The Chinese MID -- the Military Intelligence Department of the People's Liberation Army General Staff is also known in the spy community as simply the "Second Department." According to a December 1999 joint CIA/FBI report titled "Chinese Espionage Activities Against the United States", the Second Department is quite successful.

"Military intelligence collection against the United States is primarily conducted by military attaches assigned to the Defense Attaché's Office in the Chinese Embassy in Washington and the Military Staff Committee at the United Nations in New York City," states the 1999 report written by the CIA and FBI.

"For the most part, attaches openly collect information from Western publications as well as from their contacts in accordance with MID/PLA directives. Nonetheless, since 1987 the FBI and the U.S. Customs service have detected and interdicted at least two MID/PLA clandestine collection operations in the United States.

"The CIA and FBI also noted that the Second Department's greatest success in America is not through its uniformed agents and clandestine operatives. The Second has set up business in America.

"During the past 20 years, China has established a notable intelligence capability in the United States through its commercial presence," states the joint CIA/FBI report. "China's commercial entities play a significant role in its pursuit of proprietary/trade secret U.S. technology. The vast majority of Chinese commercial entities in the United States are legitimate companies; however, some are a platform for intelligence collection activities. Although a commercial entity may not be directly involved in the acquisition of information/technology, it may provide cover for both professional and non-professional intelligence collectors."

The dual-use of civilian activities to cover economic and military espionage can be directly attributed to the rise of the Chinese army as a global force.

The People's Liberation Army has remained loyal to the communist party since the fall of the Soviet Union. The attempted coup that brought Boris Yeltsin to power and the student demonstrations of 1989 frightened the Chinese communists into re-thinking their strategy, bringing the Army into communist political power. Chinese President Jiang Zemin is known to be a Chinese army "loyalist". Zemin not only leads the communist party but also has chaired the Central Military Command since his appointment to that position by Deng Xiaoping in April 1990. The fundamental principles of the new strategy are embodied in two People's Army terms for national defense: "Junzhuanmin" is the turning over of military resources to civilian use, and "junmin jieje" is the integration of the military and civilian. Both terms refer to the combination of the military and civilian resources such as airports, seaports, roads and communications. However, "Junzhuanmin" and "junmin jieje" also translate into a conversion that is reversible, with each resource having a dual function -- military and civilian. The twin track policy has resulted in increased budgets for the Chinese army, advanced technology for modern weapons and a strengthening of the Chinese military-industrial complex.

According to a Commerce Department document on Chinese military defense industries, the People's Liberation Army's new strategy is an economic war against America. "(Chinese) Civilian resources should be transferable to military industries for weapons production," states the document, entitled "Swords Into Market Shares," which was forced from the Clinton administration by a Freedom of Information lawsuit. "This is not only to prepare for war, but also to use trading firms such as NORINCO (China North Industries Corporation) and China Great Wall Industry Corporation to acquire foreign technologies, such as electronics, for military as well as economic modernization." Integration of the military and civilian economies has also put pressure on the Chinese army to make money. Budget cuts in the Army funds have been matched and surpassed by the increased income from Chinese army owned businesses. "Arms sales to the Third World are a prime example," noted the Commerce Department document. "Chinese arms sellers have found a niche in the Third World arms markets, especially in the Middle East. They are not likely to yield to political pressure and abandon these markets.

Whether or not these sales actually buy political influence for China, they are evidently quite profitable. Various sources estimate that between 17 and 25 percent of PLA profits from arms sales have been used to make up for budget cuts." Chinese army units have used capital to develop profitable business interests, such as owning a hotel and providing labor for joint ventures. U.S. Ambassador to China James Sasser wrote a State Department report on Chinese army communications activities with the so-called Chinese civilian Ministry of Posts and Telecommunications or MPT. "For example," wrote Sasser, "In laying long distance fiber optic lines for the MPT's telephones and digital data network, the PLA has provided soldiers to do much of the work. The PLA cadres are considered disciplined and hard working. Once the cable has been laid, the MPT typically allocates some of the bandwidth to the PLA." "The PLA is already involved in telecommunications in a number of other areas," stated Sasser in his report. "The PLA is probably involved in operation of some networks, particularly in southern China."

The Chinese army remains the greatest benefactor of continued trade with America. Despite budget cutbacks by the central communist government, the Chinese army's budget for strictly military resources has increased over 12 percent a year since 1990. The Chinese military continues to note that it is entitled to a "fair share" of the country's prosperity. The People's Liberation Army Second Department also shared some of its newfound wealth from U.S. trade with close friends inside America. According to the joint CIA/FBI report, China provides cash and benefits to American citizens in exchange for their support. "The Chinese government continues to seek influence in Congress through various means, including inviting Congressional members to visit the PRC, lobbying ethnic Chinese voters and prominent U.S. citizens, and engaging U.S. business interests to weigh in on issues of mutual concern," concluded the CIA/FBI report. Chinese military spies have penetrated Capitol Hill and the White House. The new Chinese military espionage network now extends inside the boardroom of corporate America, and the war-room at the Pentagon. During the Clinton years, the Chinese Army Second Department earned a reputation for success with victory after victory against the United States.

CIA/FBI Report