The Chinese Army is in business. The People’s Liberation Army (PLA)
draws great profits from business funding, commercial loans and outright
sales in America. The profits eventually are used to support the PLA’s
main line of work — that of killing people.

The Rand Corporation, a government sponsored think-tank, documented
some of the profits drawn by the Chinese Army in a 1997 report on the
red defense industry. The Clinton administration was forced to make the
Rand report public by order of Federal Judge Robert Payne during a
Freedom of Information lawsuit.

“For those who oppose any subsidization of the PLA, there is thus
ample evidence that profits from PLA-affiliated enterprises directly
benefit the main-line forces of the Chinese military,” concludes the
Rand report.

According to the Rand Corporation, “American companies in China
sometimes seek to transfer dual-use technology to their Chinese
partners, some of whom have military connections.

“The Chinese have even enlisted former government officials to help
them. Retired General Richard Secord, a member of the Reagan national
security team, helped COSTIND’s Yuanwang Corporation to create
Technology Selection Inc. in Mountain View, California, which plans to
acquire dual use technology and ship it to China.

“Where do these profits go and what are they used for?” asks the Rand

“Most analysts believe that military enterprises are permitted to
keep a substantial proportion of their earnings. According to Tai Ming
Cheung, the amount retained varies according to the type of military
enterprises and the profitability of the operation, but they are
generally able to retain 20-40 percent of their profits for reinvestment
and other uses.

“The remaining monies are divided between the General Logistics
Department (40-60%), regional and provincial military authorities
(10-20%) and the local PLA unit that owns the enterprise (10-20%). The
profits passed to the local PLA unit, in turn, are diverted to two
general areas. Some of the money is used for training, as well as to
improve the living standards of the troops, including barracks
construction and repair, food subsidies, and medical coverage. Other
funds, however, are used for more corrupt purposes, such as paying for
lavish meals, expensive foreign luxury automobiles, and Swiss bank

The Rand report is not the only view inside the Chinese economy.
There is more information on the Chinese military and illegal activities
compiled by the former U.S. Defense attaché to Beijing, Lt. Colonel
Dennis Blasko. Blasko wrote a report, called “An Introduction to the
Chinese Defense Industry” in which he details where the money goes.

“According to one informed observer,” wrote Blasko in his 1994 paper
on China, “a large percentage of the foreign earnings of
defense-industrial companies are repatriated back to the factory or
group of factories in China, in order to reinvest at the firm level,
purchase new technology or alleviate some of the social pressures
currently drowning these factories in red ink, such as raising workers’
wages and subsidizing other security burdens.

“The second major recipients are the traders themselves,” noted
Colonel Blasko, “who must pay for the foreign operations base and often
reward themselves with large official and unofficial commissions from
the transactions.

“The final group of recipients, the superior ministry … may extract
a tax from the factories, although this money is generally assumed to be
a relatively small percentage of the overall pie. In the case of the
ministry level receipts, these funds are believed to be used for a wide
variety of legitimate and illegitimate purposes, ranging from
modernization of industrial plants to the padding of the Swiss bank
accounts of top ministry officials.

“From a western perspective,” noted Blasko, “what the Chinese call
defense ‘conversion’ might better be called ‘diversification,’ as new
product lines are developed in separate areas while military production
capability is retained.

“Some of the monetary profits which accrue from defense conversion
undoubtedly have found their way back into the overall funds available
for defense spending, whether officially listed as part of the budget or
not. These additional funds naturally have given the military leadership
greater options in how they spend the monies available.

“It is certain that some profits from defense conversion could be
used to buy prohibited technology,” concluded Blasko.

The failure of American trade with China is that many of the
so-called “joint” business ventures have fallen apart, or worse, turned
into fronts for the Chinese Army operations against America. For
example, the U.S. Commerce Department documented exactly how a Chrysler
“joint venture” in China to produce minivans backfired.

The January 1999 U.S. Commerce Dept. report on technology transfers
to China states, “despite almost a decade of relative success in
producing both the Jeep Cherokee and a wholly locally produced military
style jeep (the BJ2020 series), by 1995 Chrysler had pulled out of its
bid to build a new minivan joint venture in Shanghai out of complete

“Chrysler executives were expressly concerned over licit and illicit
technology transfers. Chinese officials were demanding more advanced
technology than seemed appropriate or necessary to Chrysler,” noted the
Commerce report.

“Chrysler’s concerns were amplified when Chrysler CEO Robert Eton was
made aware that knock-offs of Chrysler’s Jeep Cherokee had been seen on
the streets of Beijing. When complaining about this to Chinese
officials, he reportedly was told that this (the ability to copy
Chrysler’s Jeep Cherokee) was a good sign of progress in China’s auto
industry, about which he should be pleased. Apparently, he was not, and
Chrysler soon canceled plans to go ahead with the Shanghai plant.”

The debate about trade with China has split the U.S. commercial
community and the Republican Party into two factions. Representative of
the two factions, two Virginia Republicans squared off this week and the
subject was permanent “Favored” trade with China. The two are seeking
to replace retiring House Commerce Committee Chairman, Representative
Thomas Bliley, R-Va.

“I do not support automatic renewal of most-favored nation status
annually,” stated State Senator Steve Martin. “Anyone who kicks his dog,
beats his wife, and maintains constant threat to his neighbors should
not expect to have normal relations with us.”

Republican Delegate Eric Cantor disagrees. “I am for opening trade
lines to make sure that we have access to trade with China. … In
fact, the more we trade with China the more likelihood there will be
freedom and opportunity and consumer choice,” said Cantor.

Cantor’s argument, that continued trade with China brings “freedom
and opportunity and consumer choice” is one shared by top national
Republican leaders, including former President Bush. Chinese dissident
Harry Wu does, however, not share Cantor’s view.

“Freedom is not defined by having more choices of toothpaste,” stated
Harry Wu flatly during a personal interview.

Harry Wu spent a good portion of his adult life in a political
concentration camp in China. Communist China maintains a system of
so-called prison camps called “Lo Gai.” Harry dug coal for 13 years
under the People’s Armed Police guards for speaking his mind, before the
communists finally exiled him from his nation.

Harry Wu told me of his dangerous attempt to re-enter China in 1995,
through the remote border with Kazakhstan. Once inside China, he was
quickly identified by the Chinese Ministry of State Security, picked up
and taken to a local station under arrest.

The remote border Security police station had no phone lines.
However, the State Security officers were in real time contact with the
main police computers in Beijing, using an American satellite uplink.
The Chinese Security officers used American computers to search a
centralized data bank in Beijing, pulling his complete dossier,
photograph and fingerprints.

Harry Wu’s capture and processing on U.S. made equipment is a simple
illustration of how American trade with China can be perverted into a
tool of oppression. The cost can take years to accumulate but it is
paid eventually. Corporate executives should note that survivors of
World War II death camps have won in court against international
suppliers such as Ford and very large Swiss banks.

For those who oppose any subsidization of the Chinese Army, there is
abundant evidence that profits from U.S. trade directly benefit the
main-line forces of the Chinese military. It’s time to put the People’s
Liberation Army out of business.

Virginia State Senator Steve Martin is right. Anyone who kicks his
dog, beats his wife, and maintains constant threat to his neighbors
should not expect to have normal relations.

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