· Classified information on seven U.S. thermonuclear warheads, including every currently deployed thermonuclear warhead in the U.S. ballistic missile arsenal. 

· Classified design information for an enhanced radiation weapon (commonly known as the"neutron bomb"), which neither the United States, nor any other nation, has yet deployed.

· Electromagnetic weapons research technology that could be used to attack both U.S. and British satellites and submarines with space-based weapons.

· Weapons-guidance systems currently used by our conventional forces, including the U.S. Army Tactical Missile System (ATACMS), the U.S. Navy Stand-off Land Attack Missile,  the U.S. Navy F-14, the U.S. Air Force F-15, F-16, and F-117 fighter jets.

The information was gained through outright espionage, review of unclassified publications, and extensive interactions with scientists from the Department of Energy's national weapons laboratories.
The stolen U.S. nuclear secrets give the PRC design information on thermonuclear weapons on a par with our own. Currently deployed PRC ICBMs targeted on U.S. cities are based on 1950s-era nuclear weapons designs. With the stolen U.S. technology, the PRC has leaped, in a handful of years, from 1950s-era strategic nuclear capabilities to the more modern thermonuclear weapons designs. These modern thermonuclear weapons took the United States decades of effort, hundreds of millions of dollars, and numerous nuclear tests to achieve.
The United States did not become fully aware of the magnitude of the counterintelligence problem at the Department of Energy national weapons laboratories until 1995. 

National Security Advisor Sandy Berger to resign. 

"Sandy Berger has failed in his duty to the administration and the American people and I think he ought to accept his responsibility," Armey said.

 Armey went on to review the following time line detailing Berger's lack of diligence in protecting U.S. national security:

· April 1996 - Berger briefed by DOE that China had stolen missile warhead technology.  Nothing happened.  In fact, Wen Ho Lee remained on the job at Los Alamos until March of this year.  Whether or not Berger told the President at that time is not clear, even from Berger's own contradictory statements.

· July 1997 - Berger was again briefed with more information on Chinese theft of still more U.S. secrets, including nuclear codes.  Berger now says he briefed the President after this briefing in 1997. 

· October 1997 - Chinese President Jiang Zemin visited Washington.

· February 1998 - If Mr. Berger's memory is now correct, the President was aware at this time that China had stolen America's most sensitive nuclear secret, when he gave an additional waiver for the export of missile technology to China.

· March 1999 - At a press conference, President Clinton stated, "To the best of my knowledge, no one has said anything to me about any espionage, which occurred by the Chinese against the labs, during my presidency."

Lax Commercial Policy also contributed to China's nuclear capabilities:

Berger was a strong advocate in the Administration for moving export licensing decisions from the State department to the Commerce department - where clearly commercial interests would take a higher priority.

Before 1996, no "High Performance Computers" were sold to Communist China.  That policy was changed in 1996, and since that time 600 computers were sent there, with the capacity to help Communist China develop the nuclear secrets they stole.
--30--
 
 

Without the nuclear secrets stolen from the United States, it would have been virtually impossible for the PRC to fabricate and test successfully small nuclear warheads prior to its 1996 pledge to adhere to the Comprehensive Test Ban Treaty.
 
 
 
 
 
 
 

The United States retains an overwhelming qualitative and quantitative advantage in deployed strategic nuclear forces. Nonetheless, in a crisis in which the United States confronts the PRC's conventional and nuclear forces at the regional level, a modernized PRC strategic nuclear ballistic missile force
would pose a credible direct threat against the United States.

Neither the United States nor the PRC has a national ballistic missile defense system.

In the near term, a PRC deployment of mobile thermonuclear
weapons, or neutron bombs, based on stolen U.S. design
information, could have a significant effect on the regional balance of power, particularly with respect to Taiwan. PRC deployments of advanced nuclear weapons based on stolen U.S. design information would pose greater risks to U.S. troops and interests in Asia and the Pacific.

In addition, the PRC's theft of information on our most modern nuclear weapons designs enables the PRC to deploy modern forces much sooner than would otherwise be possible.

At the beginning of the l990s, the PRC had only one or two silo-based ICBMs capable of attacking the United States. Since then, the PRC has deployed up to two dozen additional silo-based ICBMs capable of attacking the United States; has upgraded its silo-based missiles; and has continued development of three mobile ICBM systems and associated modern thermonuclear warheads.

If the PRC is successful in developing modern nuclear forces, as seems likely, and chooses to deploy them in sufficient numbers, then the long-term balance of nuclear forces with the United States could be adversely affected.
 

Even though the United States discovered in 1995 that the PRC had
stolen design information on the W-88 Trident D-5 warhead and
technical information on a number of other U.S. thermonuclear warheads, the White House has informed the Select Committee, in response to specific interrogatories propounded by the Committee, that the President was not briefed about the counterintelligence failures until early 1998.
 

A counterintelligence and security plan adopted by the Department of
Energy in late 1998 in response to Presidential Decision Directive 61 is a
step toward establishing sound counterintelligence practices. However,
according to the head of these efforts, significant time will be required to
implement improved security procedures pursuant to the directive.
Security at the national weapons laboratories will not be satisfactory until
at least sometime in the year 2000.

See the chapters PRC Acquisition of U.S. Technology, PRC Theft of
U.S. Thermonuclear Warhead Design Information, and PRC Missile and
Space Forces for more detailed discussions of the Select Committee's
investigation of these matters.
 
 
 
 

A. The PRC has stolen U.S. missile technology and exploited itfor
the PRC's own ballistic missile applications. 

The PRC has proliferated such military technology to a number of
other countries, including regimes hostile to the United States.
 

The Select Committee has found that the PRC has stolen a specific U.S.
guidance technology used on current and past generations of U.S.
weapons systems. The stolen guidance technology is currently used on a
variety of U.S. missiles and military aircraft, including:

The stolen guidance technology has direct applicability to the PRC's
intercontinental, medium- and short-range ballistic missiles, and its
spacelift rockets.

The theft of U.S. ballistic missile-related technology is of great value to
the PRC. In addition to ICBMs and military spacelift rockets, such
technology is directly applicable to the medium- and short-range PLA
missiles, such as the CSS-6 (also known as the M-9), the CSS-X-7
(also known as the M-11), and the CSS-8 that have been developed for,
among other purposes, striking Taiwan.

CSS-6 missiles were, for example, fired in the Taiwan Strait and over
Taiwan's main ports in the 1996 crisis and confrontation with the United
States.

The Select Committee has uncovered instances of the PRC's use of this
specific stolen U.S. technology that:

     · Enhance the PRC's military capabilities

     · Jeopardize U.S. national security interests

     · Pose a direct threat to the United States, our friends
     and allies, or our forces

The Clinton administration has determined that particular uses by the
PRC of this stolen U.S. technology cannot be disclosed publicly without
affecting national security.

The PRC has proliferated weapons systems and components to other
countries including Iran, Pakistan, Libya, Syria, and North Korea.
 
 
 

In 1997, the PRC stole classified U.S. developmental research
concerning very sensitive detection techniques that, if successfully
concluded, could be used to threaten U.S. submarines.
 
 

C. Currently-deployed PRC ICBMs targeted on the United States
are 
based in significant part on U.S. technologies illegally obtained by
the PRC in the 1950s.

This illustrates the potential long-term effects of technology loss.
 

Even in today's rapidly changing technological environment, technology
losses can have long-term adverse effects. Currently-deployed PRC
ICBMs targeted on the United States are based on U.S. and Russian
technologies from the 1950s and 1960s.

In the 1950s, a U.S. military officer and associated members of the
design team for a U.S. ICBM program (the "Titan" missile program)
emigrated to the PRC and illegally gave U.S. missile and missile-related
technology to the PRC.

This information formed the basis for the up to two dozen PRC CSS-4
ICBMs that are currently targeted on the United States.

All but two of these missiles have been deployed by the PRC for the first
time in this decade.

D. In the aftermath of three failed satellite launches since
1992,U.S. satellite manufacturers transferred missile design
information and know-how to the PRC without obtaining the
legally required licenses.

This information has improved the reliability of PRC rockets
useful for civilian and military purposes.

The illegally transmitted information is useful for the design and
improved reliability of future PRC ballistic missiles, as well.
 

U.S. satellite manufacturers analyzed the causes of three PRC launch
failures and recommended improvements to the reliability of the PRC
rockets. These launch failure reviews were conducted without required
Department of State export licenses, and communicated technical
information to the PRC in violation of the International Traffic in Arms
Regulations.

The Select Committee has concluded that the PRC implemented a
number of the recommended improvements to rocket guidance and to
the fairing (or nose cone), which protects a satellite during launch. These
improvements increased the reliability of the PRC Long March rockets.
It is almost certain that the U.S. satellite manufacturers' recommendations
led to improvements in the PRC's rockets and that the improvements
would not have been considered or implemented so soon without the
U.S. assistance.

It is possible or even likely that, absent the U.S. satellite manufacturers'
interventions on the problems associated with the defective fairing on the
PRC's Long March 2E rocket and the defective guidance system on the
PRC's Long March 3B rocket, one or more other PRC launches would
have failed.

The PRC Long March rockets improved by the U.S. technology
assistance are useful for both commercial and military purposes.
The military uses include launching:

     · Military communications and reconnaissance
     satellites

     · Space-based sensors

     · Space-based weapons, if successfully developed

     · Satellites for modern command and control and
     sophisticated intelligence collection

The Select Committee judges that the PRC military has important needs
in these areas, including notably space-based communications and
reconnaissance capabilities.

In addition, design and testing know-how and procedures communicated
during the launch failure reviews could be applied to the reliability of
missiles or rockets generally. U.S. participants' comments during the
failure investigations related to such matters as:

     · Missile design

     · Design analysis

     · Testing procedures

     · The application of technical know-how to particular
     failure analyses

To the extent any valuable information was transferred to the PRC's
space program, such information would likely find its way into the PRC's
ballistic missile program. The ballistic missile and space launch programs
have long been intertwined and subordinate to the same ministry and
state-owned corporation in the PRC.

For example, the PRC's Long March 2 rockets and their derivatives
(including the Long March 2E, on which Hughes advised the PRC) were
derived directly from the PRC's silo-based CSS-4 intercontinental
ballistic missiles that are currently targeted on the United States.

The various institutes and academies in the PRC involved in ballistic
missile and rocket design also share design and production
responsibilities. Many of the PRC personnel in these organizations have
responsibilities for both commercial rocket and military missile programs.
Attendees at important failure review meetings included PRC personnel
from such organizations.

In fact, information passed during each of the failure analyses has
the potential to benefit the PRC's ballistic missile program. The
independent experts retained by the Select Committee judge that
information valuable to the PRC's ballistic missile and space programs
was transferred to the PRC in the failure investigations.

The rocket guidance system on which Loral and Hughes provided advice
in 1996 is judged by the Select Committee to be among the systems
capable of being adapted for use as the guidance system for future PRC
road-mobile intercontinental ballistic missiles, although if a better system
is available, it is more likely to be chosen for that mission.

The Select Committee judges that information on rocket fairings (that is,
nose cones) provided to the PRC by Hughes may assist the design and
improved reliability of future PRC MIRVed missiles, if the PRC decides
to develop them, and of future submarine-launched ballistic missiles.

When Loral and Hughes assisted the PRC, they could not know whether
the PRC would in fact use such information in their military programs.
 
 

i. In 1993 and 1995, Hughes showed the PRC how to improve the
design and reliability of PRC rockets.

Hughes' advice may also be useful for design and improved
reliability of future PRC ballistic missiles.

Hughes deliberately acted without seeking to obtain the legally
required licenses.
 

In 1993 and 1995, Hughes showed the PRC how to improve the design
and reliability of PRC Long March rockets with important military
applications. The information provided by Hughes also may be useful for
improving the reliability of future PRC ballistic missiles. Hughes
deliberately acted without the legally required licenses.

In 1993 and 1995 Hughes analyzed the causes of PRC launch
failures and, for both failures, illegally recommended to the PRC
improvements to the fairing, a part of the rocket that protects the
payload. The PRC changed the fairing of its Long March rocket to
incorporate the Hughes recommendations.

Hughes also corrected deficiencies in the PRC's coupled loads analysis, a
critical rocket design technology.

Hughes also identified changes needed in PRC launch operations.

The State Department's Office of Defense Trade Controls has concluded
that Hughes significantly improved the PRC space launch program and
contributed to the PRC goal of assured access to space. The State
Department further concluded that the lessons learned by the PRC are
inherently applicable to their missile program.

The State Department administers arms export licensing, and would have
been the proper authority to license the Hughes failure investigations.

The State Department found that the PRC and Hughes personnel
engaged in an extensive exchange of data and analyses, which, among
other things, identified and corrected for the PRC deficiencies in a
number of technical areas, including:

     · Anomaly analysis

     · Accident investigation techniques

     · Telemetry analysis

     · Coupled loads analysis

     · Hardware design and manufacture

     · Testing

     · Modeling

     · Simulation

     · Weather analysis

The illegally transmitted information improved the PRC's military rockets
and operations. The illegally transmitted information may assist the PRC
in the design and improved reliability of future silo-based or mobile PRC
ballistic missiles, including particularly missiles that require fairings (or
nose cones). These would include missiles with advanced payloads (that
is, multiple warheads, or certain penetration aids designed to defeat
missile defenses), and submarine launched ballistic missiles.

The PRC has the capability to develop and deploy silo-based missiles
with multiple reentry vehicles (MIRVs or MRVs). Within a reasonable
period of years that is consistent with the PRC's possible deployment of
new mobile missiles, the PRC could deploy multiple warheads on those
mobile missiles, as well. The PRC also appears to have gained practical
insight into U.S. coupled loads analysis, and insight into diagnostic and
failure analysis techniques for identifying the causes of a launch failure.
Such lessons could be applied to both rockets and missiles.

In both 1993 and 1995, Hughes failed to apply for or obtain the required
Department of State licenses for its activities, because Hughes knew that
the Department of State would be unlikely to grant the license and that
the licensing process would in any case be lengthy.

Hughes also engaged in deliberate efforts to circumvent the Department
of State licensing requirement. To this end, Hughes sought the approval
of a Department of Commerce official for its 1995 activities and claims to
have sought the approval of a Department of Defense monitor for some
of its 1993 activities, although Hughes knew that neither official was
legally authorized to issue the required license.

Hughes had important commercial interests in the PRC at the time it
engaged in the failure investigations. These interests included future sales
of satellites to the PRC or to parties serving the PRC market, and
reducing the cost and improving the safety of launching satellites in the
PRC.
 
 

ii. In 1996, Loral and Hughes showed the PRC how to improve the
design and reliability of the guidance system used in the PRC's
newest Long March rocket.

Loral's and Hughes' advice may also be useful for design and
improved reliability of elements of future PRC ballistic missiles.

Loral and Hughes acted without the legally required license,
although both corporations knew that a license was required.
 

Loral and Hughes analyzed for the PRC the potential causes of a 1996
PRC launch failure, identified for the PRC the true cause of the failure as
a particular element within the Long March rocket's guidance unit, and
provided the PRC with technical assistance that may be useful not only
for the PRC's commercial and military space launch programs, but for
ballistic missiles as well.

In so doing, Loral and Hughes deliberately acted without the legally
required license, and violated U.S. export control laws.

Although Loral and Hughes were well aware that a State Department
license was required to provide assistance related to the guidance system
of a PRC rocket, neither company applied for or obtained the required
license. Loral was warned of the need for a license at the time it agreed
to participate in the investigation, but took no action.

Loral and Hughes also failed to properly brief participants in the failure
investigation of U.S. export requirements, failed to monitor the
investigation as it progressed, and failed to take adequate steps to ensure
that no prohibited information was passed to the PRC.

Loral and Hughes submitted lengthy written materials analyzing the cause
of the guidance system failure to the PRC and to other foreign nationals.
In addition, Loral and Hughes engaged in technical discussions, including
discussions about the details and causes of the guidance system failure,
that were almost certainly recorded by the PRC.

While some aspects of these discussions have been identified by the
Select Committee and reviewed by independent experts retained by the
Select Committee, the full range and content of these discussions remains
unknown. The Select Committee was unable to talk to several important
participants in the failure investigation, and the PRC refused to agree to
the Select Committee's request for interviews. Additional controlled
information may have been received by the PRC.

The information and assistance conveyed by Loral and Hughes led to
improvements to the guidance system of the PRC's Long March 3B
rocket. While the launch that failed was commercial, the information
transmitted by Loral and Hughes was useful, as well, for military space
launch purposes.

Loral and Hughes provided valuable additional information that
exposed the PRC to Western diagnostic processes that could lead
to improvements in the reliability of all PRC ballistic missiles.
Loral's and Hughes' advice could help reinforce or add vigor to the
PRC's adherence to good design and test practices, which could be
transferred to the ballistic missile program. The exposure to U.S.
diagnostic and test processes outlined by Loral and Hughes has the
potential to improve PRC pre- and post-flight failure analysis for the
ballistic missile program.

The technology transferred by Loral and Hughes thus has the potential, if
used by the PRC, to increase the reliability of future PRC ballistic
missiles.

The independent experts retained by the Select Committee had access
not just to the written report prepared by Loral with input from Hughes,
but also to the comments of participants about meetings in Beijing. The
independent experts conclude that information valuable to the PRC's
space and ballistic missile programs was transferred.

Neither Loral nor Hughes disclosed to export control officers of the U.S.
Government their unlicensed activities until after they were contacted by
U.S. Government licensing officials demanding an explanation for their
conduct. The U.S. Government officials became aware of the improper
activities through an article in a widely-read industry publication. This
article also came to Loral's attention prior to Loral's disclosure to the
U.S. Government.

Loral and Hughes had important commercial interests in the PRC when
they engaged in the 1996 failure investigation. These interests included
future sales of satellites to the PRC or to parties serving the PRC market,
and reducing the cost and improving the safety of launching satellites in
the PRC.
 
 

E. In light of the PRC's aggressive espionage campaign against
U.S. technology, it would be surprising if the PRC has not
exploited security lapses that have occurred in connection with
launches of U.S. satellites in the PRC.
 

The original policy permitting U.S. manufactured satellites to be launched
in the PRC envisioned strict compliance with requirements to prevent
unauthorized technology transfers.

These requirements are encompassed in U.S. regulations and licenses.
Pursuant to a bilateral agreement between the United States and the
PRC, the requirements include U.S. control over access to the satellite
while it is in the PRC. Many of these requirements imposed on exporters
are to be closely monitored by U.S. Government officials provided by
the Defense Department.

The Select Committee has found numerous lapses in the intended
pre-launch technology safeguards. Defense Department monitors
have reported numerous security infractions by exporters. Exporters
often hire private security guards to assist in the performance of their
duties to prevent technology transfers, and these private guards have also
reported security lapses.

In addition, it is likely that other security lapses have gone unreported. In
the mid-1990s, three launches and associated pre-launch activities were
not monitored by the Defense Department. Launches that were
monitored have lacked proper staffing.

Because of the PRC's aggressive efforts to acquire U.S. technology, it
would be surprising if the PRC has not exploited security lapses while
U.S.-built satellites and associated equipment and documents were in the
PRC. Prior to launch, the satellite, associated test equipment, and
controlled documents are transported to the PRC and may remain in the
PRC for periods as short as a couple of weeks or as long as two months.
The PRC would likely exploit opportunities to gain information while the
U.S. satellite and associated equipment are in the PRC before launch.

Unrestricted access to a satellite for as little as two hours could provide
the PRC with valuable, non-public information about major satellite
subsystems, as well as the design and manufacture of such subsystems.

There are numerous reasons for security infractions, some of which may
be addressed through changes in procedures:

     · Defense Department monitors on occasion have
     found poor attitudes toward security among both
     company management and private guards

     · Private security guards hired by satellite exporters
     may have an inherent conflict of interest when
     reporting on their current and prospective employers

     · Both Defense Department monitors and private
     security guards may lack sufficient training

     · Defense Department monitors sometimes lack
     continuity with a given launch

     · Often, only one Defense Department monitor may
     have been present on a project
 
 

F. Foreign brokers and underwriters of satellite and space launch
insurance have obtained controlled U.S. space and missile-related
technology outside of the system of export controls that applies to
U.S. satellite manufacturers.

While existing laws address such exports, U.S. export control
authorities may not be adequately enforcing these laws in the
space insurance industry context, nor paying sufficient attention to
these practices.
 

Satellite and space insurance is underwritten by overseas and
multinational organizations to which U.S. technical information is always
passed to assess insurance risks. This is particularly true where the
insurers have particular reasons to be concerned about launch failures.

These insurers have, on occasion, received controlled U.S. technical
information. It is not clear that manufacturers and purchasers of satellites
are transmitting satellite information to such foreign brokers and
underwriters in compliance with U.S. export control rules and
regulations.

As insurance is critical to commercial space launches, the insurance role
cannot be eliminated. Existing laws address exports to brokers and
insurers. The administration of these laws must be applied to exports of
sensitive U.S. technology to the space launch and satellite insurance
industry.
 
 

G. The Strom Thurmond National Defense Authorization Act took
important steps to correct deficiencies in the administration of
U.S. export controls on commercial space launches in the PRC.

But the aggressive implementation of this law is vital, and other
problems with launches in the PRC that the Act does not address
require immediate attention.
 

The Fiscal 1999 Department of Defense Authorization Act sought to
increase safeguards on technology transfer during foreign launches of
U.S. satellites.

The measures set forth in the Act include transferring licensing jurisdiction
to the Department of State, and increased support for the Defense
Department's efforts to prevent technology loss.

However, additional measures - including better training for Defense
Department monitors and improved procedures for hiring professional
security personnel - will be needed.
 
 

H. It is in the national security interest of the United States to
increase U.S. domestic launch capacity.
 

While U.S. policy since 1988 has permitted launching satellites in the
PRC, U.S. national security interests would be advanced by avoiding the
need for foreign launches through increased domestic launch capability.

The Reagan administration's decision to permit launches in the PRC was
affected by two factors: insufficient domestic launch options in the
aftermath of the Challenger disaster, and the perception of the PRC as a
strategic balance against the Soviet Union in the context of the Cold War.
These factors are no longer applicable today.

Launching Western satellites has provided the PRC with additional
experience that has improved its space launch capabilities. Even in the
absence of any loss of U.S. technology, such experience benefits a
potential long-run competitor of the United States.

     See the chapters PRC Missile and Space Forces, Satellite
     Launches in the PRC: Hughes, and Satellite Launches in
     the PRC: Loral for more detailed discussion of the Select
     Committee's investigation of these matters.
 
 
 
 

A. Recent changes in international and domestic export control
regimes have reduced the ability to control transfers of militarily
useful technology.

i. The dissolution of COCOM in 1994 left the United States
without an effective, multilateral means to control exports of
militarily useful goods and technology.
 

The Wassenaar Arrangement on Export Controls for Conventional Arms
and Dual-Use Goods and Technologies (Wassenaar) leaves international
controls over the transfer of military technologies to national discretion.

The dissolution of the Coordinating Committee for Multilateral Export
Controls (COCOM) in March 1994 left the United States without an
effective international mechanism to control the transfer of important
military technologies. Other multilateral control regimes set guidelines for
particular kinds of transfers (for example, certain transfers related to
missiles or weapons of mass destruction).

In the post-COCOM period, the United States dramatically liberalized
export controls.

A new COCOM-like agreement, under which national exports of certain
militarily useful goods and technologies are subject to international
agreement, would enhance efforts to restrict technology transfers. The
United States should seek to negotiate such a new arrangement.
 
 

ii. The expiration of the Export Administration Act in 1994 has left
export controls under different legislative authority that, among
other things, carries lesser penalties for export violations than
those that can be imposed under the Act.
 

Following the expiration of the Export Administration Act in 1994,
export controls on dual-use items have been continued under the
provisions of the International Emergency Economic Powers Act. This
law carries significantly lesser penalties for criminal and civil violations of
export controls than those that applied under the Export Administration
Act.

While the general criminal penalties of Title 18 of the U.S. Code may be
imposed under either scheme, administration of export controls would be
enhanced by a reauthorization of the Export Administration Act that
would restore more significant penalties for export control violations.
 
 

iii. U.S. policy changes announced in 1995 that reduced the time
available for national security agencies to consider export licenses
need to be reexamined in light of the volume and complexity of
licensing activities.
 

New procedures and deadlines for processing Commerce Department
export license applications instituted in late 1995 placed national security
agencies under significant time pressures.

Commerce officials alone are less likely to have the expertise for
identifying national security implications of exports of militarily useful
technologies. While national security agencies may be informed of
applications, due time is needed for their consideration.

However, the time frame for consideration is not always sufficient for the
Department of Defense to determine whether a license should be
granted, or if conditions should be imposed.

In addition, the Intelligence Community has sought a role earlier in the
licensing process in order to evaluate the technology and end user.
 
 

B. Dividing the licensing responsibilities for satellites between the
Departments of Commerce and State permitted the loss of U.S.
technology to the PRC.

The 1996 decision to give Commerce the lead role in satellite
exporting was properly reversed by the Congress.
 

Divided jurisdiction between Commerce and State over satellite export
licensing has facilitated the loss of U.S. technology to the PRC.

While licensing authority regarding rockets has always remained with the
State Department, in 1992 certain aspects of satellite licensing were
transferred to Commerce.

For nearly a three-year period thereafter, Commerce licenses did not
require Department of Defense monitors for launch campaigns.
Accordingly, U.S. Government officials did not monitor several launches
and launch campaigns. Given the PRC's efforts at technology acquisition,
it would be surprising if the PRC did not attempt to exploit this situation.

In 1995, a Commerce Department official improperly authorized the
transfer, in the context of a launch failure investigation, of information
regarding rocket design that would almost certainly have been prevented
had the Department of State been consulted.

In October 1996, all remaining authority for commercial satellite licensing
was transferred to Commerce.

Legislation passed by Congress in 1998 eliminated the split jurisdiction
and assigned all licensing of satellite exports to the Department of State.
 
 

C. U.S. policies relying on corporate self-policing to prevent
technology loss have not worked.

Corporate self-policing does not sufficiently account for the risks
posed by inherent conflicts of interest, and the lack of priority
placed on security in comparison to other corporate objectives.
 

To protect the national security interests of the United States, the U.S.
Government imposes substantial requirements on U.S. businesses
exporting technology to the PRC. These can include obtaining a license,
satisfying additional conditions imposed in the license, paying for U.S.
Government monitors, and providing security guards.

Under current policies, whether U.S. national security is in fact protected
from the loss of export-controlled information thus depends in large part
on the vigilance, good will, and efforts dedicated by business to comply
with lawful requirements.

Corporations may often face inherent conflicts of interest in complying
with U.S. export laws. Corporate interests that may conflict with
restricting exports as required by U.S. law include:

     · Corporate goals to expand overseas markets and to
     satisfy current or prospective customers

     · Urgent business priorities that compete for the
     attention of corporate management

     · An unwillingness to devote the financial resources
     necessary for effective security

Protecting the national security interest simply may not be related to
improving a corporation's "bottom line."

In cases discussed later in this Report, two U.S. satellite manufacturers,
Hughes and Loral, failed to live by the requirements of U.S. law. The
failure of Hughes to obtain legally required licenses, for example, reflects
a deliberate decision to assist the PRC immediately, rather than risk the
possibility that a license application would be delayed or rejected.

Such pressures may be great where important commercial opportunities
or relationships may seem to a corporation to be at stake.

U.S. policies relying on corporate self-policing to prevent technology loss
have not sufficiently accounted for the risks posed by inherent conflicts of
interest, and by the lack of priority placed on dedicating resources to
security in comparison to other corporate objectives.
 
 

D. The PRC requires high performance computers (HPCs) for the
design, modeling, testing, and maintenance of advanced nuclear
weapons based on the nuclear weapons design information stolen
from the United States.

The United States relaxed restrictions on HPC sales in 1996; and
the United States has no effective way to verify that HPC
purchases reportedly made for commercial purposes are not
diverted to military uses.

The Select Committee judges that the PRC has in fact used HPCs
to perform nuclear weapons applications.
 

PRC research institutes with connections to PLA military industries have
access to numerous U.S.-built HPCs that could be used for unlawful
military applications. HPCs are important for many military applications,
and essential for some.

One key concern is diversion of U.S. HPCs to the PRC's nuclear
weapons program. If the PRC complies with the Comprehensive Test
Ban Treaty, then its need for HPCs to design, weaponize, deploy, and
maintain nuclear weapons will be greater than that of any other nation
possessing nuclear weapons, according to the Department of Energy.

HPCs are useful for two-dimensional and critical to three-dimensional
computer modeling that would be necessary for the PRC to develop,
modify, and maintain its nuclear weapons in the absence of physical
testing.

The utility of nuclear weapons computer modeling depends on the
amount of data available from actual nuclear weapons tests, the
computing capacity that is available, and programmer expertise. For this
reason, in the judgment of the Select Committee, the PRC has targeted
U.S. nuclear test data for espionage collection, which, if successful,
would reduce its HPC performance requirements.

Complete three-dimensional models, critical to stockpile maintenance
and assessment of the effect of major warhead modifications in the
absence of physical testing, require HPCs of one million MTOPS
(millions of theoretical operations-per-second, a measure of computer
performance and speed) or more. Assessing the effects of a new
warhead without testing would require three-dimensional modeling.

Although the precise utility of HPCs in the 2,000 to 10,000 MTOPS
range for two-dimensional modeling is unclear, these HPCs may be
powerful enough to help the PRC incorporate nuclear weapons design
information that it stole from the U.S. into delivery systems without
further testing.

In fact, the Select Committee judges that the PRC has been using
HPCs for nuclear weapons applications. The illegal diversion of
HPCs for the benefit of the PRC military is facilitated by the lack of
effective post-sale verifications of the locations and purposes for which
the computers are being used. HPC diversion for PRC military use is also
facilitated by the steady relaxation of U.S. export controls over sales of
HPCs.

Until 1998, there was no verification of the end uses of HPCs in the
PRC. Modest verification procedures were announced in June 1998, but
even if these are implemented fully, they will be insufficient.

Over the past several years, U.S. export controls on the sale of HPCs to
the PRC have been steadily relaxed. As a result, while the PRC had
virtually no HPCs in 1996, the PRC had over 600 U.S.-origin HPCs at
the end of 1998.

The PRC has demonstrated the capability to assemble an HPC using
U.S.-origin microprocessors. The Select Committee has concluded,
however, that the PRC has virtually no indigenous high-end computer
production capability. Moreover, while the PRC might attempt to
perform some HPC functions by other means, these computer
work-arounds remain difficult and imperfect.

Data from the Commerce Department and Defense Department indicate
that HPCs from the United States have been obtained by PRC
organizations involved in the research and development of:

     · Missiles

     · Satellites

     · Spacecraft

     · Submarines

     · Aircraft

     · Military systems components

     · Command and control

     · Communications

     · Microwave and laser sensors

Given the lack of an effective verification regime, it is possible that these
HPCs have been diverted for military uses, which could include the
following:

     · Incorporating or adapting nuclear weapons designs

     · Upgrading and maintaining nuclear and chemical
     weapons

     · Equipping mobile forces with high-technology
     weapons

     · Building a modern fleet of combat and combat
     support aircraft and submarines

     · Conducting anti-submarine warfare

     · Developing a reliable, accurate ballistic and cruise
     missile force

     · Equalizing a battlefield with electronic or information
     warfare

     · Improving command, control, communications, and
     intelligence capabilities

Finally, the Select Committee judges that nuclear testing data and related
computer codes are a target of PRC espionage, and that the PRC's
nuclear weapons programs would benefit from the illegal acquisition of
such information.

In conjunction with such data and codes, HPCs can be used to improve
nuclear weapons designs, performance, modeling, and nuclear stockpile
maintenance that would otherwise be extremely difficult or impossible
given the restrictions imposed by the Comprehensive Test Ban Treaty.
 
 

E. The PRC has attempted to obtain U.S. machine tools and jet
engine technologies through fraud and diversions fromcommercial
end uses.

In one 1991 case studied by the Select Committee, the
Department of Commerce decontrolled jet engines without
consulting either the Defense Department or the State
Department.
 

i. In 1994 and 1995 the PRC attempted to divert an export of
machine tools by McDonnell Douglas to military uses.

The Select Committee's classified Report includes significantly more
detail on this subject than this unclassified version. The Justice
Department has requested that the Select Committee not disclose the
details of much of its investigation into these matters to protect the Justice
Department's prosecution of the China National Aero-Technology
Import/Export Corporation (CATIC) and McDonnell Douglas.

ii. In 1991 the Commerce Department decontrolled Garrett jet
engines without consulting either the Defense Department or the
State Department.

This led to a PRC effort to acquire related jet engine production
technology. The Commerce Department was prepared to approve
this transfer, which was only thwarted when the Defense
Department was alerted by the U.S. Embassy in Beijing.

     See the chapters High Performance Computers, U.S.
     Export Policy Toward the PRC, and Manufacturing
     Processes for a more detailed discussion of the Select
     Committee's investigation of these matters.
 
 
 
 

The PRC has vigorously pursued over the last two decades the
acquisition of foreign military technologies. These efforts represent the
official policy of the PRC and its Chinese Communist Party leadership.
The PRC seeks foreign military technology as part of its efforts to place
the PRC at the forefront of nations and to enable the PRC to fulfill its
international agenda. The PRC's long-run geopolitical goals include
incorporating Taiwan into the PRC and becoming the primary power in
Asia.

The PRC has not ruled out using force against Taiwan, and its thefts of
U.S. technology have enhanced its military capabilities for any such use
of force.

The PRC has also asserted territorial claims against other Southeast
Asian nations and Japan, and has used its military forces as leverage in
asserting these claims.

These PRC goals conflict with current U.S. interests in Asia and the
Pacific, and the possibility of a U.S.-PRC confrontation cannot be
dismissed.
 
 

A. The PRC has mounted a widespread effort to obtain U.S.
military technologies by any means - legal or illegal.

These pervasive efforts pose a particularly significant threat to
U.S. export control and counterintelligence efforts.
 

The PRC seeks military-related technology through a broad range of
activities that complicate U.S. counterintelligence efforts.

Many of these efforts are less centralized than was the case with those of
the Soviet Union. The number of PRC nationals who seek access to U.S.
technology is much greater than the number of persons who sought
similar kinds of information for the Soviet Union.

The Select Committee has determined that the Intelligence
Community is insufficiently focused on the threat posed by PRC
intelligence and the targeted effort to obtain militarily useful
technology from the United States. Due to our sustained focus on the
Soviet Union during the Cold War, intelligence collection against the
PRC was not a top priority for our intelligence agencies in those years.

For the last several years, the U.S. Intelligence Community has begun to
place a greater priority on the PRC. Nonetheless, the Intelligence
Community lacks sufficient Chinese linguists and needs increased
resources to address the challenge posed by the PRC's intelligence
collection efforts.

The FBI has inadequate resources in light of the extensive numbers of
PRC visitors, students, diplomats, business representatives, and others
who may be involved in intelligence and military-related technology
transfer operations in the United States.
 
 

B. Efforts to deny the PRC access to U.S. military technology are
complicated by the broad range of items in which the PRC is
interested, and by transfers to the PRC of Russian military and
dual-use technologies, which may make the consequences of the
PRC's thefts of U.S. technology more severe.
 

The PRC seeks and has acquired from the United States and elsewhere
a broad range of military and related technologies.

Russia, for example, has provided the PRC with extensive military
assistance and related technologies, including a number of complete
military systems. The Select Committee has been advised that the sheer
number of transfers of military equipment and technology to the PRC
from Russia, most of which have been a product of dramatically
increased PRC-Russian military cooperation since 1992, is vastly greater
than the number of transfers from the United States, most of which are
the result of PRC espionage.

Together, the added capabilities that the PRC has gained and continues
to gain from foreign sources makes it difficult to assess how quickly the
PRC will be able to make full use of any systems or technologies stolen
from the United States. For example, the PRC's reported acquisition of
solid-fuel and mobile missile launcher technologies, if successfully
combined with stolen U.S. nuclear design information, will enable the
PRC to field a robust road-mobile, intercontinental ballistic missile threat
to the United States sooner than would otherwise have been possible.
 
 

C. The PRC uses commercial and political contacts to advance its
efforts to obtain U.S. military, as well as commercial, technology.
 

The PRC has adopted policies in recent years aimed at increasing its
influence within the United States in order to increase access to U.S.
military, as well as commercial, technology.

To this end, the PRC has used access to its markets to induce U.S.
business interests to provide military-related technology.

The PRC also uses access to its markets to induce U.S. businesses to
lobby in behalf of common goals, such as liberalized export standards
and practices.

Agents tied to the PRC's military industries who have illegally provided
political contributions may have used these contributions to gain access to
U.S. military and commercial technology.
 
 

D. The PRC has proliferated nuclear, missile, and space-related
technologies to a number of countries.
 

The PRC is one of the leading proliferators of complete ballistic missile
systems and missile components in the world.

The PRC has sold complete ballistic missile systems, for example, to
Saudi Arabia and Pakistan, and missile components to a number of
countries including Iran and Pakistan. The PRC has proliferated military
technology to Iran, Pakistan, and North Korea.

In 1991, the PRC agreed to adhere to the April 1987 Missile
Technology Control Regime (MTCR) guidelines, but the PRC has not
accepted the revisions to those guidelines issued in 1993. The 1993
MTCR guidelines increase the kinds of missile systems subject to
controls and call for a "strong presumption to deny" both sales of
complete missile systems and components that could be used in ballistic
missiles.

The PRC has provided, or is providing, assistance to the missile and
space programs of a number of countries according to the Congressional
Research Service. These countries include, but are not limited to:

     · Iran. The PRC has provided Iran with ballistic missile
     technology, including guidance components and the recent
     transfer of telemetry equipment. The PRC reportedly is
     providing Iran with solid-propellant missile technology.
     Additionally, the PRC provided Iran with the 95-mile range
     CSS-8 ballistic missile. Since the mid-1980s, the PRC has
     transferred C-802 anti-ship cruise missiles to Iran. The
     PRC has also provided assistance to Iran's nuclear
     programs.

     · Pakistan. The PRC has provided Pakistan with a wide
     range of assistance. The PRC reportedly supplied Pakistan
     with CSS-X-7/M-11 mobile missile launchers and
     reportedly has provided Pakistan with the facilities
     necessary to produce M-11 missiles. The PRC provides
     Pakistan with assistance on uranium enrichment, ring
     magnets, and other technologies that could be used in
     Pakistan's nuclear weapons program.

     · Saudi Arabia. The PRC provided a complete CSS-2
     missile system to Saudi Arabia in 1987. The
     conventionally-armed missile has a range of 1,200 to 1,900
     miles.

     · North Korea. The Select Committee judges that the
     PRC has assisted weapons and military-related programs in
     North Korea.

The Select Committee is aware of information of further PRC
proliferation of missile and space technology that the Clinton
administration has determined cannot be publicly disclosed without
affecting national security.

     See the chapter PRC Acquisition of U.S. Technology for
     more detailed discussion of the Select Committee's
     investigation of these matters.

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 Today, House Majority Leader Dick Armey called on