http://www.insightmag.com/articles/story4.html Insight Magazine Vol. 15, No. 40 -- November 1, 1999 World Bank Loans Finance Chinese Army By Charles Smith Newly declassified documents, forced from the U.S. Commerce Department by a federal lawsuit, show 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 People's Liberation Army, or PLA. The documents reveal that World Bank loans were used to modernize the Chinese 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." However, according to the Defense Department, "Golden China Corporation" and many of the so-called "engineering research centers" supported by the World Bank loans actually were owned and operated by the Chinese military's COSTIND, which stands for the 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 Corp., or CNNC, producer of all nuclear weapons for the Chinese military. - More than $5 million to the Harbin Research Institute for "welded steel products" used in aviation and shipbuilding. 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, or PLAAF, in 1996. - More than $4 million to the Marine Design and Research Institute of China for "ship-design software and services." The Marine Design and Research Institute is part of the China National Ship Building Corp. and the primary design facility for all Chinese warships, including nuclear-powered submarines. The loans to the Chinese military from the World Bank also financed several moneymaking ventures for the PLA. For example, the World Bank provided $5.5 million to the China Textile Academy for "productivity enhancement." According to a 1997 Rand Corp. report on the Chinese defense industry, the profits from People's Liberation Army business ventures such as textile exports are split between the PLA generals and the Chinese military. The Chinese army profits are used to purchase advanced weapons, build new barracks for troops and provide medical services for PLA officers. The Chinese generals use their slice of the profits for "lavish parties, foreign luxury automobiles and Swiss bank accounts," according to the Rand report. 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 PLA-owned companies. Despite the difficulty, President Clinton is required by law to perform this task. The Fowler amendment, signed into law by Clinton on Oct. 17, 1998, requires that a list of companies controlled by the PLA and operating in the United States be published in the Federal Register by Jan. 15, 1999. So far, Clinton has ignored the law and refused to expose these PLA operations. On Sept. 24 the 10 top leaders in the House of Representatives wrote a letter to Clinton, demanding immediate compliance with U.S. law requiring public disclosure of China'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, or DIA. According to Al Santoli, an aide to Rep. Dana Rohrabacher, a California Republican, the DIA quietly has informed congressional leaders that the White House did not ask them to prepare such a list. In short, the White House has made no effort to identify the Chinese military's front companies. But many of the PLA companies that Clinton refuses to identify are well known to the Commerce Department. And evidence shows that the Clinton administration actively courted business with the Chinese generals. In 1995, Gen. Ding Henggao sent then-commerce secretary Ron Brown a partial list of PLA-owned firms, including a local PLA contact, complete with phone and fax numbers, as well as an address. "The Clinton-Gore administration's failure to obey the law is knowing, willful and longstanding," said House GOP Policy Chairman Rep. Christopher Cox of California, 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." Charles Smith is an online journalist specializing in national-security issues and is president of Richmond, VA.-based Softwar, a computer-security company.
