A Chinese vice-consul in Sydney cultivated a Labor staffer over a 15-month period before the federal election in November 2007.
The staffer told The Canberra Times that he was encouraged to divulge information on Labor Party figures and handed over internal ALP documents.
He was paid $800 and was offered more money if Labor won the federal election.
The vice-consul first sought general information on federal Labor's political fortunes and attitudes towards China, especially after Kevin Rudd's election as Labor leader in December 2007.
The conversations also covered commercial prospects in China, with the staffer seeking help about a relative's business problems in Shanghai.
Over time, the vice-consul's questions became more specific and included seeking details on contact between the Labor Party and Falun Gong, including the names of Falun Gong practitioners who had lobbied NSW Labor parliamentarians.
The vice-consul sought personal information about federal Labor figures, including frontbenchers Joel Fitzgibbon, Robert McClelland, Anthony Albanese, Tanya Plibersek, and Labor staff in the offices of Mr Rudd, Deputy Leader Julia Gillard, Mr Fitzgibbon and Mr McClelland.
The staffer handed over copies of Labor internal telephone lists, including private numbers of MPs and staffers, Labor briefing papers on marginal federal electorates and information on the largely Chinese-Australian Maxine Support Group, which campaigned for Maxine McKew against then prime minister John Howard in the seat of Bennelong.
The vice-consul said Mr Howard's defeat would be "good" for Australian-Chinese relations because his government had "lost its way" and Mr Rudd "better understood the role China will play in the future".
At the request of the vice-consul, the staffer wrote two papers on internal Labor party politics in NSW and several short "backgrounders" on federal Labor parliamentarians.
The vice-consul paid two instalments of $400 and asked staffer to sign invoices for "writing services".
The vice-consul said further payments could be made for more work if Labor won the federal election.
He encouraged the staffer to get a job with a federal Labor minister and mention was made of the possibility of travel to China, with the cost at least in part paid by a Chinese travel agency.
The vice-consul emphasised it was necessary to "be discreet" about their meetings.
The staffer said he accepted the money because he was "a bit embarrassed financially at the time" and he "didn't see anything bad about it".
"It's not like I was giving them state secrets, it was just background stuff," he said.
Shortly after the election, however, discussion with a Labor colleague about undergoing security checking for employment in a federal minister's office caused him to reconsider.
The staffer says he broke off the relationship with the vice-consul shortly after Christmas 2007.
He says they have not had any further contact.
He has not had any contact with the Australian Security Intelligence Organisation, which is responsible for protecting Australia from foreign espionage and interference.
He has since left employment with Labor and now works in the private sector.
A security expert and visiting fellow at the Australian National University, Professor Clive Williams, said the affair looked like "standard methodology" for intelligence recruitment.
"The aim is to compromise a person and then to later put pressure on them to provide more sensitive information," Professor Williams said.
Asked whether he thought he might have been the subject of attempted recruitment by an intelligence officer, the former staffer said, "I really don't know. It seemed pretty straight at first, but then I think I made a mistake. We started talking politics, you know, and I'm really interested in all that's happening in China, but I think I let it take a wrong turn."
The Chinese consulate-general in Sydney is headed by consul-general Qiu Shaofang, and has almost 40 staff.
The Chinese embassy in Canberra has repeatedly denied that China runs spies under diplomatic or consular cover in Australia.
The embassy's press office did not return calls yesterday.