PRC Acquisition of U.S. Technology

This chapter describes the methods by which the PRC attempts to acquire U.S. technology for military purposes. The types of technology and information that the PRC and individual PRC nationals have attempted to acquire, however, are far more broad. The PRC appears to try to acquire information and technology on just about anything of value. Not all of it, by any means, presents national security or law enforcement concerns.

The PRCÂ's appetite for information and technology appears to be insatiable, and the energy devoted to the task enormous. While only a portion of the PRCÂ's overall technology collection activities targeted at the United States is of national security concern, the impact on our national security could be huge.

The Committee has discovered evidence of a number of their successes. Given the size and variety of the PRCÂ's overall effort, and the limited U.S. resources and attention devoted to understanding and countering its unlawful and threatening elements, there is clear cause for concern that other serious losses have occurred or could occur in the future.

It is extremely difficult to meet the challenge of the PRCÂ's technology acquisition efforts in the United States with traditional counterintelligence techniques that were applied to the Soviet Union. Whereas Russians were severely restricted in their ability to enter the United States or to travel within it, visiting PRC nationals, most of whom come to pursue lawful objectives, are not so restricted. Yet the PRC employs all types of people, organizations, and collection operations to acquire sensitive technology: threats to national security can come from PRC scientists, students, business people, or bureaucrats, in addition to professional civilian and military intelligence operations.

In light of the number of interactions taking place between PRC and U.S. citizens and organizations over the last decade as trade and other forms of cooperation have bloomed, the opportunities for the PRC to attempt to acquire information and technology, including sensitive national security secrets, are immense. Moreover, the PRC often does not rely on centralized control or coordination in its technology acquisition efforts, rendering traditional law enforcement, intelligence, and counterintelligence approaches inadequate. While it is certainly true that not all of the PRCÂ's technology acquisition efforts are a threat to U.S. national security, that very fact makes it quite a challenge to identify those that are.

While this report, this Select Committee, and the nationÂ's counterintelligence organizations are focused on national security issues, it is thus necessary to understand the full range of the PRCÂ's technology acquisition efforts to discern its threatening aspects.

Commercial and Intelligence Operations
PRC Acquisition of U.S. Technology

The Structure of the PRC Government

The political, governmental, military, and commercial activities othe PeopleÂ's Republic of China are controlled by three directly overlapping bureaucracies: the Communist Party, the State, and the PeopleÂ's Liberation Army.

Foremost of these, and in ultimate control of all state, military, commercial, and political activities in the PRC, is the Chinese Communist Party (CCP).1 The Communist Party Secretary, Jiang Zemin, chairs both the Politburo and its powerful executive group, the Politburo Standing Committee. The Politburo, in turn, is supported by the CCP Secretariat.

The State governmental apparatus is under the direct control of the Communist Party Secretary, Jiang Zemin, who in his role as President serves as the official head of the State as well. Subordinate to the CCP Secretary in state affairs is the State Council, presided over by Premier Zhu Rongji, also a high-ranking member of the Communist Party.

The PeopleÂ's Liberation Army (PLA) is also directly under the control of the Communist Party. The top level of PLA authority is the CCPÂ's Central Military Commission (CMC), of which Jiang Zemin, the CCP Secretary, is also the Chairman. The CMCÂ's routine work is directed by its two Vice-Chairmen, Generals Zhang Wannian and Chi Haotian.

The 24-member CCP Politburo,2 which ultimately controls the PRCÂ's political, military, governmental, and commercial activities, does not usually conduct its business as a whole. Rather, due to its unwieldy size and membership consisting of persons from outside Beijing, the Politburo acts through its powerful seven-member Standing Committee. Involvement by the entire Politburo in specific decisions normally occurs when there are major policy shifts, crises need to be addressed, or formal legitimization of a particular policy is necessary.

In contrast, the seven most senior members of the Communist Party Politburo, comprising the Politburo Standing Committee, meet frequently. The CCP Politburo Standing Committee wields the real decision-making power in the PRC.

The Communist Party Secretariat officially serves as staff support to the Politburo and oversees the implementation of Politburo decisions by State bureaucracies. The Secretariat is composed of seven members of the Politburo and is an executive rather than a decision-making body. The current ranking member of the Secretariat is Vice-President and Standing Committee member Hu Jintao.

The State Council, the top level of the PRC State governmental apparatus, consists of the Premier, Vice Premiers, State Councilors, and Secretary and Deputy Secretaries General. It directs the activities of all State ministries, commissions, and offices.

The Communist PartyÂ's eight-member Central Military Commission (CMC) heads the PeopleÂ's Liberation Army, which includes the PRCÂ's army, navy, and air force, as well as espionage operations conducted through the Second Department of the PLA. The CMC has a powerful bureaucratic status roughly comparable to that of the Politburo Standing Commitee and the State Council. It meets regularly to address administrative matters and to formulate military policy and strategy.

In addition to their policy- and decision-making roles in the CMC, key members of that body – by virtue of their top posts in the Communist Party – also serve a bridging function between the CCP, the State, and the PLA.

The CMC, a Communist Party body, has no equivalent in the State sector. The State Central Military Commission, an organization within the State bureaucracy, is theoretically a separate decision-making body, but in reality it has no unique powers because its membership generally mirrors that of the PartyÂ's CMC. The PRCÂ's Ministry of Defense, the principal State bureaucracy for dealing with military affairs, is likewise composed of Communist Party CMC members, and its role is primarily a ceremonial one. The domination and control of the PLA by the Communist Party is thus complete.

COSTIND: The CCPÂ's Use of Corporations for Military Aims

The State Council controls the PRCÂ's military-industrial organizations through the State Commission of Science, Technology and Industry for National Defense (COSTIND). The State Council has a decisive role in Communist Party policy because of its function as interpreter, implementer, and overseer of broadly-worded and often ambiguous Politburo policy goals.

Created in 1982, COSTIND was originally intended to eliminate conflicts between the military research and development sector and the military production sector by combining them under one organization. But its role soon broadened to include the integration of civilian research, development, and production efforts into the military.

COSTIND presides over a vast, interlocking network of institutions dedicated to the specification, appraisal, and application of advanced technologies to the PRCÂ's military aims. The largest of these institutions are styled as corporations, notwithstanding that they are directly in service of the CCP, the PLA, and the State. They are:

• China Aerospace Corporation (CASC)


• China National Nuclear Corporation (CNNC)


• China North Industries Group (NORINCO)


• Aviation Industries Corporation of China (AVIC)


• China State Shipbuilding Corporation (CSSC)

Until 1998, COSTIND was controlled directly by both the CMC and the State Council. In March 1998, COSTIND was "civilianized" and now reports solely to the State Council. A new entity, the General Armament Department (GAD), was simultaneously created under the CMC to assume responsibility for weapons system management and research and development.

CCP Supremacy Over the State, the PLA, and the Economy

The PRC Constitution asserts the supremacy of the Communist Party over all other government, military, and civilian entities.3 But the CCP also relies on other, more pragmatic methods to ensure its primacy. The most evident and effective of these is hving senior CCP members in control of all State government bodies.4

The most obvious example of the Communist PartyÂ's practical control of both the State and the PLA is C