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Chinese Weapons Proliferation Threat a Major U.S. Concern

02 May 2005

United States sanctions China's repeat offenders for controlled export lapses

By Bruce Odessey
Washington File Staff Writer

This article is one in a series on U.S.-China economic relations.

Washington -- China should understand that preventing proliferation of weapons of mass destruction is in its own best interest, a U.S. State Department official says.

Even though the Chinese have published regulations for controlling exports that could be used by other countries pursuing nuclear, chemical or biological weapons (CBW) or missiles, the official said, Chinese companies, most of them state-owned, continue to make many troubling shipments.

The official, who asked not to be identified, said in an April interview that from January 2001 through April 2005 the State Department has sanctioned foreign companies 115 times over controlled export shipments and that 80 of those sanctions were aimed at Chinese companies.

"You can see that the great majority of entities we sanction are Chinese entities," he said, "and that's because the great majority of the supply to proliferation programs that we see is from Chinese entities."

Such sanctions typically include prohibitions on U.S. exports of controlled items to the entities and on certain U.S. imports from those entities.

The Chinese should understand that they would be threatened directly by a nuclear North Korea or a nuclear Iran or by the terrorist groups these countries support, the official said.

"They're threatened by the destabilization of the world economy if there's a CBW war in the Middle East that disrupts the world's oil supply," he went on.  "It's in their interest to make sure that Chinese companies are part of the solution rather than part of the problem."

He said the Chinese government has compiled lists of controlled items in line with commitments to multilateral export-control regimes and has halted some problematic shipments.

Yet Chinese entities continue shipping technology to missile programs in countries of concern, he said.

The multilateral export-control regimes are not treaty-based organizations but voluntary groups of like-minded countries pledged to allow exports of controlled items only after careful scrutiny.

In some cases, the Chinese are licensing exports that the United States would not approve because the Chinese have different policies, the official said.  For example, he said, the Chinese do not view Iran in the negative way the United States does, and China has economic and political interests in that country.

"We don't believe they're taking adequate account of the risk that the item they're approving is actually going to end up in a program for weapons of mass destruction or missiles," the official added, however.

In some cases problematic shipments come out of China because the Chinese government has not spent enough money on enforcement, he said.

The official said some of the Chinese entities sanctioned under U.S. law are repeat offenders -- serial proliferators.  The state-owned manufacturer China North Industry Corporation, or Norinco, is one.  China Great Wall Industry Corporation, another state-owned company with links to China's military, is another.

Gary Milhollin, an academic expert on weapons proliferation, has said that continued sales by serial proliferators appear to demonstrate "that our sanctions policy is not working very well."

In March 10 testimony before the U.S.-China Economic and Security Review Commission in Washington, Milhollin said that U.S. sanctions policy should be improved to affect not only a subsidiary company but also the parent company.

Existing U.S. sanctions impose penalties too small to hurt the offending companies' profitability, added Milhollin, who is director of the Wisconsin Project on Nuclear Arms Control.

"Although Norinco may have actually lost some money due to sanctions," Milhollin said, "Norinco officials must have decided years ago that the profits they would receive from continuing to sell missile and other technology to Iran would more than compensate for any American business they lost due to sanctions."

On a related issue, U.S. government officials express satisfaction that the Chinese are abiding by their commitments to use advanced technology imported from the United States for legitimate uses.

The U.S. Department of Commerce controls exports of what are called dual-use items -- technology that could have both civilian and military applications.

In April 2004, the United States and China reached agreement on allowing Commerce Department inspectors to make visits to verify that customers in China are using licensed technology exports as intended for civilian use and are not diverting those exports to military applications.

In the year since then, another U.S. trade official said, the Chinese have allowed these Commerce end-use visits to be done in a timely manner and without resistance.

"They realize that if there's some question or suspicion about items that have gone to them being misused or diverted or the products of those items being misused or diverted, that ultimately will probably hurt them," said the official, who also asked not to be identified.

He said controlled items amount to a relatively small proportion of U.S. exports to China -- in the year ending September 2004, about $525 million of licensed exports out of about $36 billion total exports.

Most of the controlled exports are capital goods, according to Commerce numbers; about $220 million of the licensed exports were equipment for manufacturing semiconductors.

The official said that, in the licensing process, Commerce Department examiners look at the export destination to find out who the owners are, who the customers are and whether the internal technology controls are adequate.

He ranked export destinations in China for level of cooperation in export licensing.  Easiest to deal with are Western subsidiaries operating in China, followed by new Chinese entities that operate on a transparent Western business model, he said.  After that, he said, are companies that were spun off from Chinese research institutes and, finally, companies that have done work for Chinese military or security forces.

The Commerce Department requires U.S. companies and other organizations to obtain approval before foreign nationals from certain countries are allowed to work on projects involving controlled technology.  An export license is required because regulations treat any release of controlled technology or software source code to a foreign national as a "deemed export" to the home country.

Of nearly 1,000 deemed export license applications filed in the year ending September 2004, the official said, about 400 of them were for technology involving work performed by people from China.

China continues to ignore its responsibility as a newly emerged global economic player to control the flow of weapons and weapons technology out of its borders to the hands of dangerous people, said a U.S. official in Beijing who asked not to be identified.  This threatens the security not only of the world, but of China itself, he said.  Even though China has demonstrated openness in regard to the control of imports of dual-use technology, much more must be done to stop the leakage of dangerous technology outward, and fast, he said.

(The Washington File is a product of the Bureau of International Information Programs, U.S. Department of State. Web site: http://usinfo.state.gov)