[Pages S227-S229]
From the Congressional Record Online through the 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 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

[[Page S228]]

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.
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,

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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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