The Reuters report came several days after a similar report by Hong Kong's Oriental Daily that, although providing slightly different details, also revealed the arrest of a Chinese intelligence agent turned by the United States. The Oriental Daily, which is often more of a source for entertainment news than political information, provided some contradictory versions of the story but suggested that the official was the victim of a "honey trap" operation set up by U.S. intelligence. Both the Reuters and Oriental Daily reports suggest that the information the official revealed dealt with high-level internal Chinese issues and may have exposed China's espionage operations inside the United States.

If accurate, this would represent the highest-level incident in China-U.S. espionage since the defection of the director of the MSS North America Department, Yu Qiangsheng, in 1986. That case resulted in the arrest of Jin Wudai, a prominent Chinese spy who had conducted espionage activities inside the United States for more than 40 years, and led to the shake-up of the MSS system and the removal of then-MSS head Ling Yun.

At this time Stratfor cannot verify the reports. It is possible that Reuters was simply being fed recycled material from the Hong Kong tabloids or that there is a rumor floating around that has been picked up in different locations. But the recent, unexpected U.S. State Department announcement that it was revoking or at least requiring reapplication of visas for all Chinese teachers involved in Confucius Institutes inside the United States seems to add some credence to the reports.

It has long been thought that Confucius Institutes, as well as other Chinese academic and research activities abroad, provided cover for the placement of Chinese espionage operatives or recruiters. If U.S. intelligence had known of some of these agents through a spy inside China's MSS, it could have been monitoring and tracking their activities and potentially seeking to turn some of them. If it were found that the source inside China was compromised, U.S. intelligence may have wanted to shake things up to uncover additional agents or to at least undermine Beijing's confidence in the use of those networks. By requiring the teachers to change their visa status in order to continue working in the United States, U.S. intelligence also gains an opportunity to review again each of their records to find any missed agents.

This is, of course, speculation, and given the closed nature of Chinese intelligence, it will be only in such seemingly unrelated events that confirmation of the agent's detention would be found. The MSS, and Chinese intelligence as a whole, has had several recent failures: the Wang Lijun and Chen Guangcheng cases, rumors of internal plotting between Bo Xilai and Zhou Yongkang and now the possibility that there was a spy within their own ranks. The last time there were such major failures in such a short time was more than a decade ago, when Chinese intelligence missed key Tibetan exiles fleeing to India, missed the rise of Russia's Vladimir Putin and failed to see the gathering of Falun Gong activists in Beijing. That led to a major shake-up of Chinese intelligence, and if this case is true or even partially true, another reorganization is likely.