Thread: Chinese Strength, U.S. Weakness

June 26, 2005
Chinese Strength, U.S. Weakness
If China's attempt to buy an American oil company does nothing else, it should, at long last, force the United States to decide how it plans to protect its economy, husband its resources and grow in a world where it is no longer the only economic powerhouse.

With China on a buying binge for raw materials to feed its ever-expanding economy, it was inevitable that it would eventually go beyond the more modest corporate purchases it has already begun and make a grab for something the United States really cares about. Last week, history's biggest Communist country made the ultimate capitalist play: an $18.5 billion all-cash takeover bid by the state-controlled China National Offshore Oil Corporation for the American oil company Unocal.

The bid landed with the impact of an unexploded missile in Washington, where anti-China sentiment has been running high. From both sides of the aisle, members of Congress sounded the alarm that China was threatening to gobble up world energy resources. There is politics in that: Congress has an election next year and gasoline prices are already high. But whatever happens to the deal, Americans should be glad China reminded them that it is time to examine this country's economic strategy.

China's New Power

The chairman and chief executive of the Chinese company, Fu Chengyu, insisted that American national security was not an issue and called the unsolicited bid friendly. "This transaction is purely a commercial transaction," he told reporters. That's a bit disingenuous considering the money he is using is mostly from the Chinese government and his company owes its first allegiance to Beijing authorities, not world markets. And it raises the interesting question of whether the China National Offshore Oil Corporation can have it both ways: playing by Chinese rules at home while taking advantage of American rules abroad to buy an American business. After all, this is a government-owned company operating in an authoritarian state that limits the ability of foreign companies to take their profits out of China.

"Does anybody honestly believe that the Chinese would ever let an American company take over a Chinese company?" asked Senator Charles Schumer, Democrat of New York. Actually, they have, although on a scale that hardly raised national security issues. Last year, Anheuser-Busch won a takeover battle for the Harbin Brewery Group.

The CNOOC bid is of a much higher order and deserves examination above and beyond the regulatory scrutiny normally given to corporate mergers and acquisitions. But Mr. Schumer's question ignores the way American companies have been buying up stakes in Chinese companies. Bank of America just agreed to pay $2.5 billion for a 9 percent stake in the state-run China Construction Bank. According to The Wall Street Journal, even Chevron, the rival bidder for Unocal, has a stake in a chemical plant in China and is exploring for oil in China.

So in some ways, the opposition to the CNOOC bid is the latest installment in the anti-China fervor already gripping Washington. There are a half-dozen proposals in Congress for across-the-board tariffs against Chinese imports, spurred in part by American manufacturers who complain that China's currency, the yuan, is undervalued, which results in cheaper Chinese goods coming into America and hurting American jobs. This comes on top of moves by the administration - urged on by Congress and a huge trade deficit - to forcibly stem the importing of Chinese textiles this year.

Beating up on the Chinese is fine for sound bites to convince voters that politicians care. But the real problem has less to do with China's current strength than America's current weakness. A far more rational approach to China's economic ascendancy would be to consider what steps the United States should be taking to protect itself and to grow.

America's Energy Policies

The national security of the United States is already at risk because the nation depends on imported oil for nearly 60 percent of its daily needs. That will only grow as demand increases and domestic supplies dwindle. Much of that oil comes from volatile countries in the Persian Gulf region, and the American money flowing there does nothing to encourage either more-balanced economic development or democracy. The rest comes from other parts of the world - often the most unstable parts. In any case, it all contributes to America's monstrous trade deficit and worries about what would happen to the economy if some international crisis disrupted the supply.

The antidotes are simple. Americans need to use far less oil than they do now, which means requiring more fuel-efficient vehicles and finding an alternative to refined oil to power cars and trucks.

Beijing's desire for Unocal is fueled in part by the company's natural gas reserves, most of which are in Asia. The United States cannot claim much of a national security threat from that. North American gas supplies are still fairly robust if you count Canada, and the United States can always fall back on coal to keep the lights on. Coal now provides more than half of the country's electricity anyway.

But none of that should lead to complacency. The United States needs open, accessible markets. And no fuel source is free from the effects of rising demand around the world. Natural gas prices are rising rapidly, and Americans need more-efficient power plants and more-efficient appliances to reduce demand, just as we need to develop more-efficient transportation to reduce dependency on oil.

Trade, Currencies and Debt

Congress's fixation with devaluing China's yuan to help cut American job losses is another example of blaming China for what the United States is not doing. There is no reason to think that revaluing the yuan would lead to American job growth. Indeed, Alan Greenspan said Thursday that he saw no credible evidence that a stronger yuan would increase American manufacturing activity and jobs.

Instead of bashing China, Congress and the Bush administration should be putting money into bolstering retraining programs to help American workers whose jobs migrate overseas. American school systems, American parents and American students are going to have to focus on the fact that young people with mediocre educations are not going to be able to compete with energetic, educated young people in places like China.

The United States also cannot blame the Chinese government for the weak position that its own policies have created. The Bush administration's damaging practice of combining profligate deficit spending with huge tax cuts for the rich feeds the need for Washington to borrow hundreds of billions of dollars a year just to keep things going. China has become a major buyer of the Treasury bonds that finance that debt, and because of that, the American economy depends more and more on the willingness of our Chinese underwriters to buy and hold our Treasuries. A sudden decision by China to invest elsewhere would very likely have a far more devastating effect on the country than a withdrawal of Unocal's resources.

But the solution is not to blame China. It is to institute more sensible economic policies, including revoking the unnecessary gifts that President Bush has given to very wealthy Americans at tax time.

•

Despite Mr. Fu's claim about China's friendly bid, it is a contested one, coming two months after Unocal agreed to be sold to Chevron for $16.4 billion. There are many shots that remain to be fired in the trench warfare of this corporate takeover battle. China may or may not come out on top. But even if China loses this skirmish, it is part of a longer struggle, and those charged with leading America would do well to spend this time strengthening America from within. No matter how big and powerful China becomes, it is no match for the United States when this country is at its best.

This came in from the NY Times and is fairly informative. There is a distinct libertarian streak that runs through it but its true colors which reflect the deeply ingrained tone of socialism of the NY Times was proven by its dismissal of the tax cuts which primarily benefited the affluent back in '01. The monies freed up by the tax break to the affluent went into investments which probably benefited the USA. The affluent are the element which has the capital to increase R and D and the creation of work.

The real issue is if American workers are going to come to the realization that in a free and open economic system such as ours then the worker better be studying hard to keep up with the latest things and be poised to make career changes- brutal though that may be. The alternative is to consent to working for far less and having a fall in life style. The forces of thermodynamics will not tolerate indefinitely a large imbalance between rich and poor without a war or a recession or something else which recreates a balance.

Lets pare this down to bare bones, ok?

First of all, the United States is not anti-China. We never have been and hopefully never will be. We were in fact allies during WWII and have worked together for many decades on many things including opening our market to them so they could prosper from it.

Second of all, China sits with the United States on the UN Security Council on our level.

Third of all, many of us admire China, their culture, their long vast rich history, their civilization that consists of thousands before ours.

Fourth of all, they are a much larger country, which gives them some strengths but more weaknesses.

Fifth of all, they are a communist nation, growing towards Capitalism and Democracy...but are far from the Deomocracy component.

Sixth....UNOCAL is the company whose business interests took us to Afghanistan so they could complete a pipeline. Are we to allow a sale of am American Oil Company whose assets were developed by the Blood of American Soldiers? NO WAY IN HELL are we going to allow a sale of this particular company to the Chinese, because of Afghanistan. UNOCAL now belongs to the people of the United States because lives and billions of dollars of American money were spent securing the very asset that is of interest to the Chinese Government.

This stance is not anti-China, it's just Good Business. American don't take kindly to their loved ones being called to duty and then having their service taken for granted or their great scarifice being made in Vain or for the benefit of a Communist Nation.

Connect the dots.

Pay these talkers like the one who wrote this article the attention a comic book would deserve.

HELL WILL FREEZE before the Chinese Governments owns any oil company in the United States that has assets in any nation where we sent troops. Period.

HELL WILL FREEZE before the Chinese Governments owns any oil company in the United States that has assets in any nation where we sent troops. Period.

Let's hope so, Judy. You never know!!!

Hey Judy, I love ya, but speak for yourself when you say we are not anti-China. We damn well better be, because make no mistake, they are anti-U.S. This country is run by a brutal communist dictatorship and you cannot believe one word that comes out of their mouths. They are liars, they adhere to the philosophy of General Sun Tzu (whose book I just read at the suggestion fo an Alipac member) and they want to try take us over or dominate us without firing a shot. Everything they do, even apparent concessions, are designed to help them achieve world dominance. They are well on their way.

Instead of bashing China, Congress and the Bush administration should be putting money into bolstering retraining programs to help American workers whose jobs migrate overseas. American school systems, American parents and American students are going to have to focus on the fact that young people with mediocre educations are not going to be able to compete with energetic, educated young people in places like China.

Retraining programs? You mean like for computer and technical jobs which have now been outsourced to India? We should definitely do a better job of educating our young, but that is not the problem. The problem is that China is competing using every unfair trick in the book from slave labor to manipulated currency.

We can play footsie with these folks if you like. You can also play footsie with the devil. Either way you are going to get burned.

We better get serious about this economic/military threat.

BTW, Ken Thompson of Bank of America is a fool. If he thinks his $2.5 Billion is going to buy him anything, he is a complete idiot. They will control everything from start to finish and if Bank of America gets in the way, they will nationalize or otherwise force them out of the deal. All he has done is provide some hard currency and credibility for a sworn enemy of the United States.

Keep your eyes open folks. This is going to get more and more serious. Read Dr. Constantine Menges book, China, The Gathering Threat.

Scarecrow!! I agree with you 100% about China being a threat. I view nations the same way I view people. During the cold war with the Soviet Union, I was not anti-Russia. I was afraid of their government. But the history of the Russian People and who the Russian People are can only bring good thoughts to mind about them. In the end our outreach to the Russian People many of whom had fought with our soldiers in WWII had a part to play in President Reagan being able to reach them

We are now entering a cold war with China, whether people realize it or not. It is important in my view to try to distinguish between the people of China and their communist government. Remember the students in Tiannamon Square? Recently they protested the Japanese embassy for wanting to be on the Security Council. Japan brutalized northern China during WWII. The people of China remember. They also remember, the role the United States and the American People played in that War.

Without the USA, they would be a slave territory of Japan.

The people of China remember as did the Russian people.

That's why we should not be anti-China, but rather Pro-America as they would expect us to be. I'm sure they are marvelling at the stupidity of our Government as most countries around the world are. They are asking, "why are the Americans allowing this?"

A Canadian truck driver recently asked me "Why haven't you guys already shut down this combining nations stuff?"

A Morroccan taxi-driver recently asked me "Why do you allow this illegal immigration into Texas? Why haven't you put a stop to it?"

A British Citizen asked us on the forum "What are you guys gonna do about this Global Governance?"

You know the Chinese are asking: "What are the Americans going to do?"

We must do what respectable nations expect us to do. BE AMERICANS.

Protect our Interests. Just say NO.

We know we can't trust the Chinese on trade. We knew that before we began trading. What has the government done? More trade. What has American Business done? More trade. Why would the Chinese clean up their act if IBM is over there selling them their entire computer business? Why would the Chinese clean up their act if UNOCAL is prancing around with them? Why would the Chinese clean up their act if Maytag is wining and dining them? What possible motivation does China have to do anything except pursue more and more when everyone is kissing their ass? Why would the Chinese clean up their act with Bank of America over their begging like a fool to have a little piece of something there? It is disgraceful really the way American Business has behaved with respect to China and China knows that. The Chinese judge you by respecful behavior. American Business has behaved poorly and badly. China knows that, has no respect for them, and sees them for the Prostitutes they've become.

DON'T SPEND, SAVE!!

Don't give them your money. We don't have to dislike China to simply protect our own economy. We can protect our own economy and still be civil with China. In fact, the reason they are walking all over us on trade is because they know they can. Until we say, good bye, see ya around, they will continue their practices.

We win cold wars through the people of the nations who respect us. How can the Chinese People respect us? Everything we know about our businesses and our government right now, they know. How can we expect them to respect this Looney Bin running our Country? They don't. And, you can't blame them for that. The message we must get to China anyway we can is that....this Looney Bin called the White House and a bunch of Globalists Thugs do not represent US and do not speak for the American People.

That is the most important message we must get to the world right now.

They must distinguish between the American People, this Looney Bin in Washington, and this Cartel of Globalists that visit their country. Their vision right now of an American are these well-dressed, perfumed men visiting China living it up on corporate expense accounts....which I can tell you from personal experience is not an impressive group. They are without real knowledge or true character and are pampered, spoiled, arrogant riff-raff that by some flaw in our system made it to position of CEO. In a 1 hour meeting, the Chinese will see right through them...because when you look hard....there's nothing there to begin with. They'd all sell their soul, their technology, their assets, their mother....for a stock bonus constructed to benefit them while destroying their company, displacing their workers, and selling out the United States.

AND when the US Trade Representative shows up to Whine, 30 minutes after the CEO of Bank of America just left sqealing happy with his deal, what do you expect the Chinese to say to the US Trade Reps who are just paid hacks to begin with? They'll say all nice and polite...well, China is a very complex country and these matters are well....very complex, but thanks for coming and we'll look into it!! Oh...excuse me, please, and he takes call and its Wal-Mart wanting another $3 Billion a year in Chinese made goods. So who is really unhappy says the Chinaman to himself? Bank of America is happy. Wal-Mart is happy. UNOCAL...seems happy. MAYTAG....seems happy. So...tell me, Trade Rep....who is unhappy in America? We can't please EVERYBODY in America? The "Big Boys" are happy, aren't they? Oh yeeeah, the Big Boys are very happy with China....in fact, they can't get enough of China!! These are the same Big Boys selling us out, wanting to end our nation,. That isn't China's fault.


DON'T SPEND, SAVE!!

Judy, and everyone, you'd better read this. It is NOT just the government, these people are becoming rabid nationalists along the lines of NAZI Germany. If we listen to the politically correct pansies in this country, who, by the way, are influenced by Chinese propaganda, we are doomed.

This is not shouting "Fire" in a crowded theatre. This is not "sky is falling" rhetoric. This is cold hard fact.

They are stealing our secrets, they are planning for regional and global dominance, and they wish our speedy demise. Their people support this, make no mistake about it. If you think our trade with them will save us, you are badly mistaken. They can sell their crap anywhere, as long as anyone has money. They want dominance militarily and economically.

http://insider.washingtontimes.com/a...6-122138-1088r

Great series of articles about China's military build up.


http://washingtontimes.com/specialrepor ... -1088r.htm


Chinese dragon awakens
By Bill Gertz
THE WASHINGTON TIMES
Published June 26, 2005

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Part II: Thefts of U.S. technology boost China's weaponry

Part one of two

China is building its military forces faster than U.S. intelligence and military analysts expected, prompting fears that Beijing will attack Taiwan in the next two years, according to Pentagon officials.
U.S. defense and intelligence officials say all the signs point in one troubling direction: Beijing then will be forced to go to war with the United States, which has vowed to defend Taiwan against a Chinese attack.
China's military buildup includes an array of new high-technology weapons, such as warships, submarines, missiles and a maneuverable warhead designed to defeat U.S. missile defenses. Recent intelligence reports also show that China has stepped up military exercises involving amphibious assaults, viewed as another sign that it is preparing for an attack on Taiwan.
"There's a growing consensus that at some point in the mid-to-late '90s, there was a fundamental shift in the sophistication, breadth and re-sorting of Chinese defense planning," said Richard Lawless, a senior China-policy maker in the Pentagon. "And what we're seeing now is a manifestation of that change in the number of new systems that are being deployed, the sophistication of those systems and the interoperability of the systems."
China's economy has been growing at a rate of at least 10 percent for each of the past 10 years, providing the country's military with the needed funds for modernization.
The combination of a vibrant centralized economy, growing military and increasingly fervent nationalism has transformed China into what many defense officials view as a fascist state.
"We may be seeing in China the first true fascist society on the model of Nazi Germany, where you have this incredible resource base in a commercial economy with strong nationalism, which the military was able to reach into and ramp up incredible production," a senior defense official said.
For Pentagon officials, alarm bells have been going off for the past two years as China's military began rapidly building and buying new troop- and weapon-carrying ships and submarines.
The release of an official Chinese government report in December called the situation on the Taiwan Strait "grim" and said the country's military could "crush" Taiwan.
Earlier this year, Beijing passed an anti-secession law, a unilateral measure that upset the fragile political status quo across the Taiwan Strait. The law gives Chinese leaders a legal basis they previously did not have to conduct a military attack on Taiwan, U.S. officials said.
The war fears come despite the fact that China is hosting the Olympic Games in 2008 and, therefore, some officials say, would be reluctant to invoke the international condemnation that a military attack on Taiwan would cause.
Army of the future
In the past, some defense specialists insisted a Chinese attack on Taiwan would be a "million-man swim" across the Taiwan Strait because of the country's lack of troop-carrying ships.
"We left the million-man swim behind in about 1998, 1999," the senior Pentagon official said. "And in fact, what people are saying now, whether or not that construct was ever useful, is that it's a moot point, because in just amphibious lift alone, the Chinese are doubling or even quadrupling their capability on an annual basis."
Asked about a possible Chinese attack on Taiwan, the official put it bluntly: "In the '07-'08 time frame, a capability will be there that a year ago we would have said was very, very unlikely. We now assess that as being very likely to be there."
Air Force Gen. Paul V. Hester, head of the Pacific Air Forces, said the U.S. military has been watching China's military buildup but has found it difficult to penetrate Beijing's "veil" of secrecy over it.
While military modernization itself is not a major worry, "what does provide you a pause for interest and concern is the amount of modernization, the kind of modernization and the size of the modernization," he said during a recent breakfast meeting with reporters.
China is building capabilities such as aerial refueling and airborne warning and control aircraft that can be used for regional defense and long-range power projection, Gen. Hester said.
It also is developing a maneuverable re-entry vehicle, or MARV, for its nuclear warheads. The weapon is designed to counter U.S. strategic-missile defenses, according to officials who spoke on the condition of anonymity. The warhead would be used on China's new DF-31 long-range missiles and its new submarine missile, the JL-2.
Work being done on China's weapons and reconnaissance systems will give its military the capability to reach 1,000 miles into the sea, "which gives them the visibility on the movement of not only our airplanes in the air, but also our forces at sea," Gen. Hester said.
Beijing also has built a new tank for its large armed forces. It is known as the Type 99 and appears similar in design to Germany's Leopard 2 main battle tank. The tank is outfitted with new artillery, anti-aircraft and machine guns, advanced fire-control systems and improved engines.
The country's air power is growing through the purchase of new fighters from Russia, such as Su-30 fighter-bombers, as well as the development of its own fighter jets, such as the J-10.
Gen. Hester compared Chinese warplanes with those of the former Soviet Union, which were less capable than their U.S. counterparts, but still very deadly.
"They have great equipment. The fighters are very technologically advanced, and what we know about them gives us pause for concern against ours," he said.
Missiles also are a worry.
"It is their surface-to-air missiles, their [advanced] SAMs and their surface-to-surface missiles, and the precision, more importantly, of those surface-to-surface missiles that provide, obviously, the ability to pinpoint targets that we might have out in the region, or our friends and allies might have," Gen. Hester said.
The advances give the Chinese military "the ability ... to reach out and touch parts of the United States -- Guam, Hawaii and the mainland of the United States," he said.
To better deal with possible future conflicts in Asia, the Pentagon is modernizing U.S. military facilities on the Western Pacific island of Guam and planning to move more forces there.
The Air Force will regularly rotate Air Expeditionary Force units to Guam and also will station the new long-range unmanned aerial vehicle known as Global Hawk on the island, he said.
It also has stationed B-2 stealth bombers on Guam temporarily and is expected to deploy B-1 bombers there, in addition to the B-52s now deployed there, Gen. Hester said.

Projecting power
China's rulers have adopted what is known as the "two-island chain" strategy of extending control over large areas of the Pacific, covering inner and outer chains of islands stretching from Japan to Indonesia.
"Clearly, they are still influenced by this first and second island chain," the intelligence official said.
The official said China's buildup goes beyond what would be needed to fight a war against Taiwan.
The conclusion of this official is that China wants a "blue-water" navy capable of projecting power far beyond the two island chains.
"If you look at the technical capabilities of the weapons platforms that they're fielding, the sea-keeping capabilities, the size, sensors and weapons fit, this capability transcends the baseline that is required to deal with a Taiwan situation militarily," the intelligence official said.
"So they are positioned then, if [Taiwan is] resolved one way or the other, to really become a regional military power as well."
The dispatch of a Han-class submarine late last year to waters near Guam, Taiwan and Japan was an indication of the Chinese military's drive to expand its oceangoing capabilities, the officials said. The submarine surfaced in Japanese waters, triggering an emergency deployment of Japan's naval forces.
Beijing later issued an apology for the incursion, but the political damage was done. Within months, Japan began adopting a tougher political posture toward China in its defense policies and public statements. A recent Japanese government defense report called China a strategic national security concern. It was the first time China was named specifically in a Japanese defense report.

Energy supply a factor
For China, Taiwan is not the only issue behind the buildup of military forces. Beijing also is facing a major energy shortage that, according to one Pentagon study, could lead it to use military force to seize territory with oil and gas resources.
The report produced for the Office of Net Assessment, which conducts assessments of future threats, was made public in January and warned that China's need for oil, gas and other energy resources is driving the country toward becoming an expansionist power.
China "is looking not only to build a blue-water navy to control the sea lanes [from the Middle East], but also to develop undersea mines and missile capabilities to deter the potential disruption of its energy supplies from potential threats, including the U.S. Navy, especially in the case of a conflict with Taiwan," the report said.
The report said China believes the United States already controls the sea routes from the oil-rich Persian Gulf through the Malacca Strait. Chinese President Hu Jintao has called this strategic vulnerability to disrupted energy supplies Beijing's "Malacca Dilemma."
To prevent any disruption, China has adopted a "string of pearls" strategy that calls for both offensive and defensive measures stretching along the oil-shipment sea lanes from China's coast to the Middle East.
The "pearls" include the Chinese-financed seaport being built at Gwadar, on the coast of western Pakistan, and commercial and military efforts to establish bases or diplomatic ties in Bangladesh, Burma, Cambodia, Thailand and disputed islands in the South China Sea.
The report stated that China's ability to use these pearls for a "credible" military action is not certain.
Pentagon intelligence officials, however, say the rapid Chinese naval buildup includes the capability to project power to these sea lanes in the future.
"They are not doing a lot of surface patrols or any other kind of security evolutions that far afield," the intelligence official said. "There's no evidence of [Chinese military basing there] yet, but we do need to keep an eye toward that expansion."
The report also highlighted the vulnerability of China's oil and gas infrastructure to a crippling U.S. attack.
"The U.S. military could severely cripple Chinese resistance [during a conflict over Taiwan] by blocking its energy supply, whereas the [People's Liberation Army navy] poses little threat to United States' energy security," it said.
China views the United States as "a potential threat because of its military superiority, its willingness to disrupt China's energy imports, its perceived encirclement of China and its disposition toward manipulating international politics," the report said.

'Mercantilist measures'
The report stated that China will resort "to extreme, offensive and mercantilist measures when other strategies fail, to mitigate its vulnerabilities, such as seizing control of energy resources in neighboring states."
U.S. officials have said two likely targets for China are the Russian Far East, which has vast oil and gas deposits, and Southeast Asia, which also has oil and gas resources.
Michael Pillsbury, a former Pentagon official and specialist on China's military, said the internal U.S. government debate on the issue and excessive Chinese secrecy about its military buildup "has cost us 10 years to figure out what to do"
"Everybody is starting to acknowledge the hard facts," Mr. Pillsbury said. "The China military buildup has been accelerating since 1999. As the buildup has gotten worse, China is trying hard to mask it."
Richard Fisher, vice president of the International Assessment and Strategy Center, said that in 10 years, the Chinese army has shifted from a defensive force to an advanced military soon capable of operations ranging from space warfare to global non-nuclear cruise-missile strikes.
"Let's all wake up. The post-Cold War peace is over," Mr. Fisher said. "We are now in an arms race with a new superpower whose goal is to contain and overtake the United States."




http://washingtontimes.com/specialrepor ... -6747r.htm


Thefts of U.S. technology boost China's weaponry
By Bill Gertz
THE WASHINGTON TIMES
Published June 27, 2005

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Part I: Chinese dragon awakens

Second of two parts.

China is stepping up its overt and covert efforts to gather intelligence and technology in the United States, and the activities have boosted Beijing's plans to rapidly produce advanced-weapons systems.
"I think you see it where something that would normally take 10 years to develop takes them two or three," said David Szady, chief of FBI counterintelligence operations.
He said the Chinese are prolific collectors of secrets and military-related information.
"What we're finding is that [the spying is] much more focused in certain areas than we ever thought, such as command and control and things of that sort," Mr. Szady said.
"In the military area, the rapid development of their 'blue-water' navy -- like the Aegis weapons systems -- in no small part is probably due to some of the research and development they were able to get from the United States," he said.
The danger of Chinese technology acquisition is that if the United States were called on to fight a war with China over the Republic of China (Taiwan), U.S. forces could find themselves battling a U.S.-equipped enemy.
"I would hate for my grandson to be killed with U.S. technology" in a war over Taiwan, senior FBI counterintelligence official Tim Bereznay told a conference earlier this year.
The Chinese intelligence services use a variety of methods to spy, including traditional intelligence operations targeting U.S. government agencies and defense contractors.
Additionally, the Chinese use hundreds of thousands of Chinese visitors, students and other nonprofessional spies to gather valuable data, most of it considered "open source," or unclassified information.
"What keeps us up late at night is the asymmetrical, unofficial presence," Mr. Szady said. "The official presence, too. I don't want to minimize that at all in what they are doing."
China's spies use as many as 3,200 front companies -- many run by groups linked to the Chinese military -- that are set up to covertly obtain information, equipment and technology, U.S. officials say.
Recent examples include front businesses in Milwaukee; Trenton, N.J.; and Palo Alto, Calif., Mr. Szady said.
In other cases, China has dispatched students, short-term visitors, businesspeople and scientific delegations with the objective of stealing technology and other secrets.
The Chinese "are very good at being where the information is," Mr. Szady said.
"If you build a submarine, no one is going to steal a submarine. But what they are looking for are the systems or materials or the designs or the batteries or the air conditioning or the things that make that thing tick," he said. "That's what they are very good at collecting, going after both the private sector, the industrial complexes, as well as the colleges and universities in collecting scientific developments that they need."
One recent case involved two Chinese students at the University of Pennsylvania who were found to be gathering nuclear submarine secrets and passing them to their father in China, a senior military officer involved in that country's submarine program.
Bit by bit
To counter such incidents, the FBI has been beefing up its counterintelligence operations in the past three years and has special sections in all 56 field offices across the country for counterspying.
But the problem of Chinese spying is daunting.
"It's pervasive," Mr. Szady said. "It's a massive presence, 150,000 students, 300,000 delegations in the New York area. That's not counting the rest of the United States, probably 700,000 visitors a year. They're very good at exchanges and business deals, and they're persistent."
Chinese intelligence and business spies will go after a certain technology, and they eventually get what they want, even after being thwarted, he said.
Paul D. Moore, a former FBI intelligence specialist on China, said the Chinese use a variety of methods to get small pieces of information through numerous collectors, mostly from open, public sources.
The three main Chinese government units that run intelligence operations are the Ministry of State Security, the military intelligence department of the People's Liberation Army and a small group known as the Liaison Office of the General Political Department of the Chinese army, said Mr. Moore, now with the private Centre for Counterintelligence Studies.
China gleans most of its important information not from spies but from unwitting American visitors to China -- from both the U.S. government and the private sector -- who are "serially indiscreet" in disclosing information sought by Beijing, Mr. Moore said in a recent speech.
In the past several years, U.S. nuclear laboratory scientists were fooled into providing Chinese scientists with important weapons information during discussions in China through a process of information elicitation -- asking questions and seeking help with physics "problems" that the Chinese are trying to solve, he said.
"The model that China has for its intelligence, in general, is to collect a small amount of information from a large amount of people," Mr. Moore said during a conference of security specialists held by the National Security Institute, a Massachusetts-based consulting firm.

In the learning phase
Mr. Szady acknowledges that the FBI is still "figuring out" the methods used by the Chinese to acquire intelligence and technology from the United States.
Since 1985, there have been only six major intelligence defectors from China's spy services, and information about Chinese activities and methods is limited, U.S. officials said.
Recent Chinese spy cases were mired in controversy.
The case against Katrina Leung, a Los Angeles-based FBI informant who the FBI thinks was a spy for Beijing, ended in the dismissal of charges of taking classified documents from her FBI handler. The Justice Department is appealing the case.
The case against Los Alamos National Laboratory scientist Wen Ho Lee, who was suspected of supplying classified nuclear-weapons data to China, ended with Mr. Lee pleading guilty to only one count among the 59 filed.
The FBI has been unable to find out who in the U.S. government supplied China with secrets on every deployed nuclear weapon in the U.S. arsenal, including the W-88, the small warhead used on U.S. submarine-launched nuclear missiles.
"I think the problem is huge, and it's something that I think we're just getting our arms around," Mr. Szady said of Chinese spying. "It's been there, and what we're doing is more or less discovering it or figuring it out at this point."
Mr. Bereznay said recently that Chinese intelligence activities are a major worry. FBI counterintelligence against the Chinese "is our main priority," he said.
In some cases, so-called political correctness can interfere with FBI counterspying. For example, Chinese-American scientists at U.S. weapons laboratories have accused the FBI of racial profiling.
But Mr. Szady said that is not the case.
China uses ethnic Chinese-Americans as a base from which to recruit agents, he said.
"They don't consider anyone to be American-Chinese," Mr. Szady said. "They're all considered overseas Chinese."
So the answer he gives to those who accuse the FBI of racial profiling is: "We're not profiling you. The Chinese are, and they're very good at doing that."

Pushing an agenda
China's government also uses influence operations designed to advance pro-Chinese policies in the United States and to prevent the U.S. government from taking tough action or adopting policies against Beijing's interests, FBI officials said.
Rudy Guerin, a senior FBI counterintelligence official in charge of China affairs, said the Chinese aggressively exploit their connections to U.S. corporations doing business in China.
"They go straight to the companies themselves," he said.
Many U.S. firms doing business in China, including such giants as Coca-Cola, Boeing and General Motors, use their lobbyists on behalf of Beijing.
"We see the Chinese going to these companies to ask them to lobby on their behalf on certain issues," Mr. Guerin said, "whether it's most-favored-nation trade status, [World Health Organization], Falun Gong or other matters."
The Chinese government also appeals directly to members of Congress and congressional staff.
U.S. officials revealed that China's embassy in Washington has expanded a special section in charge of running influence operations, primarily targeting Congress.
The operation, which includes 26 political officers, is led by Su Ge, a Chinese government official.
The office frequently sends out e-mail to selected members or staff on Capitol Hill, agitating for or against several issues, often related to Taiwan affairs.
Nu Qingbao, one of Mr. Su's deputies, has sent several e-mails to select members and staff warning Congress not to support Taiwan.
The e-mails have angered Republicans who view the influence operations as communist meddling.
"The Chinese, like every other intelligence agency or any other government, are very much engaged in trying to influence, both covertly and overtly," Mr. Szady said.

Taking technology
The real danger to the United States is the loss of the high-technology edge, which can impair U.S. competitiveness but more importantly can boost China's military.
Immigration and Customs Enforcement (ICE), a part of the Department of Homeland Security, is concerned because the number of high-profile cases of illegal Chinese technology acquisition is growing.
"We see a lot of activity involving China, and I think it would be fair to say the trend is toward an increase," said Robert A. Schoch, deputy assistant director in ICE's national security investigations division.
Mr. Schoch said that one recent case of a South Korean businessman who sought to sell advanced night-vision equipment to China highlights the problem.
"We have an awesome responsibility to protect this sensitive technology," he said. "That gives the military such an advantage."
ICE agents are trying hard to stop illegal exports to China and several other states, including Iran and Syria, not just by halting individual exports but by shutting down networks of illegal exporters, Mr. Schoch said.
Another concern is that China is a known arms proliferator, so weapons and related technology that are smuggled there can be sent to other states of concern.
"Yes, some of this stuff may go to China, but then it could be diverted to other countries," Mr. Schoch said. "And that is the secondary proliferation. Who knows where it may end up."
As with China's military buildup, China's drive for advanced technology with military applications has been underestimated by the U.S. intelligence community.
A report prepared for the congressional U.S.-China Economic and Security Review Commission found predictions that China was unable to advance technologically were false.
In fact, the report by former Pentagon official Michael Pillsbury highlights 16 key advances in Chinese technology -- all with military implications -- in the past six months alone.
The failure to gauge China's development is part of the bias within the U.S. government that calls for playing down the threat from the growing power of China, both militarily and technologically, Mr. Pillsbury stated.
"Predictions a decade ago of slow Chinese [science and technology] progress have now proved to be false," the report stated.
Unlike the United States, China does not distinguish between civilian and military development. The same factories in China that make refrigerators also are used to make long-range ballistic missiles.
At a time when U.S. counterintelligence agencies are facing an array of foreign spies, the Chinese are considered the most effective at stealing secrets and know-how.
"I think the Chinese have figured it out, as far as being able to collect and advance their political, economic and military interests by theft or whatever you want to call it," Mr. Szady said. "They are way ahead of what the Russians have ever done."

http://washingtontimes.com/specialrepor ... -2991r.htm

Chinese technology theft on the rise, U.S. says
By Bill Gertz
THE WASHINGTON TIMES
Published June 27, 2005

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U.S. government investigators say the number of cases involving China and its middlemen who have illegally obtained sensitive or classified U.S. weapons technology is growing.
In the past few years, Chinese agents illegally purchased or were caught trying to steal night-vision technology, restricted electronic components, embargoed components for precision-guided missiles, radar and electronic warfare, and communications systems, according to Immigration and Customs Enforcement (ICE) officials.
China also sought to purchase encryption devices that are embargoed for export and computer software used in missile development, ICE officials said.
In one recent case, China tried to purchase parts for F-4 and F-5 jets and Hawk missiles from U.S. suppliers that were intended for reshipment to Iran.
Officials said one of the most damaging illegal technology exports to China took place in the late 1990s.
In that case, China secretly obtained technology related to the Aegis battle management system, used in the most modern U.S. warships.
A Chinese front company won a contract from the system manufacturer and then stole details about Aegis, according to FBI counterintelligence officials.
By 2004, China had deployed its first two Luyang II guided-missile destroyers, both equipped with the Chinese version of the Aegis system.
The Aegis system is used for tracking and shooting at enemy aircraft and also is the heart of the Navy's new sea-based missile defense.
Earlier, in 1997, two American satellite companies, Space Systems/Loral and Hughes Space and Communications Co., violated U.S. export laws when they helped China fix an electrical glitch in the Long March space launch booster, which had direct applications for Chinese long-range missiles. Those missiles are aimed at U.S. cities.
In 2002, Loral agreed to pay a $20 million fine for passing the missile data, and in 2003, Boeing Satellite Systems Inc., which purchased Hughes, agreed to pay $32 million in fines.
Pentagon and ICE officials say it is difficult to determine how much technology China has obtained because, in recent years, Beijing has begun using third-party nationals to obtain embargoed goods.
"We know of some cases that lead us to say affirmatively that we see an increase," one ICE official said. "But in the larger picture, there [are] many other cases that are associated with China."
ICE agents have approached about 6,000 U.S. companies that are known targets of illicit Chinese technology and equipment theft. The program is designed to win the cooperation of company managers and their employees in thwarting foreign-technology spies.
Some of the U.S. companies are more concerned with making money than protecting America's national security, the officials said.
"What our investigations have seen is, yes, there are things going to China," one official said. "But who do we see involved in the acquisition of these things? We see businessmen, greedy businessmen. Not necessarily agents of the Chinese government."
One example is the case of Gao Zhan, a well-known U.S. human rights activist and former American University professor, the officials said. Gao pleaded guilty in 2003 to one count of illegally exporting technology to China and tax fraud. She spent seven months in prison and now faces deportation to China, where she previously had been sentenced to 10 years in prison for spying.
"Here's a woman who gets arrested in 2001 by the Chinese for allegedly spying for Taiwan," one ICE official said. "She gets off the hook over there, and she comes over here. We end up arresting her for exports to China, over half a million dollars in various missile technology and airborne battle management technology. This is a key example of a greedy businesswoman."
Officials said the recent illegal export cases involving China help show the areas in which its military is working to modernize.
"We know what China is looking for. They're looking for aircraft engines, they're looking for night-vision equipment, they're looking for missile-system components, they're looking for electronic warfare and communications," one ICE official said.





http://washingtontimes.com/national/200 ... _page2.htm


Beijing devoted to weakening 'enemy' U.S., defector says
By Bill Gertz
THE WASHINGTON TIMES
Published June 27, 2005

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China's communist leaders view the United States as their main enemy and are working in Asia and around the world to undermine U.S. alliances, said a former Chinese diplomat.
Chen Yonglin, until recently a senior political officer at the Chinese Consulate in Sydney, Australia, said in an interview that China also is engaged in large-scale intelligence-gathering activities in the United States that, in the past, netted large amounts of confidential U.S. government documents from agents.
"The United States is considered by the Chinese Communist Party as the largest enemy, the major strategic rival," Mr. Chen told The Washington Times in a telephone interview from Australia, where he is in hiding after breaking with Beijing in May.
All Chinese government officials are ordered to gather information about the United States, "no matter how trivial," he said. "The United States occupies a unique place in China's diplomacy," Mr. Chen said.
A pro-democracy activist who took part in the 1989 demonstrations in Beijing's Tiananmen Square, Mr. Chen, 37, spent 10 years as a Foreign Ministry official. He said he defected and sought political asylum in Australia to highlight repression of the Chinese people by their government and the ruling Communist Party, as well as the repression of dissidents such as democracy activists and the Falun Gong spiritual group.
Most Chinese government activity in the United States involves information-gathering carried out by military-related intelligence officers or civilians linked to the Ministry of State Security, Mr. Chen said.
"I know that China once got a heavy load of confidential documents from the United States and sent it back to China through the Cosco ship," Mr. Chen said, referring to the state-owned China Ocean Shipping Co.
The information was "very useful" to China's military and related to "aircraft technology," he said.
The Chinese also send political police abroad to monitor overseas Chinese and others in North America who Beijing considers opponents of the regime, he said.
China's government has targeted Australia as part of its "money diplomacy" and is working hard to persuade Australia not to send troops to help the United States in any conflict over the Republic of China (Taiwan), Mr. Chen said.
China has sought to influence Australia's government through high-level political visits and favorable trade and by offering contracts on energy-related products. The goal is to force Australia to become part of a China-dominated "grand neighboring region" in Asia and to "force a wedge between the U.S. and Australia," he said.
The U.S. government has a close intelligence relationship with Australia and has been working to build stronger military ties, as the Pentagon shifts its global strategy toward Asia with the planned deployment of more arms in the western Pacific region to counter a Chinese military buildup.
Mr. Chen said he is "frustrated" that the Australian government in May turned down his request for political asylum, a move he thinks was linked to Australian government fears of upsetting Beijing.
Mr. Chen also said he fears that Chinese agents could kidnap him, as they have done with other exile dissidents. He said he prefers to stay in Australia with his wife and child, but also could seek asylum in the United States if Australia threatens to send him back to China, which he fears would endanger his life.
Two other Chinese government officials also defected recently in Australia and have revealed Chinese government spying activities.
Mr. Chen also provided new insights into the closed world of China's ruling power structure and political tensions between President Hu Jintao and former President Jiang Zemin.
Mr. Hu is not fully in control of the government and military, and Mr. Jiang continues to wield power behind the scenes through allies in the armed forces, he said.
"Hu is still in the shadow of Jiang and will be until Jiang dies," Mr. Chen said.
The Chinese leader, however, launched his own version of Chinese ideology at the end of last year that calls for education in advancing the Communist Party. Asked whether Mr. Hu will bring democratic reform to China, Mr. Chen said the Chinese leader is the beneficiary of the dictatorship and, therefore, is unlikely to make changes.
"For the past 16 years, a lot of people have been looking to see if the Communist Party can change from the top down to the low levels, but nothing changes," Mr. Chen said.
On China's military buildup, Mr. Chen said Beijing is following the strategy of former leader Deng Xiaoping, who urged China to "bide our time, build our capabilities" -- military as well as economic and political. "What that means is that when the day is mature, the Chinese government will strike back," he said.
Mr. Chen said the danger of a war over Taiwan is growing.
"That is possible as Chinese society is getting more unstable," he said. "Once any serious civil disobedience occurs, the government may call for a war across the Taiwan Strait to gather [political] strength from people."