[Congressional Record (Bound Edition), Volume 148 (2002), Part 1]
[Senate]
[Pages 373-375]
[From the U.S. Government Publishing Office, www.gpo.gov]




              CHINESE MILITARY'S USE OF FOREIGN TECHNOLOGY

  Mr. KYL. Mr. President, a recent article in the Far Eastern Economic 
Review on China's use of foreign technology to modernize its military 
explains the far-reaching impact of China's purchase of foreign 
technology on that country's military capabilities. For example, it 
describes Rolls Royce's recent sale to China of 90 Spey jet engines, 
some of which will likely be used for the Chinese military's JH-7 
fighter bombers. The technology used in these engines is admittedly 
dated; but some are concerned that the sale may represent the beginning 
of a larger relationship between Rolls Royce and China. The article 
also details China's growing reliance on Russian-designed

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aircraft, missiles, and navy destroyers and submarines. A February 2001 
article in Jane's Intelligence Review described the relationship 
further, stating:

       Between 1991 and 1996 Russia sold China an estimated $1 
     billion worth of military weapons and related technologies 
     each year. That figure doubled by 1997. In 1999 the two 
     governments increased the military assistance package for a 
     second time. There is now a five-year program (until 2004) 
     planning $20 billion worth of technology transfers.

  Perhaps of even greater concern is that, according to the Wisconsin 
Project on Nuclear Arms Control, the United States approved $15 billion 
in ``strategically sensitive exports'' to China during the 1990s. These 
exports included equipment that can be used to design nuclear weapons, 
build nuclear weapons components, improve missile designs, and build 
missile components. And it is important to remember China's primary 
objective in acquiring these and other military technologies, to be 
able to defeat our long-standing, democratic ally Taiwan in a conflict 
quickly enough to prevent American military intervention.
  Last September, the Senate passed S. 149, the Export Administration 
Act of 2001. S. 149 was approved despite serious concerns of some, 
including myself, that the U.S. export control process is ineffective 
in stopping the export of militarily sensitive technologies to 
countries, like China, that pose a potential military threat to the 
United States or to U.S. interests abroad. S. 149, if enacted into law, 
would allow China to import even more sensitive technology than it has 
in the past. It would decontrol a number of dual-use technologies, 
including items used to make nuclear weapons and long-range missiles.
  I urge my colleagues to take a moment to read the Far Eastern 
Economic Review article, and to consider the impact on China's military 
capabilities of foreign technology purchases and, more importantly, the 
potential long-term ramifications of further weakening the U.S. export 
control process.
  I ask unanimous consent that the article be printed in the Record.
  There being no objection, the article was ordered to be printed in 
the Record, as follows:

         [From the Far Eastern Economic Review, Jan. 24, 2002]

                              China--Arms

                     (By David Lague in Hong Kong)

       Buying Some Major Muscle: The People's Liberation Army is 
     shopping for foreign arms and the latest military technology 
     with a vengeance; Costing tens of billions of dollars a year, 
     this drive will change the face of its forces at war and is 
     unsettling some foreign governments.
       In the field of frustration and broken dreams that for many 
     foreign firms is the China market, arms dealers and suppliers 
     of technology to boost military firepower have discovered 
     their El Dorado.
       International arms-trade monitors estimate that China is 
     now the world's biggest arms importer as it steps up a drive 
     to re-equip the People's Liberation Army so that, if 
     necessary, it has the strength to recover Taiwan by force and 
     can deter intervention by the United States in a cross-strait 
     conflict.
       From supersonic fighters and missiles to computer-aided-
     design software the PLA and its associated civilian agencies 
     are filling order books across the world.
       ``In my view, practically every area of PLA modernization 
     is affected by the acquisition, utilization, absorption or 
     development of foreign technology,'' says PLA watcher Richard 
     Fisher of the Jamestown Foundation in Washington.
       The Stockholm International Peace Research Institute in its 
     2001 yearbook noted that China had become the world's biggest 
     importer of arms in 2000, mainly through deliveries of ships 
     and combat aircraft from Russia. These imports were valued at 
     close to $3 billion, more than twice any other buyer's tally. 
     In the secretive world of the international arms trade, the 
     true value of Chinese offshore orders is difficult to 
     uncover. Defence experts estimate up to half of Russia's $4 
     billion in military sales last year went to China. When 
     combined with imports of so-called dual-use technology--
     equipment and know-how with military as well as civilian 
     applications--most analysts expect the total to be much 
     higher.
       To pay for what Fisher described as its international 
     military ``spending spree,'' Beijing announced in March last 
     year that its published defence budget was jumping more than 
     17% to $17.2 billion. Real annual spending, including 
     payments for foreign weapons and technology, is estimated by 
     many analysts at more than $60 billion. The government is 
     already signalling that it plans further defence-budget 
     increases this year.
       The main beneficiaries of Chinese spending: Russia and 
     Israel, since the West imposed an arms embargo in retaliation 
     of the 1989 Tiananmen Massacre. U.S. and European makers of 
     nonlethal military hardware and dual-use technology are, 
     however, eager suppliers.
       The independent U.S. Wisconsin Project on Nuclear Arms 
     Control calculates that Washington approved some $15 billion 
     in strategically sensitive exports to China in the decade up 
     to 1999. These included advanced computers needed to design 
     and test nuclear weapons, machine tools for making missile 
     parts and specialized equipment used for making military 
     semiconductors.
       Some key customers for U.S. technology are the China 
     Precision Machinery Import-Export Corp., a maker of anti-ship 
     missiles, the National University of Defense Technology, 
     which designs weapons, and Huawei Technologies--accused by 
     Washington of helping Iraq improve its air-defense system.
       In recent years, much international attention has focused 
     on sensational allegations of Chinese espionage at U.S. 
     nuclear-arms laboratories. But far from having to steal much 
     of the latest military technology, Beijing is simply buying 
     it.
       ``Western companies want to get into this market,'' says 
     Taipei-based PLA analyst Tsai Min-yen of the Taiwan Research 
     Institute. ``The way they can build contacts with China is to 
     sell these dual-use or nonlethal technologies.''
       Even such top Western firms as British engine-maker Rolls-
     Royce are looking for a piece of the action. It sells defense 
     equipment as part of its broader aerospace, marine and energy 
     business in China--though it is reluctant to give details of 
     its military sales.
       Rolls-Royce confirmed to the REVIEW that it recently 
     supplied up to 90 Spey jet engines and spares to China that 
     defence analysts believe the PLA intends to fit on to its JH-
     7 fighter-bombers--also being modified with modern radar and 
     long-range missiles.
       Rolls-Royce spokesman Martin Brodie says that the company 
     first supplied this engine type to China in the 1970s and 
     continues to support that original deal. ``The details of our 
     support are, as with most companies, a matter of commercial 
     confidence,'' he says.
       The PLA needs more of the reliable Spey engines because it 
     failed to copy those it received earlier and hasn't designed 
     a local replacement. Rolls-Royce argues its Spey engines 
     incorporate 1960s technology, implying they will not 
     significantly boost PLA power. In contrast, Asia-based 
     Western defense officials say the Pentagon objected to the 
     latest deal on the grounds that it would enhance the PLA's 
     capabilities.
       Rolls-Royce indicates more defense-related business is on 
     its mind. On a visit in October, Chief Executive John Rose 
     discussed ``current cooperation and opportunities for the 
     future'' with officials from China's Commission on Science, 
     Technology and Industry for National Defense, according to a 
     company statement.
       Earlier British technology sales proved a boost to the PLA. 
     In 1996, Racal Corp., now part of the French Thales Group, 
     sold up to eight Skymaster long-range airborne radars to be 
     fitted on PLA Navy Y-8 aircraft. Britain at the time 
     justified the sale by saying it would help Beijing against 
     rampant smuggling. Since then, the specialist defence press 
     has reported that these aircraft are used to assist Chinese 
     missile warships locate distant targets.
       Other British sales are aimed at civilian use but seem to 
     offer clear military advantages. Surrey Satellite Technology, 
     perhaps the world's leading micro-satellite maker, has played 
     a major role developing China's infant micro-satellite 
     industry with technology transferred to China through a joint 
     venture with Beijing's elite Qinghua University. Specialists 
     have warned that this type of technology is vitally important 
     for the Chinese military to mount combined air and sea 
     operations in the Taiwan Strait.
       Company spokeswoman Audrey Nice rejects any link between 
     Surrey's technology and the Chinese military. ``The PLA does 
     not exist as far as Surrey is concerned,'' she says. ``There 
     are no defence applications whatsoever.'' However, she is 
     unable to rule out Chinese military access to data from 
     satellites launched as a result of the joint-venture 
     collaboration. ``The satellite is owned by Qinghua 
     University,'' says Nice, adding that any questions should be 
     directed to the university.
       To reduce its dependence on foreign suppliers, China is 
     investing heavily in research and development to build a 
     military industrial base. In the meantime, the PLA armoury 
     resembles an overflowing shopping trolley at an international 
     arms bazaar--with imported arms and technology ordered before 
     the Tiananmen embargo being gradually introduced and combined 
     with the newer purchases.
       Should China go to war in the near future over Taiwan, its 
     air force will rely on front-line Russian-designed strike 
     aircraft alongside locally built fighters based on an Israeli 
     design partially funded by the U.S.

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       Other Chinese-made aircraft will carry Russian and Israeli 
     missiles and find their targets with British and Israeli 
     radar and electronics. The navy will deploy a combination of 
     powerful new Russian warships and submarines alongside 
     locally built ships fitted with U.S. and Ukrainian engines 
     and Italian torpedoes. French companies have supplier air-
     warfare missiles, tactical command-and-control systems and 
     helicopters.
       On land, the PLA will field modern Russian tanks and 
     artillery. Many armoured vehicles will be protected with 
     advanced Israeli-designed armour cladding. Older Chinese 
     tanks have Israeli gun and gunsight systems.
       Overhead, satellites built with British and German help 
     will keep watch on the battlefield, fix positions for ground 
     forces and feed target data to ships and aircraft. Meanwhile 
     China's nuclear deterrent will be mounted on launchers 
     improved with assistance supplied by the U.S.
       Beijing isn't shy about its growing power. When one of the 
     PLA navy's latest class of warship, the sleek 8,000-tonne 
     guided-missile destroyer Shenzhen, berthed in Hong Kong in 
     November after visiting Europe, it was touted as an example 
     of how China was capable of building world-class warships.
       That may be an exaggeration with most Western counterparts. 
     But by regional standards, the Shenzhen's Ukrainian gas 
     turbines, French Crotale air-defense missiles, Russian YJ-2 
     anti-ship missiles and two Russian Ka-28 anti-submarine-
     warfare helicopters make it formidable vessel.
       While the arms merchants pile in, there are clear signs of 
     unease in some foreign capitals about the scale of China's 
     arms-buying bonanza and the danger to regional security. For 
     the U.S. and regional governments, the main concern is that 
     short-term corporate greed is overpowering Western fears of 
     arming a potential enemy of the future to the teeth.
       Reflecting such official unease, New York-based satellite-
     maker Loral Space & Communications agreed with the U.S. 
     Justice Department this month to pay a record $14 million 
     fine to settle charges that it may have illegally given 
     satellite know-how to Beijing.
       Hughes Electronics of California is also expected to settle 
     with Washington over its role in similar technology leaks.
       A U.S. Congressional committee in 1999 accused both 
     companies of helping overcome serious shortcomings in Chinese 
     rocket launchers following an expensive series of failed 
     satellite launches in the mid-1990s. Since then, China 
     launched more than 30 satellites without a hitch. There are 
     strong suspicions in Washington that the PLA's nuclear 
     missiles carried on the same launchers and aimed at the U.S. 
     are now more reliable because of information from U.S. firms.
       At the same time as the probes into Hughes and Loral, 
     Washington forced Israel to cancel a $1.25 billion sale of up 
     to five Russian-built aircraft equipped with Israeli-made 
     Phalcon early warning radar to the PLA. Such aircraft would 
     be crucial in coordinating large-scale operations over the 
     Taiwan Strait.
       Anxious to keep its good relations as an arms supplier with 
     Beijing, Tel Aviv is now negotiating to pay compensation to 
     China for backing out of the deal. Diplomats say that 
     discussions between both sides earlier this month in Beijing 
     also covered what other hardware may be supplied by Israel.
       But regardless of international pressure on sellers, 
     tension across the Taiwan Strait is likely to prolong the 
     feast for arms makers. As China's power grows, so does 
     Taiwan's demand for yet more weapons to ensure parity. The 
     Bush administration last year agreed to supply Taipei with 
     its biggest arms package in decades, including a group of up 
     to eight submarines that alone will cost more than $4 
     billion.
       Watching the arms race, some analysts are questioning the 
     wisdom of China buying hardware from such a range of 
     suppliers. For a start, the logistical and technical support 
     needed to maintain so many different weapons systems is a 
     major challenge. And it takes more than just advanced 
     hardware to be a military power. Training, military doctrine 
     and the integration of weapons and sensors are also vital. 
     There is also the danger that in trying to keep pace with 
     Western firepower, China might overextend itself 
     financially--as the Soviet Union did.
       Nevertheless, analysts such as Tsai in Taipei believe that 
     the sheer pace of its spending is allowing China to close the 
     military gap with the U.S. and the rest of the West fast 
     enough to pose a real security threat for Taiwan. ``It is 
     unnecessary for China to catch up with the West in all 
     fields,'' he says. ``They just need enough to deter the U.S. 
     from becoming involved in the Taiwan Strait.''

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