China Gets U.S. Military Phones

0 Comments | Insight on the News, Dec 21, 1998 | by Timothy W. Maier

The United States has helped to build the Chinese military space telecommunications network, a system that is so sophisticated that it can be used without interception.

In 1994 President Clinton boasted that building a mobile cellular-phone network with American technology for the Chinese people was good economic policy. That was White House spin, say critics, and it has come undone.

According to recently released Commerce Department records, the White House knew for some time that this state-of-the-art system was to be hand-delivered to the People's Liberation Army, which had become partners in a massive telecommunication business enterprise with China Telecom, a government-controlled company.

While some debate remains about whether the People's Liberation Army, or PLA, actually is employing the system, there is no doubt that profits from this billion-dollar industry trickle down to build ever more weapons of mass destruction that someday could be used against the United States.

And there is great concern among China hawks in U.S. defense circles that this so-called "cellular system," when linked with a satellite network, could enable the PLA to suppress political resistance, enhance its command-and-control communications and spy on U.S. allies in Asia.

And who paid for this sophisticated telecommunication system?

Unknowing U. S. investors may have footed the bill when one of the chief Chinese backers borrowed money on the U.S. bond market -- an action that has led to calls from frustrated China hawks to push forward the U.S. Market Securities Act. This is legislation that would create a new Securities Exchange Commission Office of National Security to monitor the U.S. fund-raising activities of companies with ties to the Beijing regime. But any such law would be too late to stop the mobile-telephones project, already well under way.

Clinton initially painted it as a humanitarian deal. A cellular-phone system for China not only could save lives in emergency situations, improving communications during floods or other natural disasters, it would be an economic boon for U.S. corporations that want a piece of this billion-dollar venture. Not surprisingly, a host of U.S. companies led by Loral Space & Communications jumped on board. Beijing then tapped the U.S. bond market to finance the deal, never telling individual investors that their retirement savings would be used to fund the project. After all, under current law such disclosure is not required.

The PLA was involved in the deal through China Telecom, says Eric Harwit, associate professor of Asian studies at the University of Hawaii, who is working on a book about the Chinese telecommunications industry. "The PLA had frequencies they didn't need for military purposes, so they decided to use it for commercial purposes and do the joint venture."

But Harwit disputes China hawks who claim the PLA will be employing the system for military purposes. Instead, he says, this is a business opportunity for the PLA to make a profit, though it may not last. Under pressure, the Chinese government has ordered the PLA to divest from all commercial enterprises. "I don't see how the PLA is going to proceed" with such divestiture, he says, adding that they naturally have been reluctant to pull out of business opportunities that are profitable.

Regardless of whether the American-designed system is used for military purposes, and it is hard to see why it wouldn't be, it puts money in the PLA's pockets. And so the question is whether the White House misled the public about the venture by claiming it was a humanitarian project to aid the Chinese people rather than to strengthen the Chinese military

"They knew," insists Charles Smith, president of the Richmond, Va.-based Softwar Corp., a computer consultant who relentlessly has filed Freedom of Information Act requests to learn government plans for controlling and exporting computer encryption. "They knew they were directly dealing with the Chinese army," he says.

Smith points to 1994. That year, while Clinton gave assurance that the project was for "civilians," his commerce secretary, Ron Brown, secretly met with Chinese Gen. Shen Rong-Jun to discuss building the mobile-phone network, according to recently released Commerce records.

Rong-Jun, who is deputy chief of the Commission of Science Technology and Industry for National Defense, or COSTIND, is in charge of the PLA's, satellite program. In addition to serving military purposes, the PLA stood to make a handsome profit by venturing into the satellite pay-per-view broadcast system, as well as profits generating from millions of phone calls.

Rong-Jun teamed up with billionaire Li Ka-shing, chairman of the Hong Kong-based Hutchison Whampoa Ltd., the Red Chinese merchant mariner. Ka-shing was found guilty of insider trading and censured in 1984 by a Hong Kong tribunal but continues to be a prominent player. He sits on the board of PLA arms dealer and White House kaffeeklatsch guest Wang Jun's company China International Trust and Investment Corp., another PLA-allied giant.