"Australians can be reassured that ASIO was previously aware of matters that have been reported today, and has been actively investigating them. However, in accordance with long-standing practice, I will not comment on this particular operational matter, including any detail of the individuals involved." "Hostile foreign intelligence activity continues to pose a real threat to our nation and its security. ASIO will continue to confront and counter foreign interference and espionage in Australia." Mr Zhao disclosed the alleged approach to ASIO about a year ago, according to his associates and multiple Western security sources, and he identified the man he says approached him as another Melbourne businessman, Brian Chen. Mr Chen (Chinese name Chen Chunsheng) has denied knowing Mr Zhao or being involved in Chinese intelligence activities. However, sources say Australian authorities have determined that Mr Chen had been in contact with Mr Zhao. Mr Zhao’s claims have sparked an investigation into the alleged efforts by Chinese military intelligence to place an espionage asset in Canberra.

In March this year, Mr Zhao was found dead in a Melbourne motel room. Local police who have prepared a brief for the coroner have been unable to conclude how he died. Mr Burgess's statement said of Mr Zhao's death: "Given that the matter in question is subject to a coronial inquiry, and as not to prejudice our investigations, it would be inappropriate to comment further." The suspected plot to fund Mr Zhao's campaign would be the clearest example of Chinese government foreign interference ever detailed in a Western country, and provides some insight into the scale and nature of the threat that ASIO has labelled “unprecedented” but which has never been publicly explained in detail. What was alleged by Mr Zhao "is a state-sponsored attempt to infiltrate our Parliament using an Australian citizen and basically run them as an agent of foreign influence in our democratic system,” said Liberal MP Andrew Hastie, who is chair of the Australian Parliament’s intelligence and security committee and who has been briefed. The revelations emerged amid the defection to Australia of a man claiming to be a Chinese spy. Wang Liqiang, who says he was an intelligence operative, claimed the Chinese government used front companies and influence campaigns to infiltrate Hong Kong’s independence movement, organise kidnappings and assaults on democracy activists and interfered in Taiwan’s elections.

Chinese authorities hit back on Saturday with claims that Mr Wang had been found guilty in 2016 of fraud, was being investigated over a second allegation and had been the subject of a number of other property and loan disputes. Mr Wang denied the claims and stood by his claims. Mr Chen and Mr Zhao's story is not related to the matters that Mr Wang revealed. Wang Liqiang, a Chinese spy who has defected to Australia. Credit:Illustration: Mark Stehle, Portrait: Steven Siewert Contrary to the views recently expressed by former prime minister Paul Keating, former ASIO boss Duncan Lewis said Australia’s political system was under assault from Beijing. Mr Lewis warned that the Chinese government was seeking to "take over" Australia's political system through its "insidious" foreign interference operations. The revelations also raise fresh questions about the decades-long failure of authorities under old and new security laws to prosecute a single Chinese spy in Australia. Half a dozen senior government sources said 12 months after new counter interference laws were introduced, the federal police was struggling to enforce them due to drastic underfunding and lack of expertise.

'A perfect target' Liberal Party records show that from 2015 until his death, Mr Zhao was a Liberal Party member in the federal electorate of Chisholm, which was won by Liberal MP Gladys Liu in the May federal election, and which has a large Chinese-Australian vote. Loading Replay Replay video Play video Play video “He was a paid-up member, which means he was likely active in his branch and division,” Mr Hastie told The Age, The Sydney Morning Herald and 60 Minutes. “Nick himself I think was a perfect target for cultivation - a guy who was a bit of a high-roller in Melbourne, living beyond his means, someone who was vulnerable to a foreign state intelligence service cultivating.” The intensely private entrepreneur lived in the upmarket south-eastern suburb of Glen Iris with his wife and their daughter. From at least 2016, Mr Zhao faced financial problems and was hiding secrets from friends and relatives.

Loading Court records show that in 2017 Mr Zhao was charged with obtaining financial advantage by deception over accusations he had fraudulently obtained loans to buy luxury vehicles. In 2018, administrators began to pursue him over the collapse of his Brighton car dealership, and by early 2019, Mr Zhao had fallen out with his wife and owed money to shadowy Chinese investors. “He was a very ambitious young guy who got ahead of himself,” said Bill McLoy, who managed Mr Zhao’s car dealership in Ringwood until 2015. Another business associate, Yvan Lieutier, managed two dealerships for Mr Zhao until 2017 and described him as “young and ambitious … he wanted to make money quick”. In early 2019, Mr Zhao told two associates that he’d revealed to ASIO how Mr Chen, whose company is also based in Melbourne, had offered to set him up in a new business with a million-dollar capital injection. In return, Mr Zhao said Mr Chen wanted him to run for a seat in Australia’s Parliament in the electorate of Chisholm.

Untimely death Loading Mr Zhao was found dead by a cleaner in a motel room in suburban Mount Waverley in March. Local police who prepared a brief for the coroner have been unable to conclude how he died. That task will now fall to incoming Victorian state coroner John Cain. Mr Zhao’s death means he can never repeat the allegations he made to ASIO about Mr Chen in any public forum. There is no suggestion that Mr Chen has any knowledge or involvement in Mr Zhao’s death and he denies ever having met him. “I don’t know him (Nick Zhao). [I] Really don’t know [him],” Mr Chen said.

Mr Zhao’s former employees, Mr Lieutier and Mr McLoy, said they heard Mr Zhao might have killed himself. Victoria Police has said that the matter was “before the coroner and as such we are unable to comment further”. According to Mr Hastie, “We need to explore every nook and cranny, we cast as much light into the shadows, and make sure that we have a full and comprehensive understanding of how he died and why he died.” A complicated life The Age, the Herald and 60 Minutes have confirmed from multiple Western security sources that Mr Chen is a suspected senior Chinese intelligence operative, a claim Mr Chen has confirmed was put to him by Australian officials at Melbourne airport in March but which he vehemently denies. For a businessman with interests in Melbourne, Mr Chen leads a complicated life. He has been photographed wearing a Chinese military uniform and has also posed as a journalist with global media while attending international political summits, including the G20 and APEC. Mr Chen said in an interview he had been pictured in a Chinese military uniform because “some friends joined the army so I borrowed their uniforms to take some photos to show off. There’s no other meaning.”

Mr Chen also appeared to concede he had posed as a journalist. A Hong Kong media company, China Press Group Limited, lists Mr Chen in an archived page as "journalist number 14" based in the media company’s Hong Kong headquarters. Mr Chen said in an interview he had been given journalist accreditation by a media proprietor to allow him to attend international political summits. He said he had gone to the summits with a friend, and “I just follow him, wander around the country, be introduced to some friends and do some projects”. Brian Chen The Belt and Road initiative Mr Chen maintains a network of contacts in Australia which has donated to both major political parties, and he has had dealings with serving and former senior political figures across Asia and Europe. His business, Prospect Time, promotes China’s “Belt and Road” infrastructure initiative. This and his suspected links to Chinese military intelligence leave open the possibility he is using Belt and Road as cover for an intelligence operation. The Belt and Road initiative is backed by some political leaders around the world, including Victorian Premier Daniel Andrews, but criticised by others as a front for China’s strategic interests.

Hong Kong and Chinese corporate records reveal Mr Chen runs several companies involved in the military, public security and energy sectors and his business partners include firms linked to the Chinese government. One of Mr Chen’s Hong Kong firms is a joint-venture partner in a Beijing security company with a subsidiary of Norinco Group, a Chinese state-owned defence company, selling armoured police vehicles and buses. Mr Chen said in an interview that this had been of interest to his Australian interrogators, but that it was meaningless. The website of Mr Chen’s company, Prospect Time International Investments, says the firm has assumed “the role of one of China’s technological forerunner and window to the world” and conducted business “all over the Greater China Areas, south-east Asia, Australia, Europe and America". In May 2017, Mr Chen met former Thai prime ministers Yingluck Shinawatra and Somchai Wongsawat and “other political and business officials to discuss cooperation projects” before a trip to the Maldives, where Mr Chen met with Vice-President Abdulla Jihad and discussed Belt and Road infrastructure initiatives.

At the end of July 2017, Mr Chen led a team of “professional elites” to visit the Pacific Islands nation of Palau in connection to a $150 million five-star hotel development. In May 2018, Mr Chen was spruiking infrastructure projects in the Philippines Loading Between 2004 and 2009, Mr Chen’s co-director in Prospect Time International Investment Australia was businessman Wang Zhenhai, who has ties to the Chinese Communist Party’s influence agency, the United Front Work Department. There is no suggestion that Wang Zhenhai was involved in the alleged approach to Mr Zhou. Mr Wang said he was "family friends with [Mr Chen] for a long time", but denied that Mr Chen was a Chinese operative. Mr Wang claimed he was a co-director of Mr Chen's company because company law required companies to have one Australian citizen as a director for it to be registered. Mr Wang said he had never heard of Nick Zhao.