[Congressional Record Volume 143, Number 80 (Tuesday, June 10, 1997)]
[Extensions of Remarks]
[Pages E1171-E1173]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                                  MFN

                                 ______
                                 

                        HON. BENJAMIN A. GILMAN

                              of new york

                    in the house of representatives

                         Tuesday, June 10, 1997

  Mr. GILMAN. Mr. Speaker, today, I received a copy of an excellent 
paper from Frank Gaffney with the William J. Casey Institute of the 
Center for Security Policy. The paper makes the excellent point that: 
``While MFN is a blunt instrument * * * it is also the only measure 
currently on the table that is remotely proportionate to the magnitude 
of the danger Beijing is creating, to a considerable degree with 
resources it is garnering from trade with the United States.''
  I ask that my colleagues read the paper and request that the full 
text be printed at this point in the Record:

  Non-Renewal of MFN for China: A Proportionate Response to Beijing's 
              Emerging, Trade-Subsidized Strategic Threat

       Washington, DC.--Congress is expected shortly to consider 
     President Clinton's proposal to renew for an additional year 
     China's Most Favored Nation (MFN) status. While there are 
     many compelling reasons for opposing such a renewal, the 
     William J. Casey Institute of the Center for Security Policy 
     believes that there is one overarching factor that demands 
     this step: Communist China is utilizing much of the huge 
     trade surplus that it enjoys thanks to this privileged 
     trading status to mount a strategic threat to the United 
     States and its vital interests in Asia, the Middle East and 
     beyond.
       While MFN is a blunt instrument--affecting, if it is 
     denied, millions of innocent Chinese workers, the economy of 
     Hong Kong, U.S. jobs associated with exports to and imports 
     from China, etc.--it is also the only measure currently on 
     the table that is remotely proportionate to the magnitude of 
     the danger Beijing is creating, to a considerable degree with 
     resources it is garnering from trade with the United States.


                       China's Offensive Strategy

       In the Summer 1994 edition of Orbis, Ross H. Munro reported 
     that, in 1993, the West was afforded ``an unprecedented--and 
     at times disturbing--inside look at how important elements in 
     China's armed forces view neighboring countries as well as 
     the United States.'' This insight was obtained when a Western 
     diplomat serendipitously obtained a copy of a book entitled 
     ``Can China's Armed Forces Win the Next War?'' that had been 
     published by the People's Liberation Army (PLA) for internal 
     consumption only.
       According to Munro, this book provided ``virtual 
     confirmation of reports . . . that the Chinese leadership in 
     general and the senior Chinese officer corps in particular 
     view the United States as China's principal adversary now and 
     for decades to come.'' This view has become even more 
     entrenched during the intervening years. As Munro and co-
     author Richard Bernstein put it in their own, critically 
     acclaimed book published earlier this year, ``The Coming 
     Conflict with China.''
       ``China's harsh rhetoric and incidents like [a dangerous 
     U.S.-Chinese naval encounter in October 1994] in the Yellow 
     Sea are not so much temporary responses to a temporary 
     situation but products of a fundamental change in the Chinese 
     attitude toward the United States. The use of the words 
     `hegemonism,' `subversion' and `interference' with regard to 
     the United States signals a change in China's strategic 
     thinking. Before, Beijing saw American power as a strategic 
     advantage for the PRC; now, it has decided that American 
     power represents a threat, not just to China's security but 
     to China's plans to grow stronger and to play a paramount 
     role in the affairs of Asia.
       ``China, in short, has determined that the United States--
     despite the trade, the diplomatic contacts, the technology 
     transfers, the numerous McDonald's and Kentucky Fried 
     Chickens open in the People's Republic, despite even the 
     limited amount of cooperation that still existed between the 
     two countries--is its chief global rival.''
       The enormous impetus behind China's determined effort to 
     acquire a modern military capable of decisively projecting 
     power derives from this zero-sum view of the U.S.-PRC 
     relationship.\1\ The Chinese leadership believes, after all, 
     that it must be able not only to dominate the nations of East 
     Asia and the South China Sea. It sees China as having to 
     exercise control over the Pacific out to what the Chinese 
     call ``the second island chain'' (i.e., the Philippines, 
     Japan and even the U.S. territory of Guam).\2\ The larger 
     purpose appears to be even more ambitious: to render the 
     United States incapable of exercising influence in Asia that 
     would compete with, let alone counter, Chinese hegemony in 
     the region.


                       Implementing the Strategy

       The Chinese are pursuing a multifaceted campaign to 
     accomplish these strategic objectives. The following are 
     among the means the PRC is pursuing toward such ominous ends:
       Strategic Force Modernization: The Washington Times 
     recently reported that China is expected to begin deploying 
     by the year 2000 an advanced intercontinental-range ballistic 
     missile, designated the Dong Feng-31 (DF-31). This missile 
     will give Beijing the ability to deliver nuclear warheads 
     with great accuracy throughout the Pacific and parts of the 
     western United States.
       The DF-31 reportedly is benefitting from SS-18, SS-25 and 
     Topol-M ICBM technology China is obtaining from Russia and/or 
     Ukraine. Its lethality--and that of other Chinese strategic 
     forces--will be greatly enhanced by supercomputers the United 
     States has provided to Beijing's military-industrial 
     complex.\3\ And the DF-31 is expected to be fielded on a 
     mobile transporter-erector-launcher derived from Russian 
     technology supplied by Belarus. The survivability afforded by 
     this MAZ launcher, together with advances in Chinese 
     ballistic missile-launching submarines capable of firing the 
     DF-31, suggests that Beijing is intent on acquiring a 
     formidable strategic nuclear capability that cannot be 
     preemptively destroyed and that will be capable of holding 
     American cities and other targets credibly at risk.
       A foretaste of the use to which China may be willing to put 
     such a capability can be seen in a report published on the 
     front-page of the New York Times on 24 January 1996. It 
     described how a senior Chinese official had signaled 
     Beijing's willingness to engage in ``nuclear blackmail'' 
     against the United States by suggesting that American 
     interference in China's coercion of Taiwan could result in an 
     attack on Los Angeles. In the absence of any deployed U.S. 
     ability to intercept a Chinese ballistic missile launched at 
     Los Angeles--or any other target in the United States--such 
     threats may well have the desired effect.
       Build-up of Other Aspects of China's Military: Beijing is 
     also pouring billions of dollars into what might be called a 
     ``Great Leap Forward'' for other elements of the People's 
     Liberation Army, notably its power-projection capabilities 
     (long-range aircraft, blue-water naval units, precision-
     guided munitions and unconventional weapons). Such 
     capabilities pose, most immediately, a danger that China will 
     be able to control transit of the South China Sea and 
     access to its energy and other strategic resources.\4\
       China's drive to modernize the non-nuclear elements of its 
     military is also benefitting hugely from imported technology. 
     Thanks to advanced machine tools, computer-aided design 
     capabilities, composite materials, chip-manufacturing 
     technology and the other foreign dual-use technology like--
     whether acquired legally or illegally--together with its 
     purchase of full-up military hardware or components,\5\ 
     Beijing is now obtaining new generations of highly 
     competitive jet fighters, cruise missiles, attack submarines 
     and armored vehicles. The threat posed by such weaponry will 
     not arise from China alone; given past Chinese practices, 
     such equipment will shortly be available for purchase by 
     rogue states from Iran to North Korea.
       Espionage: The illegal acquisition of U.S. technology--
     especially that of the dual-use variety--is a priority 
     assignment for the hundreds of People's Liberation Army-owned 
     or -affiliated front companies operating in the United 
     States.\6\ Together with large numbers of intelligence 
     operatives, 40,000 graduate and undergraduate students and 
     Overseas Chinese entrepreneurs doing business in this country 
     or with its companies,\7\ America faces a literally 
     unprecedented risk of penetration and espionage and, 
     consequently, an immense counter-intelligence challenge. In 
     his new book about economic espionage, ``War by Other 
     Means,'' John Fialka declares that China's prime intelligence 
     agency, the Ministry of State Security, has ``flooded the 
     United States with spies, sending in far more than the 
     Russians even at the height of the KGB's phenomenal 
     campaign.''
       Not least is the danger that China's penetration of the 
     computer and telecommunications industries will translate 
     into a sophisticated, if not unique, Chinese capability to 
     wage information warfare (IW) against the United States. This 
     capability is especially sinister since the vulnerability of 
     America's computer infrastructure to IW attacks offers 
     Beijing a means to inflict grave harm on the U.S. economic 
     and national security in a way that may enable the attacker 
     to avoid detection, responsibility and retaliation.
       Arming U.S. Gangs and Drug Lords: China has been caught 
     shipping AK-47s and other lethal firepower to criminal 
     elements in this country with the potential to sow mayhem in 
     American society. PLA-affiliated companies have offered to 
     sell undercover U.S. law enforcement officers posing as drug 
     lords not only automatic weapons--whose lethal effects were 
     evident when the streets of Los

[[Page E1172]]

     Angeles were turned into a war zone by bank robbers wielding 
     AK-47s manufactured by the Chinese firm Norinco \8\--but 
     rocket-propelled grenade launchers, light armored vehicles 
     and shoulder-fired surface-to-air missiles.
       China is also believed to be active in supplying narcotics 
     from Southeast Asia to the U.S. market. Its merchant marine--
     the Chinese Ocean Shipping Company (COSCO)--has been 
     implicated in smuggling drugs as well as guns and other 
     contraband into the United States. President Clinton has 
     nonetheless personally intervened no fewer than three times 
     on COSCO's behalf in connection with the effort this arm of 
     the PLA has been making to take over the U.S. Navy's vast 
     Long Beach Naval Base. This is all the more extraordinary 
     since, according to a senior Soviet military intelligence 
     officer who defected to the United States, China is likely 
     collaborating with Russia in utilizing COSCO assets and 
     facilities for signals intelligence and other espionage 
     activities, pursuant to the two nations' bilateral 
     intelligence cooperation agreement of 1992.
       Financial Penetration: Since 1988, China has issued some 
     eighty bonds on the U.S. and Western securities markets. 
     While the bulk of these have been yen-denominated bonds, the 
     total amount of dollar-denominated Chinese bonds (primarily 
     issued in the U.S. market) has now reached at least $6.7 
     billion.
       This preferred borrowing venue provides major Chinese 
     state-owned enterprises and banks intimately connected with 
     the PLA and Beijing's security services with access to large 
     sums of undisciplined, unconditioned and inexpensive cash. 
     This money can be easily diverted to finance activities 
     inimical to U.S. security interests--not to mention American 
     principles and values. Worse yet, in the process, Beijing is 
     successfully recruiting numerous politically influential 
     constituencies in this country that will have a financial 
     vested interest in ensuring that China is not subject to 
     future U.S. economic sanctions, containment strategies or 
     other forms of isolation and/or penalties.
       A sense of the implications of such financial operations 
     can be gleaned from the case of one of the conglomerate's run 
     by Wang Jun, the arms dealing Chinese ``princling'' who was 
     invited to attend a Democratic fund-raising coffee klatch at 
     the Clinton White House last year. The Chinese International 
     Trade and Investment Corporation (CITIC) has, thus far, 
     floated $800 million in dollar-denominated bonds--financial 
     instruments that are now in the portfolios of U.S. pension 
     funds, securities firms, insurance companies and other 
     prominent players in the American investor community.
       While the full dimensions of China's efforts to utilize the 
     political access afforded by its financial and other business 
     operations in the United States are, at this writing, far 
     from clear--and currently the subject of intensive 
     congressional and Justice Department investigations, one 
     thing is certain: Beijing has had a keen interest in shaping 
     U.S. policy in various ways, notably by: gaining access to 
     supercomputer and other militarily relevant technology; 
     preventing the exploitation of American deposits of ``clean'' 
     coal; facilitating the sale of securities in the American 
     market--to say nothing of discouraging close U.S. ties with 
     Taiwan, etc. It adds insult to injury that Chinese efforts to 
     suborn or otherwise influence this country's elected leaders 
     must have been underwritten, at least in part, by the 
     proceeds of undisciplined bond sales to American companies 
     and citizens.
       Proliferation: Beijing has, for years, been aggressively 
     and irresponsibly facilitating the spread of weapons of mass 
     destruction (WMD) and other deadly ordinance to rogue states 
     capable of using them against U.S. personnel, interests and/
     or allies. Worse yet, it seems safe to assume that open 
     source data concerning China's proliferation activities are 
     but the tip of the iceberg. If so, the picture that emerges 
     is one of a nation systematically seeding the Middle East, 
     Persian Gulf and South Asia with chemical, biological and 
     nuclear weapons technology--together with ballistic and 
     cruise missiles with which such arms can be delivered over 
     increasingly long ranges.
       This danger is only increased by the prospect that the 
     Peoples Republic of China regards these transactions as more 
     than simply a valuable means of generating hard currency, 
     securing energy supplies and garnering influence around the 
     world. If Beijing is also using proliferation as an integral 
     part of a campaign to diminish U.S. presence and influence in 
     the Western Pacific, the possibility that its clients might 
     use Chinese-supplied arms to precipitate conflict in regions 
     far removed from Asia could seen as desirable by the Chinese 
     leadership. After all, it would almost certainly preoccupy 
     the United States--substantially tying down and drawing down 
     its military, political and strategic resources.


              A Prescription For U.S. Policy Toward China

       The United States can no longer indulge in the delusion 
     served up by some of Beijing's paid advocates--namely, that 
     it is up to America whether China will become an enemy. In 
     fact, their writings for internal consumption, their policies 
     and programs make it clear that the Chinese leadership 
     decided to view the U.S. in that way years ago.
       The available evidence suggests that it is foolish to 
     discount the implications of China's strategy for U.S. 
     security out of some confidence that Western capitalism's 
     ``engagement'' with Beijing will ensure that the PRC is 
     transformed, over time, into a benign international power. 
     Americans' ironic embrace of this variation on the Marxist 
     concept of economic determinism not only disregards the 
     practical effects of such ``engagement'' to date; it also 
     overlooks the dangers that are likely to arise in the 
     interim.
       Accordingly, while the United States would prefer to avoid 
     confronting China, it has no responsible choice under present 
     and foreseeable circumstances but to stop engaging in 
     activities that are having the effect of making it yet more 
     difficult and more dangerous to challenge the PRC. The 
     William J. Casey Institute of the Center for Security Policy 
     believes that the place to start is by non-renewal of MFN for 
     China.
       This action should be complemented, however, by a number of 
     other, critically important initiatives. These include:
       Denying PLA-front companies and other inappropriate Chinese 
     borrowing entities the opportunity to sell bonds in the U.S. 
     market. This step can be taken in a non-disruptive fashion 
     (e.g., by creating a security-minded screening mechanism for 
     these prospective bond issuers) without fear of jeopardizing 
     U.S. exports, jobs or ``people-to-people'' contacts 
     unaffected by such transactions.
       Blocking Chinese access to strategic facilities (in the 
     U.S. and elsewhere, notably at the eastern and western ends 
     of the Panama Canal).
       Prohibiting the sale of American military production 
     facilities and equipment to China.
       Terminating the ``anything goes'' policy with respect to 
     the export of dual-use technology to Chinese end-users. In 
     the interest of obtaining maximum pressure for change in 
     China, U.S. allies should be offered the same choice they are 
     currently given under the D'Amato legislation on Iran and 
     Libya (i.e., foreign companies and nationals must decide 
     whether to export militarily-sensitive equipment and 
     technology to China or risk losing their unfettered access 
     to the American marketplace).
       Increasing significantly the resources dedicated to 
     uncovering and thwarting Chinese espionage, technology theft 
     and influence operations in the United States. And
       Intensifying efforts to provide truthful information and 
     encouragement to those resisting communist repression 
     (including greatly expanding the operations of Radio Free 
     Asia; enforcing the existing bans on the importation of slave 
     labor-produced goods; imposing penalties for religious 
     intolerance, etc.) After all, how a nation treats its own 
     people is a good indicator of how it is likely to deal with 
     those of other states.
       This step can help make clear that the United States is not 
     an enemy of the Chinese people, but that it steadfastly 
     opposes the totalitarian government that brutally rules them. 
     It can also help undercut the nationalist xenophobia that the 
     Chinese leadership promotes in its bid to retain power.


                            The Bottom Line

       The Casey Institute is under no illusion that the 
     tremendous course-correction entailed in such steps will be 
     easily taken by either the U.S. executive or legislative 
     branches. Still, the nature of the threat posed by China is 
     in key respects of a greater magnitude and vastly greater 
     complexity than that mounted by the Soviet Union at the 
     height of the Cold War. It behooves the United States 
     correctly to perceive this danger and respond appropriately 
     before it becomes any harder to do so.


                               Footnotes

     \1\According to a front-page article in the 19-25 May 1997 
     issue of Defense News; the Pentagon has just released a study 
     entitled ``Chinese Views of Future Warfare,'' that draws on 
     Chinese writings to document ``Beijing's doctrinal shift from 
     a low-technology, personnel-intensive people's war to high-
     technology regional warfare based on information deterrence 
     and possible first-strikes.''
     \2\China evidently concluded after Operation Desert Storm 
     that the traditional strategy of defending its homeland by 
     retreating into the hinterlands and waging ``people's war'' 
     could not assure victory against a modern military force like 
     that of the United States. Consequently, the PRC had to adopt 
     a forward defense--geared toward denying the U.S. the in-
     theater bases, logistical facilities and staging points that 
     were decisive to the Gulf War's outcome.
     \3\According to the New York Times of 28 May 1997, the United 
     States has sold 46 supercomputers to China over the last 18 
     months, ``giving the Chinese possibly more supercomputing 
     capacity than the entire Department of Defense.'' Matters are 
     made worse by former Secretary of Defense William Perry's 
     decision to redefine what a ``supercomputer'' is: Where in 
     1992, the standard was arbitrarily increased from 195 MTOPS 
     (million theoretical operations per second) to 10,000 MTOPS. 
     As a result, many extremely powerful machines that fall below 
     the new definition of supercomputer have also been made 
     available for export to China.
     \4\For a frightening illustration of the implications of such 
     a development, see Dragonstrike: The Millennial War by the 
     respected British journalists, Humphrey Hawkins and Simon 
     Holberston.
     \5\Two articles documenting China's acquisition of militarily 
     relevant technology from the United States and other Western 
     nations are: a front-page Wall Street Journal article by 
     Robert S. Greenberger which appeared on 21 October 1996 and 
     was entitled ``Let's Make a Deal--Chinese Find Bargains in 
     Defense Equipment as Firms Unload Assets''; and ``Unilateral 
     Armament--Until China's Position in the World is Better 
     Defined, Western Countries Should Stop Selling Arms to 
     Beijing,'' by Richard Fisher, Jr. which appeared in the 2 
     June 1997 edition of National Review.
     \6\Insight Magazine's Tim Maier cites Wall Street Journal 
     reporter John Fialka as estimating that ``about 450 Chinese 
     companies are under federal investigation for economic 
     espionage in the United States,'' See ``PLA Espionage Means 
     Business,'' 24 March 1997, pp. 8-14.
     \7\According to Randolph Quon, an investment banker who 
     formerly worked closely with the Chinese leadership, 150 
     prominent overseas Chinese

[[Page E1173]]

     families--including the Riadys of Indonesia--represent 
     enormously important economic and strategic assets to the 
     PRC's leadership. Their huge net worth (measured by some 
     observers to be in the trillions of dollars), their influence 
     in their respective countries and their ability to serve as 
     indigenous surrogates, if not as ``Fifth Columns,'' for 
     Beijing enormously complicates the task of responding to 
     China's predations.
     \8\According to the London Sunday Times of 6 April 1997, 
     ``Norinco [is] a huge state-run arms manufacturing 
     conglomerate, which answers to the State Council, China's 
     cabinet. Norinco has been implicated in the supply to Iran of 
     strategic materials that could help the Islamic regime 
     develop weapons of mass destruction. Its ultimate boss is Li 
     Peng, China's prime minister.''

     

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