It's weird to even have this debate, but it seems we must. In an article redolent of the "den of spies" rhetoric thrown against the US embassy in Tehran under the Shah, Michael Turton, using a report from Fa Lun Gong-founded Epoch Times as his evidence, characterises the Confucius Institutes thus:
"Confucius Institutes have two, and only two, functions: one is propaganda, and the other is intelligence on the academic community. Watch out for the one in your neighborhood; its presence is entirely inimical to the development of robust critical views of China, academic freedom, and democratic politics."
This might have been defensible had the Epoch Times report contained anything solid linking the Confucius institutes to either of these activities. Instead, there is little in the report to support such claims. To support the assertion that Confucius institutes serve to propagate propaganda, the only direct link in the article is the presence of a group of pro-Beijing demonstrators "wearing T-shirts with labels identifying them as being from Montreal's Confucius Institute". Backing up the idea that Confucius institutes facilitate the gathering of intelligence, at most the article mentions a speech in which the head of the Canadian security service lumped the Confucius Institutes in with other instruments of Chinese policy, and a 2007 warning from an academic that Confucius Institutes might restrict freedom of speech at universities (with no follow-up).
The section that opens the article describes a Xinhua report about a Canada-based Confucius Institute instructor engaging in criticism of Canadian reporting from China in 2008. However, this activity seems to have consisted mainly of showing students a map showing Tibet as being inside China (like almost every map in the world) and reads like a CCP propaganda piece that may well be exaggerated or manufactured. At any rate, it shows nothing conclusive about the Confucius Institutes, certainly no evidence of the Confucius Institutes engaging in intelligence gathering or direct propaganda. Michael Turton's European friends may have reported rumours of intelligence gathering, but once again, no solid examples were cited.
Otherwise the sources cited in the Epoch Times article largely agree with the majority view on the Confucius institutes: that they are an exercise in soft power, not direct propaganda, and none of the experts quoted referenced the gathering of intelligence as a purpose of the Confucius Institutes.
[Picture: A Confucius Institute instructor (just kidding). Photo by Alan Light, 1980.]