By William Hawkins
The Washington Times
February 12, 2008
On Jan. 29, the House Judiciary Subcommittee on Crime, Terrorism and
Homeland Security held a hearing on Chinese espionage.
One of the witnesses was Larry Wortzel, chairman of the congressionally
chartered U.S.-China Economic and Security Review Commission. Mr.
Wortzel spent 25 of his 32 years in the U.S. Army working in military
intelligence, then ran the Heritage Foundation's Asian Studies Center.
He told the subcommittee that "The commission concluded in 2007 that
China's defense industry is producing new generations of weapon
platforms with impressive speed and quality. We believe that some of
these advancements are due to the highly effective manner in which
Chinese defense companies are integrating commercial technologies into
military systems. ... There is a long record in China going back over
two centuries of sending government-directed missions overseas to buy or
shamelessly steal the best civil and military technology available,
reverse engineer it, and build an industrial complex that supports the
growth of China as a commercial and military power."
His testimony raises the questions of whether any real line can be drawn
between military and civilian sectors in a Chinese economy dominated by
state-owned and state-controlled firms under a communist regime that
still draws up five-year plans and tightly manages all interaction
between Chinese and foreign enterprises.
The question is not academic. The Commerce Department recently
designated five Chinese corporations as "vetted end-users" who can now
buy restricted technology with military applications without obtaining
export licenses from the U.S. government.
The notion is that these firms are civilian enterprises that can be
trusted not to pass along information to other Chinese firms or agencies
in the military sector. This notion is insane. It is the result of heavy
lobbying by American firms who want to sell Beijing whatever it wants,
wishing only to make a profit as China expands.
The highly regarded Wisconsin Project on Nuclear Arms Control has
reported on the ties two of the vetted Chinese firms have with the
Beijing regime and military. Shanghai Hua Hong NEC Electronics Co. is
majority owned through a corporate chain by state-owned China
Electronics Corporation, which produces military equipment as well as
consumer electronics. BHA Aerocomposite Parts Co. is partly owned by
AVIC I, a state-owned aerospace conglomerate that produces fighters,
nuclear-capable bombers, and many other weapon systems used by the
People's Liberation Army. Anyone concerned about U.S. security in a
turbulent world should go to the Wisconsin Project Web site and read the
Commerce claims it will monitor the vetted firms, but reports by the
Government Accountability Office (GAO) have questioned the department's
ability to do so, especially in the face of uncooperative Chinese.
A 2006 GAO report designated "identification and protection of critical
technologies as a government-wide high-risk area" and concluded, "Given
its lack of systematic evaluations, Commerce cannot readily identify
weaknesses in the dual-use export control system or implement needed
corrective measures." GAO earlier reported that Commerce lacks the
personnel to police end-users in China.
The illusion of separation between military and civilian in China has
also come up in the ongoing security review of Huawei Technologies bid
for a 16.5 percent share of 3Comm, an American firm that produces
network security software for the Pentagon. Bain Capital is buying 3Comm
with Chinese minority participation. The fear is that Huawei will not
only be able to get access to the firm's technology, but may expand its
control over time, since Bain only buys firms to sell them later for a
Bain has argued that Huawei is a civilian firm. However, when the
prestigious Rand Corp. published a report on the Chinese defense
industry at the end of 2005, it described Huawei as representing "the
new digital-triangle model, whereby the military, other state actors,
and their numbered research institutes help fund and staff commercially
oriented firms that are designated 'national champions,' receive lines
of credit from state banks, supplement their R&D funding with directed
money, and actively seek to build global market share. The military, for
its part, benefits as a favored customer and research partner." Anything
Huawei gets from 3Comm will go straight to the PLA for use against
Yet, 3Comm seems confident the deal will go through. It has called a
Feb. 29 shareholder meeting to approve the buyout by Bain and Huawei.
The Committee on Foreign Investment in the United States (CFIUS), which
is conducting the review, is chaired by the Treasury Department, whose
naive view of China rivals that of the Commerce Department.
Republicans pride themselves on being strong on national security, and
believe this is their trump suit against the Democrats. Certainly, Sen.
John McCain hopes so, as he bids to carry the party's banner into the
Unfortunately, Republicans also think of themselves as the "party of
business," making them vulnerable to the "anything for a buck" pleadings
of foreign traders and lobbyists. China is the test case as to which
trait will prevail in the waning days of the Bush administration.
William Hawkins is senior fellow for national security studies at the
U.S. Business and Industry Council.
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