CONTENTS

SUMMARY

MOST RECENT DEVELOPMENTS

BACKGROUND AND ANALYSIS

     Chinese Missile and Nuclear Proliferation
          Possible Motives and Policy Constraints
          Missile and Related Technology Transfers
               The Multilateral Regime and U.S. Laws
               Exports of CSS-2 IRBM to Saudi Arabia
               M-9 SRBM
               M-11 SRBM Exports to Pakistan and MTCR-related
                 Sanctions
               Missile Technology Exports to Iran
               Other Possible Chinese Missile Transfers
          Nuclear Proliferation Issues
               The NPT and Nuclear Suppliers Group (NSG)
               Chinese Exports of Nuclear Equipment and
                 Technology
               Pakistan
               Algeria
               Iran
               Iraq
               Syria
               China's Support in Resolving North Korean Nuclear 
                 Problem
               Nuclear Testing and Fissile Material Production

     Policy Issues for Congress

          Security Dialogue
          High Technology Trade
          Nonproliferation Regimes and International Groups
          Multilateral Export Controls
          U.S. Missile Defense
          Arms Sales to Taiwan
          International Lending

LEGISLATION

Chinese Missile and Nuclear Proliferation

SUMMARY

The President has identified proliferation as a primary danger to U.S. security interests. China has contributed to the danger by providing nuclear weapons technology to Pakistan, and other nuclear technology to Iran and Algeria. China has also supplied CSS-2 intermediate range ballistic missiles to Saudi Arabia, Silkworm anti-ship missiles to Iran and Iraq, and ballistic missile technology to Pakistan and perhaps Iran, North Korea and others. China developed the mobile, solid-fuel M-9 and M-11 short range ballistic missiles reportedly with Pakistan, Syria, and Iran as interested buyers.

In June 1991 the U.S. first imposed sanctions on China for transferring M-11 technology to Pakistan. Facing international criticism of its proliferation activities, possible conditions on MFN status, in addition to the missile sanctions, China acceded to the Nuclear Non-Proliferation Treaty (NPT) on Mar. 9, 1992, and promised in November 1991 to abide by the MTCR (if and when the June 1991 sanctions were lifted). Washington waived the sanctions on Mar. 23, 1992.

However, on Aug. 24, 1993, the U.S. determined that China had again transferred M-11 missile related equipment to Pakistan, and imposed new sanctions. Secretary Christopher and Foreign Minister Qian Qichen signed an agreement on Oct. 4, 1994, that the United States would waive the August 1993 sanctions and China would not export "ground-to-ground missiles" inherently capable of delivering a 500 kg. warhead 300 km. The countries agreed to discuss the MTCR, a possible Chinese binding commitment to observe it, and possible Chinese membership in the MTCR. In the early months of 1995, there has been evidence that China has transferred missile technology to Iran and Pakistan.

Another issue is China's cooperation on nuclear nonproliferation. Despite China's accession to and apparent compliance with the NPT, concerns remain about (1) its long-term programs of nuclear energy cooperation with Iran and Pakistan; (2) its suspected continued cooperation with Pakistan's nuclear weapons program; and (3) its failure to join the Nuclear Suppliers Group and require full-scope safeguards.

Candidate Bill Clinton had criticized former President Bush for rejecting human rights, trade, and nonproliferation conditionality for China's MFN status but in May 1993, he separated MFN renewal from proliferation issues and separated MFN from human rights considerations in 1994.

U.S. officials consider China's support important in persuading North Korea to abandon its nuclear weapon program. That is one reason that some considered China's 100 kiloton nuclear test on June 10, 1994 irresponsible. China conducted additional tests on October 7, 1994, May 15, 1995, and Aug. 17, 1995. China has consistently opposed sanctions against North Korea, and its nuclear tests could further encourage North Korea to develop nuclear weapons. But Chinese diplomatic pressure, and perhaps subtle economic pressure, may have encouraged North Korean dialogue with the United States. On October 4, 1994, China also agreed to work with the United States to promote a ban on the production of fissile material for nuclear weapons.

In August 1995 Secretary Christopher again raised concerns about Chinese nuclear exports to Iran, and also arranged further talks with the Chinese on MTCR issues.

MOST RECENT DEVELOPMENTS

On Oct. 24, 1995, President Clinton and President Jiang Zemin had a very positive meeting covering many topics, including a discussion of nonproliferation in general. On October 30, Secretary of Defense Perry said the top potential flash point in Sino-U.S. relations is "the proliferation of some their production and know-how and some of their weapons to ... dangerous regimes -- to Iran, for example." In November 1995, a Defense Department official said, "Chinese firms have provided some assistance [to Iran, both in terms of the infrastructure for building chemical plants and some of the precursors for developing chemical agents." (Washington Times, Nov. 10, 1995, p. 5.)

The FY1996 Intelligence Authorization bill, in conference committee since late October 1996, allows the President to delay sanctions against proliferators if their imposition would jeopardize an intelligence operation or criminal investigation. (HR 1655)

BACKGROUND AND ANALYSIS

Chinese Missile and Nuclear Proliferation

Chinese nuclear and missile exports continue to raise concerns in the U.S. Government. On Apr. 17,1995, Secretary of State Christopher urged Foreign Minister Qian Qichen to forego the export of nuclear reactors and technology to Iran and arranged further talks between U.S. and Chinese officials regarding nuclear proliferation and missile proliferation concerns. In August 1995 Secretary Christopher met with Qian Qichen to reestablish talks on these and other issues after a hiatus. On Sept. 27, Qian Quichen said China would cancel the transfer of the nuclear reactors to Iran. Throughout the 1980s, Chinese missile- and nuclear-technology exports conflicted with U.S. foreign policy goals. Chinese assurances regarding their exports were vague and unsatisfactory, but Washington moderated its criticism of Beijing in part due to China's strategic importance in counterbalancing Moscow. However, the 1989 Tiananmen crackdown, the end of the Cold War, and the 1991 Persian Gulf War against Iraq changed perceptions. The Tiananmen Square crisis stalled the improvement in U.S.-China relations and raised human rights as a central factor. The decline of China's strategic importance has supported arguments for a tougher U.S. policy toward China on proliferation, human rights, and trade. Revelations about Iraq's missile, chemical, and nuclear weapons programs heightened concerns about the spread of such weapons technology and dual-use supplies. New disclosures in 1991 about Chinese missile and nuclear technology transfers to Pakistan and the Middle East added impetus to international criticism of China. Legislation passed in 1991 requires U.S. sanctions for illicit missile or missile technology transfers.

In 1992, after the U.S. imposed some sanctions and threatened others, China signed the Nuclear Nonproliferation Treaty (NPT) and agreed to abide by the Missile Technology Control Regime (MTCR). But China has exported missile technology and dual-use items and may have transferred entire missiles since it first agreed to observe the MTCR guidelines. Chinese technology transfers are especially troubling because of their contribution to indigenous nuclear and missile development capabilities. Iraq demonstrated that much commercially available technology can be applied to nuclear weapons and missile programs.

Although China, after media disclosures, has provided many details about its nuclear transfers, experts find Chinese transfers troubling because of their secrecy and association with suspected nuclear bomb programs. Some of its nuclear exports and its exports of Silkworm, CSS-2, M-9, and M-11 missiles and related technology have been shrouded in secrecy.

Possible Motives and Policy Constraints

Many analysts believe that sensitive Chinese arms sales are controlled by only a few very influential military and political officials in the Central Military Commission and Politburo -- and not the weaker Foreign Ministry. In addition to national defense, intelligence, and foreign policy interests, Chinese military export policy probably reflects personal interests of the top leaders' family members who oversee arms sales companies. China has been expanding its missile and nuclear related sales, in part to earn foreign exchange which contributes to the Chinese goal of modernization, especially in defense.

Several countries that were denied Western military or nuclear exports, turned to China as a supplier of sensitive technology. This position may provide greater Chinese strategic political influence in the Middle East and South Asia, and serve Beijing's foreign policy goals of asserting independent clout and checking U.S. influence on domestic and international policies. Other possible Chinese interests include balance of power concerns in South Asia and the Middle East, cheaper oil supplies, and Islamic influences over ethnic minorities in northwestern China. The extent to which Beijing shares Western nonproliferation interests is uncertain.

Missile and Related Technology Transfers

Ballistic missiles are considered destabilizing weapons primarily because they can deliver nuclear, chemical or biological weapons. Also potential target countries lack defenses against missiles and therefore may launch preemptive strikes against enemy missiles or may seek their own missiles and unconventional warheads.

The Multilateral Regime and U.S. Laws.

In April 1987, Canada, France, West Germany, Italy, Japan, United Kingdom, and the United States established the Missile Technology Control Regime (MTCR) as a set of guidelines to control the export of equipment and technology that could contribute to a missile system capable of delivering nuclear weapons (i.e., a missile capable of delivering a 500 kg (1,100 lb) warhead to 300 km (186 miles)). "Membership" has expanded to 25 countries. China has agreed to observe the guidelines but is not a formal partner to the regime. The MTCR is not a treaty or executive agreement, and has no organization that monitors compliance (like the IAEA). States adhering to the MTCR have agreed to guidelines that call for restraint in exports of items and technologies listed in the MTCR Equipment and Technology Annex. Category I of the Annex covers complete missile systems, major subsystems, and related production facilities and equipment. Category II lists usable components, equipment, material, and technology.

On Jan. 7, 1993, MTCR members issued new guidelines to cover missiles capable of delivering all weapons of mass destruction (nuclear, chemical, and biological weapons). The MTCR now strongly calls for denying transfers of Category I items, and any missiles (with a range of at least 300 km, regardless of payload), and Category II items judged to be intended for delivering any weapon of mass destruction. There has been no indication that China has agreed to this revision.

Congress amended U.S. statutes to set policy on U.S. exports of missile technology and to help enforce the MTCR. In passing the National Defense Authorization Act for FY1991, Congress amended the Arms Export Control Act (AECA) (Section 73(a) of P.L. 90-629) and the Export Administration Act (EAA) (Section 11B of P.L. 96-72) to require U.S. sanctions if the President determines that a U.S. or foreign person knowingly "exports, transfers, or otherwise engages in the trade of any MTCR equipment or technology that contributes to the acquisition, design, development, or production of missiles in a country that is not an MTCR adherent..." U.S. law requires sanctions remain in effect for 2 years, but the President may waive the sanctions if it is "essential" to U.S. national security.

In the FY1993 Defense Authorization Act (P.L. 102-484), Congress enacted the Iran-Iraq Arms Nonproliferation Act. It requires sanctions against countries that transfer to Iran or Iraq any goods or technology (including dual-use items and training or information) that "could" contribute to the acquisition of weapons of mass destruction and their delivery systems. The required sanctions include suspension of economic and military assistance, and nuclear cooperation (less relevant for China); and AECA and EAA MTCR-related sanctions.

Exports of CSS-2 IRBMs to Saudi Arabia.

In 1987, during the Iran-Iraq War, China secretly sold an estimated 36 CSS-2 intermediate-range ballistic missiles (IRBM) to Saudi Arabia for about $3-3.5 billion. The range of the Saudi CSS-2s is about 2,800 km (1,740 miles) -- enough to reach Iran, Iraq, and Israel. The Saudis reportedly approached China for missiles after the Reagan Administration could not persuade Congress to lift the limit of 60 F-15 fighters that could be sold to Saudi Arabia. Riyadh said it acquired the missiles as deterrence against possible missile attacks from Tehran.

The missiles are named DF-3 by the Chinese ("DF" for Dong Feng, or East Wind) and designated CSS-2 by the United States ("CSS" for Chinese Surface-to-Surface). According to Jane's, the CSS-2 IRBM is a single-stage missile using storable liquid fuel, first deployed by the Chinese in 1971, with a range between 2,500-3,000 km (1,553-1,863 miles). While the Chinese designed the CSS-2 missiles to carry nuclear warheads, Saudi Prince Bandar (Saudi ambassador to Washington who secretly negotiated the deal in Beijing) assured the United States that the Chinese had modified the missile to carry a large conventional warhead. The Chinese issued similar assurances. Then-Foreign Minister Wu Xueqian on Apr. 6, 1988 said that "the Saudi government made a commitment to us of no transfer, no first use of these missiles, and to use these missiles entirely for defensive purposes." While insisting that the missiles contributed to peace and stability, Wu also said that China supported Arab states against any threat of a preemptive Israeli attack on the new missiles, thus admitting that the missiles could be destabilizing. Indeed, in early 1988, Israel threatened a preemptive strike against the CSS-2s, recalling the Israeli attack on an Iraqi nuclear reactor in June 1981.

China may have been motivated by both the large profits from this unique missile deal and greater political influence in the Middle East. Beijing's diplomatic rivalry with the Taipei government may also have motivated the sale, as Saudi Arabia had been one of the few remaining countries to maintain diplomatic relations with Taiwan.

M-9 SRBM.

For several years, Washington has been concerned about reported Chinese attempts to sell Syria and, perhaps, Iran the M-9 short-range ballistic missile (SRBM). The M-9 is estimated to have a range of 600 km (375 miles) and exceeds the range and payload limits of the MTCR guidelines (300 km and 500 kg). It is a single-stage, solid-fuel, fully mobile missile with an inertial guidance system. The M-9 is considered conventional or nuclear capable, and more accurate (circular error probable (CEP) of about 650 meters) than the modified Scud-B ballistic missiles launched by Iraq during the 1991 Persian Gulf War. China has developed the M-9 missile for export, with China Precision Machinery Import and Export Corporation (CPMIEC) marketing the missile abroad. M-9 flight tests reportedly began in June 1988.

M-11 SRBM Exports to Pakistan and MTCR-Related Sanctions.

Chinese transfers to Pakistan of the M-11 SRBM, or the technology associated with the missile, have caused major problems in the U.S.-Chinese relationship. The United States has twice imposed sanctions on Chinese enterprises because of missile technology transfers.

The M-11 is reportedly capable of carrying an 800 kg warhead up to 180 miles (290 km). The Chinese first revealed the M-11 SRBM in 1988 and reportedly successfully flight-tested it in 1990. The M-11 missile is a two-stage, fully-mobile, solid-propellant missile with an inertial guidance system. Transfers of the M-11 or related equipment violate the MTCR guidelines because the missile has the inherent ability to deliver a 500 kg warhead 300 km.

In June 1991, then-President Bush imposed MTCR-related sanctions and additional restrictions on exports of high-speed computers and satellites against Chinese and Pakistani entities when he determined that China had exported M-11 missile technology to Pakistan. The New York Times, citing intelligence analysts, said China had delivered to Pakistan guidance units that could be used to control the flight of the M-11 missile (NYT Jan. 31, 1992). These sanctions affected China Great Wall Industry Corp. (which has offered satellite launch services since 1986) and China Precision Machinery Import and Export Corp. (which has marketed the M-series missiles abroad).

In Beijing in November 1991, then-Secretary of State James Baker said the Chinese agreed to observe the MTCR guidelines and parameters, and that the Americans "understand that this applies to the M-9 and M-11 missiles." As part of the bargain, China required that the United States lift the June 1991 sanctions. The Chinese Foreign Minister sent a requested written message (received on Feb. 1, 1992, but not yet made public) to Baker, reportedly confirming the Chinese intent to abide by the MTCR and not to transfer M-9s and M-11s. China did not enter an international agreement to observe the MTCR guidelines (considered a binding commitment) or become an MTCR "member" or formal "adherent." The June 1991 sanctions were effectively waived on Mar. 23, 1992.

The Dec. 4, 1992, Los Angeles Times and Washington Post reported that intelligence analysts sighted Chinese M-11 SRBMs in Pakistan "within the last two weeks." According to more recent press reports, intercepted communications, human intelligence reports, and satellite photographs of M-11 missile canisters or crates at Sargodha Air Base in Pakistan indicate China has transferred complete missiles, but the Administration reportedly has no photographs of the missiles themselves in Pakistan. (Washington Times, Sept. 7, 1994, Washington Post, July 3, 1995) After months of policy debate, on Aug. 24, 1993, the Administration, determined that China had shipped M-11 related equipment to Pakistan and imposed Category II sanctions. The so-called "Helms amendment" to the AECA (enacted by the 102nd Congress) requires that missile proliferation sanctions under the AECA in the case of countries with non-market economies (but excluding the former Warsaw Pact countries) be applied to all activities of the government relating to development or production of missile equipment or technology, space systems or equipment, military aircraft, and electronics. In introducing the amendment on July 29, 1991, Senator Helms specified the intention to sanction all "arms exporting" entities. The sanctions were levied on one Pakistani and eleven Chinese defense industrial aerospace entities (including China's satellite launch provider) and consisted of the denial for 2 years of U.S. Government contracts and export licenses for missile equipment or technology (MTCR Annex items).

The primary effect of the sanctions was on the export to China of satellites that included military technology as well as military or dual-use technology listed in the MTCR annex. Satellites are not listed in the MTCR Annex but certain components are, and China Great Wall Corp. (satellite launcher) is a sanctioned company. A 1989 U.S.- China agreement allowed the China Great Wall Industry Corp. to launch nine U.S.-built satellites until 1994 and required China to charge prices "on par" with Western competitors (about $40-50 million per geostationary orbit launch). The Foreign Relations Authorization Act for fiscal years 1990-91 (P.L. 101-246) banned the export of Munitions List items and U.S.-built satellites for Chinese launch (in response to the June 1989 Tiananmen crackdown), but the President may waive the ban.

The net impact of the sanctions on U.S. businesses is uncertain. Clearly, if the Chinese satellite launches had been effectively blocked some U.S. contracts would have been jeopardized, but other U.S. companies (e.g., McDonnell Douglas and General Dynamics), and Russian and European commercial launch service providers may also have benefited from a lack of Chinese competition.

The U.S. Government indicated it was ready to negotiate a waiver for the sanctions, perhaps on the basis of a new and binding Chinese commitment to the MTCR, such as a bilateral Memorandum of Understanding. (The U.S. and Russia signed such an agreement on Sept. 2, 1993.) As the government debated the lifting of sanctions, some argued U.S. security interests were at stake, and that U.S. credibility would be significantly weakened if satellites were exempted. Others said that U.S. export interests should prevail and a positive relationship with China was important for other U.S. interests such as preventing a nuclear armed North Korea. While U.S., European, and Russian companies also provide launch services, China depends on satellite launch for profit as well as prestige.

On the eve of President Clinton's Nov. 19, 1993 meeting with the Chinese president at the APEC (Asian Pacific Economic Cooperation) meeting in Seattle, the Administration formally proposed waiving the sanctions in return for another Chinese promise not to export missiles, but the effort failed.

In separate actions indirectly related to nuclear and missile proliferation issues, the Administration decided in November and December 1993 to allow exports to China of a Cray supercomputer and advanced telecommunications equipment, including equipment for fiber optics systems. These items are not covered by the sanctions in effect against China, but have long been considered to be strategically and militarily sensitive technologies that, during the Cold War, were only exported to trusted countries.

The Administration determined in January 1994, that State Department could not issue export licenses for satellites containing military components (APStar-1 and Optus-B3, built by Hughes Aircraft Co. were subject to State licensing). Other satellites (such as AsiaSat-2 and EchoStar built by Martin Marietta Corp.) were subject to Commerce Department export licensing. The Administration determined that exports to China of these satellites on the Commerce Control List were not banned by the missile-technology sanctions because the Department of Commerce bases its licensing decisions on the end product being exported, not on component parts. But the Administration still had to grant a waiver of the prohibition on exporting satellites to China under the Foreign Relations Authorization Act (P.L. 101-246). In March, Hughes agreed to remove a sensitive encryption chip from its satellite so that it could be removed from the Munitions List and could then be approved for export to China by the Commerce Department. These steps, according to Aviation Week and Space Technology (Mar. 14, 1994), removed the last hurdles for about $1 billion worth of satellite launches by China. On June 22, 1995, President Clinton terminated the suspension of licenses for the export to China of cryptographic items included on the munitions list (PM 57). This action allows State Department to license exports of satellites with cryptographic devices so that China can launch the satellites into space.

The Clinton Administration pursued an active policy of improving relations with China in 1994 and many high level U.S. officials, including Secretary of the Treasury Bentsen, Secretary of State Christopher, and Secretary of Commerce Brown, visited the country. Other officials from State and Defense Departments also visited China as the United States reestablished military contacts with China, and tried to resolve the missile proliferation issue. In mid-August 1994, the Executive Deputy Chief of the PLA's General Staff visited with Secretary Perry and with Gen. Shalikashvili and discussed missile proliferation, U.S. sanctions, and U.S. fighter aircraft sales to Taiwan. But until late September, the Chinese would not discuss their position on missile proliferation in any detail, and no progress was made.

In fact, new evidence of Chinese M-11 missiles sales to Pakistan was reported in September 1994. According to the Washington Times (Sept, 7, 1994), Pakistan agreed on Aug. 22, 1994, to pay China $15 million toward a 1988 contract for M-11s. Chinese teams were reportedly scheduled to visit Pakistan to unpack and assemble missiles and to train Pakistani soldiers in their use. U.S. Government officials said that if positive evidence of actual missile transfers was obtained, harsher sanctions (category I) would be required. Chinese and Pakistani officials consistently deny the transfer of M-11 missiles .

At the end of September 1994, U.S. Ambassador to China Stapleton accompanied Chinese Foreign Minister Qian Qichen to Washington for talks with President Clinton and Secretary Christopher. Negotiations continued into October and broke the 13 month deadlock over China's missile technology sales and U.S. sanctions. On October 4, Secretary Christopher and Foreign Minister Qian Qichen signed a joint statement in which the United States agreed to waive the August 1993 missile sanctions and China agreed not to export "ground-to-ground missiles" that have the inherent ability to deliver a 500 kg warhead 300 km. Still China did not enter a binding international agreement to observe the MTCR guidelines but agreed to work with the United States "through a step-by-step approach to resolve differences over missile exports." The Chinese pledge not to export "ground-to-ground missiles" apparently did not include missile technology exports, which were the subject of U.S. sanctions in 1991 and 1993. However both countries reportedly "reaffirmed their respective commitments to the Guidelines and parameters of the MTCR." Press reports in June and July 1995 cite U.S. concern over continuing missile technology exports to Pakistan and Iran. China broke off talks when the United States granted a visa to Taiwan President Lee Teng-Hui in June 1995, but contacts were reestablished by Under Secretary of State Tarnoff in July and Secretary Christopher in August 1995 (Defense News, June 19-25, 1995, pp. 1, 50; NYT, June 22, 1995, pp. 1, 6.).

Missile Technology Exports to Iran. Since the mid-1980s, China has supplied Silkworm anti-ship missiles, Oghab 273mm artillery rockets, and components, technology, and materials for rocket and missile production. China reportedly helped Iran construct and improve other missiles, such as the Scud, may have supplied parts of M-series missiles for use in other missiles, and reportedly helped convert surface-to-air missiles (SAMs) into SRBMs (e.g., the 8610). China transferred to Iran sensitive gyroscopes "used in" missile guidance systems, according to an intelligence report cited by the Wall Street Journal on Mar. 18, 1992. The May 19, 1993, Flight International, citing Israeli intelligence sources, reported that Iran is developing a medium to long range solid-fuel missile believed to be based on the Chinese M-9 program. China has also been implicated in an alleged Iranian program to produce a 1000 km missile, the Tondar-68. During the first 6 months of 1995, U.S. intelligence reportedly obtained information that indicates China has been providing Iran technology, materials, guidance systems, machine tools, and engineering assistance that would support the production of missiles exceeding the range and payload thresholds of the MTCR. If the U.S. Government determines China has transferred unauthorized missile technology to Iran or Pakistan, it must impose sanctions under the Arms Export Control Act, the Export Administration Act, and perhaps the Iran-Iraq Arms Nonproliferation Act.

Other Possible Chinese Missile Transfers.

According to Space News (Nov. 1-7, 1993, p. 1), Russia and Ukraine sold China RD-170 engines used on the Zenit space launcher in 1991, and Russia also reportedly sold China electronic equipment that could be used to improve missile accuracy.

The Chinese may also may have retransferred to various countries anti-ballistic missile systems, such as purchased Russian S-300 systems and U.S. theater missile defense technologies that it may have obtained covertly. Reports indicate China may have given North Korea assistance in the Taepo-dong missile development program.

In 1992, the New York Times reported that China delivered to Syria 30 tons of chemicals needed missile fuel, and that Chinese engineers were suspected to be helping Syria build missiles. The Washington Post reported that China had contracts to sell missile and nuclear related technology worth over $1 billion to Iran, Syria, and Pakistan. Other reports indicate China may be providing missile technology to Turkey.

In April 1994, Defense Intelligence analysts reportedly discovered that North Korea is developing two new, liquid-fueled, two-stage missiles, the Taepo Dong 1 and Taepo Dong 2 (Jane's Defense Weekly, March 12). The first stage of the TD-2 resembles the Chinese CSS-2 in size, leading some analysts to think China may have provided North Korea missile technology. Jane's credited the TD-2 with a range of 3500 km (2170 miles).

On Dec. 18, 1994, the South China Morning Post reported that a shipment of 30 tons of ammonium perchlorate, used in missile fuel, was seized in January 1994 in Saudi Arabia. The material originated in Guangdong, China and was being shipped by a Hong Kong firm to Jordan, with an ultimate destination of Iraq. A naturalized South Korean-American was charged with organizing the shipment.

Nuclear Proliferation Issues

Of special concern to the United States are China's position on the Nuclear Non-Proliferation Treaty and the Nuclear Suppliers Group, China's nuclear technology exports to countries that may have nuclear weapons programs, China's support in resolving the problem of North Korea's nuclear program, China's position on nuclear testing and the production of fissile material.

The NPT and Nuclear Suppliers Group (NSG).

Since 1984, China has said that it does not advocate, encourage, or engage in the proliferation of nuclear weapons and that it requests IAEA safeguards as a condition for its nuclear exports since joining the IAEA in 1984. Nevertheless, China has made secret, un-safeguarded nuclear transfers. For years China also refused to sign the NPT, calling it "discriminatory." However, with China shunned by Western countries after the June 1989 Tiananmen crackdown, Premier Li Peng announced on Aug. 10, 1991 that China "has in principle" agreed to sign the NPT, and China acceded to the NPT on Mar. 9, 1992.

On Feb. 24, 1993, CIA Director James Woolsey testified that Chinese nuclear deals with Algeria and Syria appear consistent with NPT obligations. On July 28, 1993, Woolsey stated that China's nuclear cooperation with Iran is NPT-consistent but "of concern," and the nuclear relationship with Pakistan is "of greater concern." Moreover, China does not require full-scope safeguards (IAEA inspections of all other declared nuclear materials and facilities in addition to the imported supplies). Also, China does not belong to the Nuclear Suppliers Group (NSG), a multilateral effort to harmonize and strengthen the export controls of supplier countries on all nuclear technology including dual-use technology. With 27 members, including Russia, the NSG agrees on international norms to supplement the IAEA safeguards on fissile materials.

Chinese Exports of Nuclear Equipment and Technology.

In the recent past, Chinese exports of nuclear equipment or technology to Pakistan, Algeria, Iran, Iraq, and Syria have been of great concern to the United States. In the fall of 1994, the Chinese periodical Zhengming said China had rejected requests from several Southeast Asian nations for assistance in developing nuclear weapons and an offer from an African country to buy nuclear weapons.

Pakistan.

Pakistan, not a party to the NPT, is believed to have a nuclear weapons program that received Chinese assistance. On Feb. 6, 1992, the Foreign Secretary of Pakistan admitted that his country has the components and know-how to build "at least one" nuclear explosive device. On Dec. 1, 1992, "NBC News" reported that Pakistan can assemble and drop "at least seven" nuclear weapons within hours. On Feb. 24, 1993, CIA Director James Woolsey testified that, prior to joining the NPT in 1992, China "probably provided some nuclear weapons related assistance to Islamabad," and that "it's unclear whether Beijing has broken off contact with elements associated with Pakistan's weapons programs."

The Reagan Administration had convincing evidence that China was helping Pakistan to operate its Kahuta uranium-enrichment plant and had given Pakistan a nuclear bomb design, the June 22 and 23, 1984, New York Times reported. The Aug. 9, 1990 Nucleonics Week disclosed that China designed the nuclear system for a Pakistani research reactor (Parr-2), added in 1989, which uses highly enriched uranium fuel. Also, according to the San Jose Mercury-News of Nov. 21, 1990 and the New York Times of Nov. 22, 1990, the FBI conducted an investigation that began about 1986 into Chinese theft from Lawrence Livermore national laboratory of information on building a neutron bomb and the transfer of the secrets to Pakistan. China also assisted in fuel fabrication for the rebuilt and upgraded Parr-1 research reactor the Jan. 24, 1991, Nucleonics Week said. Moreover, China has given Pakistan enough weapons-grade uranium to fuel two nuclear weapons, nuclear arms control specialists Gary Milhollin and Gerard White wrote in the May 12, 1991, Washington Post. They also stated that Chinese scientists have been sighted at the Kahuta complex (in which gas centrifuges are used to produce weapons-grade uranium), and that, in 1986, China sold Pakistan tritium (used to achieve fusion in hydrogen bombs and to increase the yield of tritium boosted nuclear bombs). China is also believed by Western intelligence to have given a design for a 25-Kt solid-core implosion device to Pakistan, Nucleonics Week reported May 23, 1991.

On Dec. 31, 1991, China signed a $500 million contract to build a 300-MW nuclear power reactor for Pakistan. In 1990 and 1991, Germany and France (which has declined to sell Pakistan a reactor) began to require full-scope safeguards (IAEA inspections of all declared nuclear facilities of the recipient country). China, in contrast, does not require full-scope safeguards. Pakistan has refused IAEA safeguards on its nuclear fuel cycle program, but requested IAEA safeguards for the Chinese reactor. Chinese officials claim construction can be completed (in about 7 years) despite the Western ban on supplies. Work reportedly started on Aug. 1, 1993.

Algeria.

In contrast to long-suspected nuclear cooperation with Pakistan, China's nuclear assistance to Algeria (not a party to the NPT) was secret until April 1991. The Washington Times on Apr. 11, 1991, first reported the Chinese construction of a nuclear reactor in Algeria as part of a weapons program, generating renewed concerns about covert nuclear technology transfers to the Middle East. U.S. intelligence found that the reactor under construction could be used to produce nuclear bomb fuel, according to the Apr. 20, 1991 Washington Post. The report stated that intelligence experts were suspicious because the reactor is believed to be larger than required for nuclear research, there are no electrical power generation facilities, a surface-to-air missile battery is nearby, and the facility is located at a remote site (at Ain Oussera about 155 miles south of Algiers.) According to Nucleonics Week of Apr. 18, 1991, some U.S. intelligence estimates of the size of the cooling towers suggest a possible upgraded power level as great as 60 megawatts. Algeria said Apr. 30, 1991 that the reactor would only generate electrical power and produce radioactive isotopes for medical research, would be fueled by low-enriched uranium, and would have a maximum thermal output of 15 megawatts.

The Chinese initially did not admit to their nuclear assistance to Algeria. On Apr. 14 1991~ the Chinese Foreign Ministry denied the Washington Times report without reference to a nuclear reactor. Then on Apr. 30, the Chinese issued a revised response, saying that the agreement on nuclear cooperation for China to provide a nuclear reactor to Algeria had been signed in 1983 and that the reactor would be used only for peaceful purposes since its power would be 10-15 megawatts. The statement also claimed that since China did not join the IAEA until 1984, it did not have to seek IAEA safeguards on the deal with Algeria. In fact, China applied to join the IAEA in September 1983. The Bush Administration did not express great concern about the Chinese reactor in Algeria, especially since Algeria promised to request IAEA safeguards. The State Department said, in April 1991, that it was aware of the cooperation but had no reason to conclude that the assistance was knowingly part of a weapons program.

Iran.

On Apr. 17, 1995, Secretary of State Christopher raised U.S. concerns over a proposed Chinese sale of nuclear reactors to Iran in discussions with Foreign Minister Qian Qichen in New York. The deal would reportedly include the Chinese construction of two 300 megawatt nuclear power reactors and related technology and training. The Chinese have also discussed providing Iran the technology to produce nuclear reactor fuel rods, including equipment for the enrichment of uranium and the production of uranium hexafluoride according to the Washington Post (Apr. 17, 1995). At a joint press conference, Secretary Christopher said, "...Iran ... is simply too dangerous with its intentions and its motives and its designs to justify nuclear cooperation of an allegedly peaceful character.... We that believe that cooperation and the techniques that would be developed there, the expertise that would be developed, the scientists that would be there, lend themselves to such great possibilities of misuse and abuse that we think that cooperation should not begin." Qian Qichen responded, "There is no international law or international regulation or international agreement that prohibits such cooperation on the peaceful use of nuclear energy". The Washington Times reported that Chinese technicians had constructed calutrons in Iran for the enrichment of uranium. (Sept. 25, 1995, p. 1) The United States was so concerned about Iran's nuclear program and its support of international terrorism that, on May 9, 1995, the President imposed an embargo on trade and investments with Iran. Later, on Sept. 27, 1995, Qian Quichen stated China would not complete the transfer of reactors to Iran.

China -- Iran's largest single arms supplier during the Iran-Iraq War -- concluded agreements in 1989, 1991, and 1992 with Iran to provide nuclear technology. Iran also is believed to have substantial nuclear collaboration with Pakistan, long a recipient of Chinese nuclear assistance. CIA Director James Woolsey testified on July 28, 1993 that as "Iran's principal nuclear supplier," China has provided nuclear technology that is consistent with the NPT, but "of concern" nevertheless because of Iran's nuclear weapons program. Secretary of State Christopher said on Jan. 20, 1995 that "Today Iran is engaged in a crash effort to develop nuclear weapons." The Clinton Administration advised Russia and China to refrain from selling nuclear technology to Iran. (Iran asked that Germany or another Western country resume construction of two nuclear reactors at Bushehr damaged by Iraqi air attacks in 1987 and 1988. Western countries, suspecting a civilian cover for a weapons program, have refused. Russia plans to complete the two light water reactors in Bushehr with an electrical output of 1 million kilowatts each. Russia may build two other reactors in Iran later.)

The United States suspects a tenacious, long-term Iranian nuclear weapons program and opposes even dual-use nuclear technology transfers to Iran. Suspicions arise partly from: (1) oil- and gas-rich Iran does not need nuclear power plants; (2) it is allegedly engaged in a $2 billion-a-year military buildup including the nuclear program; and (3) Iran in 1991-1992 sought and almost acquired for plutonium production a large, completely-Chinese nuclear research reactor (25-30 MW) together with key fuel cycle facilities from Argentina, revealed Nucleonics Week (Sept. 24, 1992). U.S. pressure halted these shipments -- which are unnecessary for a peaceful nuclear program, with MFN status for China a factor, said Nucleonics Week (Oct. 1, 1992). The May 27, 1993, New York Times reported that the Clinton Administration plans a new approach to isolate Iran, including trying to persuade China to cancel nuclear deals.

Nucleonics Week of May 2, 1991 reported that U.S. and European intelligence found that since 1988, 15 Iranian nuclear engineers from Iran's nuclear research center at Isfahan have been secretly trained in China; that a secret Iranian-Chinese nuclear cooperation agreement dates from after 1985; and that China transferred technology for reactor construction and other projects at Isfahan. In early July 1991, Chinese Premier Li Peng not only visited Tehran, but stopped at Isfahan, to visit Chinese nuclear scientists and the military complexes there. On Oct. 30, 1991, The Washington Post reported that Iran was trying to build a nuclear bomb and that China was secretly providing a calutron for uranium enrichment, a nuclear reactor to be located at Isfahan, and training for Iranian nuclear engineers. On Nov. 4, 1991, China acknowledged that Chinese and Iranian companies signed "commercial" contracts in 1989 and 1991 to transfer respectively an electromagnetic isotope separator (calutron) and a small nuclear reactor, for "peaceful purposes.'

In February 1992, an IAEA team visited Iran and found that a Chinese-supplied calutron and a small nuclear reactor were not part of an Iranian weapons program as reported by the press in October 1991. The IAEA mission (on a pre-arranged and limited visit, not a special inspection) looked at six Iranian sites -- with the Chinese calutron and reactor -- and found no proof there, at the time, that any Iranian nuclear activity violated peaceful principles. The team found that the Chinese-supplied calutron is different from the calutrons used by Iraq to enrich uranium. The one in Iran was found to be a standard electromagnetic separator configured for natural zinc and used to produce stable isotopes, with no enrichment capability (at the time). The inspectors also said that the mini neutron reactor is still under construction, although the fuel has been supplied, and the IAEA will be implementing safeguards. Nonetheless, skeptics point out that: (1) Iran could still evade international discovery of any hidden nuclear weapons activity as Iraq had done extensively; and (2) Iraq had started out with a small calutron and then developed numerous and larger ones. The Iranians reportedly said that they reluctantly turned to China after failing to obtain preferred Western assistance due to export controls.

On Sept. 10, 1992, China and Iran finalized an agreement on "nuclear energy cooperation," when Iranian President Rafsanjani visited Beijing accompanied by top-level military and atomic energy officials, but in September 1995, China said the deal was off. China had estimated the construction of two 300-MW nuclear reactors in Iran and technical training would take 10 years to complete. But, as with the Chinese nuclear reactor for Pakistan, supporting Western components and equipment were being denied to Iran and might have delayed the project. Iran, an NPT-signatory, has an IAEA safeguards agreement to submit all declared nuclear materials to inspections. However, Iraq had shown the weaknesses of the IAEA safeguards system.

Iraq.

China, formerly a major arms supplier to Iraq, reportedly also transferred duel-use nuclear technology and know-how to that country. China helped Iraq build sophisticated magnets for stabilizing uranium enrichment centrifuges, according to Middle East Markets (a Financial Times newsletter), the Washington Times reported on Dec. 14, 1989. Iraq reportedly sought Chinese assistance only after failing to obtain the special magnets from British sources. China also sold Iraq low-enriched uranium from a Chinese military reprocessing plant in the late 1970s, according to Nucleonics Week (May 9, 1991). During 1984-1986 China conducted a feasibility study on building a clandestine nuclear reactor for Iraq.

Syria.

On Nov. 29, 1991, China announced plans to sell a small (30-kilowatt) nuclear reactor to Syria as an IAEA technical assistance program. The IAEA first denied the Syrian request because Syria refused to sign a safeguards agreement, although it was a party to the NPT. In May 1992, the IAEA secured a safeguards agreement for the reactor and fuel, after Syria agreed to allow IAEA inspections of all nuclear facilities.

China's Support in Resolving North Korean Nuclear Problem.

China has more influence on North Korea than most countries because of its subsidized exports of oil to North Korea and its relatively high level of other economic relations. This summer, China was given some credit for encouraging the late Kim II-sung to allow progress in negotiations with the U.S. Recently in China, Secretary Perry said, I don't see the discussion with the Chinese as asking them to put pressure on the North Koreans to agree...but rather as participating and helping implement the agreements whenever it is they are finally reached." (Baltimore Sun, Oct. 17, 1994)

Nuclear Testing and Fissile Material Production.

On Aug. 17, 1995, China conducted its 43rd nuclear test, an explosion estimated to be equivalent to 20-80 kilotons of TNT. Other recent tests included an explosion on June 10, 1994 of a 100 kiloton hydrogen bomb; an Oct. 7, 1994 test of a nuclear weapon estimated to be between 40 to 150 kt., and a test on May 15, 1995, four days after 170 countries approved the indefinite extension of the Nuclear Non-Proliferation Treaty. Chinese spokesmen said that the country plans a few more nuclear tests before joining an international moratorium. Western analysts predict three more before the end of 1996 when a Comprehensive Nuclear Test Ban Treaty is expected to be in place. China is participating in the treaty negotiations and calls for the destruction of all atomic weapons by all states. On October 4, 1994, China agreed to work with the United States "to promote the earliest possible achievement of a multilateral, non-discriminatory, internationally and effectively verifiable convention banning the production of fissile materials for nuclear weapons or other nuclear explosive devices."

Policy Issues for Congress

While China signed the NPT in 1992 and promised to abide by the MTCR in 1991, again in 1992, and as recently as Oct. 4, 1994, concerns remain about Chinese compliance with current commitments and cooperation with international nonproliferation regimes. U.S. policy statements have stressed the importance of non proliferation but economic interests and other security interests have at times conflicted with concerns about missile and nuclear proliferation. The Clinton Administration has endorsed a policy of constructive engagement with China, including high level discussions and normal MFN trade treatment.

Security Dialogue.

After the June 1989 Tiananmen crackdown, the Bush Administration suspended military exchanges and arms sales with China, among other sanctions. In early November 1993, the Clinton Administration resumed high-level military ties with China to advance U.S. security goals, including nonproliferation and a series of high level exchanges has taken place. The Chinese reportedly hope the series of meetings may lead to a summit.

High Technology Trade.

GAO reported in April 1995 that the U.S. approved $530 million worth of missile-related exports to China between 1990 and 1993. The report said U.S. end-use controls are only marginally effective, the effectiveness of sanctions is unknown, and that some missile export controls are weak. In separate U.S. actions not directly related to proliferation controls, the Administration decided in November and December 1993 to allow exports to China of a Cray supercomputer and advanced telecommunications equipment, including equipment for fiber optics systems. While visiting China, various cabinet officers have promoted increased trade between China and the U.S. Since CoCom was dissolved in March 1994, U.S. export restrictions have been reduced to focus on items that contribute significantly to the development and production of weapons of mass destruction, including some dual-use items. Military sales to China have not yet been allowed, but there is increasing demand to export duel- use equipment and technology that can enhance China's military capabilities. China plans to build at least 14 more reactors in its own country in the next 30 years and wants Western technology for them, creating a $55 billion market for reactors, equipment, and technology (Nucleonics Week, March 23,1995; Wall Street Journal, Nov. 9, 1994). U.S. producers, such as Westinghouse Electric, are eager to participate in these projects but are currently barred. Public Law 99-183 requires detailed presidential certifications before the 1985 Agreement for Nuclear Cooperation Between the United States and China can be implemented and U.S. exports can be approved. Chinese nuclear cooperation with Iran will be a factor in whether such presidential certifications can be made. Secretary of Energy O'Leary offered to work with the Chinese to overcome obstacles to a presidential certification allowing expanded nuclear cooperation (Nucleonics Week, Mar. 23, 1995). In February 1995, Westinghouse singed an agreement with China to sell two steam turbines and related technology for reactors being built in Qinshan, China.

Nonproliferation Regimes and International Groups.

Recognizing limits to the effectiveness of the NPT/IAEA safeguards system -- as shown by Iraq's advanced nuclear weapons program, the U.N. Security Council has tried to strengthen the IAEA's verification authority. Legislation was proposed in the 103rd Congress to address these concerns (see, for instance Section 161 of H.R. 2333 and H.R. 2076) and similar proposals may be made in the 104th Congress.

U.S., Russian, Japanese, and European officials together may urge China to commit to the Nuclear Suppliers Group and Australia Group (on chemical and biological weapons). Chinese participation may also be sought for regional arms control groups, such as the five-country talks proposed for South Asia by Pakistan in June 1991. The FY1993 foreign assistance appropriations act (P.L. 102-391) required a report on nuclear non-proliferation efforts in South Asia and nuclear and missile programs of China, India, and Pakistan. The State Department submitted that report on Apr. 29, 1993, stating that "concerns remain about whether China has terminated its links to Pakistan's nuclear weapons program and about its missile export policies." In September 1994, Indian officials complained to the visiting Chinese defense minister, Gen. Chi Haotian, about M-11 sales to Pakistan. The Chinese regional security policies will continue to be of concern to Congress as the United States seeks to improve its relations with India and Pakistan and to reduce the risk of nuclear war on the subcontinent.

Multilateral Export Controls.

At a November 1992 meeting, a 42-member Cooperation Forum was proposed as a successor to the Coordinating Committee on Multilateral Export Controls (CoCom). The group would include former Soviet-bloc countries, refocusing export control from communist to proliferation threats. Russian cooperation is important as Russia is now selling China advanced weapons, and is selling Iran nuclear technology. On Dec. 18, 1992, Russia and China signed an agreement on the sale of Russian nuclear reactors, raising concern about re-transfer of technology to Iran and Pakistan. In March 1994, CoCom was abolished but no replacement organization has been formed.

Arms Sales to Taiwan.

The Sept. 2, 1992 U.S. decision to sell Taiwan 150 F-16A/B fighters has complicated the Sino-U.S. dialogue on nonproliferation. China suspended its participation in the Arms Control in the Middle East (ACME), or Permanent Five, talks, arguing that Washington violated the U.S.-PRC Joint Communiqu‚ of Aug. 17, 1982, on reducing U.S. arms sales to Taiwan. Some analysts believe the Chinese increased proliferation activities in retaliation for the F-16 sale. China had agreed, during the June 1991 bid for MFN, to join in President Bush's initiative for the Five Power talks that were to include bans on nuclear bomb materials and ballistic missiles in the Middle East. At the third meeting in May 1992, China refused to include missiles and missile technology in the guidelines on weapons of mass destruction. Multilateral pressures are believed by many observers to be more effective than unilateral U.S. actions, such as in trade or export control policy. U.S. leadership to press China to participate fully in strengthening international nonproliferation regimes would capitalize on China's desire to be treated as a "great power" and perceived as a responsible world leader.

U.S. Missile Defense.

In February 1995, a Chinese foreign ministry official expressed concern that the U.S. missile defense programs could create an arms race in space and implied they could give the United States a first strike capability. If the United States deploys an advanced ballistic missile defense system in Asia, the Chinese official said it would increase the danger of nuclear war.

International Lending.

Congress may restrict U.S. support for multilateral development bank (MDB) loans. For example, U.S. law requires anti-narcotics cooperation for U.S. support for MDB loans to certain countries. Since the violent suppression of protests at Tiananmen Square, the United States has supported only those MDB loans designed for basic human needs in China. U.S. influence is limited, however, and the World Bank and the Asian Development Bank have resumed and increased substantial lending to China. In the 103rd Congress, one committee report (H. Rept. 103-125 on FY1994 foreign aid appropriations) recommended that the Secretary of the Treasury develop a reform agenda for G-7 discussion aimed at denying funds from international financial institutions to countries that have not signed international agreements on nonproliferation of nuclear, chemical, and biological weapons, and missiles.

LEGISLATION

H.R.149 (Solomon)

Prohibits the export of satellites intended for launch from launch vehicles owned by the People's Republic of China. Introduced Jan. 4, 1995; referred to Committee on International Relations. Referred to Subcommittee on International Economic Policy and Trade and Subcommittee on Asia and the Pacific on Jan. 17, 1995.

H.R.361 (Roth)

The Omnibus Export Administration Act of 1995 (Sec. 117) allows the export of telecommunications equipment to civil end users in China and other designated countries without a validated license. This section of the act also establishes the Secretary of Commerce as the licensing authority for commercial communications satellites, some of which have in the past been licensed by the Department of State because they included items on the U.S. Munitions List. Introduced Jan. 4, 1995; referred to subcommittee on International Economic Policy and Trade on Jan. 25, 1995.

H.R.20508 (Bereuter)

Calls on the President to persuade China to adhere to international nonproliferation standards by halting the export of ballistic missile technology and assistance with other weapons of mass destruction to Iran, Pakistan, and other countries. Introduced July 19, 1995; called by special rule and passed House July 20; referred to the Senate Committee on Foreign Relations July 21.