In a related development, a Chinese-origin businessman, William Tsu Cha-Wai,   was arrested in California on January 10 on the charge of illegally exporting about 200 sophisticated integrated circuits (ICs) to China.   These ICs find application in military radar systems. According to the Justice Department officials William Tsu Cha-Wai is born in China but has become a naturalised US citizen.

Already two Chinese companies, Dalian Sunny Industries (a.k.a Limmt Economic and Trade Company Ltd) and Bellamax are facing trade sanctions for allegedly engaging in the missile technology proliferation.  The sanctions were imposed on Feb 2, 2009 for a period of two years by invoking the US Arms Export Control Act and the Export Administration Act of 1979.

This is not the first time that the Limmt Economic and Trade Company Limited is facing the US wrath. It came under sanctions regime earlier in June 2006 for supplying missile-related components to Iran.

China expectedly took exception to the US decision with foreign ministry spokeswoman, Jiang Yu, saying that American action could harm bilateral cooperation in the field of anti-proliferation besides prospects for future economic cooperation.  She also argued that American domestic laws could not be used against foreign business entities.

Proliferation of US Space Technology to China

On November 17, 2008, Shu Quan-Sheng, a China-born US citizen, pleaded guilty before a US court for illegally exporting American military space know-how to China in violation of the US Arms Export Control Act, according to the Justice Department.  

An expert in cryogenics, Shu was President of Virginia based AMAC International Inc which has offices in Beijing. It is a NASA sub-contractor as well and deals in cryogenic and magnetic components.

Faced with a water tight case, Shu admitted that he had handed over information on the design and development of a fuel system for space launch vehicles to China between 2003 and 2007. He also confessed that he gave a specific military document detailing the design of liquid hydrogen tanks crucial to space launch vehicles in December 2003.

The third charge that stuck to him and he admitted was that he had bribed Chinese officials about $ 189,300 to secure a $ 4 million contract (awarded in January 2007) for the development of a liquid hydrogen tank system for an unidentified French company.

China Foreign Office strongly refuted these allegations (November 18, 2008) and asserted tha the case against Shu was sheer fabrication based on ulterior motives.  

Another case that remains a sore point in the Sino-American relations was an attempt to export carbon fiber products illegally to China. Carbon fiber, a corrosion resistant material, is used for electromagnetic shielding in rockets, satellites, and spacecraft as well for uranium enrichment.

Ping Cheng, a US citizen and two Singapore nationals (Kok Tong Lim and Jian Wei Ding) were indicted in the case. The charge is that they had conspired to violate the US export administration regulations between Oct 2006 and Oct 2008 to illegally export high-modulus carbon fiber (Torray M40 and Torray M60) to China, Singapore and Hong Kong.  It is also alleged that the China Academy of Space Technology (CAST) was one of the intended destinations.

The same month, Oct 2008, saw US impose trade sanctions on three Chinese companies viz., China Xinshidai Company (CXC), China Shipbuilding and Offshore International Corporation Ltd (CSOIC), and Huazhong Numerical Control Co Ltd. (HCNC) for allegedly violating the ban on sale of technology that could help Iran, Syria or North Korea. The ban effective from October 23, 2008 was for two years.

Similar non-proliferation related trade sanctions were clamped on four other Chinese companies from April 23, 2007 for a period of two years. These firms were China National Precision Machinery Import/Export Corporation, Shanghai Non-Ferrous Metals, Pudong Development Trade Company and Zibo Chemet Equipment Company.

The 2008 ‘melt down’ and its aftermath has however forced the United States and the European Union to go soft on sanctions regime and to tap China’s huge foreign exchange reserves for bailing out their cutting edge industries and enterprises, that need foreign capital for survival, according to the annual report (2008) by COSTIND submitted to the Ministry of National Defence.  

The report further reveals that China’s Xinghou Group has bought over the Soma group of France, one of the oldest manufacturers of high speed gears, machines and tools that find extensive applications in aviation, space and defence industry.
 
US Department of Commerce has recently lifted sanctions imposed on Great Wall Group since 2006 that will help USA do business with China.

Put differently, the financial crisis that engulfed the West has come as a boon to China to play the role of a savoir of these enterprises in difficult time. This is enabling the Chinese to get access to key equipment and cutting edge technologies in the fields of space aviation and missile defence.

This is also clear from a Paris based website’s report that French companies including France Telecom were being forced to share their communications filtering expertise with Chinese intelligence agencies. A specific request came from Zhou Yongkang, member of the Politburo Standing Committee of the CCP CC and head of the security apparatus in China, the web site, Intelligence online (FBIS) said.

The new technologies would enable China not only to monitor telephone conversations but also disconnect a conversation in case it is found any identified key words are used