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PRC Acquisition of U.S. Technology

page 4

The PRC also tries to identify ethnic Chinese in the United States who have access to sensitive information, and sometimes is able to enlist their cooperation in illegal technology or information transfers.

Finally, the PRC has been able to exploit weaknesses and lapses in the U.S. system for monitoring the sale and export of surplus military technology and industrial auctions.

The PRC is striving to acquire advanced technology of any sort, whether for military or civilian purposes, as part of its program to improve its entire economic infrastructure.29 This broad targeting permits the effective use of a wide variety of means to access technology. In addition, the PRCs diffuse and multi-pronged technology-acquisition effort presents unique difficulties for U.S. intelligence and law enforcement agencies, because the same set of mechanisms and organizations used to collect technology in general can be used and are used to collect military technology.

The PRCs blending of intelligence and non-intelligence assets and reliance on different collection methods presents challenges to U.S. agencies in meeting the threat. In short, as James Lilley, former U.S. Ambassador to the PRC says, U.S. agencies are "going nuts" trying to find MSS and MID links to the PRCs military science and technology collection, when such links are buried beneath layers of bureaucracy or do not exist at all.30

The 'Princelings

Unlike the Soviet Union, where nepotism in the Communist Party was rare, ruling in the PRC is a family business. Relatives of the founders of the Chinese Communist Party rise quickly through the ranks and assume powerful positions in the CCP, the State, the PLA, or the business sector. These leaders, who owe their positions more to family connections than to their own merit, are widely known as "princelings." 31

Political, military, and business leaders in the PRC exercise considerable influence within their respective hierarchies. With the exception of those who make their way to the uppermost levels of the CCP or State bureaucracies, however, their authority, clout, and influence extend only to those below them within that hierarchy. They have little ability to influence either the leaders above them within their own hierarchy or the leaders in other hierarchies.32

Princelings operate outside these structures. Because of their family ties and personal connections to other CCP, PLA, and State officials, they are able to "cross the lines" and accomplish things that might not otherwise be possible.33

Two of the currently most notable princelings, Wang Jun and Liu Chaoying, have been directly involved in illegal activities in the United States.

Wang Jun is the son of the late PRC President Wang Zhen. Wang simultaneously holds two powerful positions in the PRC. He is Chairman of the China International Trade and Investment Company (CITIC), the most powerful and visible corporate conglomerate in the PRC. He is also the President of Polytechnologies Corporation, an arms-trading company and the largest and most profitable of the corporate structures owned by the PLA. Wangs position gives him considerable clout in the business, political, and military hierarchies in the PRC.34

Wang is publicly known in the United States for his role in the 1996 campaign finance scandal and for Polytechnologies indictment stemming from its 1996 attempt to smuggle 2,000 Chinese AK-47 assault rifles into the United States. He attended a White House "coffee" with President Clinton in February 1996 and was given a meeting with Commerce Secretary Ronald Brown the following day. He was also connected to over $600,000 in illegal campaign contributions made by Charlie Trie to the U.S. Democratic National Committee (DNC).35

Liu Chaoying is the daughter of former CCP Central Military Commission Vice-Chairman and Politburo Standing Committee member General Liu Huaqing, who has used numerous U.S. companies for sensitive technology acquisitions. General Liu has been described as the PLAs preeminent policymaker on military R&D, technology acquisition, and equipment modernization as well as the most powerful military leader in the PRC. His daughter is a Lieutenant Colonel in the PLA and has held several key and instrumental positions in the PRCs military industry, which is involved in numerous arms transactions and international smuggling operations.36 On two occasions she has entered the United States illegally and under a false identity.

Col. Liu Chaoying is currently a Vice-President of China Aerospace International Holdings, a firm specializing in foreign technology and military sales.37 It is the Hong Kong subsidiary of China Aerospace Corporation, the organization that manages the PRCs missile and space industry. Both organizations benefit from the export of missile or satellite-related technologies and components from the United States, as does China Great Wall Industry Corporation, Col. Lius former employer and a subsidiary of China Aerospace Corporation, which provides commercial space launch services to American satellite manufacturers.

China Aerospace Corporation is also a substantial shareholder in both the Apstar and APMT projects to import U.S. satellites to the PRC for launch by China Great Wall Industry Corporation.38

A Chinese-American, Johnny Chung, during the course of plea negotiations, disclosed that during a trip to Hong Kong in the summer of 1996, he met with Col. Liu and the head of the MID, Gen. Ji Shengde. According to Chung, he received $300,000 from Col. Liu and Gen. Ji as a result of this meeting. The FBI confirmed the deposit into Chungs account from Hong Kong and that the PLA officials likely served as the conduit for the money.

The Select Committee determined that Col. Lius payment to Johnny Chung was an attempt to better position her in the United States to acquire computer, missile, and satellite technologies. The purpose of Col. Lius contacts was apparently to establish reputable ties and financing for her acquisition of technology such as telecommunications and aircraft parts.39

Within one month after meeting with Col. Liu in Hong Kong, Chung formed Marswell Investment, Inc., possibly capitalizing the new company with some of the $300,000 he had received from Col. Liu and Gen. Ji.40 Col. Liu was designated as president of the company, which was based in Torrance, California. The company is located in southern California, in the same city where China Great Wall Industry Corporation also maintains its U.S. subsidiary.

Col. Liu made two trips to the United States, one in July 1996 and one in August 1996, apparently seeking to expand her political and commercial contacts. During Col. Lius July trip, Chung arranged for her to attend a DNC fundraiser where she met President Clinton and executives involved in the import-export business.41

Shortly afterwards, Chung also arranged for her to meet with the Executive Vice President of the Federal Reserve Bank of New York.42

Lius August 1996 trip to the United States came at the invitation of Chung, who had told her that he had contacted Boeing and McDonnell Douglas regarding her interest in purchasing aircraft parts.43

That same month, Col. Liu traveled to Washington, D.C., where Chung had contacts arrange for her to meet with representatives of the Securities and Exchange Commission to discuss listing a PRC company on U.S. stock exchanges.44 Soon after the meeting, when Chung and Lius alleged involvement in the campaign finance scandal became the subject of media reports, Col. Liu left the United States. Marswell remains dormant.45

Princelings such as Wang and Liu present a unique technology transfer threat because their multiple connections enable them to move freely around the world and among the different bureaucracies in the PRC. They are therefore in a position to pull together the many resources necessary to carry out sophisticated and coordinated technology acquisition efforts.46

Acquisition of Military Technology from Other Governments

To fill its short-term technological needs in military equipment, the PRC has made numerous purchases of foreign military systems. The chief source for these systems is Russia, but the PRC has acquired military technology from other countries

as well. Specific details on these acquisitions appear in the Select Committees classified report, but the Clinton administration has determined that they cannot be made public.

Russia

After years of hostile relations between the PRC and the Soviet Union, Russia has again become the PRCs main source of advanced weapons and has sold numerous weapon systems to the PRC.47 The technologically-advanced weapons systems and components the PRC either has purchased or plans to purchase from Russia include electronic warfare and electronic eavesdropping (SIGINT) equipment, air-to-air missiles, advanced jet fighters, attack helicopters, attack submarines, and guided missile destroyers.48 These transfers have been used to improve the capabilities of the PLA ground, air, and naval forces.

Israel

Recent years have been marked by increased Sino-Israeli cooperation on military and security matters.49 Israel has offered significant technology cooperation to the PRC, especially in aircraft and missile development.50 Israel has provided both weapons and technology to the PRC, most notably to assist the PRC in developing its F-10 fighter and airborne early-warning aircraft.51

The United States

The PRC has stolen military technology from the United States, but until recently the United States has lawfully transferred little to the PLA. This has been due, in part, to the sanctions imposed by the United States in response to both the 1989 Tiananmen Square massacre and to the PRCs 1993 transfer of missile technology to Pakistan.

During the Cold War, the United States assisted the PRC in avionics modernization of its jet fighters under the U.S. Peace Pearl program.52

After the relatively "cool" period in U.S.-PRC relations in the early 1990s, the trend since 1992 has been towards liberalization of dual-use technology transfers to the PRC.53 Recent legal transfers include the sale of approximately 40 gas turbine jet engines, the sale of high performance computers, and licensed co-production of helicopters.54

Nonetheless, the list of military-related technologies legally transferred to the PRC directly from the United States remains relatively small.

Illegal transfers of U.S. technology from the U.S. to the PRC, however, have been significant.

Significant transfers of U.S. military technology have also taken place in the mid-1990s through the re-export by Israel of advanced technology transferred to it by the United States, including avionics and missile guidance useful for the PLAs F-10 fighter. Congress and several Executive agencies have also investigated allegations that Israel has provided U.S.-origin cruise, air-to-air, and ground-to-air missile technology to the PRC.55

Back  |  Forward


COX REPORT

Overview
pages 1 | 2 | 3 | 4

PRC Acquisition of U.S. Technology
pages 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9

PRC Theft of U.S. Nuclear Warhead Design Information
pages 1 | 2 | 3 | 4 | 5

High Performance Computers
pages 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9 | 10

PRC Missile and Space Forces
pages 1 | 2 | 3 | 4 5 | 6 | 7 | 8 | 9

Satellite Launches in the PRC: Hughes
pages 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9

Satellite Launches in the PRC: Loral
pages 1 | 2 | 3 | 4 | 5 | 6

Launch Site Security in the PRC
pages 1 | 2 | 3 | 4 5 | 6

Commercial Space Insurance
pages 1 | 2 | 3 | 4

U.S. Export Policy Toward the PRC
pages 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9

Manufacturing Processes
pages 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9 | 10

Recommendations
pages 1 | 2 | 3

Appendices
pages introduction | A | B | C | D | E | F



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