May 31, 1999
Web posted at: 11:13 a.m. EDT (1513 GMT)

There are lots of moments to begin this tale of Chinese spying, American bungling and diplomatic trembling, but let's take the day in 1955 when Shanghai-born Qian Xuesen goes home. He had fled the Japanese occupation of China and landed at M.I.T., then earned a Ph.D. at Caltech, where he joined a rocket-research group to pioneer supersonic aerodynamics and thin-shell-stability theory for ballistic missiles. At the university's prestigious Jet Propulsion Lab, he helped design Private A, the first U.S. solid-fuel missile that worked. Then he was invited into the U.S. Army as a colonel to fashion the Titan ICBM, workhorse of the cold war silo-missile force.

But in 1955, Qian suspiciously loses his security clearances and is fired from U.S. ballistic-missile programs. No one formally charges that he stole information or delivered secrets to Beijing. When he is invited back to China, the U.S. lets him go. Once home, he takes charge of ballistic-missile development, and today he is regarded as the father of China's missile force, awarded the highest honors a scientist can achieve. Qian is the brains behind the 20-odd '50s-era ICBMs, including those Beijing currently targets at the U.S.

Was he a spy? Was the U.S. foolhardy in letting him go? Yes, on both counts, according to the scathing 909-page Cox report, Congress's account of how the Chinese stole and bought America's most precious nuclear secrets and how the U.S. made it easy for them to do it. Used to be, spies were guys in their intelligence service and ours who lied and duped one another into handing over a nation's secrets with help from the occasional renegade citizen. We each knew the other was an enemy, and we kept our countries and our people at arm's length. Even so, secrets slipped out. But how do you guard your nation against information-hungry friends or business partners? What do you do to keep national-security secrets when a foreign scientist can scan our unclassified journals for weapons know-how; a foreign student can work inside our top research labs; a foreign company can buy our high-performance computers, aerospace tools, telecommunications technology?

That question lies at the core of the dire declarations in the report that China has systematically stolen our vital security secrets, pilfering design information on every advanced thermonuclear warhead we deploy, on missile guidance, even on the never fielded neutron bomb, to acquire weapons knowledge "on a par" with the U.S. With "insatiable" appetite and "enormous" energy over decades, Beijing's agents mined valuable military information from every corner of the American military-industrial complex and haven't given up yet. From that time to the present, a permissive, often inept U.S. government let the People's Republic help itself to valuable technology thefts. Now, claims the report, China has leaped from reliance on Qian's obsolete clunkers to imminent deployment of sophisticated modern missiles that directly threaten U.S. national security. "No other country," said Representative Christopher Cox, the California Republican who was chairman of the committee, "has succeeded in stealing so much from the U.S."

Read on to find out if you should believe those shocking headlines. But whether "understated," as Cox and many other Republicans claim, or an exaggerated "worst case," as many intelligence experts and Democrats respond, the report is sparking political fallout that imperils U.S. relations with China. Partisans in Washington have seized on the allegations to fight another election-time round of "who lost China." Beijing has denied all the charges strenuously, and its hard-liners wave the report as proof of hostility from a superpower out to "contain" a rising China. Both countries threaten to disrupt the delicate balancing act that keeps Sino-American relations from spinning out of control. Nobody wants a new cold war, but overheated emotions could provoke a self-fulfilling prophecy.

The spying

Passed unanimously by Republicans and Democrats on the nine-member committee, the Cox report depicts a relentlessly malevolent China steadily stripping away every American military secret to threaten the U.S. with deadly new nuclear missiles. It slips close to hysteria, though, when it says, for example, that every one of the 80,000 Chinese who travel annually to the U.S. is tasked by military-intelligence officials to glean technological tidbits, or that 3,000 U.S.-based "front" companies do the bidding of hidden Beijing connections.

A sober morning-after appraisal of the available information is not so chilling (one-third of the Cox report remains classified). Sizable numbers of arms-control experts, intelligence agents and FBI officials regard much of the tome as biased and alarmist and disagree with many of its central claims. But even they agree that the report lays out a real problem: for decades China has been running an intensive intelligence-collection effort targeting an array of U.S. military and commercial technologies. Nor does anyone doubt that Beijing has acquired both by stealth and by legitimate means pieces of hardware and information that could accelerate modernization of its outmoded military.

But for all their gloss and heft, the black-bound volumes assert more drastic espionage than they prove. Trumpeting the loss of all seven warhead designs, the report can document only the theft of unspecified eyes-only information about the top of the line, miniaturized nuclear warhead known as the W-88. A Chinese citizen handed over an official Beijing document marked SECRET to U.S. authorities in 1995, confirming the theft of W-88 information sometime between 1984 and 1992. But the CIA concluded the person who proffered the document was actually an agent for the Chinese government. That immediately raised suspicion among White House and CIA officials that Beijing, for some unfathomable reason, may have been conducting a disinformation campaign to make Washington believe it had the U.S.'s most precious military secrets. The document, what's more, is cited as a major piece of evidence that China filched designs for four other warheads "sometime prior" to 1995. To this day, neither the intelligence community nor arms-control experts know whether China got its hands on any detailed specifications or blueprints for them.

And the report makes giant leaps of assumption about the military capabilities China gained from its spying and high-technology purchases. Cox & Co. assert that "the stolen U.S. secrets have helped China fabricate and successfully test modern strategic thermonuclear weapons." They state that Beijing may test a long-range mobile solid-fuel-missile system this year and could be ready to deploy it by 2002.

Not likely, said a blue-ribbon intelligence-community assessment in April compiled in response to Cox's central findings. Its experts concluded that so far, "the aggressive Chinese collection effort has not resulted in any apparent modernization of their deployed strategic force or any new nuclear weapons deployment." The Cox report errs, explains Bates Gill, a China expert at the Brookings Institution, by "equating acquisition with capability, period." China has been more like a car thief stealing a hubcap here, a fuel-injection system there--but that doesn't mean it can build a Mercedes from the bits and pieces. Although no one minimizes the possible future impact of China's aggressive acquisitions, almost every expert in Washington and Beijing says it will take the struggling nation decades to translate information it has pilfered into a superpower's ranks of bristling missiles.

The report's most compelling indictment is not of China but of the U.S. Lax security at national weapons labs virtually invited Beijing to pick their pockets. For years officials ignored complaints that the labs were wide open, and no Administration bothered to bolster their feeble protective measures. "On the security breaches," says Winston Lord, former U.S. ambassador to China, "I say, Shame on us."

The carelessness continued into the first years of Clinton's presidency. His predecessors were embarrassingly oblivious to the spying under their nose. The Clinton Administration first got wind of the problem in 1995 but, critics charge, took an astonishingly long time to do anything about it. Critics say National Security Adviser Sandy Berger, who was briefed in 1996, deep-sixed the problem to get Clinton past the election. Berger insists the briefers told him only general stuff, just "troubling" enough to order a thorough look. He sent the briefers to Capitol Hill, where congressional committees did nothing.

It was more than a year later, in mid-'97, before investigators returned with a more alarming report. Clinton was briefed, and Berger ordered a major reform of security at the labs. Seven months later, a presidential directive finally went out to the Energy Department. Yet little action was taken until September 1998, after new Energy Secretary Bill Richardson arrived, another glaring delay that officials lamely ascribe to "bureaucratic inertia." Last week more than 80 members of Congress demanded that Clinton dismiss the National Security Adviser for "failing in his responsibility."

The Administration fumbled the case of Wen Ho Lee too. The report doesn't name him, to keep the ongoing investigation dark. But he is the Los Alamos scientist suspected of divulging the sensitive data on the ultracompact W-88 warhead, revealed in 1995. It was not until mid-1996 that the FBI began to ask discreet questions and 1997 when agents went to the Justice Department for permission to search his computer and tap his phone. In 1997, Justice blocked FBI attempts to search Lee's computer, citing a lack of probable cause. The FBI asked again; Justice said no again. Not until February, as the story was about to break, did investigators get a look inside his hard drive. They were appalled to discover he had downloaded the "legacy codes," containing all the most important data the U.S. had amassed from years of nuclear testing, onto his unclassified computer. Lee was fired but has not been charged, and no one knows if he sent those codes to Beijing. Attorney General Janet Reno and the FBI are engaged in an unseemly blame game, while Congress calls for someone's head to roll.

The buying

While the Cox report harps on spying, what China stole is dwarfed by what it got legally. It's no secret that once Washington threw open the doors 20 years ago, a lot of Chinese exploited this country's freedom to soak up material from unclassified publications, study at the best universities, download technical reports from the Net. Beijing skillfully stitched the tidbits together into the rudiments of a new nuclear arsenal. The high-tech revolution here has moved cutting-edge military information into the civilian mainstream, making a lot of dangerous know-how available to potential enemies. That's the price of the free flow of information in an open society.

Over the same period, four Presidents have pushed to stoke up trade with China for rich profits for the U.S. economy. The hard part is making sure the U.S. doesn't sell the Chinese goods they could turn to military use. Sensibly regulated exports actually boost American security indirectly by promoting closer ties and helping ensure that China doesn't make deals with less conscientious countries.

But in balancing these interests, the Clinton Administration is hardly the first to take off the security brake. It was Ronald Reagan who allowed U.S. satellites to be lofted into space by Chinese rockets after the Challenger blew up and Europe's aerospace company charged too much. Pressed by American satellite companies, Bush continued to approve still more launches even after sanctions were imposed for the 1989 Tiananmen massacre, and when Clinton came in eager to make trade a centerpiece of foreign policy, Big Business worked him to go further, faster. According to the report, the chiefs of Hughes and Loral, who together won five licenses, dropped by the White House, sat on advisory panels and lobbied hard for the Administration to move the whole licensing procedure to Commerce, which the White House pretty much did in 1996.

The result: after Hughes and Loral lost three satellites when the Long March rockets boosting them into space blew up, the Cox report says, they "acted without the legally required license" as they worked out the trouble with the Chinese. In the process, says the report, they gave away information on guidance systems that could boost the accuracy of Chinese ballistic missiles. Both Hughes and Loral deny they violated export-control law or transferred sensitive information. Congress reacted last winter by ordering the licensing process back to State.

All told, successive Administrations steadily relaxed export controls on a slew of computers, machine tools and high-end electronics that China could covertly put to forbidden military use. These "dual-use" sales have long eluded a neat solution: security hawks deride pro-traders as "rope sellers"--capitalists eager to sell communists the rope to hang us with. Under the business-first mantra of Commerce Secretary Ron Brown, the Clinton Administration raised the commercial imperative to new heights, shifting decisions from the traditional "no, but..." assumption that tech trade is a security risk unless proved otherwise to the "yes, but..." preference for business first. Corporations were allowed to police their own security; the downsizing Defense Department marketed obsolete equipment as scrap, and the Chinese snapped it up.

Some critics contend that the wholesale auction on generous business contributions to presidential-campaign treasuries, Republican and Democratic alike, tipped the U.S. too far from proper vigilance. This Administration insists it has tried hard to balance a nearly impossible equation that demands limitless access to Chinese markets for American firms and limited rights for technology transfer. That dilemma, in a sense, is America's. It is extremely difficult to keep technology out of China's hands. If the U.S. doesn't sell it, another country will. Evidence that Beijing diverts items to the military is sketchy. And, intelligence officials say, the U.S. actually gains access to China's secrets when it installs or monitors its most sensitive equipment.

The fallout

It seems absurd that the fate of nations could hang on the sale of a Pentium III chip. "It's an illusion that we can draw a bright line in the sand," says Jeffrey Garten, a Commerce official during Clinton's first term and now dean of Yale's School of Management. "So it's healthy that we have a national debate over what we transfer and what we hold back." Engagement with China rests on scores of such decisions, and virtually no one, not even in the white heat of the Cox report, is seriously calling for Washington to disengage.

Republican presidential candidates, including the junior Bush, are out in force bashing Clinton as soft on China--just as the President did when he ran against the senior Bush. But they don't want to dry up campaign contributions or cut off their constituents' trade. And once in office, every President since Richard Nixon has come round to the same realization. If not engagement, what? Cold war? Hot war? Those are hardly practical choices. And so for 20 years, there has been little daylight visible between the basic ways that Republicans and Democrats have approached the rising power of the world's most populous country, pursuing the effort to foster political reform and global stability by encouraging China's economic development.

Now the danger is that Clinton's implacable critics, armed with the Cox report, will vent their outrage on the entire Sino-American relationship. They are right to slam the door on Chinese spying, but a sizable number sound ready to turn China into the New Enemy. Washington hardheads talk of holding up the annual renewal of China's normal trade relations (the new bureaucratic label for most-favored- nation trading status) or blocking its entry into the World Trade Organization.

The report catches China in an even more sour mood. Long resentful that the West never treats them as equals, the Chinese are hungry to control their own military destiny. They want to match the U.S. on the world stage and dominate their hemisphere in the same way Washington dominates its own. China's approach to international relations may seem crude, but it underpins the deep anger with which China has greeted the recent string of American embarrassments. Charges of campaign-financing corruption, Premier Zhu Rongji's rebuffed concessions to win wto endorsement, nato's assault on a sovereign Yugoslavia, the bombing of the Chinese embassy in Belgrade, which no Chinese citizen believes was accidental--all these add up to frightening confirmation that the U.S. is bent on "containing" China from achieving its rightful place in the world. The Cox report not only buttresses the public tilt toward tension and mutual distrust but also strengthens Beijing's own hard-liners as they call on China's leaders to get tough.

Chinese and American diplomats continue to agree in private that the two countries have too much to lose to let the relationship rupture. For now, Beijing is still dedicated to catching up to the U.S. economically, and a military buildup isn't its top priority, "unless we help change it," says a Clinton aide. Whether China chooses to exploit the secrets it has already stolen to embark on a superpower arms race may depend on how Washington manages this dangerous rift. The Cox report offers a stark warning. If we get hostile, they will get hostile. If both China and the U.S. give in to extremists in their capitals and let their relationship unravel, the worst-case scenario the report presents just might come true.

--Reported by Jay Branegan, Elaine Shannon and Douglas Waller/ Washington and Jaime A. FlorCruz/Beijing

Cover Date: June 7, 1999

• The Cox report hypes the China danger, but the rivalry is real and growing.
• Is China's military the biggest winner from the boom in trade with U.S. technology firms?
• China wants to be a world power on a par with the U.S., but it has a lot of catching up to do
• When the U.S. bungles, the world sees a conspiracy. The story may be simpler
• Gore joins the choir, saying that faith has a role in public life. How did the idea go mainstream?
• Mental health reform: What it would really take
• Inside Kosovo: A visit to a devastated land
• On the stump, Hillary comes down in size and sounds more like Al than Bill
• Judicious spending

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