The Door To China Might Be UNLATCHED>
China Gets U.S. Military Phones
Insight Magazine
In 1994 President Clinton boasted that building a
mobile cellular- phone network with American
technology for the Chinese people was good
economic policy. That was White House spin,
say critics, and it has come undone.
According to recently released Commerce
Department records, the White House knew for
some time that this state-of-the-art system was to
be hand-delivered to the People's Liberation Army, which had become
partners in a massive telecommunication business enterprise with China
Telecom, a government-controlled company.
While some debate remains about whether the People's Liberation Army, or
PLA, actually is employing the system, there is no doubt that profits from
this billion-dollar industry trickle down to build ever more weapons of mass
destruction that someday could be used against the United States.
And there is great concern among China hawks in U.S. defense circles that
this so-called "cellular system," when linked with a satellite network, could
enable the PLA to suppress political resistance, enhance its
command-and-control communications and spy on U.S. allies in Asia.
And who paid for this sophisticated telecommunication system?
Unknowing U.S. investors may have footed the bill when one of the chief
Chinese backers borrowed money on the U.S. bond market - an action that
has led to calls from frustrated China hawks to push forward the U.S.
Market Securities Act. This is legislation that would create a new Securities
Exchange Commission Office of National Security to monitor the U.S.
fund-raising activities of companies with ties to the Beijing regime. But any
such law would be too late to stop the mobile-telephones project, already
well under way.
Clinton initially painted it as a humanitarian deal. A cellular- phone system
for China not only could save lives in emergency situations, improving
communications during floods or other natural disasters, it would be an
economic boon for U.S. corporations that want a piece of this billion-dollar
venture. Not surprisingly, a host of U.S. companies led by [ Loral Space &
Communications ] jumped on board. Beijing then tapped the U.S. bond
market to finance the deal, never telling individual investors that their
retirement savings would be used to fund the project. After all, under current
law such disclosure is not required.
The PLA was involved in the deal through China Telecom, says Eric Harwit,
associate professor of Asian studies at the University of Hawaii, who is
working on a book about the Chinese telecommunications industry. "The
PLA had frequencies they didn't need for military purposes, so they decided
to use it for commercial purposes and do the joint venture."
But Harwit disputes China hawks who claim the PLA will be employing the
system for military purposes. Instead, he says, this is a business opportunity
for the PLA to make a profit, though it may not last. Under pressure, the
Chinese government has ordered the PLA to divest from all commercial
enterprises. "I don't see how the PLA is going to proceed" with such
divestiture, he says, adding that they naturally have been reluctant to pull out
of business opportunities that are profitable.
Regardless of whether the American-designed system is used for military
purposes, and it is hard to see why it wouldn't be, it puts money in the
PLA's pockets. And so the question is whether the White House misled the
public about the venture by claiming it was a humanitarian project to aid the
Chinese people rather than to strengthen the Chinese military.
"They knew," insists Charles Smith, president of the Richmond, Va.-based
Softwar Corp., a computer consultant who relentlessly has filed Freedom of
Information Act requests to learn government plans for controlling and
exporting computer encryption. "They knew they were directly dealing with
the Chinese army," he says.
Smith points to 1994. That year, while Clinton gave assurance that the
project was for "civilians," his commerce secretary, Ron Brown, secretly
met with Chinese Gen. Shen Rong-Jun to discuss building the mobile-phone
network, according to recently released Commerce records.
Rong-Jun, who is deputy chief of the Commission of Science Technology
and Industry for National Defense, or COSTIND, is in charge of the PLA's
satellite program. In addition to serving military purposes, the PLA stood to
make a handsome profit by venturing into the satellite pay-per-view
broadcast system, as well as profits generating from millions of phone calls.
Rong-Jun teamed up with billionaire Li Ka-shing, chairman of the Hong
Kong-based [ Hutchison Whampoa Ltd. ] , the Red Chinese merchant
mariner. Ka-shing was found guilty of insider trading and censured in 1984
by a Hong Kong tribunal but continues to be a prominent player. He sits on
the board of PLA arms dealer and White House kaffeeklatsch guest Wang
Jun's company China International Trust and [ Investment Corp. ] , another
PLA-allied giant.
Hutchison is the company that beat out the U.S. bid to control the Panama
Ports. Last year Ka-shing also turned to U.S. investors - and issued $2
billion in bonds. The Beijing borrowers never said how the money would be
used but, according to Dow Jones Newswires, Hutchison revealed in the
bond issues that its 50 percent-held subsidiary known as Chung Kiu
Telecommunication Ltd. has signed agreements to provide cellular services
and equipment to joint ventures between the PLA and the Chinese Ministry
of Posts and Telecommunications, or MPT.
Likewise, Smith noted in 1996, U.S. Ambassador to China James Sasser
stated in a report that the "PLA has for some time been discussing with the
MPT the possibility of using frequencies allocated to the PLA for
establishing a mobile-phone network based on Code Division Multiple
Access technology," according to records obtained by Insight.
Loral Globalstar satellite cellular phones rely on this precise system and have
supplied it under contract to the U.S. military. Loral, whose chief executive
officer is Bernard Schwartz - one of the biggest Democratic Party
contributors - needed a special waiver to sell the system to Beijing. In 1996,
Clinton signed the waiver and Loral sold the technology to the PLA. A few
months later Clinton moved the satellite-application approval from the State
Department to the Commerce Department - a move that was lobbied hard
by both Schwartz and Hughes Electronics' president Michael Armstrong,
now head of AT&T.
And remember that the cellular phones are not the only communications
project the PLA controls. Amid concern about rocket failures - including a
1996 explosion that destroyed a $200 million satellite - Rong-Jun
contracted with [ Hughes Electronics ] of Los Angeles to purchase $650
million worth of U.S. satellites to be used for telecommunications. This
hardly can be a civilian enterprise, according to consultants and
national-security experts. Virginia telecommunication consultant Andrew
Frie says the price is troubling because there seems to be no way to get a
financial return on the investment.
So was something else involved in all of this satellite networking? Edward
Timperlake, a U.S. national-security expert, says this system greatly could
enhance command-and-control communications for the PLA and create "an
unbreakable system" that not even the National Security Agency could tap.
William Triplett, former general counsel for the Senate Foreign Relations
Committee, says these satellites have special antennas that "might be used to
spy on Asian military forces as well as handle PLA encrypted
tele-communications." The prime targets, Triplett says, would be India,
Taiwan, Japan, South Korea, the Philippines, Malaysia and Singapore. "This
system is so big, it could be used for the People's Armed Police to suppress
pro-democracy movements in the countryside," warns Triplett.
Rong-Jun asked Hughes to place his son in charge of the project. "He put
his son in there to make sure Americans didn't put a trap door in" that would
allow the United States to monitor Chinese communications, says Triplett,
who along with Timperlake recently authored the New York Times
best-seller The Year of the Rat.
However, when New York Times reporter Jeff Gerth revealed that Loral
may have violated the law by faxing to Beijing a classified analysis of what
caused a 1996 Chinese rocket explosion, the State Department blocked
participation by Rong-Jun's son in the project. Following Insight's series of
stories that raised questions concerning the security clearance of engineer
Wah Lim, whose assistant faxed the sensitive 1996 rocket-explosion report,
California Republican Rep. Chris Cox launched a congressional probe. Both
Loral and Hughes have claimed they did nothing illegal in helping Beijing.
Lim also maintains he is innocent.
Congress subsequently placed on hold all satellite-technology deals with
China until these probes conclude. After the press exposure the White
House this year changed its tune by acknowledging that the mobile-phone
network sold to the Chinese military would have dual capabilities - not just
civilian - but claimed it primarily would be used for civilian purposes. The
White House also has said that Beijing would get the system from another
country if the United States refused to cut a deal.
Encryption expert Smith, who has been following this story with keen
interest, doesn't buy the latest White House spin. "The question," he says, "is
who were they going to get it from? The Germans sold them a system. It
didn't function. The Russians wouldn't put it up for them. Loral offered the
best deal."
Meanwhile, great damage appears to have been done as a result of the
report faxed to Beijing to reveal what was wrong with China's
intercontinental ballistic missiles. And the trail to how that damage report
came to be provided to China could lead to the White House should House
Judiciary Chairman Henry Hyde of Illinois call former Justice Department
prosecutor Charles LaBella to discuss a secret memo advocating the
appointment of an independent counsel to probe the White House for
possible illegal fund-raising activities involving China.
The memo triggered a firestorm between House Government Reform and
Oversight Committee Chairman Dan Burton of Indiana and Attorney
General Janet Reno, who was cited by Burton's committee for contempt of
Congress. What's in that memo? No one who knows is saying. But Hyde
could obtain it and investigate, if he dare.
(Copyright 1998)
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