China and Proliferation of Weapons of Mass
Destruction and Missiles: Policy Issues
Summary
Congress has long been concerned about whetherU.S. policy advances theU.S.
interest in reducing the role of the People’s Republic of China (PRC) in the
proliferation of weapons of mass destruction (WMD) and missiles that could deliver
them. Recipients of China’s technology include Pakistan and countries that the State
Department says support terrorism, such as Iran, North Korea, and Libya. This CRS
Report discusses the national security problem of China’s role in weapons
proliferation and issues related to the U.S. policy response, including legislation,
since the mid-1990s. A table summarizes the U.S. sanctions imposed on PRC
entities for weapons proliferation. This CRS Report will be updated as warranted.
Since 1991, China has taken some steps to mollify concerns about its role in
weapons proliferation. Nonetheless, supplies fromChina have aggravated trends that
result in ambiguous technical aid, more indigenous capabilities, longer range
missiles, and secondary (retransferred) proliferation. As the Director of Central
Intelligence (DCI) has reported, China remains a “key supplier” of weapons
technology — particularly missile or chemical technology.
Policy issues in seeking PRC cooperation have concerned summits, sanctions,
and satellite exports. On November 21, 2000, the Clinton Administration agreed to
waive missile proliferation sanctions, resume processing licenses to export satellites
to China, and discuss an extension of the bilateral space launch agreement, in return
for another promise from China on missile nonproliferation. However, PRC
proliferation activities again raised questions about sanctions. On 8 occasions, the
Bush Administration has imposed sanctions on PRC entities (not the government)
for transfers (related to ballistic missiles, chemical weapons, and cruise missiles) to
Pakistan and Iran, under the Arms Export Control Act, Export Administration Act,
IranNonproliferationAct, Iran-IraqArms NonproliferationAct, and ExecutiveOrder
12938. Among the actions, on September 1, 2001, the Administration imposed
missile proliferation sanctions denying satellite exports (for 2 years), after a PRC
company transferred technology to Pakistan, despite the November 2000 promise.
During preparations for the U.S.-PRC summit in October 2002 at Crawford, TX,
China, on August 25, 2002, published the missile export controls promised in
November 2000. With questions about China’s enforcement of the regulations and
reductions in proliferation activities, President Bush has not waived the sanctions
imposed in September 2001. Moreover, on May 23, June 26, and July 30, 2003, the
Administration imposed sanctions onPRCentities formissile proliferation, signaling
U.S. frustrations with China. China’s cooperation is also sought on North Korea.
The 107th Congress enacted the FY2003 Intelligence Authorization Act (P.L.
107-306) with Section 827 (inserted by Senator Thompson) to require the DCI to
submit annual reports on PRC and other foreign companies that are involved in
weapons proliferation and raise funds in U.S. capitalmarkets. In the 108th Congress,
the Senate’s FY2004 Intelligence Authorization Act (S. 1025, passed as H.R. 2417
on July 31, 2003) included Section 339(f) to repeal the above reporting requirement.

Policy Papers-American Defense Council


CHINA: Merchant of Weapons of Mass Destruction to the Axis of Evil

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Introduction

President Bush, in his 2002 State of the Union Address named three countries on the United States' official list of terrorist states, North Korea, Iran and Iraq, as the "Axis of Evil." This briefing paper documents China’s sale of the tools of mass death – weapons of mass destruction – to these and the other states on the official list of terrorist states.

Currently seven countries are on the terrorist state list: Cuba, Iran, Iraq, Libya, North Korea, Sudan and Syria. There has also been discussion in the U.S. government to form an informal watch list. The Taliban regime in Afghanistan, Pakistan, Lebanon, and Yemen have been suggested as candidates for the informal list. China’s sale of the tools of mass death to these countries is also documented in this report.

Fool Me Once Shame on You, Fool Me Six Times, Shame on Me

In the past two decades, China has promised six times not to transfer missiles and missile technology yet has "broken each of those promises," by arming Pakistan, Syria, North Korea and possibly even Libya.

The treaties and agreements the Chinese have signed are:

February 1992 promise to abide by the Missile Technology Control Regime (MTCR);
March 1992 accession to the Nuclear Nonproliferation Treaty (NPT);
January 1993 signing and subsequent ratification of the Chemical Weapons Convention (CWC);
October 1994 statements on the MTCR and fissile material production (China has agreed to export restrictions for complete missiles but not to the MTCR technical annex that addresses exports of missile technologies);
November 1995 white paper on arms control and disarmament;
May 1996 statement on making only safeguarded nuclear transfers;
July 1996 announcement of a moratorium on nuclear testing; signing of the Comprehensive Test Ban Treaty in September 1996; and joining the Zangger Committee in October 1997.
China has also ratified the Biological and Toxic Weapons Convention.

Iran Gets from China: Assistance with chemical, biological, and nuclear weapons, missile delivery systems, conventional weapons, and major oil deals.

Nuclear Assistance – According to the Pentagon, China is a "principal supplier of nuclear technology to Iran." China has been selling nuclear technology to Iran since the 1980s. China and Iran signed a 10-year nuclear cooperation agreement in 1990. Iran agreed to purchase two 300MW pressurized water reactors (PWRs) from China in 1992. In September 1995, the Chinese ambassador to Iran confirmed that China was supplying uranium enrichment and other nuclear technology to Iran.

While China suspended sales of nuclear reactors to Iran in 1995, the Chinese continued to aid the Iran program with other deals. According to reports, the China Nuclear Energy Industry Corporation planned to sell to Iran a "uranium conversion facility," this could have allowed Iran to produce weapons-grade material in 1995. While the deal was later canceled, Robert J. Einhorn, Deputy Assistant Secretary of State for Non-Proliferation, told Congress in 1997 that China had given Iran a blueprint to construct the facility.

In October 1997, China gave the United States assurances to end its nuclear cooperation with Iran, but said it would complete cooperation on two nuclear projects: a small research reactor and a zirconium production facility at Isfahan that Iran will use to produce cladding for reactor fuel. Then in January 1998, the U.S. discovered the China Nuclear Energy Industry Corporporation planned to sell the chemical at issue, anhydrous hydrogen fluoride (AHF), to the Isfahan Nuclear Research Center in central Iran, a principal site of Iranian efforts to manufacture the explosive core of an atomic device. The same month the Clinton administration certified to Congress that China was not proliferating any nuclear materials.
After Washington (finally) protested, Beijing claimed to have stopped the sale. An intelligence report in 1999 said that China had renewed negotiations with Iran to possibly build a graphite production facility, which would allow Iran to produce 200 tons a year of nuclear-grade graphite. The CIA stated in September 2001 that it is aware of some interactions between Chinese and Iranian entities that have raised questions about its "no new nuclear cooperation" pledge.

Missiles – During the second half of 2000, entities in China continued to supply crucial ballistic missile–related equipment, technology, and expertise to Iran in order to help Iran obtain its goal of developing a longer-range ballistic missile capability. China is selling Iran materials for the development of solid rocket fuels, the setting up of a factory for making the NP-110 missile engine, and the transfer of missile-guidance technologies. The guidance systems are meant both for long-range ballistic missiles and shorter-range Scuds, already available in Middle Eastern arsenals. They include sensors that are generally used on satellites. China built a missile range with all the necessary telemetry equipment for testing long-range ballistic missiles in Iran. U.S. intelligence observed China shipping Iran about 1,000 tons of specialty steel in 1998, which it was suspected would be used to make Iranian missiles.
Chemical Warfare – Iran has sought considerable assistance from China in the development of its chemical warfare program. The latest CIA report states that Iran continues to seek dual-use CW-related production equipment and technology from Chinese companies, but it is unclear to what extent these efforts have succeeded.

The CIA reported in 1996 that a Chinese firm shipped 400 metric tons of chemicals used in producing nerve gas to an Iranian chemical-arms center. China also sold Iran entire chemical factories, including special glass-lined vessels for mixing precursor chemicals. Then the U.S. imposed sanctions on seven Chinese entities for knowingly and materially contributing to Iran’s chemical warfare program in May 1997. These sanctions still remain in effect.
In 1998 China's SinoChem sold the Defense Industry Organization, Iran's main defense procurement agency, 500 tons of materials, which could enable Iran to become self-sufficient in producing large stockpiles of advanced nerve gas. The State Department placed sanctions on China's Jiangsu Yongli Chemicals and Technology Import and Export Corp. in June 2001 for selling chemical-weapons materials in violation of the Iran Nonproliferation Act. Then the State Department sanctioned two companies, Liyang Chemical Equipment, and the China Machinery and Electric Equipment Import and Export Co., and an individual, Q.C. Chen for selling Iran chemical- and/ or biological-weapons equipment in January 2002. One of the companies produces equipment, which could be used to produce chemical weapons.

Biological Warfare – In 1997, Secretary of State Madeleine K. Albright in a written response to a question from Sen. Robert Bennett, stated that the U.S. had received reports of Chinese companies selling equipment to Iran, which could boost Tehran's large-scale effort to produce biological weapons.

Conventional Arms Sales – Iran continues to seek and acquire conventional weapons and production technologies primarily from Russia and China. The total value of arms transfers agreements by China to Iran rose from $400 million to $600 million during the period from 1993-1996 to 1997-2000. China has sold Iran weapons such as C-802 anti-ship cruise missiles, SA-2 surface-to-air missiles, F-7 combat aircraft, and fast-attack patrol vessels. In 1999, China transferred technology to improve Iran's short-range FL-10 cruise missiles so they can be fired from attack helicopters and fast patrol boats. The Pentagon stated that these missiles were not covered by the 1998 promise of China not to provide Iran with cruise missile technology, but it did violate the spirit of the agreement.

Trade – Trade between Iran and China reached $2.5 billion in 2000, and is expected to reach $3.5 billion by the end of 2001. Iran is currently the largest exporter of oil to China comprising 16.6% of China's total crude oil imports in the first 7 months of 2001. Over the past year China and Iran have signed agreements allowing Chinese companies to explore for oil in Iran. The possibility of building a natural gas pipeline from Iran to China through Pakistan is also under consideration.

Diplomatic Relations – It was only in February 2000, the first time in six years, that the Chinese foreign minister visited Tehran. President Mohammad Khatami in June 2000 then visited China, the third visit by an Iranian head of state, during which the two countries signed five agreements. Khatami became the first Muslim head of state to visit Kashgar in Xinjiang. Defense Minister Shamkhani accompanied Khatami on the trip, and visited Chinese weapons factories and held meetings with Chinese military leaders. He was expected to sign a series of accords providing for regular contacts between the military commands of both sides. During the trip, Beijing University expressed its interest in broadening the scientific exchanges with Iran. Hu Jintao, the Chinese Vice President, accompanied by a high-ranking delegation, visited Tehran, Isfahan and Shiraz in January 2001.

Shanghai Cooperation Organization (SCO) – Iran is also interested in joining the SCO. This would allow Iran to join Russia and China to oppose U.S. "hegemony," and to work to contain the Islamic fundamentalists in the region, which are hostile to Iran's brand of Shiism. Iran could possibly be the next nation to join the group.

Iraq gets from China: Specialty chemicals used for chemical weapons, and nuclear and missile fuel, fiber-optics and computers for Iraq’s air defense system, diplomatic support in the U.N. Security Council to end sanctions, conventional weapons, a market for its oil (purchased in contravention of U.N. sanctions).

Military Assistance – Over the past year there have been reports of Chinese experts playing an important role in rebuilding and improving Iraq's air defense system, including upgrading its radar stations and linking them with underground command centers. Allegations first arose last February that several Chinese firms were providing Iraq with fiber-optic upgrades at several strategic sites. Diplomats began to notice a large increase in the numbers of Chinese working in Iraq in the months prior to the February disclosure.

A French Arabic paper has also reported that the Chinese have upgraded the Iraqi radar network, including French- and Russian-built radars and also "Volks" radars and helped the Iraqis develop "Scud-B" missiles after Iraqi intelligence obtained the necessary equipment for this purpose that had been smuggled from abroad. Reports estimate during the 1980s Iraq bought more then $5 billion worth of Chinese conventional weapons.

Missiles & Nuclear Assistance – U.S. federal authorities thwarted a plan to ship the chemical, ammonium perchlorate, to Iraq from China through Jordan in 1993. The chemical is used as a missile fuel ingredient. China sold Iraq about seven tons of a rare chemical, lithium hydride, used in the manufacture of nuclear weapons and missile fuel in 1990. Lithium hydride could also be used in the manufacture of various types of nerve gas. The sale occurred just before the U.N. arms embargo was imposed. It has also been reported China helped Iraq to construct special magnets in 1989 for stabilizing high-speed centrifuges used in uranium enrichment, which could be of use to Iraq’s nuclear bomb program.

Trade – China exported $148 million worth of goods and imported $116 million from Iraq in 1999. In 1999 Chinese companies signed a contract to build a gas turbine power station ($75 million) in Iraq.

In April 1999 the Chinese Company Huawei Technologies, signed a $28 million contract with Iraq to build a mobile phone system. The U.N. 661 committee approved the contract in July, but in September, an Iraqi paper claimed the Chinese canceled the contract. The 661 committee released more then $80 million dollars worth of contracts in exchange for Chinese support on a Security Council resolution that would have overhauled U.N. sanctions on Baghdad.

Two other Iraqi contracts include China selling nearly $15 million of microwave radio equipment from CMEC International Engineering Company and a $15.5 million sale of telecommunications equipment by China National Technical Import.

China officially imported 372,056 tons of oil from Iraq in July, which comprised 1% of their total imports for the month. Iraq has also been smuggling considerable amounts of oil through a recently re-opened railway line to Syria. Arab security experts said that most of the oil has been exported to Russia and China. These funds are then used for front companies operating in a number of countries including China so Saddam can then buy equipment from Europe, which cannot be traced, back to Iraq.

Diplomatic Relations – Iraqi Deputy Prime Minister Tariq Aziz visited China in November 2000 and met with President Jiang Zemin. Aziz visited China and Russia in January 2002 to discuss bilateral relations and the "US threats against Iraq" after September 11th. China has been working with Russia and France in the U.N. Security Council to drop the sanctions against Iraq in return for a number of lucrative contracts.

North Korea Gets from China: A military alliance, intelligence sharing, missile technology, conventional weapons, illegal drugs, and trade, food and energy aid, and assistance in repressing its people by returning those who escape into China.

Missiles –North Korea continues the procurement of raw materials and components for its ballistic missile programs from various foreign sources, especially through North Korean firms based in China. In recent years, Chinese firms have provided some important missile-related items and technical assistance to North Korea.

The Congressional Cox Committee released that China and North Korea were working together to place small warheads on North Korea’s long-range missiles. China sold North Korea YJ-1 (C-801) missiles according to one unconfirmed report.

The National Security Agency discovered a Chinese missile transfer through a Hong Kong company to North Korea in December 1999. U.S. intelligence agencies observed in October 1999, China’s Changda Corp. requesting fiber optic gyroscopes for use in China’s and North Korea’s missile programs. Secretary of State Albright raised this issue after the U.S. detected China shipping the same parts to North Korea earlier in the year. In July 1999, The Washington Times reported the transfer of "accelerometers and gyroscopes are key missile-guidance components" from China to North Korea and some of the material originated in the U.S.

The NSA monitored China sharing space technology with North Korea in 1998, which the North Koreans could use for their missile program although the NSA did not find proof of this. The North Koreans surprised the world when they tested the Taepodong-1 missile on August 31,1998 after a visit earlier in the month by Xiong Guangkai, PLA’s Deputy Chief of Staff.
In 1995 U.S. intelligence observed approximately 200 North Korean missile specialists in China for training. The Defense Intelligence Agency also reported in 1994 that the first-stage diameter of the Taepodong-2 missile closely matches the size of the Chinese CSS-2 intermediate-range missiles.

North Korea has also been implicated as being used by China to covertly smuggle Chinese missile technology to Pakistan. The Indian Intelligence service discovered in 1999 a North Korean ship carrying missile components with Chinese markings to Pakistan.

North Korea also sells the missile technology it acquires to Iran, Syria, Pakistan, and Egypt. The International Institute for Strategic Studies estimated North Korea sells $500 million worth of missile technology to Iran and Pakistan each year. All of the proceeds go to the military.

Conventional Arms Sales – North Korea has imported $340 million of military equipment over the past 10 years, although half of this spending has happened in the past two years according to South Korean defense ministry figures. The majority of foreign materials were purchased from China and Russia focusing on aircraft parts, tank engines and batteries.
Military Alliance and Intelligence Sharing – In May 1996 China and North Korea signed an agreement calling on Beijing to provide military assistance to North Korea, although they did not reveal any of the details of what this entailed. The intelligence operations of both countries work closely together. The North Koreans provide the Chinese with information on U.S. forces in South Korea and Japan.

Trade – China exported $329 million worth of goods and imported $42 million from North Korea in 1999. China is North Korea’s largest trading partner. China is also North Korea’s largest donor nation providing needed resources such as food and energy. There are a number of narcotic factories in North Korea, which after production then move the drugs into China by agents, diplomats, or Chinese "traders" for further distribution.

Diplomatic Relations – North Korean leader Kim Jong-Il has visited China twice in May 2000 and January 2001 on secret unofficial visits. The only other country he has visited is Russia. Jiang Zemin visited North Korea in September 2000 the highest visit by a Chinese official since 1992. During Jiang’s visit both countries condemned the U.S. plan to develop missile defense. China uses North Korea to increase its influence in the region by offering to aid negotiations. The reunification of the Koreas is also in China’s interest since then there would no longer be a reason for a large U.S. force in South Korea.

Human Rights – Due to the poor conditions, North Koreans often cross the border into China seeking refugee status. China regularly denies this status to the fleeing North Koreans and deports anyone they find back to North Korea.

While Afghanistan was not listed as among the Axis of Evil, it is instructive to examine China’s relationship with Afghanistan under the Taliban.

Afghanistan: What the Taliban Got from China: Telecommunication infrastructure projects, economic and technical cooperation, conventional weapons, cash for crash-landed U.S. cruise missiles that China purchased.

Conventional Weapons – The Taliban recovered one or two intact cruise missiles in the wake of the U.S. August 20th, 1998 strike against Bin Laden. It was reported that a high level Chinese military delegation visited Afghanistan to inspect the cruise missiles and negotiate for their purchase. A tape recording of two alleged veterans of the camps exists of the Taliban discussing with Chinese businessmen the sale of the cruise missiles for $10 million. A CIA spokesman confirmed the rumors of such a deal, but he added that there has been no confirmation of a Chinese study of any such missiles. An Indian report this September alleged that Chinese agents have helped Kabul in upgrading their defense capabilities, and sold weapons to the Taliban.

China sold to Afghanistan 850 Hong Ying-5 portable surface-to-air missile (SAM) and 350 Type-63 107mm MRL (multiple rocket launcher) during the 1980s. When allied troops entered the caves in Tora Bora, they found large amounts of Chinese ammunition. Some officials have speculated this ammunition was left over from the 1980s when the United States and China supplied the mujahideen fighters. A senior U.S. official told The Washington Times that China supplied the Taliban with SA-7 missiles about a week after the attack on the World Trade Center on September 11. A Chinese spokesman said they have acted "according to the Security Council resolutions" for the weapons embargo against Afghanistan.

Trade – The Chinese company CEIEC (China National Electronics Import-Export Cooperation) signed a contract and began to install digital telephone equipment in Afghanistan last year, according to an Afghan news agency.

The U.S. Defense Intelligence Agency lists CEIEC as a part of China's defense industrial organization under the Ministry of Information Industry and that it produces radar, cryptographic (coded communication) systems, fiber and laser optics, communications, computers, and other systems. The Washington Times also identified Zhongxing Telecom and Huawei Technologies as working on the telephone system in Kabul for the past two years. India began investigating the activities of Huawei’s Bangalore unit for allegations that it may have helped Pakistan, Taliban and Iraq with their telecommunication systems. Huawei officials deny these charges.

On September 11, China and the Taliban signed a memorandum calling for promotion of economic and technical cooperation between the two countries. This is a part of China’s effort to offer the Taliban trade and technology in exchange for agreeing to ban Chinese Islamic Fundamentalist training in the Afghan terrorist training camps. In December 2001, Huawei’s branch in Bangalore India was accused of working on the Taliban telecom surveillance equipment project. Huawei denied the accusations.

Diplomatic Relations – China closed its embassy in Kabul, the Afghan capital, in 1993, and did not maintain normal government relations with the Taliban. China continued to maintain contact with many factions in Afghanistan including the Taliban. China seeks to control the Islamic separatist movement in Xinjiang. As a member of the Shanghai Cooperative Organization, China has spoken out against terrorists based in Afghanistan, but would not support Russia’s plan to bomb training bases. During the summer of 2000 the Taliban stepped-up its contacts with China in its efforts to block further U.N. sanctions. China is now considering reopening its embassy with the defeat of the Taliban, and wants any Chinese Uyghurs found in Afghanistan returned to China.

The following states, with the exception of Pakistan, are listed by the U.S. Department of State as state sponsors of terror. Each rely very heavily on China as a supplier of various aspects of weapons of mass destruction or their delivery systems.

What Syria gets from China: Missile assistance, general defense cooperation, interest-free loans.

Nuclear Assistance – Syria is not believed to be pursuing the development of nuclear weapons. However, it retains an interest in nuclear technology and has a small Chinese-supplied research reactor, which is under IAEA safeguards.

Missiles – During 1999, Damascus continued to work on establishing a solid-propellant rocket motor development and production capability with help from outside sources. In addition, foreign equipment and assistance for its liquid propellant missile program, came primarily from North Korean entities but also from firms in China and Russia, which have been, and will continue to be, essential for Syria’s missile effort.

The Syrians are laying the groundwork to develop a modern, solid propellant SRBM. Syria is seeking Chinese solid-fuel technology, mostly through Iran and other third parties.
Although this Chinese assistance is not believed to involve complete missiles, it does include components and production technology for solid-fuelled engines and propellants, as well as guidance systems and training.

For example, the Syrians received 10 metric tons of aluminum powder in 1999 from North Korea that had originated in China, which could be used as a key component for the solid fuel. The Syrians have been attempting to buy the advanced M-9 medium-range ballistic missile directly from China. The deal was canceled in 1997.

ABC News reported in 1999 that Syria is trying to obtain Chinese medium-range, mobile-launch missile technology through a circuitous route that involves Iran, Pakistan and North Korea. In 1996 the CIA observed the China Precision Machinery Import-Export Corp. shipping missile-related components to a Syrian research institute in charge of developing missile production capabilities. The exact nature of the cargo was not known, but the Chinese company is a major manufacturer of M-11 missiles and the buyer also is in the missile business. Further, China provided technological assistance to Syria’s domestic missile production in 1992 when Chinese scientists visited Syrian missile plants in Aleppo and Hama.
Trade – China exported $203 million worth of goods and imported $5 million from Syria in 1999. China sells Syria a considerable amount of electronic goods. Chinese companies are involved in two key projects in Syria: the construction of a cotton mill in Jableh on the coast and a hydroelectric plant in the Ghuta region near the capital.

Diplomatic Relations – Vice President of Syria, Abdul Halim Khaddam, visited China last May and met with Jiang Zemin. Chinese Vice President Hu Jintao visited Syria in January 2000 and signed an economic and technical cooperation agreement and another agreement under which China will grant Syria an interest-free loan of 30 million Chinese yuans ($3.6 million) for two development projects.