Science Committee backgrounder on dual-use space technology.
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June 22, 1998

China: Dual-Use Space Technology
2318 Rayburn House Office Building
Thursday, June 25, 1998
9:30am

Scheduled Witnesses

The purpose of the hearing is to (1) discuss the significance of information that may have been transferred by Loral and Hughes to the People’s Republic of China; (2) examine the implications of an improved Long March on U.S. national security, U.S. launch industry competitiveness, and the U.S. industrial base; and (3) review components of space-related agreements that the Administration has been negotiating with the People’s Republic of China.

Background

Actions by Loral and Hughes are the catalyst for the current controversy surrounding potential missile technology transfer to China. The 1996 participation of Loral and Hughes in a launch failure investigation resulted in the May 1997 Pentagon Report and the current investigation by the Justice Department. Given the ongoing Justice Department investigation, the February 1998 waiver by President Clinton for export of a Loral-built satellite to be launched in China is also part of the controversy. Other congressional hearings on this issue have focused on the export control process, including the differences between the Bush Administration and the Clinton Administration. The primary purpose of the Science Committee hearing is to examine this issue from the standpoint of the U.S. launch industry. [See Attachment A for a chronology of events (1989-1998) prepared by Shirley Kan, Analyst in Foreign Affairs, Foreign Affairs and National Defense Division of the Congressional Research Service.]

Launches of U.S.-built satellite on Chinese rockets have been affected by two categories of sanctions imposed on the People’s Republic of China: (1) Tiananmen Square sanctions; and (2) missile proliferation sanctions.

Tiananmen Sanctions

In 1990, the United States imposed post-Tiananmen sanctions as required by the Foreign Relations Authorization Act for FY1990-1991 (P.L. 101-246). Section 902 (a) requires suspensions in programs related to: (1) Overseas Private Investment Corporation, (2) Trade and Development Agency, (3) exports of Munitions List items, (4) exports of crime control equipment, (5) export of satellites for launch by China, (6) nuclear cooperation, and (7) liberalization of export controls. Suspensions (3) and (5) affect export of satellites to China. Section 902 (b) allows Presidential waivers of the suspensions by reporting that "it is in the national interest" to terminate a suspension.

Missile Proliferation Sanctions

Congress enacted explicit guidelines for trade sanctions related to missile proliferation in 1990. A requirement for the President to impose sanctions against U.S. persons or foreign persons engaging in trade of items or technology listed in the Missile Technology Control Regime (MTCR) Annex was added to the Arms Export Control Act (Section 73(a)) and to the Export Administration Act of 1979 (Section 11B(b)(1)).

The Missile Technology Control Regime was formed on April 16, 1987 when the governments of Canada, France, Italy, Japan, the United Kingdom, the United States and West Germany agreed to restrict the export of missiles and associated technologies that Third World countries could use to develop unmanned, nuclear weapons delivery systems. The Missile Technology Control Regime (MTCR) established a set of ground rules for controlling sensitive missile-relevant transfers, with reference to a detailed list of restricted items the exporting of which was either to be licensed or prohibited altogether.

Section 73(a) of the Arms Export Control Act requires sanctions against any U.S. citizen or any foreign person whom the President determines to be engaged in exporting, transferring, conspiring to export or transfer, or facilitating an export or transfer of, any equipment or technology identified by the Missile Technology Control Regime that contributes to the acquisition, design, development, or production of missiles in a country that is not an MTCR adherent. Sanctions vary according to the degree of sensitivity of the equipment or technology exported.

Category I violations involve the transfer of a complete missile. Sanctions imposed as a result of a violation would preclude the export of commercial communications satellites for launch from the violating country. Category II violations involve the transfer of missile-related equipment and technology. Category II sanctions do not affect commercial communications satellites controlled by Commerce because even though the satellites may contain missile-related components, Commerce deems the components inaccessible.

Section 11B of the Export Administration Act authorizes sanctions against U.S. persons and foreign persons who engage in commercial transactions that violate missile proliferation controls. Sanctions are required against any U.S. citizen who the President determines to be engaged in exporting, transferring, conspiring to export or transfer, or facilitating an export or transfer of, any equipment or technology identified by the MTCR Annex.

Since the imposition of Tiananmen sanctions in 1990, President Bush and President Clinton have issued waivers for the export of U.S.-origin satellites to be launched in China. Presidents Bush and Clinton have issued at least 13 waivers for 20 satellite projects (on a case-by-case basis) since the Tiananmen sanctions were imposed. [see Attachment B] The Clinton Administration has considered issuing a blanket waiver of Tiananmen sanctions on satellites in return for cooperation from China in missile nonproliferation.

Loral and Hughes

After the February 15, 1996 launch failure of a Long March 3B rocket carrying a Loral-built satellite, Loral and Hughes participated in a review of the Chinese accident investigation findings. Hughes participated because a Hughes-built satellite, APSTAR 1A, was the next satellite scheduled for launch on a Chinese Long March rocket. On April 10, 1996, the Chinese presented their preliminary determination that the crash was caused by an open electrical circuit in the rocket’s "inertial measurement unit" (which is the core of the guidance system). According to the Chinese, the open circuit occurred because a particular solder joint failed. When the circuit opened just after takeoff, the guidance system provided the propulsion system with wrong information as to the position of the rocket, causing the propulsion system to pitch the rocket sharply toward the ground.

Given the history of Long March failures, the insurance companies were unwilling to insure the next Long March launch until a Western review of the accident investigation findings was conducted and the review verified the Chinese findings. An Independent Review Committee was formed with the following members:

Chairman of the Committee

Dr. Wah Lim
Senior Vice President and General Manager for Engineering and Manufacturing
Space Systems/Loral.

Members of the Committee

Mr. John Holt
Former Managing Director
British Aerospace Space & Communications Ltd

Dr. John Smay
Chief Technologist
Space Attitude Control System
Hughes Space and Communications Company

Mr. Karl Kachigan
Former Director Launch Vehicle Engineering
General Dynamics-Convair

Mr. Fred Omsby
Former Manager of Satellite and Launch Vehicle Program Office

INTELSAT
Mr. Reinhard Hildebrandt
Expert Responsible for the Ariane Launch Operations
Daimler-Benz Aerospace

Mr. Robert Steinhauer
Chief Scientist
Hughes Space and Communications Company

The following experts from Loral supported the committee:

Dr. Fred Chan
Senior Expert of Attitude Control and Platform

Dr. Jack Rodden
Principal Engineer Systems Analysis

Mr. Nabeeh Totah
Director of Spacecraft Engineering Department

Mr. Nick Yen
Senior Secretary of the Independent Review Committee.

Independent Review Committee

The President of Space Systems/Loral met with Loral’s government security committee on April 11, 1996. A member of the committee, Dr. Bryen (former head of the Defense Technology Security Administration in DoD) suggested that Space Systems/Loral work with the Department of State and have the department sign off on Loral’s response to the People’s Republic of China prior to delivery of comments.

Two formal meetings of the Independent Review Committee with the Chinese were held: (1) April 22-24, 1996 in Palo Alto, California and (2) April 30-May 1, 1996 in Beijing. Minutes from both meetings, the draft preliminary report, and final preliminary report were sent to China Great Wall Industry Corporation (China’s launch company) without prior submittal of the materials for review by the State Department.

Loral failed to notify the Defense Department of the two meetings, thus no DoD monitors were present. DoD may have failed in its responsibility to ask Loral, since the Loral/Hughes investigation had been publicly announced. Further, Loral has stated that it discussed the Independent Review Committee’s work with a number of U.S. officials interested in China’s space program, while the review was being conducted.

Written questions were given to China Great Wall Industry Corporation (China Great Wall) at the first meeting. The questions were prepared by Independent Review Committee (IRC) members and staff based on previously received reports from China. IRC members and staff asked numerous oral questions at the meetings to understand better the China Great Wall analysis and conclusions.

Minutes of the first meeting were prepared by Mr. Nick Yen of Loral and faxed to China Great Wall on April 25, 1996. Minutes of the second meeting were prepared by Mr. Yen and faxed to China Great Wall on May 6, 1996. After the second meeting, IRC members began putting together the Preliminary Report.

Mr.Yen faxed a copy of the draft Preliminary Report to China Great Wall on May 7, 1996. On May 9, 1996, Dr. Wah Lim sought review from Space System/Loral’s General Counsel before formal release of the final Preliminary Report.

On May 10, 1996, Space System/Loral’s General Counsel attempted to halt distribution of the report not realizing the draft had been faxed to China Great Wall on May 7, 1996. An hour previous to this attempt to halt distribution on May 10, 1996, Mr. Yen faxed the final version of the Preliminary Report, less attachments, to China Great Wall.

On May 13, 1996, Mr.Yen faxed a copy of the final Preliminary Report to Mr. Paul O’Conner of Johnson and Higgins (insurance brokerage firm) in Beijing (Mr. Yen thought it was permissible to send the report to U.S. insurers). The report was sent over a fax to a Beijing hotel. This action is considered an "export" under the International Traffic in Arms Regulations (ITAR) even though the recipient was a U.S. person.

On June 15, 1998, staff from the House National Security Committee, International Relations Committee, and Science Committee were briefed on the export control process by officials from the State Department, Commerce Department, Defense Technology Security Administration, Arms Control and Disarmament Agency, and National Security Council. When asked whether Loral was required to obtain a license to participate in the 1996 launch failure investigation, David Tarbell, the Director of the Defense Technology Security Administration (DTSA) stated that DTSA always has viewed a launch failure analysis to be the conduct of a defense service which requires a license.

On April 4, 1998, Jeff Gerth of The New York Times reported on an inquiry into criminal activity by Loral and Hughes. It was reported that Loral and Hughes assisted the Chinese in improving the guidance systems of the Long March rocket in connection with the investigation of the Long March 3B failure which occurred in February 1996. The Times article also reported that a February 1998 decision by President Clinton to sign a waiver allowing Loral to launch another satellite on a Chinese rocket was opposed by Justice Department officials because it would be more difficult to prosecute the companies.

On April 13, 1998, Jeff Gerth of The New York Times reported on a May 1997 Pentagon report which concluded that scientists from Hughes and Loral had turned over expertise that improved the reliability of China’s nuclear missiles. "One year later [May 1997] the Pentagon completed its damage assessment of the incident. It concluded, officials said, that ‘United States national security has been harmed.’"

Loral prepared a "fact sheet" that was sent to the Science Committee on May 18, 1998. The document stated, "Allegations that Space Systems/Loral provided missile guidance technology to the Chinese are false." [See Attachment C] Loral has acknowledged that it was a "serious mistake" not to have sought State Department approval prior to its IRC activities. Loral further maintains that it is not clear that any violation occurred with respect to technical data.

Pentagon Report

There have been numerous press accounts about a May 1997 Pentagon report which concluded that expertise passed from Loral and Hughes to the Chinese during the 1996 launch failure investigation harmed U.S. national security.

The so-called "Pentagon Report" was produced by a DoD agency, the Defense Technology Security Administration (DTSA). Another report was prepared by an Air Force agency, the National Air Intelligence Center (NAIC). There also have been press accounts of a CIA report on the issue. State referred the Loral/Hughes technology transfer issue to the Justice Department. The Justice Department then initiated a criminal investigation into possible export control law violations by Loral and Hughes.

The one-page analysis prepared by the CIA (March 19, 1997) reportedly conflicts with the DTSA and Air Force reports. This analysis reportedly stated that the IRC report did not raise "proliferation concerns" that could harm U.S. security.

1998 Waiver

President Clinton, in February 1998, approved a waiver for the Loral-built Chinasat 8 satellite to be exported for launch in China. To approve a waiver of Tiananmen sanctions, the President must determine that it is "in the national interest." Samuel Berger, President Clinton’s national security adviser, sent a memorandum to the President on the proposed waiver on February 12, 1998. Mr. Berger recommended approval of the waiver by the President. Mr. Berger, in the memorandum, acknowledged the concern of the Justice Department’s Criminal Division that this waiver could have a significant adverse impact on any prosecution that might take place, based on a pending investigation of export violations by Loral.

Similarities between space launch vehicles and ballistic missiles

Dr. William Graham, former Deputy Administrator of NASA and Science Advisor to Presidents Reagan and Bush, stated at a recent congressional hearing, "There is a misperception that ICBMs [Intercontinental Ballistic Missiles] are more sophisticated and complex than space launch vehicles (SLVs). In reality, the opposite is true. The preponderance of SLVs are ICBMs with additional elements....The essential elements of an SLV are its propulsion, structure, staging, guidance and control, ground support and launch equipment and procedures, overall system integration, payload (the satellite), and payload development. The essential elements of an ICBM are the same with the exception of the payload, which for an ICBM is a reentry vehicle containing some type of warhead, rather than a satellite."

Defense and State Department officials have expressed their concerns about technologies "to integrate the satellite to the launch vehicle because this technology can also be applied to launch ballistic missiles to improve their performance and reliability. Accelerometers, kick motors, separation mechanisms, and attitude control systems are examples of equipment used in both satellites and ballistic missiles.... They also expressed concern about the operational capability that specific characteristics, in particular antijam capability, crosslinks, and baseband processing, could give a potential adversary."

Former CIA Director James Woolsey testified in 1993 before the Senate Governmental Affairs Committee, "... space launch vehicle technology is very similar to and it is clearly applicable toward developing ballistic missiles... the technologies for ICBM’s (sic) and space launch vehicles are very close and in some cases virtually identical."

It was under Commerce controls that Motorola and Lockheed Martin worked with the Chinese to launch a series of small communications satellites known as Iridium. Several issues involving the satellite dispenser (a dispenser is needed when launching multiple satellites so that they can each be released individually) were resolved, including proper mounting and release of the satellites, coupling load analysis (explosive bolt usage to allow payload release without harm to sensitive electronics), and attitude control.

This dispenser technology has direct application to multiple independently targetable reentry vehicles (MIRVs). China first decided to develop MIRVs for deployment in 1970. Development was stalled in part, however, by a lack of capability to miniaturize warheads. The priority for the project on MIRVs was lowered in March 1980, but research and development on MIRVs resumed on November 10, 1983, as part of the DF-5 modification program. Some are concerned that China’s use of multi-satellite dispensers, or smart dispensers, to launch more than one satellite on a Long March rocket has contributed to its development of MIRV capability.

Due to the aforementioned similarities between ballistic missiles and space launch vehicles, experience in one area readily translates into the other. Thus, the more that China learns about space launch vehicles, the more knowledge it will be able to apply to its strategic nuclear forces. Anne Gilks, a British expert on the Chinese space program, observed, "The relationship between China’s space and ballistic missile programs (sic) has been close and often symbiotic." Gilks further notes that experience with the Long March 2 space launch vehicle helped the Chinese improve the guidance of their DF-4 (CSS-4) ballistic missile.

China is in the midst of a significant modernization of its strategic nuclear forces and ballistic missile capabilities. In 1994, Lieutenant General James Clapper, then Director of the Defense Intelligence Agency, testified before the Senate that Chinese modernization of its military was aimed at the United States. According to Clapper, "China is modernizing both its conventional and strategic forces to enable the PLA [People’s Liberation Army] to better support Beijing’s political initiatives and China’s ability to compete with such countries as Japan, Russia, and the U.S. both regionally and globally." A November 1997 report by the Department of Defense concluded, "China has embarked on a ballistic missile modernization program. While adding more missiles and launchers to its inventory, China is also concentrating on replacing liquid-propellant missiles with mobile solid-propellant missiles, reflecting concerns for survivability, maintenance, and reliability." More recently, George Tenet, Director of Central Intelligence, testified before the Senate Select Committee on Intelligence in January 1998 that, "Chinese military modernization remains a key leadership goal. China is increasing the size and survivability of its retaliatory nuclear missile force." Air Force General Eugene Habiger, Commander of the U.S. Strategic Command, stated on March 31, 1998 that China is engaged in a major nuclear modernization that includes development of multiple-warhead missiles capable of hitting all parts of the U.S. except southern Florida.

Until the 1980s, China’s policy was to be self-sufficient in research and development capabilities to support this modernization. However, by the mid-1980s the Chinese government determined that it could accelerate its military modernization and reduce the cost of modernization to China by gaining access to Western technology. Lieutenant General Patrick Hughes, Director of the Defense Intelligence Agency, testified before the Senate Select Committee on Intelligence in January that "China will continue to actively seek advanced technology, including a much-improved knowledge base from ‘overseas’ students, and from cooperative nations and commercial partners, and will proliferate some technical capabilities as it sells selected weapons systems to other countries." Chinese officials themselves confirm that they are seeking to support modernization through access to foreign technology. Zhu Yilin and Xu Fuxiang of the Chinese Academy of Space Technology in Beijing listed one of China’s goals in space as "Cooperating in international space technological exchanges in various fields through multiple administrative levels and channels to catch up and harmonize with the world’s advanced space technology." (emphasis added)

Given the nature of space technology, which can be used for both civilian and military purposes, the Chinese will be able to modernize their military capabilities by acquiring ostensibly "civilian" space technology. The Deputy Director of China’s Central Military Commission, which is the body in the Chinese Communist Party responsible for setting national military priorities, reportedly said that civilian technologies would serve as the "foundation for developing science and technology industries for national defence," and that China, "should pay attention to turning advanced technology for civilian use into technology for military use."

Additionally, the Chinese government decided that it would help finance its strategic modernization by selling dual-use space goods and services. China’s entry into the global launch market was calculated to help raise funds to modernize its space launch vehicle/ballistic missile technologies and capabilities. China’s launching of U.S.-built satellites – worth up to a half-billion dollars in revenue to date – has helped finance China’s own missile-modernization efforts and missile exports to nations like Pakistan and Iran. Gilks notes, "China lacks both the money and the technology to develop its space programme as quickly as it would wish and has been keen to acquire foreign technology—but is still constrained by a tight budget. However, the prospect of commercial gain has allowed funding for limited joint ventures." Consequently, Chinese military industries are engaging in commercial activity to generate revenues that cover the overhead for military research and development. For example, Gilks notes that in 1987, the Ministry of the Aerospace Industry, at the time responsible for civil and military aviation and space technology development in China, financed 66% of its overhead costs through commercial activity.

The Ministry later was split into other organizations. The Commission on Science Technology and Industry for National Defense, (COSTIND) oversees space activities in China, with several organizations reporting to it. Among them are the China National Space Administration and the China Aerospace Corporation. China Great Wall Industry Corporation, part of China Aerospace Corporation, markets commercial space launch services. The China Great Wall Industry Corporation and its research and development counterpart, the Chinese Academy of Launch Technology, may continue to provide military services since no military institutions dedicated to those functions were created when the Ministry of Aerospace was split. Finally, China seeks to acquire the administrative and management skills needed to conduct high-technology research and development and translate the results into usable military power. Frankenstein and Gill note, "As part of the reform process, efforts are underway to introduce concepts of systems engineering, systems analysis, life-cycle management and more ‘scientific decision-making’ into the [military] procurement process." Yilin and Fuxiang, of the Chinese Academy of Space Technology, confirm that China seeks to improve its management skills and "learn the foreign advanced management mode," in order to improve its space capabilities. While such issues do not receive the same attention as explicit technology transfers, such as the sale of technology or the relation of design information, teaching Chinese managers Western management techniques also is likely to help China improve its space launch vehicle/ballistic missile capabilities.

China’s Launch Industry

China Great Wall Industry Corporation (China Great Wall) has been China’s space launch company since 1986. It is a state-owned corporation and belongs to China Aerospace Corporation which oversees China’s space and missile research and development establishment. China Aerospace Corporation develops strategic and tactical ballistic missiles, space launch vehicles, surface-to-air missiles, cruise missiles, and military and civilian satellites.

China Great Wall uses the Long March series of rockets to launch satellites. Long March boosters also are produced as China’s DF-4 and DF-5A ICBMs deployed in the Second Artillery, the strategic missile force of the People’s Liberation Army (PLA). China has three launch sites: Shuang Cheng-Tzu, Taiyuan, and Xichang. Xichang, in southeastern China, is used for satellites destined for geostaionary orbit above the equator.

China reportedly launched its first satellite on April 24, 1970. By May 31, 1998, China had conducted 60 launches, of which eight were complete failures and four placed satellites into incorrect orbits. This number includes five launch failures between 1973 and 1979 that have not been officially acknowledged by China, but are counted by Western analysts. On April 7, 1990, Great Wall launched its first commercial foreign satellite, Asiasat 1. [See Attachment D for a history of Chinese space launches, prepared by Marcia S. Smith, Specialist in Aerospace and Telecommunications Policy of the Science, Technology, and Medicine Division of the Congressional Research Service]

United States’ Launch Industry

The rise of a competitive, global market for commercial launch services in the past decade has cost U.S. launch service providers their previous monopoly on launching commercial satellites. During the 1970s, NASA was designing and building the Space Shuttle. It was decided that once the Shuttle was operational, the U.S. expendable launch vehicles would be phased out. In the early 1980s, production lines for the U.S.-built Delta and Atlas rockets began to close down. In 1979, the European Space Agency successfully launched its first Ariane 1 rocket and began to compete for commercial payloads.

The Challenger tragedy in 1986 ended Shuttle flights for 32 months. The U.S. share of the world commercial space transportation market plummeted during this time and did not begin to recover until 1990. After Challenger, U.S. policy changed to support a "mixed fleet" approach using both the Shuttle and expendable launch vehicles. There was a tremendous push to re-open production lines and get U.S. expendable launch vehicles up and running in order to support the backlog of U.S. government and commercial payloads.

The entry of China, Russia and Ukraine into the commercial launch market has confronted U.S. launch providers with non-market economy competitors who are able to undercut U.S. launch bids significantly even under the terms of existing launch service trade agreements.

In September 1988, the Reagan Administration approved export of three satellites to be launched by China Great Wall on the condition that China sign three international treaties related to liability for satellite launches and other subjects; agree to price its launch service "on a par" with Western companies; and establish a government-to-government level regime for protecting technology from possible misuse or diversion. China met the conditions and the two countries signed a 6-year agreement in January 1989.

On June 5, 1989 after the Tiananmen Square massacre, President Bush suspended all military exports to China. In 1989, exports of communications satellites still were still governed by the State Department’s Munitions List. The three satellite licenses, therefore, were suspended as the satellites were deemed military exports. In December 1989, the licenses were reinstated.

Launch Trade Agreement

The United States currently has launch trade agreements with China, Russia, and Ukraine. The purpose of the agreements is to manage the international market for launch services and reduce the impact of low prices charged by non-market economies on U.S. launch providers. Two of the conditions included in the 1989 agreement were that China would seek to launch no more than nine international satellites between 1989 and 1994, and that it would charge prices "on a par" with other launch service providers. The six-year agreement signed in 1989 expired at the end of 1994.

A new seven-year agreement was signed on March 13, 1995 allowing China up to 11 new launches for international customers to geostationary orbit. Existing contracts for four launches under the 1989 agreement were incorporated into the agreement, thus a total of 15 launches are allowable in the 1995-2001 timeframe. Neither reflights of failed missions, nor launches of commercial payloads intended strictly for internal Chinese use count against this quota. The 1995 agreement stipulated that China was to charge no less than 15% below what Western companies charge or a U.S. review of the price would be triggered (for example, if the lowest Western bid is $100 million, the Chinese are not supposed to bid less than $85 million). Under the 1995 agreement, China has conducted 6 launches which count against the agreement, with 9 remaining through 2001.

One of the provisions of the agreement allows for additional launches depending on the global launch rate. If the total number of commercial launches to geostationary orbit in the world averages 20 launches per year for the first three years of the agreement, China is permitted an additional two launches. If the number of commercial launches averages 20 per year for the first four years of the agreement, China is permitted an additional three launches. From 1995-1997, 61 commercial launches to geostationary orbit occurred around the world. Because the 20/per year average has been met over this three-year period, China has qualified for the additional two launches under the agreement. [See Attachment E for a table of U.S.-origin satellites launched by the People’s Republic of China, prepared by Marcia S. Smith, Specialist in Aerospace and Telecommunications Policy of the Science, Technology and Medicine Division of the Congressional Research Service]

For low Earth orbit (LEO) launches, it was agreed that China will be deemed in compliance of the agreement if China and Russia combined do not win launch contracts to more than 50% of any particular LEO satellite constellation (for example, Motorola’s Iridium system). On October 27, 1997, the U.S. and China agreed to pricing provisions for LEO launches. China agreed to price its LEO launches on a par with U.S. and European launch companies.

United States/China space cooperation

The U.S. and China signed an agreement on Cooperation in Science and Technology in 1979. This agreement called for the establishment of the U.S./People’s Republic of China Science & Technology Joint Commission, to be co-chaired by the President’s Science Advisor and his Chinese counterpart, the Chairman of the State Science and Technology Commission. Biannual Joint Commission meetings were held through 1987. The meeting planned for 1989 was canceled due to the Tiananmen Square massacre. On May 22, 1991, the U.S. and People’s Republic of China (PRC) governments renewed the overall Science & Technology Agreement, with an intellectual property rights annex attached. The first U.S./PRC Science and Technology Joint Commission Meeting since 1987 was held April 12, 1994.

In October 1996, a number of NASA officials attended a conference in Beijing. The possibility of expanding cooperation in Earth science was raised. Discussions held in 1996 and 1997 led to a draft "umbrella" MOU which was submitted for interagency review. Several concerns were expressed by various agencies about potential technology transfer to the Chinese. In December 1997, NASA stated it would pursue project-specific agreements. In February 1998, the National Security Council staff inquired about space cooperation with the Chinese. The draft MOU was modified to state clearly that no technology transfer would occur. NSC incorporated the technology transfer wording changes to the "umbrella" MOU and linked it to a larger non-proliferation package. It was decided later that Chinese compliance with MTCR would be a prerequisite of pursuing the umbrella MOU or else NASA could only pursue project-specific agreements. On March 22-23, 1998, talking points about the revised MOU and MTCR requirements were cleared by the interagency process and used by the State Department-led nonproliferation delegation that visited China. The umbrella MOU is still a part of the bigger non-proliferation package but there has been no movement on China’s part to agree to comply with MTCR. The possibility of project-specific agreements also still exists. Areas that have been discussed for potential cooperation are: atmospheric science; land-cover and land-use change; natural hazards; solid Earth science and geodynamics; calibration and validation of new Earth science sensors and data sets; and topographic mapping.

Chronology

This chronology tracks the events relating to technology transfers to China, commercial satellite launches, the actions of both American and Chinese aerospace companies, and the policies of the Bush and Clinton administrations. It is current through August of 1998 and was compiled by the Congressional Research Service. It is featured in CRS Report 98-485 F.

1989

• Jan. 1989: The United States and China signed an agreement for six years under which China agreed to charge prices for commercial launch services "on a par" with Western competitors and to allow China to launch nine U.S.-built satellites through 1994.

• 6/4/89: Crackdown on peaceful, political demonstrators in Beijing.

• 12/19/89: President Bush waived sanctions for export of Aussat-1, Aussat-2, and Asiasat communications satellites for launch from China, under sec. 610 of the Department of Commerce, Justice, and State, the Judiciary, and Related Agencies Appropriations act 1990 (P.L. 101-162).

1990

• 2/16/90: P.L. 101-246 enacted to require post-Tiananmen sanctions, including suspensions in approving exports to China of Munitions List items and satellites.

• 4/7/90: China Great Wall Industry Corporation, using a LM-3 rocket, launched a foreign satellite, Asiasat (built by Hughes), for the first time.

1991

• 4/30/91: President Bush waived sanctions under Sec. 902(b) of P.L. 101-246 to allow exports of Aussat-1 and -2 and Freja satellites for launch from China in part because China was not the end-user. President Bush denied a license to export U.S. satellite components for a Chinese satellite, Dongfanghong-3, citing "serious proliferation concerns."

• 6/16/91: The Bush Administration announced sanctions to be imposed on China for transferring missile related technology to Pakistan. The sanctions affected high technology trade with China, covering (1) high performance computers, (2) satellites for launch from China (except for the Freja and Aussat satellites), and (3) sanctions for missile proliferation as required by the Arms Export Control Act and Export Administration Act (imposed on China Great Wall Industry Corp. and China Precision Machinery Import/Export Corp.). The U.S. sanctions were intended to enforce the MTCR.

• 6/25/91: The sanctions on the two Chinese state-owned companies for missile proliferation in Pakistan took effect.

• 11/21/91: After Secretary of State James Baker visited Beijing, the Chinese foreign ministry issued a vague statement that China "intends to abide" by the MTCR.

1992

• 2/1/92: According to the Bush Administration, the Chinese foreign minister sent a secret letter to the U.S. Secretary of State promising to abide by the MTCR.

• 2/22/92: The Chinese foreign ministry issued a statement saying that "China will act in accordance with the guidelines and parameters of the existing missile and missile technology control regime in its export of missiles and missile technology," after the United States effectively lifts the June 1991 sanctions.

• 3/22/92: Aborted launch of Aussat (Optus-B1) satellite from China after LM-2E rocket malfunctioned and the rocket stalled on the launch pad. Beijing Review (Nov. 2-8, 1992) reported that the rocket’s malfunction was caused by a fault in the ignition system which triggered an emergency shut-down.

• 3/23/92: The Bush Administration effectively waived the sanctions imposed in June 1991 on China for missile proliferation.

• 8/14/92: China successfully launched the Optus-B1 satellite.

• 9/11/92: President Bush waived sanctions under P.L. 101-246 to allow exports of five satellites (Asiasat-2, Apsat, Intelsat-7A, Starsat, and AfriStar) for launch from China and parts for China’s Dongfanghong-3.

• 10/23/92: Under the Bush Administration, the State Department issued a rule to amend section 38 of the Arms Export Control Act. The rule transferred commercial communications satellites that do not have certain sensitive characteristics (under nine categories) to the export licensing control of the Commerce Department. Military satellites and communications satellites with any of the nine categories of sensitive characteristics remained on the State Department's Munitions List.

• Nov. 1992: According to President Clinton’s report to Congress submitted in May 1993, China may have supplied M-11 short-range ballistic missiles or related technology to Pakistan. This transfer may have been taken in retaliation for President Bush’s decision in September 1992 to sell F-16 fighters to Taiwan.

• 12/21/92: A Chinese LM-2E launch vehicle exploded and destroyed the Australian Optus-B2 satellite (built by Hughes) it was carrying. After the explosion, Chinese officials denied that Chinese rockets were responsible, blaming the satellite built by Hughes. Aviation Week and Space Technology (Jan. 30, 1995) reported that Hughes and China Great Wall Industry Corp. agreed to declare the cause of that failure to be undetermined. Some experts, however, reportedly identified the premature opening of the launch vehicle’s payload fairing as causing the accident.

1993

• 2/11/93: After renegotiating security procedures, the United States and China signed a new agreement on satellite technology safeguards, superseding the agreement of 12/17/88.

• 5/28/93: President Clinton decided to extend most-favored-nation trade status to China with conditions on human rights, but no linkage to weapons proliferation. Nonetheless, after persistent reports that China was continuing to transfer missile components to Pakistan — if not complete M-11 short-range ballistic missiles, the President also reported to Congress that "at present, the greatest concern involves reports that China in November 1992 transferred MTCR-class M-11 missiles or related equipment to Pakistan."

• 7/2/93: President Clinton waived sanctions under P.L. 101-246 to allow exports to China of Iridium and Intelsat-8 satellites for launch from China.

• 8/16/93: Hughes and CGWIC issued a joint statement after seven months of "vigorous and cooperative investigation" into the cause of the explosion on 12/21/92. The statement did not identify a cause, with each side denying blame.

• 8/24/93: The Clinton Administration determined that China had shipped M-11 related equipment (not missiles) to Pakistan and imposed sanctions required by the Arms Export Control Act and Export Administration Act. The sanctions were imposed on Pakistan’s Ministry of Defense and 11 Chinese defense industrial aerospace entities, including China Great Wall Industry Corp. The sanctions denied U.S. government contracts and export licenses for missile equipment or technology (items in the MTCR annex) for two years. Exports of satellites were affected because of components such as "kick motors" used on missiles and installed on some satellites to boost them into orbit.

• 8/26/93: The U.S. aerospace industry lobby, including the Aerospace Industries Association, called on the Clinton Administration to weaken the missile proliferation sanctions.

• 8/31/93: One week after imposing sanctions, Assistant Secretary of State Winston Lord said that "we’re ready at any time to sit down with the Chinese, both to try to find a way to lift the sanctions if they cooperate but also to explain more fully the MTCR and its revised guidelines."

• 9/25/93: National Security Adviser Anthony Lake told the Chinese ambassador that the Clinton Administration was willing to negotiate a waiver of the sanctions, but a more formal and binding Chinese commitment than the one made in November 1991 was needed.

• 10/20/93: The Washington Post reported that top executives of U.S. satellite manufacturers, Martin Marietta Corp. and Hughes Aircraft Co., were lobbying intensively for the Clinton Administration to waive the export ban for satellites. Reportedly due to these objections from private industry (which were supported by the Commerce Department), the National Security Council reviewed the decision to implement the sanctions. In September 1993, Norman R. Augustine, chairman of Martin Marietta, wrote a letter to Vice President Al Gore, arguing that the sanctions "present U.S. companies as an unreliable supplier." Some Members of Congress supported the export of satellites for launch from China.

• 11/9/93: The CEO of Hughes Aircraft Company, C. Michael Armstrong, delivered a speech in which he objected to the inclusion in the sanctions of commercial communications satellites. He also said that he "asked the President of the United States to review the situation."

• 11/16/93: National Security Adviser Anthony Lake wrote a memo to President Clinton proposing the NSC's interpretation of the sanctions imposed in August to allow the export of two satellites controlled by the Commerce Department, but not the five controlled by the State Department. State had argued that all satellite licenses were suspended under the sanctions, but Commerce argued that sanctions did not cover any licenses. The President approved the NSC's recommendation

• 11/19/93: President Clinton met with Chinese President Jiang Zemin at the Asian Pacific Economic Cooperation (APEC) meeting in Seattle. On the eve of the meeting, press reports said that the Administration had formally proposed waiving the sanctions in return for another Chinese promise, in more detail and with more authority, not to export MTCR-class missiles. Senior officials reportedly argued in favor of a broad interpretation of the law to allow the export of two of seven satellites.

1994

• 1/6/94: The Clinton Administration announced a new policy exempting commercial communication satellites from sanctions for missile proliferation imposed on 8/24/93, facilitating export licenses for one Hughes and two Martin Marietta satellites.

• 4/2/94: A Chinese weather satellite exploded in a plant.

• 7/13/94: President Clinton waived sanctions under P.L. 101-246 for the Echostar satellite to be exported for launch from China.

• 7/21/94: A Chinese LM-3 rocket launched the Apstar-1 satellite (built by Hughes).

• 8/28/94: A Chinese LM-2E rocket launched Australia’s Optus-B3 satellite (built by Hughes).

• Sept. 1994: Secretary of Commerce Ron Brown led trade delegation to China, including Bernard Schwartz, Loral’s chairman.

• 10/4/94: Secretary of State Warren Christopher and Foreign Minister Qian Qichen issued a joint statement in which the United States agreed to waive the August 1993 sanctions (for missile proliferation) and China agreed not to export "ground-to-ground missiles" that are "inherently capable" of delivering at least 500 kg to at least 300 km (an important understanding meant in part to include the M-11 missiles under the MTCR guidelines).

• 11/1/94: The Administration’s waiver of the sanctions for missile proliferation took effect.

• 11/30/94: China launched its Dongfanghong-3 satellite, but failed to launch it into the correct position due to a fuel leak.

• Dec. 1994: President Clinton selected Armstrong of Hughes to head the Export Council.

1995

• 1/26/95: A Chinese LM-2E launch vehicle exploded after liftoff, destroying the Apstar-2 satellite (built by Hughes) it was carrying. Hughes and China Great Wall Industry Corporation were reported as planning to determine the cause of the explosion. (Aviation Week and Space Technology, Jan. 30, 1995)

• 2/9/95: The Wall Street Journal reported that Chinese aerospace industry officials contradicted an official Chinese newspaper’s account that blamed Hughes for the explosion on January 26, 1995. Instead of blaming Hughes, as Ta Kung Pao (in Hong Kong) did, officials from China Great Wall Industries Corp. and the China National Space Administration said that the article did not reflect China’s official view and that the investigation had not concluded. A spokesman for Hughes said that a thorough investigation into the cause of the explosion would take months to complete.

• 3/13/95: The United States and China concluded a new agreement for 7 years to allow China to launch up to 11 new satellites to geostationary orbit at prices not less than 15 percent below that charged by Western competitors.

• 7/21-28/95: The PLA Second Artillery test-fired M-9 short-range ballistic missiles toward Taiwan, after Taiwan’s president visited Cornell University in June.

• 7/25/95: Hughes and CGWIC issued a joint statement on separate findings of six-month investigations into the cause of the explosion on 1/26/95. CGWIC blamed strong winds for shaking Hughes’ satellite apart, while Hughes said that severe winds caused the Chinese rocket’s fairing to collapse.

• 8/15/95: Hughes provided to the Department of Commerce the final report on the investigation of the launch failure of Apstar-2. The report included a summary of information conveyed to China Great Wall during several meetings that took place from February to June 1995.

• 10/9/95: Secretary of State Warren Christopher initialed a classified memorandum to retain the State Department’s licensing authority over commercial communications satellites (cited in New York Times, May 17, 1998).

• 11/28/95: A Chinese LM-2E rocket launched the Asiasat-2 satellite (built by Lockheed Martin), but the bumpy launch knocked the satellite’s antenna-feed horns out of alignment, resulting in a loss of signal power. Asiasat company claimed $58 million in insurance for the damage. (Flight International, Oct. 2-8, 1996).

• 12/6/95: President Clinton issued Executive Order 12981 giving the Departments of State, Defense, and Energy, and the Arms Control and Disarmament Agency authority to separately review export license applications submitted to the Department of Commerce under the Export Administration Act and relevant regulations.

• 12/28/95: A Chinese LM-2E rocket launched the Echostar-1 satellite (built by Martin Marietta).

1996

• 2/6/96: President Clinton waived sanctions under P.L. 101-246 for the Chinasat-7 satellite to be exported for launch from China.

• 2/6/96: President Clinton waived sanctions under P.L. 101-246 for 2 Cosat (later called Chinastar) satellites to be exported for launch from China.

• 2/6/96: President Clinton waived sanctions under P.L. 101-246 for the Mabuhay satellite to be exported for launch from China.

• 2/15/96: A LM-3B rocket exploded after liftoff, destroyed the Intelsat satellite (built by Loral), and smashed into a village. The death toll was probably higher than the official report of six deaths and 57 injured.

• 3/8-15/96: Despite the dramatic explosion of a Chinese rocket one month before, the PLA’s Second Artillery again test-fired M-9 ballistic missiles toward targets close to Taiwan’s ports, on the eve of Taiwan’s first presidential election.

• 3/10-11/96: In further deterioration of U.S.-China relations, the United States deployed two carrier battle groups to waters off Taiwan, calling China’s live-fire exercises "reckless" and "risky."

• 3/12/96: President Clinton approved a memo written by then deputy national security adviser Samuel R. Berger to reverse Secretary Christopher's decision of October 1995 and transfer export control authority over commercial satellites from the State Department to the Commerce Department (New York Times, July 18, 1998).

• 3/14/96: The Clinton Administration announced a decision to move commercial communications satellites from the Munitions List to the Commerce Control List of dual-use items, so that the export license jurisdiction was moved from the Department of State to the Department of Commerce (implemented in November 1996).

• April 1996: At China's request, Dr. Wah L. Lim, a Senior Vice President and engineer at Loral, chaired a review committee to study China's technical evaluation of the cause of the accident on Feb. 15, 1996. Loral says China had identified the problem as residing in the inertial measurement unit (IMU) of the guidance system of the rocket. Loral believed that it did not have to request a U.S. government license and monitoring. The first meeting was held in Palo Alto, CA, and the second, in China. The Chinese participated in the two meetings.

• 5/7/96: A draft preliminary report of the review committee was sent to all participants of the meetings. The report confirmed that the cause of the accident was an electrical flaw in the electronic flight control system. The report allegedly discussed weaknesses in the Chinese rocket’s guidance and control systems. (New York Times, April 13, 1998)

• 5/10/96: Loral's executive in charge of export controls told Dr. Wah Lim not to send the report to China.

• 5/13/96: Loral’s executives provided the report to the Departments of State and Defense.

• 6/17/96: Loral provided a voluntary disclosure to the Department of State, concerning all communications with China. The company argues that its policy of consultation with the Department of State was not implemented, but it did not violate U.S. laws.

• 6/23/96: President Clinton waived sanctions under P.L. 101-246 for the Asia Pacific Mobile Telecommunications (APMT) satellite to be exported for launch from China.

• 7/3/96: China launched the Apstar-1A satellite (built by Hughes) on a LM-3 rocket.

• 7/9/96: President Clinton waived sanctions under P.L. 101-246 for a Globalstar satellite to be exported for launch from China.

• 8/18/96: China failed to launch its Chinasat-7 satellite (built by Hughes) into the correct orbit, after the third stage of the LM-3 rocket shut down early, reported the Far Eastern Economic Review (Aug. 29, 1996).

• 10/15/96: President Clinton issued an Amendment to Executive Order 12981 (issued on 12/6/95) concerning export licensing procedures for commercial communications satellites and hot-section technologies for commercial aircraft engines that are transferred from the State Department’s Munitions List to the Commerce Department’s Commerce Control List (of dual-use items).

• 10/21/96: The Bureau of Export Administration of the Department of Commerce issued regulations to implement the transfer of commercial satellites from control under the Munitions List to the Commerce Control List.
• 11/5/96: The Department of State issued regulations to implement the transfer of commercial satellites from control under the Munitions List to the Commerce Control List, even if the satellites include individual components or technologies on the Munitions List.

• 11/19/96: President Clinton waived sanctions under P.L. 101-246 for U.S. parts for the Chinese Fengyun-1 (FY-1) meteorological satellite. The waiver cited suspensions under sections 902(a)(3) and 902(a)(5), indicating that technologies controlled under the Munitions List were involved.

• 11/23/96: President Clinton waived sanctions under P.L. 101-246 for the Sinosat satellite to be exported for launch from China. The waiver cited suspensions under sections 902(a)(3) and 902(a)(5), indicating that technologies controlled under the Munitions List were involved.

1997

• March 1997: The Air Force's National Air Intelligence Center (NAIC) reportedly concluded in a classified report that Loral and Hughes provided expertise that helped China to improve the guidance systems on its ballistic missiles and that U.S. national security was damaged (Washington Post, June 7, 1998). NAIC's report was sent to DTSA, the State Department, and the Justice Department.

• 5/12/97: China successfully launched its Dongfanghong-3 communications satellite, built by China Aerospace Corp. on a LM-3A rocket, prompting personal congratulations from top government and military leaders.

• 5/16/97: A classified report at the Department of Defense’s Defense Technology Security Administration (DTSA) concluded that Loral Space and Communications Co. and Hughes Electronics had transferred expertise to China that significantly enhanced the reliability of its nuclear ballistic missiles and "United States national security has been harmed" (New York Times, April 13, 1998 and June 27, 1998).

• May 1997: The U.S. Trade Representative (USTR) reported that China had violated the pricing provisions of a bilateral agreement on the Mabuhay launch.

• 6/10/97: China successfully launched its Fengyun-2, a second-generation Chinese meteorological satellite, on a LM-3 rocket.

• 8/19/97: China launched the Agila 2 (formerly called Mabuhay) satellite (built by Loral).

• 9/1/97: China launched two test satellites for Iridium to demonstrate the technical viability of the new Long March variant, LM-2C/SC.

• 9/10/97: The Washington Times, citing Israeli and U.S. intelligence sources, reported that China Great Wall Industry Corporation was supplying key telemetry equipment (for sending and collecting guidance data during flight tests) to Iran for its development of the Shahab-3 and Shahab-4 medium-range ballistic missiles.

• Sept. 1997: Likely prompted by DTSA’s report, the Department of Justice began its criminal investigation into allegations that Loral and Hughes illegally passed technical assistance to China. The investigation is still ongoing.

• 10/17/97: China launched Asia Pacific Telecommunications Satellite (ApStar-2R) (built by Loral) on LM-3B rocket.

• 10/27/97: The USTR announced that the United States and China agreed on new provisions for the Bilateral Agreement on Space Launch Services (signed in 1995). The new provisions set clear terms for Chinese pricing of launch services to low earth orbit.

• Nov. 1997: After a summit in Washington, Chinese President Jiang Zemin visited a Hughes satellite plant in California.

• 12/8/97: China launched two satellites for Iridium on one Long March 2C/SC rocket to low earth orbit. The rocket had two stages and a smart dispenser on top that deployed the two satellites. Some in the United States are concerned that the technology used to launch more than one satellite at once will help China in its suspected development of multiple-independently targeted re-entry vehicles (MIRVs) for its ICBMs.

1998

• 2/12/98: National Security Adviser Samuel Berger wrote a memorandum for President Clinton on whether to waive post-Tiananmen sanctions for the export of a Loral-built Chinasat-8 satellite. Berger noted that the Department of State, with the concurrence of the Department of Defense and the Arms Control and Disarmament Agency, recommended the waiver. However, "the Criminal Division of the Justice Department has cautioned that a national-interest waiver in this case could have a significant adverse impact on any prosecution that might take place, based on a pending investigation of export violations" by Loral. (printed in the New York Times, May 23, 1998)

• 2/18/98: President Clinton waived sanctions under P.L. 101-246 for the Chinasat-8 satellite (built by Loral) to be exported to China. Loral says that it is the most powerful satellite that China has ever bought.

• 3/12/98: Gary Samore, Special Assistant to the President and Senior Director for Nonproliferation and Export Controls in the National Security Council, wrote a Secret memo proposing to support Chinese membership in the MTCR, issue a "blanket waiver" of the post-Tiananmen sanctions to cover all future satellite launches, and increase the number of space launches from China — in return for Chinese cooperation in missile nonproliferation. (The classified memo was printed in the March 23, 1998, Washington Times.)

• 3/16/98: Loral Space and Communications signed an agreement with China Great Wall Industry Corp. to launch five of Loral’s communication satellites between March 1998 and March 2002 using Long March-3B rockets.

• 3/22/98: China Aerospace Corp. kicked off a Quality Promotion Plan to help ensure success in its commercial launch business in research, production, and testing.

• 3/26/98: China launched two Iridium satellites, built by Lockheed Martin for Motorola, on an improved LM-2C/SD rocket. (According to China, this launch was China’s 15^th "successful" commercial launch for foreign customers since 1990.)

• 3/26/98: John Holum, Acting Under Secretary of State for Arms Control and International Security Affairs, concluded his visit to China and confirmed that he discussed increasing the quota on the number of satellite launches from China.

• 3/29/98: A Hong Kong newspaper owned by the Chinese government reported that China Aerospace Corporation found in its investigations into past failed launches of satellites that all the failures were caused by problems in production and management related to quality control. A previous explosion of an LM-3B rocket (on 2/15/96) was found to have been caused by a defect in a power pack nodal point which caused a short circuit when the rocket ignited, resulting in a malfunction in the inertial platform.

• 4/3/98: China’s official news agency quoted Zhang Haiming, general-manager of a division of Lockheed Martin, as saying that the company is "consulting with the Chinese on satellite manufacturing."

• 4/4/98: The New York Times reported that a Federal grand jury is investigating whether Loral Space and Communications of New York and Hughes Electronics of Los Angeles provided expertise to China that "significantly advanced" the guidance systems of its ballistic missiles in studying the accidental destruction in February 1996 of a satellite built by Loral. Administration officials reportedly said that the Department of Justice, fearing that its criminal investigation would be undermined, opposed the President’s February 1998 waiver and approval for export of similar technology to China (for Chinasat-8). Loral’s chief executive was reported as the largest personal donor to the Democratic National Committee for the 1996 election.

• 4/9/98: John Holum, Acting Undersecretary of State for Arms Control and International Security Affairs, stressed that exports of satellites to China for launch occur with an export license and strict security measures to "preclude assistance to the design, development, operation, maintenance, modification or repair of any launch facility or rocket in China, and we monitor that very carefully." He also confirmed that after the accident in February 1996, the Department of State "became aware that there may have been a violation." The case was referred to the Department of Justice for investigation. He said that there are "strong legal remedies" for violations of export control laws, including a denial of future licenses.

• 4/13/98: The New York Times again reported on the criminal investigation of Loral and Hughes, adding that a highly classified Pentagon report concluded in May 1997 that the companies had transferred expertise to China that "significantly improved" the reliability of China’s nuclear ballistic missiles.

• 4/15/98: Loral’s president and chief operating officer, Gregory Clark, stated that Loral "did not divulge any information that was inappropriate."

• 4/16/98: A Chinese Foreign Ministry spokesman stated that "the exchange of technical information about satellite launchings between U.S. companies and the Chinese aerospace department was a normal activity and fell under international rules." He also said that the companies "did not provide technical information about missile technology."

• 4/21/98: Loral’s chairman and CEO, Bernard Schwartz, said that "we have done our own internal investigation, and I’m satisfied that our people acted well — good behavior and in compliance [with U.S. export control regulations]."

• 4/28/98: Under Secretary of Commerce for Export Administration William Reinsch testified to the Joint Economic Committee that satellite exports to China have shown how effective dual-use export controls allow U.S. exporters to compete and "win without risk to our national security." He said that controls on satellite exports to China are extensive and include measures to "reduce the risk" of illicit technology transfers. Since November 1996 (when the licensing jurisdiction was transferred from the Department of State to Commerce), Commerce issued three export licenses for satellites to be launched from China — "with the concurrence of all agencies."

• 4/30/98: A spokesman at the State Department, James Foley, denied a Washington Times report that the Administration presented China with a draft agreement for space cooperation. He admitted, however, that officials have considered scientific space cooperation as one way to encourage Chinese cooperation in missile non-proliferation. He also stressed that "there still is not any U.S. plan or proposal to offer China access to missile technology."

• 5/2/98: A Chinese Long March 2C/SD rocket launched two Iridium satellites (built by Lockheed Martin) to low earth orbit.

• May 1998: The Justice Department began a preliminary inquiry into whether political donations influenced President Clinton’s approval of satellites to China.

• 5/15/98: The New York Times reports that fund-raiser Johnny Chung told the Justice Department that part of his donations to the Democratic Party in the summer of 1996 came from the PLA through Liu Chaoying, a PLA lieutenant colonel (possibly retired) and a senior manager and vice president for China Aerospace International Holdings, Ltd. (a subsidiary of China Aerospace Corporation in Hong Kong). She is also a daughter of retired General Liu Huaqing, formerly a vice chairman of the PLA’s command, the Central Military Commission, and formerly a member of the Standing Committee of the Politburo.

• 5/18/98: Loral issued a statement saying that allegations that it provided missile guidance technology to China are false. The company states that "the Chinese alone conducted an independent investigation of the launch failure [in February 1996] and they determined that the problem was a defective solder joint in the wiring — a `low-tech’ matter."

• 5/30/98: China launched its Chinastar-1 (Zhongwei-1) (built by Lockheed Martin) on a LM-3B rocket.

• June 1998: The Justice Department expanded its investigation to examine whether Hughes violated export control laws in transmitting a report to China on the launch failure on January 26, 1995 that destroyed the Apstar-2 satellite. The Commerce Department had approved Hughes' report.

• 7/2/98: The State Department suspended the license issued in 1996 for Hughes that permitted Shen Jun, son of a Chinese lieutenant general, to work on a $500 million satellite deal for Asia Pacific Mobile Tele-communications (APMT) consortium. Lt. Gen. Shen Rongjun has been a Deputy Director of the Commission on Science, Technology, and Industry for National Defense (COSTIND) since 1985. The Administration is re-examining the APMT project, in part because the Chinese governmental investors include those with ties to the military: COSTIND, China Launch and Tracking Control, China Aerospace Corp., Ministry of Information and Industry, and China Telecommunications Broadcasting Satellite Corp. (Chinasat). Some are concerned about that the APMT satellite could be used by the Chinese military to improve command and control and that the satellite contains sensitive technologies, including a huge 40-ft.-wide antenna and on-board digital processor, also used in Hughes' classified, communications satellites used by the U.S. military.

• 7/18/98: China launched Sinosat-1 (built by French companies, Alcatel and Aerospatiale) on a LM-3B rocket.

Other events since June 1998:

• 6/23/98: Senate hearings reveal that Defense Department monitors were not present during many Chinese launches of American satellites between 1994 and 1996—even before the transfer of export control to the Commerce Department.

• 6/24/98: Hearing in the House reveal that a top-secret circuit board was missing after a failed Chinese launch of a Loral satellite. After the rocket carrying the satellite exploded shortly after take-off, the Chinese barred American officials from the crash site for five hours. When Americans were finally allowed in, the supersecret encoded circuit board was missing. It is also learned that the Justice Department has begun another investigation of a second failed China rocket launch that carried an American satellite.

• 6/26/98: The New York Times reports on newly released portions of a 1997 Pentagon memo that concluded Loral and Hughes had harmed national security in sharing information with Chinese rocket scientists. The memo contends that Loral and Hughes had committed three "major" security breaches, three "medium" violations, and 12 "minor" violations. The Times reports: "All the infractions involved assistance American technical experts gave the Chinese to help solve problems with their rockets' guidance and control systems, an area of weakness in China's missile programs."

• 7/15/98: The bipartisan Commission to Assess the Ballistic Missile Threat to the United States, chaired by former Secretary of Defense Donald Rumsfeld, submits its final report to Congress. The conclusions of the Rumsfeld Commission contradict a controversial 1995 National Intelligence Estimate (NIE), which stated that there was no missile threat to the continental U.S. for fifteen years.

• 7/21/98: The Washington Times reports that the Chinese have manufactured 6 new long-range ICBMs—a one-third increase since the beginning of the year of their stock of missiles capable of striking the U.S.

• 7/22/98: It is revealed that the Chinese military conducted missile tests while President Clinton was in China during his official June 27 to July 3 visit.

• 8/8/98: The State Department suspends work on a joint satellite launch project between Boeing and Russian and Ukrainian engineers. State suspends the project after concluding that "sensitive U.S. space information was improperly disclosed."

• 8/9/98: The Washington Post reports that Hughes Corp. is "intensely lobbying the Clinton administration for permission to proceed with a new telecommunications satellite deal with China despite the concern in Congress over technology transfers that could help the Chinese military."

Defense Technology Security Agency: The DTSA is charged with guarding the nation’s military and technological secrets and had a prominent role in the approval of technology transfers during the Reagan and Bush administrations. Observers have noted that the influence and importance of the agency has diminished during the Clinton administration, especially when authority over export waiver was shifted to the Commerce Department. The function of the DTSA is to be combined with three other defense agencies starting October 1998. According to Defense Week: "The Defense Threat Reduction Agency (DTRA) would consolidate the functions of three existing agencies: the On-Site Inspection Agency, the Defense Special Weapons Agency, and the Defense Technology Security Agency, according to a draft Pentagon directive establishing the agency." Some view this as an attempt to dismantle the agency.

Export Controls–Departments of Defense, Commerce, and State: In November of 1996 President Clinton transferred authority over technology export licensing from the State Department to the Commerce Department. Former Bush advisor Tina Silverman noted that the "transfer of this function shifted the balance of interests away from the protection of sensitive technologies in favor of commercial interests."

Before this transfer of authority to Commerce, the Defense Department had a "veto" power over waiver and license decisions—their main concern, of course, being national security. After the change, the Commerce Department assumed responsibility for licensing the export of all commercial communications satellites. According to press reports at the time, the State Department, with support from the Department of Defense, initially opposed the shift in licensing jurisdiction because of the existence of certain militarily-sensitive technologies embedded within the satellites. Former Secretary of State Warren Christopher has noted that he argued to retain State’s licensing role.

As it stands now, DOD is only one of many agencies responsible for technology licensing decisions. Any national security objections they raise must be supported by a majority of the agencies involved in the interagency review process. The GAO has testified that under the current Commerce-headed system, "Defense’s power to influence the decision making process has diminished . . ."

[Note on Export Controls: Recent hearings jointly held by the House International Relations and National Security Committees found that several U.S. satellite launches by China took place in 1995 and 1996 without Department of Defense monitors—even before the jurisdiction shift on export controls.]

Arms Control and Disarmament Agency: The ACDA is part of the interagency review process that determines export waivers for technology transfers. Its mission is to "strengthen the national security of the United States by formulating, advocating, negotiating, implementing and verifying effective arms control, nonproliferation, and disarmament policies, strategies, and agreements. In so doing, ACDA ensures that arms control is fully integrated into the development and conduct of United States national security policy."

Office of Defense Trade Controls: DTC is part of the State Department. According to the Journal of Commerce, the DTC "serves as a gatekeeper for U.S. technology and a guardian against the spread of weapons of mass destruction. It is also an export licensing agency." The Journal also reports that aerospace industry sources "say DTC officials have stubbornly resisted the president's March 1996 decision to transfer the licensing of satellites for foreign launches to the Commerce Department, fearing that China will obtain missile technology through eased controls."

Interagency Review: A general term applied to the process by which different cabinet agencies arrive at administration policy. In the case of technology exports to China, when the Clinton administration transferred authority over exports from the State Dept. to the Commerce Dept., the administration also re-arranged the interagency review process concerning technology transfers. Instead of the Defense Dept. having a "veto" over other agencies in the technology transfer process, all national security objections had to be supported by a majority of agencies involved in the interagency review—effectively striping Defense of its veto power.

Munitions List: Maintained by the State Department and the Department of Defense, the "munitions list" is an inventory of America’s "most sensitive military and intelligence-gathering technology." Officially, the Munitions List is Section 38 of the Arms Export Control Act.

Commerce Control List: Satellites were placed on the Commerce Control List when the Clinton administration transferred authority over satellite exports from the State Department to the Commerce Department.

Hughes Electronics, headquarters in El Segundo, California. See pages 14-35, 49.

Lockheed Martin, headquarters in Bethesda, Maryland. See pages 21-26, 34.

Space Systems/Loral, headquarters in Palo Alto, California. See pages 13, 20-35, 43, 51.

(a subsidiary of Loral Space and Communications of New York)

Motorola, headquarters in Schaumburg, Illinois. See pages 25, 24, and 39.

China Aerospace Corporation (CASC): CASC oversees China’s space and missile research and development.

Chinese Academy of Space Technology: This organization is the equivalent of America’s NASA. According to several published reports, the academy has announced plans to launch a manned spacecraft and a small lunar probe within the next few years.

China Great Wall Industry Corporation: China’s company that market’s space launch services. Owned by China Aerospace Corporation, it develops strategic and tactical ballistic missiles, space launch vehicles, surface-to-air missiles, cruise missiles, and satellites. Great Wall was sanctioned by the U.S. in 1991 and 1993 for exporting M-11 missile parts to Pakistan.

China International Trade and Investment Corporation (CITIC): Chinese state-run venture and primary overseas trading company with a stake in American satellite business. Its chairman, Wang Jun, attended Democrat fundraising "coffees" at the Clinton White House in 1997. It is reported that on the very day of his visit to the White House, President Clinton "signed waivers allowing the Chinese to launch four American satellites—though unrelated to the business interests of China International Trade." (see "Wang Jun")

Bernard Schwartz: Chairman of Loral Space and Communications and top contributor to the Democrat National Committee in 1997.

C. Michael Armstrong: Former Chairman and CEO of Hughes Aircraft Company; member of the President’s Export Council. In 1993, he lobbied the Clinton administration to exempt commercial communication satellites from the sanctions imposed on China for transferring M-11 missile parts to Pakistan.

Johnny Chung: Democrat fundraiser and frequent visitor to the White House. Chung pleaded guilty to siphoning $20,000 in illegal contributions to the Clinton-Gore reelection campaign.

Liu Chaoying: Executive of China Aerospace and daughter of retired General Liu Huaqing, a senior Chinese official and member of the Communist Politburo. She holds the honorary rank of lieutenant colonel in the People's Liberation Army.

Wang Jun: Chairman of China International Trade and Investment Corporation. "Attended a White House coffee with President Bill Clinton at the same time his company was suspected of smuggling guns into the United States; Clinton later said it was ‘clearly inappropriate’ for Wang to be there and ordered tighter screening of White House guests."

Nonproliferation: The goal of preventing additional nations developing nuclear weapons than already have it; the intellectual framework upon which several international arms control and arms monitoring agreements are based.

Missile Technology Control Regime (MTCR): The MTCR is an informal export control arrangement among 29 of the world’s most advanced suppliers of ballistic missiles and missile-related materials and equipment. The regime is designed to stem the spread of ballistic and cruise missiles capable of delivering a 500-kilogram payload 300 kilometers or more, by establishing a common export control policy (the Guidelines) and a shared list of controlled items (the Annex) that each country implements with its own national legislation. China has promised to adhere to the MTCR, but is not a member.

ICBM: Inter-continental ballistic missile. Used to deliver nuclear or other explosive payloads at long ranges; similar to, but not to be confused with rockets (such as China’s Long March) used to put payloads into space.

M-11 Missile: Chinese short range ballistic missile with a range of 186 miles. The U.S. has twice sanctioned China this decade for exporting M-11 missile parts to Pakistan.

Long March Rockets: Chinese rockets used to launch commercial satellites into orbit. Until recently, Long March missiles were considered unreliable. Long March rockets exploded after take-off in 1992, 1995 and 1996, destroying satellites built by Hughes and Loral.

CSS-4 Missiles: Long range strategic missiles with the capacity to deliver nuclear warheads. They are estimated to have a range of 8,078 miles. The Central Intelligence Agency reports that 13 out of China’s 18 CSS-4 missiles are aimed at U.S. targets.

MIRVs: Multiple independently targeted reentry vehicles. A crucial technology that allows multiple nuclear weapons to be released from a single missile. MIRV technology dramatically increases the potency and accuracy of a missile after it is launched and is also used to assist in the deployment of satellites.

Technology transfer authority given to Commerce Department

This New York Times article explains the decision making process behind the Clinton administration’s transfer of control over sensitive technology exports from the State Department to the Commerce Department. Many have observed this decision contributed to a weakening of national security priorities.

Tie To Donations Denied

Easing of Rules in 1996 Was a Shift of Balance Between Security and Commerce

The New York Times

May 17, 1998, Sunday, Section 1; Page 1; Column 1

BYLINE: By Jeff Gerth and David E. Sanger

DATELINE: WASHINGTON, May 16: On Oct. 9, 1995, Secretary of State Warren Christopher ended a lengthy debate within the Clinton Administration by initialing a classified order that preserved the State Department's sharp limits on China's ability to launch American-made satellites aboard Chinese rockets.

Both American industry and state-owned Chinese companies had been lobbying for years to get the satellites off what is known as the "munitions list," the inventory of America's most sensitive military and intelligence-gathering technology. But Mr. Christopher sided with the Defense Department, the intelligence agencies and some of his own advisers, who noted that commercial satellites held technological secrets that could jeopardize "significant military and intelligence interests."

There was one more reason not to ease the controls, they wrote in a classified memorandum. Doing so would "raise suspicions that we are trying to evade China sanctions" imposed when the country was caught shipping weapons technology abroad—which is what happened in 1991 and 1993 for missile sales to Pakistan.

The Secretary of State’s decision to keep satellites on the munitions list, making it harder for them to be exported, did not stand for long. Five months later, President Clinton took the unusual step of reversing it.

Control of export licensing for communications satellites was shifted to the Commerce Department, then run by Ronald H. Brown, who was deeply interested in promoting American businesses overseas and had been one of the Democratic Party's key fund-raising strategists. Several licenses have since been approved.

A reconstruction of Mr. Clinton’s decision to change the export control rules, based on interviews and documents, shows that it followed a turf war between the State and Commerce Departments, and a broader debate over how to balance America's security concerns and commercial competition in the hottest of all the emerging markets.

It also illustrates the intersection of the interests of both large American donors and surreptitious foreign donors to the 1996 campaign.

Both American satellite makers and the Chinese were delighted with the decision because the Commerce Department has dual responsibilities: licensing sensitive exports and promoting sales of American goods around the world.

One of the beneficiaries of that decision, it now turns out, was China Aerospace because its rockets could launch American satellites. An executive of the state-owned Chinese company, Liu Chaoying, is said to have provided tens of thousands of dollars from Chinese military intelligence to the Democratic Party in the summer of 1996.

Ms. Liu's involvement was described to Federal investigators recently by Johnny Chung, a Democratic fund-raiser who says he took $300,000 from Ms. Liu – who is also a lieutenant colonel in the Chinese military -- and donated almost $100,000 of it to Democratic causes, apparently keeping the rest for his businesses.

President Clinton's decision was announced in March 1996, several months before the donations were made. But the actual change was delayed until the fall.

The White House said it did not know the source of Mr. Chung's donations and denies that the decision was influenced by campaign donations, domestic or foreign.

"This was motivated by competitiveness and streamlining bureaucracy concerns, and nothing else," Samuel R. Berger, Mr. Clinton's national security adviser, said in an interview two weeks ago.

On Friday, Mr. Berger's spokesman, Eric Rubin, said the decision was also part of the Administration’s China policy, and specifically its effort to encourage China to clamp down on military exports.

"On many occasions, this was discussed with the Chinese Government because we believe that policy on satellite licenses is one of the tools we have to strengthen our nonproliferation policy," Mr. Rubin said.

Mr. Clinton's decision took place after months of tension with Beijing.

In January reports of China's export of nuclear technology to Pakistan and missiles to Iran caused considerable concern in Congress and the Pentagon. In early May, two months after Mr. Clinton reversed the Secretary of State, the Administration said China had agreed to curb its missile and nuclear exports. But that announcement was greeted with considerable skepticism by Republican critics, including Bob Dole, who was well on the way to getting the nomination for President.

During the campaign, the Republicans attacked Mr. Clinton for failing to curb China's sales of nuclear and missile technology to other countries.

The satellite decision in March was one element of the Administration's "carrot-and-stick-approach to working with China," said James Lilley, a former United States Ambassador to Beijing.

But in the way business and diplomacy mix in Washington’s dealings with China, the decision also resonated in boardrooms on both sides of the Pacific. It satisfied the commercial interests of the American aerospace industry, which had long sought access to China’s low-cost ability to launch satellites into space, aboard rockets called the Long March.

And it bolstered China’s own commercial interests. Ms. Liu’s parent company, China Aerospace, owns a large piece of a Hong Kong satellite operator. It also owns the China Great Wall Industry Corporation, the rocket company that launches both private satellites and tests and provides equipment for the missiles in China’s nuclear arsenal. It was Great Wall that the State Department sanctioned in 1991 and 1993 for selling missiles to Pakistan.

Other powerful Chinese state enterprises also had multibillion-dollar stakes in getting access to American satellites. Among them was the China International Trade and Investment Corporation, whose chairman, Wang Jun, gained unwanted attention in the United States last year when it was revealed that he attended one of Mr. Clinton’s campaign coffee meetings in the White House. The day of Mr. Wang’s visit, Mr. Clinton, in what Mr. Rubin said was a coincidence, signed waivers allowing the Chinese to launch four American satellites—though they were unrelated to the business interests of China International Trade.

"Any suggestions that these decisions were influenced by Wang Jun's presence in the U.S. is completely unfounded," Mr. Rubin said.

It is not known what motivated Ms. Liu or the Chinese military to make the donations. Ms. Liu’s father, Gen. Liu Huaqing, was not only China’s highest military officer but a member of the leadership of the Communist Party.

The White House and the Democratic National Committee deny any knowledge of the source of Mr. Chung’s $366,000 in donations, most predating his connection with Ms. Liu, and all of which was returned.

But there is no doubt that American companies—partners and suppliers of China International Trade and China Aerospace—put enormous pressure on the White House. They were also important campaign contributors. For example, the chief executive of Loral Space and Communications gave $275,000 between November 1995 and June 1996 to the Democrats.

A Lobbying Effort To Persuade Bush

China’s drive to obtain a steady stream of satellite technology from the United States preceded the Clinton Administration’s arrival in Washington.

In 1990, just a year after the killings at Tiananmen Square, officials from China Aerospace and the Chinese Government approached Mr. Lilley, the American Ambassador, pressing for President Bush to waive restrictions enacted in the aftermath of Tiananmen that barred China from launching American satellites.

"They hit me very hard," Mr. Lilley recalled recently. "It was a prestige national program. It was putting China on the map as the big space country of the 21^st century."

Mr. Bush, who became America’s first permanent representative in Communist China in 1974, granted a waiver that allowed a launching on one of China's Long March rockets. In 1992, a number of Senators—including Al Gore, then still a Senator from Tennessee—wrote to the Bush Administration warning that China was using the launchings to "gain foreign aerospace technology that would be otherwise unavailable to it."

In the last days of the 1992 Presidential campaign, Mr. Gore made the waivers an issue, contending that President Bush "has permitted five additional American-built satellites to be launched by the Chinese."

"President Bush really is an incurable patsy for those dictators he sets out to coddle," Mr. Gore said in a speech at the Goddard Space Flight Center in Greenbelt, Md.

Business Leaders Pressure Clinton

Almost as soon as Mr. Clinton took office, business leaders began their campaign to drastically change his views about China.

Both Chinese and American companies were working to get satellites off the State Department’s munitions list. The rules for exporting goods that are on the list are particularly tough. Congress must be notified 30 days in advance. Moreover, the State Department considers only nonproliferation issues and defers to the Pentagon’s judgments.

In contrast, the Commerce Department’s export-control administration solicits a host of views and must weigh the effects of its decisions on America’s competitive position.

Mr. Christopher’s aides also noted in their 1995 classified memorandum that "U.S. firms remain concerned there could be additional sanctions imposed on China precluding future munitions licenses," exactly the kind of sanctions that had been only recently lifted for China Aerospace’s subsidiaries.

And there was a lot at stake: an estimated 14 commercial communications satellite launc