Squandered loans to China?

Newly declassified documents, forced from the U.S. Commerce Department by a
federal lawsuit, shows that $200 million in World Bank loans for a
“Technology Development Project” actually went to weapons research labs and
businesses wholly owned by the Chinese army. The documents reveal that World
Bank loans were used to modernize the Chinese army defense industry.

“The objective of the project is to support the (Chinese) Government’s
continuing reforms in technology policy and institutions so as to promote
the development of clear, productivity-enhancing technologies in China’s
industries,” states a 1995 report written by the Industry and Energy
Operations Division of the World Bank.

According to the World Bank report, “the (Chinese) Government will pass on
US$194.3 million of the loan proceeds through SPC (State Planning
Commission) to eligible sub-borrowers in the
form of sub-loans, with the Golden China Corporation acting on its behalf as
a financial agent.”

“The first component is designed to assist in transforming part of the
research and development (R&D) establishment into market-responsive
technology development corporations,” states the World Bank report. “This
component would hive off the most dynamic technology development and
service-oriented elements of existing research institutions to create —
through a competitive selection process — new, market-oriented entities,
called Engineering Research Centers (ERCs).”

“The second component comprises complementary investments in improving
technology public services, including: (i) the modernization of the National
Institute of Metrology and (ii) a technical assistance program for a
Productivity Center as well as for several training activities.”

However, according to the Defense Department, “Golden China Corporation” and
many of the so-called “Engineering Research Centers (ERCs)” supported by the
World Bank loans were actually owned and operated by the Chinese army unit
COSTIND (Chinese Commission for Science, Technology, and Industry for
National Defense). For example, the World Bank provided:

• $5 million to the Northwest Institute for Nonferrous Metal Research for
  “rare earth materials” used in “chemical, aviation,” and “nuclear power
  stations.” The Northwest Institute for Nonferrous Metal Research is part of
  the China National Nuclear Corporation (CNNC), producer of all nuclear
  weapons for the Chinese army.

• Over $5 million to the Harbin Research Institute for “welded steel
  products” used in “aviation” and “ship building.” Harbin was identified by
  the Department of Defense as a Chinese army front used to purchase Allied
  Signal turbo-fan engines for the People’s Liberation Army Air Force (PLAAF)
  in 1996.

• Over $4 million to the Marine Design & Research Institute of China for
  “ship design software and services.” The Marine Design & Research Institute
  is part of the China National Ship Building Corp. and the primary design
  facility for all Chinese warships, including nuclear powered submarines.

• Over $4 million to the Nanjing Radio Factory for “audio/visual” products
  used in “T.V.s, satellite equip., radios, CD players, etc.” The Nanjing
  Radio Factory is owned and operated by the Chinese army. The factory
  produces a wide variety of electronics for the PLA including CRTs, satellite
  equipment, and secure military radios.

• $3 million to Xi’an Jiatong University for “fluid machinery” research used
  in “turbo-compressors.” Xi’an Jiatong University was identified by the
  Defense Department as a major research center for the Chinese army, sharing
  facilities with the PLA chemical and biological weapons facilities that are
  located nearby.

The Chinese army loans from the World Bank also financed several money
making ventures for the Chinese army. For example, the World Bank provided
$5.5 million to the “China Textile Academy”
for “productivity enhancement.”

The World Bank was joined by “Foreign & Domestic Partners” also seeking to
improve the PLA textile production such as “Toray (Japan); Dupont (U.S.);
Bermag (Germany), the Textile Academy in Russia; and the Wool Bureau of New
Zealand.”

Even the World Bank could not avoid the fact that Chinese workers are being
exploited under harsh conditions by the Chinese army. The World Bank report
notes that “one-third” of the “11,000” textile firms associated with the
China Textile Academy are small to medium size enterprises (SMEs). The
report noted that many of the labor intensive textile “industries are in
urgent need of various properties” such as “environmental protection” for
their workers.

According to a 1997 Rand Corp. report on the Chinese defense industry, the
profits from PLA business ventures, such as textile exports, are split
between the PLA generals and the Chinese army. The Chinese army profits are
used to purchase advanced weapons, build new barracks for troops and provide
medical services for the PLA officers.

The Chinese generals use their slice of the profits for “lavish parties,”
“foreign luxury automobiles” and “Swiss bank accounts.” Thus, there is
little money left to provide “environmental protection” or improve working
conditions.

Of course, the Clinton administration, claims that it is impossible to
identify Chinese army-owned companies. Despite the difficulty, President
Clinton is required by law to perform this task.

Clinton signed the Fowler Amendment into law Oct. 17, 1998. It requires that
a list of companies controlled by Communist China’s People’s Liberation Army
be published in the Federal
Register by Jan. 15, 1999. So far, Clinton has ignored the law and refused
to reveal the PLA-owned businesses in America.

On Friday, Sept. 24, 1999, the ten top leaders in the House of
Representatives wrote a letter to Clinton, demanding immediate compliance
with U.S. law requiring public disclosure of the PRC’s PLA-owned companies
doing business in the United States.

According to House members, the Clinton White House claimed in September
1999 to have assigned the task of identifying the PLA companies to the
Defense Intelligence Agency (DIA). The DIA, however, has quietly informed
congressional leaders that the White House did NOT ask them to prepare such
a list. Thus, the identity of the Chinese army front companies operating
inside the United States continues to go unreported.

Many of the PLA companies that Clinton refuses to identify are well known to
the Commerce Department. The facts show the Clinton administration actively
courted business with the Chinese generals. In 1995, General Ding Henggao
sent Ron Brown a partial list of PLA-owned firms, including a local Chinese
army contact, complete with phone, fax and address.

“The Clinton-Gore administration’s failure to obey the law is knowing,
willful, and long-standing,” said House Policy Chairman Christopher Cox, who
released the letter. “Eight months after the deadline in the law, it is
essential that the president comply. By violating this statutory obligation,
the president shows contempt not only for the law but for congressional
oversight and the national security.”

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