China's intelligence services have systematically targeted Canada's science and technological sectors and use Chinese students and visiting scientists to steal cutting-edge technology for military use and to enhance its global economic competitiveness, according to a senior intelligence source.

In its annual report to Parliament, the Canadian Security Intelligence Service warns that foreign spies are seeking to acquire "Canada's scientific and technological developments, critical economic and information infrastructure, military and other classified information, putting at risk Canada's national security."

Although CSIS does not cite any one country, a high-level intelligence source has identified China as the "most aggressive" in seeking to illegally acquire Canadian technologies.

The official said CSIS was mainly referring to China in its 2003-04 report when the spy service discussed how "certain foreign governments direct their departments, state-owned corporations and intelligence services to engage in economic espionage against Canada."

China uses visiting students, scientists, business people and delegations to obtain industrial secrets and high technology that will benefit Chinese companies and its military-industrial complex, said the source, who asked not to be identified for national security reasons.

Russian intelligence services have also sought to obtain Canadian technology, which led to the arrests of two of their agents in 1996. However, the Canadian intelligence official said China has been the most enterprising in using clandestine or coercive activity to gain unauthorized access to economic and military intelligence.

China has targeted Canada's nuclear industry, aerospace, biotechnology, mining and metallurgy, environmental and the oil and gas sectors.

Beijing's China Defence Science and Technology Information Centre is the key collector of Canadian and foreign technology and is part of the Chinese military's General Equipment Department.

According to a 2003 Pentagon report, China's GED oversees a "complex web of factories, institutes and academies that are subordinate to China's nuclear, aeronautics, electronics, ordnance, shipbuilding and astronautics industries."

It added: "Each of these institutions has an import/export corporation to facilitate the import of technology and knowledge."

Wenxng Zuo of the Chinese embassy on Ottawa strenuously denied yesterday that China has engaged in espionage in Canada to gain secrets for economic and military use.

"No, it's not true," she said.

The revelation of Chinese spying comes as Prime Minister Paul Martin is about to embark on a 10-day trip to Asia that includes stops in Beijing and Hong Kong. International Trade Minister Jim Peterson will lead a trade mission to China at the same time.

Mr. Martin, whose family's shipping company has had ships built at low-wage Chinese shipyards, is under pressure from the opposition and some Liberal backbench MPs to reject China's takeover of Noranda, one of Canada's biggest and best-known mining firms.

Noranda is in acquisition talks with the metals producer China Minmetals Corp, an enterprise controlled by the Chinese government, which wants to pay $6.7 billion for 100 per cent of the mining giant.

Canada is not the only country that has deep concerns about Chinese intelligence operations. The United States has also accused China of carrying out economic espionage.

The FBI claims China uses its nationals, who are sent to North America to study advanced technology, to infiltrate U.S. companies to gain access to sensitive information. They then return to China and set up their own companies or provide the information to the military.

A U.S. congressional committee concluded in 1999 that China obtained critical information about an array of U.S. warheads, including its modern strategic thermonuclear weapons program, through theft from U.S. nuclear weapons labs as well as meticulous scanning of publicly available informat ion.

Paul Moore, a former FBI intelligence analyst who specialized in Beijing espionage activities, told the Washington Times that Chinese intelligence services do not usually pay money for high-technology secrets and expect people friendly to the Communist government, many of whom are ethnic Chinese, to provide it free.

According to a Chinese spying manual, obtained by the Washington Times in 2000, more than 80 per cent of all Chinese espionage focuses on open-source material obtained from government and private-sector information. The remaining 20 per cent is gathered through illicit means from scientists at meetings, through documents supplied by agents or through electronic eavesdropping, bribes or computer hacking.

The manual, titled Sources and Methods of Obtaining National Defence Science and Technology Intelligence, said Beijing set up a database of "famous scientists" overseas, and describes how "special methods" are used to obtain classified information through "satellite surveillance, electronic bugging, special agent activities (buying or stealing), etc."

Robert Fife is parliamentary bureau chief