built. >> The developers owe their uh customers that paid up uh to the magnitude of1 trillion US. >> So if I did a down payment on one of these apartments, >> right? >> Will I ever see that money? >> No, you will not see the money. It's Gone. It's finished. >> It's gone. It's finished. So I mean it's it's really dramatic. 10 years ago, we were told that

this was the way people put money down for their nest egg, >> right? >> For their retirement fund. Is that still the case? >> The 66% 23 of a family household average wealth is in in apartments. >> That loss of wealth has depressed consumer spending and dragged down the Economy. We wondered if the people blame President Xi for that or for the co deaths. But it was impossible for us to gauge public opinion or if it even matters. While no one from the government would give us an interview, we were able to learn as York

Whitka who's lived here for 30 years told us, it's not a good idea to bet against the Chinese people. What are some of the positive aspects of the economy here? They do have a strong manufacturing base Still. Well, the big part is really between the ears of people, the brains of the Chinese entrepreneurs that actually made this success story happen. China is not really good in basic research, but they are fantastic in development. They're world champion in actually making products better, faster, and cheaper. >> Are they better? >> Yes, they are in some areas. Our

Chinese competitors are breathing down our neck And basically drive some of us out the market. >> For instance, China now makes over 80% of all the solar panels in the world. It dominates the wind turbine market and last year became the world's biggest exporter of cars and more. >> They're the leading trade partner of twice as many countries in the world as the United States. So they have >> they're leading trade partner >> with over 60 countries in the world. >> And now with heavy government subsidies, it is fast becoming a leader in electric vehicles.

The car maker BYD is vying with Tesla for the title of bestselling EV maker in the world. Shanghai based Neo is trying to break through with high techch innovations. In December, the company unveiled a new battery with a driving range of 620 m, more than 200 m further than Tesla's topend model. >> This is this is >> our flagship. William Lee, the CEO and founder of Neo, says its battery swap technology allows owners to swap out their depleted battery for a fully charged one in under 3 minutes. >> Exactly. It's a uh two and a

half minutes. >> Two and a half minutes. >> Two and a half. Yes. We already installed 2,200 swap station all around China. China is also developing a humanoid robot industry. >> Look at that. >> After lots of year, it's coming true. >> Alex Goo is the founder and CEO of Forier Intelligence. >> Hi there. >> Last year, he launched the GR1, his first generation humanoid. >> We can do arm. You can swing the arm. Yeah. You see? >> Oh, look at the fingers. Oh my word. Can he play the piano? >> Yeah, future definitely can.

>> In the future. [laughter] >> Also in the future, he says the robots could provide health care for China's rapidly aging population. >> Maybe we can, for example, we can remote control such kind of robots to help my grandpa for example. [laughter and gasps] Yeah, I think >> President Xi, who visited this company Last year, has called for the mass production of humanoids by 2025. >> In his annual New Year speech, he talked about the country's economic woes and for the first time acknowledged the high unemployment rate. Still, he has laid out a long-term goal

of doubling China's economy by 2035 and surpassing the West in technology. Our companies and tech experts are competing on AI and biotech and quantum mathematics. All those technological advances will lead to a New generation of military technology. Our two militaries are vying for military supremacy. who's going to be the most powerful in the most important strategic part of the world, which is the Indo-Pacific. >> Presidents Biden and Shei met in San Francisco in November in hopes of reestablishing military communications between our two countries, which China had cut off. >> I think we're back to a

more settled and Stable relationship between the two countries, but it's been a roller coaster. >> The low point, he says, was the spy balloon incident last year. But there's also been the buildup of military bases in the South China Sea, the increase of air sordies near Taiwan, and the buzzing of US military planes. >> Do you see a lowering of the temperature in the South China Sea? >> No. And that's a problem. >> You don't. >> And then on Taiwan, following Speaker Pelosi's visit, we've seen now for 16 months a higher rate of Chinese both

air activity and naval activity. That's very intimidating. Meant to intimidate >> and that hasn't pulled back on that. >> They haven't pulled back on that. And I think ultimately they want to become and overtake the United States as the dominant country globally. And we don't Want that to happen. We don't want to live in a world where the Chinese are the dominant country. >> When the Cold War ended, we all thought our system had won. >> Yeah. >> You know, their system failed, our system rose up. Now he's come back and said, "No, no, the

communist system's the right way. I guess we didn't bury that after all." You know, it's it's interesting to Compare the old Cold War with this time. What distinguishes this time versus the old Cold War? Soviet Union had a strong military and nuclear weapons. It had a very weak economy which in no way competed with ours. China's economy is very strong. We're dealing with an adversary, a competitor in China stronger than the Soviet Union was in the 1940s,50s,60s,7s, and 80s. >> So, if that was a cold war, what are you Calling this? >> It's a competition

of ideas, a battle of ideas. our idea, America's big idea of a democratic society and human freedom versus China's idea that a communist state is stronger than a democracy. We don't believe that. So there's a battle here as to whose ideas should lead the world and we believe those are American ideas.