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China 's Record of Proliferation Activities
Paula A. DeSutter, Assistant Secretary for Verification and Compliance
Testimony Before the U.S.-China Commission
Washington, DC
July 24, 2003

Good Morning, Mr. Chairman, Mr. Vice-Chairman, members of the Commission, thank you for inviting me to testify before you today to offer the Administration's perspective on China's record of proliferation activities.

I am proud to serve as Assistant Secretary for the State Department's Bureau of Verification and Compliance. Our bureau is charged by law with ensuring that arms control, nonproliferation, and disarmament agreements and commitments are effectively verifiable; with assessing compliance with such agreements and commitments once they are reached; and with serving as

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the policy community's primary liaison to the U.S. Intelligence Community on verification and compliance issues. These responsibilities have necessarily involved us closely in many of the issues I will discus today.

Let me begin by stating the obvious: China is a key to achieving the Administration's goal of stopping the proliferation of weapons of mass destruction technology throughout the world. Chinese officials at every level have said both publicly and privately to us that China recognizes the importance of this issue, and expressed their hope that nonproliferation can be an area of cooperation rather than contention between our two countries.

While we too share this desire, I must report to you today that we continue to see problems in the proliferant behavior of certain Chinese entities and remain deeply concerned about the Chinese government's often narrow interpretation of nonproliferation commitments and lack of enforcement of nonproliferation regulations. The government of China has not done enough to ensure that all Chinese entities abide by the nonproliferation commitments the Chinese government has made. This has an impact on our bilateral relationship. As Secretary Powell said last year, " China's fulfillment of its nonproliferation commitments would be crucial to determining the quality of the United States -- China relationship."

While there are many buyers in the market for WMD [weapons of mass destruction] and missiles, there are only a handful of states with the capability to be dealers in that market. China's sophistication with many of these technologies has made it possible for Chinese entities to become key exporters of WMD and missile technology. Unfortunately, Chinese entities' record of transferring these technologies -- and the record of the Chinese government's enforcement of its own laws and regulations to stem these transfers -- have for the most part been poor.

Permit me to walk through a bit of the history of China's proliferation and the U.S. response to that history so that I can explain the bedrock upon which our policies are based. Basically I will outline the policies that did not work, and explain why we are redoubling our efforts and trying some new approaches.

My bottom line will be that while we will continue high level dialogue directed at persuading the PRC [People's Republic of China] to adopt national policies to enforce its commitments, we are also seeking to enhance deterrence of Chinese proliferation by changing the cost/benefit analysis to make a change in behavior more attractive to China.

Missile Proliferation

Missile proliferation is presently our most significant proliferation concern with China.

At the highest levels, the Chinese Government states that it opposes the proliferation of missile technology and that it forbids Chinese firms and entities from engaging in transfers that violate its commitments to the United States. Unfortunately, the reality often does not bear this out.

As we concluded in the most recent Noncompliance Report submitted to Congress, "Chinese state-owned corporations have engaged in transfer activities with Pakistan, Iran, North Korea, and Libya that are clearly contrary to China's commitments to the U.S." The report further noted that these "actions call into serious question China's stated commitment to controlling missile proliferation."

The Chinese Government appears to view missile nonproliferation, at least in part, not as a goal in and of itself but as an issue that needs merely to be managed as part of its overall bilateral relationship with the United States. China has generally tried to avoid making fundamental changes in its transfer policies by offering the U.S. carefully-worded commitments. A brief review of the history of U.S. nonproliferation discussions with China will help to illustrate China's diplomatic strategy.

The 1992 and 1994 Missile Commitments

China made its first missile nonproliferation commitment to the United States in March 1992. This commitment was the direct result of the United States' imposition of sanctions in June 1991 on two Chinese entities -- the China Great Wall Industry Corporation (CGWIC) and the China Precision Machinery Import-Export Corporation (CPMIEC) -- in connection with the sale of M-11 missiles to Pakistan. In return for the U.S. ending sanctions on these two entities, China provided a written commitment in March 1992 to then-Secretary of State Baker that it would abide by the original "guidelines and parameters" of the Missile Technology Control Regime (MTCR) , which the United States publicly stated were indeed applicable to both the M-9 (CSS-6) and M-11 (CSS-7) missiles. Despite this commitment, Chinese entities transferred M-11 missiles to Pakistan. In response to U.S. complaints, China indicated that the M-11 missile was not covered by the MTCR and that it was still fully adhering to its 1992 pledge.

In 1993, the United States imposed sanctions on the Chinese Ministry of Aerospace Industry, CPMIEC, and the Pakistani Ministry of Defense for their roles in the transfer. In return for the lifting of these 1993 sanctions, China agreed in October 1994 -- in a Joint Statement with the United States -- that it would not transfer ground-to-ground missiles "inherently capable of reaching a range of at least 300 km with a payload of at least 500 kilograms."

Nevertheless, in the years following this 1994 commitment, Chinese entities continued their missile-related sales to Pakistan and provided significant assistance to Iran and Syria in contravention of their commitments to the United States. China declared in October 1996 that its previous agreements did not cover items contained on the MTCR Annex.

Following additional negotiations, in June 1998, China in a Joint Statement reaffirmed that its policy was "to prevent the export of equipment, materials, or technology that could in an any way assist programs in India or Pakistan, for nuclear weapons or for ballistic missiles capable of delivering such weapons." However, despite even these assurances, Chinese missile-related transfers continued.

The November 2000 Commitment

In response to the continuing transfers, the U.S. engaged in extensive negotiations to obtain yet another nonproliferation commitment from China. These efforts culminated in a November 2000 commitment wherein China pledged not to assist "in any way, any country in the development of ballistic missiles that can be used to deliver nuclear weapons (i.e., missiles capable of delivering a payload of at least 500 kilograms to a distance of at least 300 kilometers)." In addition, China agreed to enact and publish comprehensive missile-related export controls "at an early date." In exchange for China's further promise, the United States agreed to waive sanctions that were required by United States law for past assistance by Chinese entities to the Iranian and Pakistani missile programs.

China's Compliance with the November 2000 Commitment

New concerns soon arose with respect to China's compliance with its November 2000 commitment. A shipment of missile-related technology to Pakistan in contravention of the 2000 commitment prompted the United States to impose sanctions in September 2001 on the China Metallurgical Equipment Corporation (CMEC). In response, the Chinese Government denied that its company had shipped missile-related items to Pakistan. The Chinese Foreign Ministry, for instance, publicly stated that "[i]n-depth investigations by the Chinese side indicate that [CMEC] has never engaged in any activities as alleged by the United States and the U.S. allegation is groundless." In subsequent conversations with the Chinese on this issue, however, we have had more forthcoming exchanges on the question of CMEC and its activities.

Since the CMEC problem in 2001, additional concerns have emerged with respect to the implementation of China's export regulations and serial proliferators.

Chinese Missile Export Regulations

As part of its November 2000 commitments, China promised to publish at "an early date" a comprehensive export control list. After more than a year and a half, China finally published this control list in August 2002. This was a significant and welcome step. Nevertheless, China still has some important deficiencies in its export controls that it needs to address. First, the new Chinese control list is not as comprehensive as the MTCR Annex. For example, the Chinese control list does not include ammonium dinitramide (ADN) -- an advanced ingredient used as a fuel oxidizer in solid propellant missiles. Second, unlike the MTCR, the new Chinese regulations do not specifically prohibit the export of complete missile production facilities. Finally, the Chinese export control regulations do not list any factors to be used in determining whether to approve transfers.

Important implementation and enforcement issues also need to be addressed. China does not appear to be enforcing controls at its borders, allowing unauthorized transfers to go undetected. Furthermore, it must establish a system of end-use verification checks to ensure that items approved for transfer are not diverted. It is also important to ensure that "catch-all" controls are implemented effectively within China. To that end, one area of possible cooperation between the U.S. and China could be in the area of export control enforcement and implementation.

Finally, China needs clearly to signal to all Chinese entities that it intends vigorously to enforce its export controls. To date, Beijing has not taken the necessary steps under these new controls to prevent sensitive transfers or prosecute violations. China should make an effort to publicize its efforts to enforce its export control regulations. Such publicity will demonstrate to the international community China's commitment to stop the proliferation of missile-related items.

I do not detail these facts in order to give you a history lesson, for I am sure you are familiar with these events. I recount it, however, to direct your attention to the unfortunate fact that China only gets serious about even promising to stop proliferation when it appears that failure to do so would have implications for the broader bilateral relationship. The few steps China has taken in the direction of taking proliferation seriously - Beijing's commitments of 1992, 1994, 1998, and 2000, and its new regulations in 2002 - occurred only under the imminent threat, or in response to the actual imposition, of sanctions.

The Serial Proliferator Problem

All of these problems with China's implementation of its commitments are underscored by the continuing problem of business-as-usual proliferation by Chinese companies dubbed "serial proliferators." On numerous occasions, we have expressed our concerns about these entities to the Chinese Government and have asked Beijing to subject exports by these serial proliferators to persistent and close scrutiny.

Despite these efforts, however, the Chinese Government has failed to halt transfers of missile-related items from these notorious Chinese proliferators to countries such as Iran. Take, for example, the China North Industries Corporation, known as NORINCO. For some time, we have been alerting the Chinese Government to our concerns about the activities of NORINCO. Nonetheless, the Chinese Government has taken no action to halt NORINCO's proliferant behavior. In the face of Chinese inaction, therefore, the Administration has sanctioned NORINCO twice this year, once in May and once this month.

This serial proliferator problem, however, isn't limited to just NORINCO. Another example of a serial proliferator that has not been reined in by China is CPMIEC. The United States sanctioned CPMIEC or its parent organization in 1991, 1993, 2002 and 2003, for missile-related transfers to Iran and Pakistan.

We will continue to impose sanctions, as warranted and when legally available, on Chinese serial proliferators or any other entity that transfers missile-related items. The Executive Order sanctions the U.S. Government placed on NORINCO in May 2003 are an excellent case in point. These sanctions prohibit NORINCO from entering into any contracts with the U.S. Government and prevent the importation into the United States of any good manufactured by NORINCO or its subsidiaries.

We will closely monitor the response of the Chinese Government to our concerns about NORINCO and its reaction to the imposition of sanctions. As in the case of CMEC, the Chinese have stated that our sanctions were "unjust," glossing over U.S. concerns about the continuing proliferation threats posed by these companies. The Chinese Ministry of Foreign Affairs spokesman denied that any transfer by NORINCO had occurred, stating that "[a]ccording to the investigation of the Chinese side, the relevant company in China has not offered help to the relevant projects of Iran. In our view, the U.S. is imposing its own national policy on others by willfully imposing sanctions in some fields for no good reason." It is possible that at some point the PRC will act to give a more forthcoming response as we experienced in the CMEC case.

Nuclear Proliferation

The United States is concerned about China's compliance with its nuclear nonproliferation commitments. In particular we are concerned that China has structured its membership and involvement in various international nuclear regimes so that it may still "lawfully" circumvent the basic purpose and intent of the these regimes. For example, China has joined the Zangger Committee , but not the Nuclear Suppliers Group (NSG) . This distinction is significant, because the Zangger Committee requires only item specific safeguards, while the NSG requires more stringent full-scope safeguards as a condition of supply. This makes it possible for China to continue providing assistance to safeguarded nuclear facilities in proliferator countries, such as Pakistan. Indeed, it is clear that China continues to contribute to the nuclear programs of both Pakistan and Iran. We will continue to urge China to join the Nuclear Suppliers Group and accept full-scope safeguards as a condition of new nuclear supply.

Chemical Weapons Proliferation

China's maintenance of a chemical weapons program is a matter of serious concern to us. We are no less concerned about certain Chinese entities' continued transfers overseas of dual-use chemical agents and technologies and equipment that can be used in chemical weapons programs.

The United States believes that, despite being a State Party to the Chemical Weapons Convention (CWC) , China has an advanced chemical weapons research and development program.

Although China has declared that it does not possess chemical weapons, we believe that Beijing has not acknowledged the full extent of its CW program. We also believe that China possesses an inventory of traditional CW agents. Moreover, a number of China's chemical industrial facilities are highly capable - giving it the ability to produce many dual-use chemicals.

One ongoing initiative at the Organization for the Prohibition of Chemical Weapons (OPCW) would focus more attention on increasing the number of industrial inspections at facilities that produce chemicals not directly controlled under the Convention. This effort would help to alleviate some concern regarding activities within China's massive chemical industry.

This proposal is being discussed by the Executive Council of the OPCW, and the U.S. plans to follow up with Beijing on this proposal during the U.S.-China Security Dialogue next week. My bureau is also actively pursuing a compliance dialogue with China.

China has instituted internal export controls over chemicals listed on the CWC Schedules, and 20 varieties of precursor chemicals and chemical production equipment appearing on the Australia Group (AG) control list. In addition, China also has instituted "catch-all" provisions for chemical (and biological) goods, which provide a legal basis to control items not on the lists, if the exporter has reason to believe or has been informed that the items are destined for a CBW program.

The U.S. remains concerned, however, about the role of Chinese entities providing CW-related equipment, technology, and precursor materials to Iran. The U.S. continues diplomatic efforts to encourage China to prevent exports to CW-related end-users, particularly in Iran.

In the recent, past the U.S. has imposed sanctions on several Chinese entities for providing material assistance to Iran's CW program, the most recent sanctions being imposed earlier this month.

Biological Weapons Proliferation

Similarly, the U.S. believes that despite being a member of the Biological Weapons Convention (BWC) , China maintains a BW program in violation of its BWC obligations.

The United States believes that China's consistent claims that it has never researched, produced or possessed BW are simply not true - and that China still retains its BW program.

We would like to begin a bilateral dialogue to help increase our confidence in China's BWC activities, consistent with Article V of the BWC (which provides that the Parties will consult one another and cooperate in solving any problems which may arise in relation to the objective of, or in the application of the provisions of, the Convention).

Given the failure to enforce its stated nonproliferation goals with regard to missile technology, nuclear related items and its chemical weapons program, we must be concerned about the possibility of undetected proliferation of its dual-use items or actual elements of a BW program.

Administration Perspective

On the surface, China's policies appear to tackle nonproliferation issues. China avows that it is opposed to the proliferation of WMD and their means of delivery, as noted in many official Chinese speeches and even government websites. This policy reverses China's views in the late seventies and early eighties. In the last decade or more, China has signed up to an impressive array of commitments:

The PRC signed the Nuclear Non-Proliferation Treaty (NPT) , the Biological Weapons Convention (BWC), and the Chemical Weapons Convention (CWC). It made missile nonproliferation commitments in 1992, 1994, 1998, and 2000. Last year the Chinese government also promulgated formal missile export and dual-use chemical and biological agent regulations.

Regrettably, however, China has not delivered on many of these promises. Chinese firms and individuals continue to be prime exporters of missile technology to several countries, including rogue states; China continues to maintain both chemical and biological weapons programs. Chinese entities' transfers of dual-use chemical agents and technologies and equipment that can be used in chemical weapons programs -- and the lack of Chinese government enforcement of the regulations meant to stop them -- remain of deep concern to the United States.

Since the PRC has not stemmed its proliferation of missiles and nuclear technology, we must ask whether this failure reflects an inability or an unwillingness to stop this proliferation. It has been said by some that Chinese transfers of WMD are the result merely of inefficient export control systems, and that Chinese companies too often ignore the Central Government and violate export control regulations. While this may undoubtedly occur, the facts I have outlined today suggest that these problems do not always stem from mere incapacity.

Clearly, in dealing with the issue of China and nonproliferation, we have our work cut out for us. The extent to which the Chinese authorities are aware of or are involved in the activities of certain Chinese entities is unknown to us. Similarly, the difficulty of squaring China's stated policy in support of nonproliferation objectives with the problematic transfers we continue to see necessarily complicate our dealings with the PRC on this issue. Further complicating the situation is the confusing relationship between the proliferating entities and the government of China. Many entities appear to be organizations with direct ties to the Chinese government while some appear to have a more tenuous relationship with the Central government.

President Bush has stated that he seeks a candid, cooperative, and constructive relationship with the PRC. To that end, he has met with his Chinese counterpart four times in the past two years, including most recently with new President Hu Jintao in Evian. The President is also committed to resolving the problem of the proliferation of WMD and the means to deliver them, and has made it clear that he wants to continue a dialogue with China on these issues. Under Secretary John Bolton, in fact, is leading a delegation to China this week, continuing the Administration's dialogue with Beijing on nonproliferation and related issues.

Our commitment to dialogue, however, does not mean that this Administration will turn a blind eye to transfers from China of WMD technologies and delivery systems. This Administration is determined to use every tool available to us in checking the spread of these dangerous weapons.

The Bush Administration has aggressively used the sanctions process to help change the way China and other countries with proliferation problems behave because we believe that sanctions are a valuable tool with which to influence incentive structures.

In the past, sanctions were often threatened in order to elicit nonproliferation commitments from the Chinese. In exchange for such promises, however, the U.S. Government usually waived sanctions. The problem with this approach was that, after having forestalled the actual imposition of sanctions by promising to behave, the Chinese sometimes continued their proliferant behavior, notwithstanding their new commitments. This Administration has decided that it is time for a different approach, and we are resolved to make every effort to stem transfers of WMD and missiles.

We are committed to the sanctions process for several reasons. First, sanctions provisions exist in U.S. law and we are required to impose sanctions under certain conditions. But sanctions are also a valuable policy instrument in their own right, and we believe they can be effective in helping deter transfers of WMD technology and delivery systems. Repeated threats of sanctions come to lack credibility when they are not carried out. The knowledge that this administration may very well sanction a foreign entity for trafficking in WMD technology, however, will now signal to other would-be proliferators that they finally have to make a hard business choice: is trafficking in such goods really worth the economic cost of giving up trade with the United States?

For the Chinese government and its corporate entities this is a very real question. The recent sanctions against the NORINCO brought home to China and the world that WMD trafficking now has concrete and painful consequences. Trade between the U.S. and China was worth approximately $120 billion in 2002, and NORINCO was one of the larger PRC firms involved in this business. Although we recognize that economic sanctions often have painful consequences for U.S. importers, manufacturers, retailers, and consumers, our national security interests are clear. In the case of the recent NORINCO sanctions, a conglomerate that does a lot of business in the United States has now forfeited the privilege of trading here by engaging in activity that threatens our security.

We trust that other companies will take this lesson to heart.

No matter how resolute the U.S. may be on economic sanctions, however, there will always be some who still deal in these weapons. The President has recognized that we need additional tools in our struggle against WMD proliferators. This is why he announced on May 31 the groundbreaking Proliferation Security Initiative (PSI). This initiative is designed to improve our ability to impede and actually to interdict the transfer of WMD-related goods at sea, in the air, and on the ground. Recognizing that our current "nonproliferation toolbox" does not provide a means to cover all aspects of the proliferation problem as it has evolved, PSI is a necessary and innovative approach to preventing WMD and missile-related proliferation. Over the past few months, the Administration has been working with eleven countries to structure a means of combining our resources and building upon existing domestic authorities with an eye to improve our collective capabilities to halt and interdict WMD and missile-related transfers. We are optimistic that this initiative will assist the in the worldwide fight against proliferation of WMD and delivery systems.

While North Korea is not the subject of my testimony today, I am aware of your keen interest in the situation there and in China's potential involvement in the solution to this problem, and would like to say a few words on this subject. The Administration is deeply concerned about the threat posed by North Korea's nuclear program to the countries in the region and to the global nuclear non-proliferation regime. North Korea's aggressive exports of missile technology are also of serious concern. China and others in the region and throughout the international community share these concerns.

The North Korean nuclear problem must be solved through a multilateral process involving those with a direct stake in the outcome, including the South Korea, Japan, China and possibly others in the region. We value the role that China has played in this matter. On Friday, July 18, Secretary Powell and Deputy Secretary Armitage met with visiting Chinese Vice Foreign Minister Dai Bingguo and his delegation. They discussed in detail how to achieve our common goal of a peaceful, non-nuclear Korean Peninsula through multilateral talks. We made clear our strong belief that the time has come for other parties to join multilateral talks in order to ensure that all key issues are addressed.

Conclusion

I would like to conclude my remarks by noting that China has taken some steps towards joining us in opposing proliferation of WMD and missile systems. Perhaps the most clear examples of this can be seen in our joint efforts to halt the DPRK's nuclear ambitions and to lower tensions in South Asia. In some respects, however, Beijing's lack of enforcement and implementation of its own regulations are in contrast to its commitments.

The U.S. and China have many areas of overlapping interest. For its part, China has expressed its hope that nonproliferation can be an area of cooperation rather than contention. That is our hope, as well, and we will continue to work with the PRC to ensure their cooperation in halting the spread of WMD and missiles.

That said, we recognize that the issue of nonproliferation is often a contentious one between us, and we will not paper over our differences. We will continue to use sanctions to underscore our compliance diplomacy so long as the PRC remains unable or unwilling to enforce its WMD and missile technology related regulations to stop proliferation by its quasi-governmental and private enterprises. At the same time, we look forward to continuing our ongoing discussions with China about these important issues. Resolution of these ongoing proliferation problems is essential: this Administration takes proliferation very seriously, however, and will not stand idly by and watch rogue states and terrorists obtain missiles and Weapons of Mass Destruction.

Mr. Chairman, that concludes my prepared remarks and I would be happy to take questions from you and your fellow commissioners.