China and proliferation of weapons of mass destruction and missiles: policy issues.(CRS Report for Congress)

Updated May 9, 2007

Summary

Congress has long been concerned about whether U.S. policy advances the national interest in reducing the role of the People's Republic of China (PRC) in the proliferation of weapons of mass destruction (WMD) and missiles that could deliver them. Recipients of China's technology reportedly include Pakistan and countries that the State Department says support terrorism, such as Iran and North Korea. This CRS Report, updated as warranted, discusses the national security problem of China's role in weapons proliferation and issues related to the U.S. policy response, including legislation, since the mid-1990s. China has taken some steps to mollify U.S. concerns about its role in weapons proliferation. Nonetheless, supplies from China have aggravated trends that result in ambiguous technical aid, more indigenous capabilities, longer-range missiles, and secondary (retransferred) proliferation. As the Director of Central Intelligence (DCI) has reported to Congress, China remains a "key supplier" of weapons technology, particularly missile or chemical technology.

Policy issues in seeking PRC cooperation have concerned summits, sanctions, and satellite exports. On November 21, 2000, the Clinton Administration agreed to waive missile proliferation sanctions, resume processing licenses to export satellites to China, and discuss an extension of the bilateral space launch agreement, in return for another promise from China on missile nonproliferation. However, PRC proliferation activities again raised questions about sanctions. On 19 occasions, the Bush Administration has imposed sanctions on 32 different PRC "entities" (not the government) for transfers (related to ballistic missiles, chemical weapons, and cruise missiles) to Pakistan, Iran, or another country, including repeated sanctions on some "serial proliferators." (Table 1 summarizes sanctions imposed on PRC entities.) Among those sanctions, on September 1, 2001, the Administration imposed missile proliferation sanctions that effectively denied satellite exports (for two years), after a PRC company transferred technology to Pakistan, despite the November 2000 promise. On September 19, 2003, the State Department imposed more missile proliferation sanctions on NORINCO, a defense industrial firm, effectively denying satellite exports to China. However, for six times, the State Department waived this sanction for the ban on imports of other PRC government products related to missiles, space systems, electronics, and military aircraft, and then issued a permanent waiver in March 2007.

Skeptics question whether China's cooperation in weapons nonproliferation has warranted President Bush's pursuit of closer bilateral ties. The Administration has imposed repeated sanctions on "entities" but not the PRC government. China has not joined the Proliferation Security Initiative (PSI). Since 2002, Bush has relied on China's "considerable influence" on North Korea to dismantle its nuclear weapons. Beijing has hosted the Six-Party Talks and sponsored the Joint Statements of September 19, 2005, and February 13, 2007. Some question whether there has been progress in the process as well as results. China has pursued balanced positions on Iran and North Korea, but also evolved to vote for U.N. Security Council resolutions imposing sanctions against those countries. The 110th Congress might oversee a policy review by a North Korea Policy Coordinator as required by P.L. 109-364.

 
Contents 
 
Purpose and Scope 
 
PRC Proliferation Challenges 
    Partial Nonproliferation Commitments 
    Continuing Concerns and CIA Report 
    Nuclear Technology Sales to Pakistan 
        Ring Magnets 
        Other Nuclear Cooperation 
        A. Q. Khan 
    Missile Technology Sales to Pakistan 
        M-11 Missiles 
        Missile Plants and MRBMs 
    Nuclear Technology Sales to Iran 
        1997 Promise 
        Uranium Enrichment 
        Referral to U.N. Security Council 
    Missile Technology Sales to Iran 
        Ballistic Missiles 
        Anti-Ship Cruise Missiles 
    Chemical Sales to Iran 
    North Korea's Missile and Nuclear Weapons Programs 
        Suspected Missile Supplies 
        Secret Nuclear Programs 
        PRC Ports and Airspace 
        Military Relations 
        Trilateral and Six-Party Talks in Beijing 
    Missile Technology Sales to Libya 
    Missile Technology Sales to Syria 
    Missile Technology Sales to Iraq 
 
Policy Issues and Options 
    Issues for Policy 
        Debate 
        The PRC Government's Role 
    Foreign and Defense Policies 
        Summits 
        Counter-Terrorism Campaign 
        Missile Defense, Proliferation Security Initiative (PSI) 
        Export Control Assistance 
        Linkage to the Taiwan Issue 
    Economic Controls 
        Satellite Exports 
        Sanctions and the "Helms Amendment" 
        Capital Markets 
        Nuclear Cooperation and U.S. Export of Reactors 
        U.S. Import Controls 
        U.S. Export Controls 
    Nonproliferation and Arms Control 
        Nonproliferation Regimes (MTCR, NSG, etc.) 
        CTBT and Fissile Materials Production 
    International Lending and Japan 
 
List of Tables 
 
Table 1. PRC Entities Sanctioned for Weapons Proliferation 

Purpose and Scope

Congress has long been concerned about whether U.S. policy advances the U.S. interest in reducing the role of the People's Republic of China (PRC) in the proliferation of weapons of mass destruction (WMD) and missiles and obtaining China's cooperation in weapons nonproliferation. This problem refers to the threat of nuclear, chemical, or biological weapons and missiles that could deliver them. Some have argued that certain PRC transfers violated international treaties or guidelines, and/or have contravened various U.S. laws requiring sanctions to shore up those international standards. Even if no laws or treaties are violated, many view China's transfers as threatening U.S. security interests. Using a variety of unclassified consultations and sources, this CRS Report discusses the national security problem of the PRC's role in weapons proliferation and issues related to the U.S. policy response, including legislation, since the mid-1990s. Table 1, at the end of this report, summarizes the U.S. sanctions imposed or waived on PRC entities or the PRC government for weapons proliferation.

For a discussion of the policy problem in the 1980s to 1996, see CRS Report 96-767, Chinese Proliferation of Weapons of Mass Destruction: Background and Analysis, by Shirley Kan. See also, by the same author, CRS Report 98-485, China: Possible Missile Technology Transfers Under U.S. Satellite Export Policy--Actions and Chronology.

PRC Proliferation Challenges

Partial Nonproliferation Commitments

Since 1991, Beijing has taken steps to address U.S. and other countries' concerns by increasing its partial participation in international nonproliferation regimes and issuing export control regulations. However, questions have remained. China first promised tentatively to abide by the Missile Technology Control Regime (MTCR) in November 1991 and February 1992 and later reaffirmed that commitment in an October 4, 1994 joint statement with the United States. The MTCR, set up in 1987, is not an international agreement and has no legal authority, leaving issues about U.S. sanctions to shore up the standards unresolved. It is a set of voluntary guidelines that seeks to control the transfer of ballistic and cruise missiles that are inherently capable of delivering at least a 500 kg (1,100 lb) payload to at least 300 km (186 mi), called "Category I" or "MTCR-class" missiles. It was unclear whether China adhered to the revised MTCR guidelines of 1993 calling for the presumption to deny transfers of any missiles capable of delivering any WMD (not just nuclear weapons). A 1996 State Department fact sheet said that China unilaterally committed to controlling exports "consistent with the MTCR Guidelines and Annex," with the MTCR consisting of a common export control policy (Guidelines) applied to a common list of controlled items (Annex). However, a Senate Foreign Relations Committee report of September 11, 2000, said the State Department had argued to Congress that China agreed to the MTCR Guidelines, but not the Annex.

On November 21, 2000, Beijing said that it has no intention of assisting any other country in developing ballistic missiles that can be used to deliver nuclear weapons (missiles with payloads of at least 500 kg and ranges of at least 300 km) and promised to issue missile-related export controls "as soon as possible." After a contentious period that saw new U.S. sanctions, the PRC finally published those regulations and the control list (modeled on the MTCR) on August 25, 2002, as Washington and Beijing prepared for a Bush-Jiang summit on October 25, 2002.

China acceded to the Nuclear Nonproliferation Treaty (NPT) on March 9, 1992. The NPT does not ban peaceful nuclear projects. On May 11, 1996, the PRC issued a statement promising to make only safeguarded nuclear transfers. China, on July 30, 1996, began a moratorium on nuclear testing and signed the Comprehensive Test Ban Treaty (CTBT) in September 1996 but (like the United States) has not ratified it. Premier Li Peng issued nuclear export control regulations on September 10, 1997. On October 16, 1997, China joined the Zangger Committee (on nuclear trade). Also in October 1997, China promised not to start new nuclear cooperation with Iran. On June 6, 1998, the U.N. Security Council (including China) adopted Resolution 1172, asking states to prevent exports to India or Pakistan's nuclear weapon or missile programs. The PRC issued regulations on dual-use nuclear exports on June 17, 1998. In May 2004, China applied to join the Nuclear Suppliers Group (NSG), which accepted China as a member after the Bush Administration decided to support China, despite congressional concerns.

In November 1995, China issued its first public defense white paper, which focused on arms control and disarmament. Also, China signed the Chemical Weapons Convention (CWC) in January 1993. On April 25, 1997, China deposited its instrument of ratification of the CWC, before it entered into force on April 29, 1997. From 1993 to 1998, the PRC issued export control regulations on chemicals. On October 14, 2002, on the eve of a Bush-Jiang summit, the PRC issued regulations for export controls over dual-use biological agents and related technology. On December 3, 2003, China issued a white paper on nonproliferation, which stated that its control lists are almost the same as those of the Zangger Committee, NSG, CWC, Australia Group, and MTCR.

Continuing Concerns and CIA Report

Nevertheless, China is not a member of the MTCR or the Australia Group (AG) (on chemical and biological weapons). (In June 2004, China expressed willingness to join the MTCR.) China did not join the 93 countries in signing the International Code of Conduct Against Ballistic Missile Proliferation in The Hague on November 25, 2002. China has not joined the Proliferation Security Initiative (PSI) announced by President Bush on May 31, 2003. PRC weapons proliferation has persisted, aggravating trends that result in more ambiguous technical assistance, longer range missiles, more indigenous capabilities, and secondary (retransferred) proliferation.

The Director of Central Intelligence (DCI) noted that, for July-December 1996, "China was the most significant supplier of WMD-related goods and technology to foreign countries." As required by Section 721 of the FY1997 Intelligence Authorization Act, P.L. 104-293, the DCI's report to Congress, "Unclassified Report to Congress on the Acquisition of Technology Relating to Weapons of Mass Destruction and Advanced Conventional Munitions," has named China (plus Russia and North Korea) as "key suppliers" of dangerous technology. Subsequent discussions of the DCI's report refer to this "Section 721 report." Original legislation required a semi-annual report, and the FY2004 Intelligence Authorization Act, P.L. 108-177, changed the requirement to an annual report. However, neither the CIA nor the Director of National Intelligence (DNI) has submitted this required report to Congress since the November 2004 report that covered July-December 2003.

Nuclear Technology Sales to Pakistan

Ring Magnets. In 1996, some in Congress called for sanctions after reports disclosed that China sold unsafeguarded ring magnets to Pakistan, apparently in violation of the NPT and in contradiction of U.S. laws, including the Arms Export Control Act (P.L. 90-629) and Export-Import Bank Act (P.L. 79-173), as amended by the Nuclear Proliferation Prevention Act of 1994 (Title VIII of P.L. 103-236). On February 5, 1996, the Washington Times disclosed intelligence reports that the China National Nuclear Corporation, a state-owned corporation, transferred to the A.Q. Khan Research Laboratory in Kahuta, Pakistan, 5,000 ring magnets that can be used in gas centrifuges to enrich uranium. Reportedly, intelligence experts believed that the magnets provided to Pakistan were to be used in special suspension bearings at the top of rotating cylinders in the centrifuges. The New York Times, on May 12, 1996, reported that the shipment was made after June 1994 and was worth $70,000. The PRC company involved was China Nuclear Energy Industry Corporation, a subsidiary of the China National Nuclear Corporation. The State Department's report on nonproliferation efforts in South Asia (issued on January 21, 1997) confirmed that "between late 1994 and mid-1995, a Chinese entity transferred a large number of ring magnets to Pakistan for use in its uranium enrichment program."

The Clinton Administration's decision-making was complicated by considerations of U.S. corporations doing business in China. Officials reportedly considered imposing then waiving sanctions or focusing sanctions only on the China National Nuclear Corporation, rather than large-scale sanctions affecting the entire PRC government and U.S. companies, such as Westinghouse Electric Corporation (which had deals pending with China National Nuclear Corporation) and Boeing Aircraft Company. At the end of February 1996, Secretary of State Warren Christopher instructed the Export-Import Bank to suspend financing for commercial deals in China for one month, reported the New York Times (February 29, 1996). Christopher reportedly required time to try to obtain more information to make a determination of whether sanctions would be required. Meanwhile, DCI John Deutch reportedly said at a White House meeting that PRC officials at some level likely approved the sale of magnets. Defense Secretary William Perry supported this view, but officials of the Commerce and Treasury Departments and the U.S. Trade Representative argued there was lack of solid proof, according to the Washington Post (April 1, 1996).

On May 10, 1996, the State Department announced that China and Pakistan would not be sanctioned, citing a new agreement with China. Clinton Administration officials said that China promised to provide future assistance only to safeguarded nuclear facilities, reaffirmed its commitment to nuclear nonproliferation, and agreed to consultations on export control and proliferation issues. The Administration also said that PRC leaders insisted they were not aware of the magnet transfer and that there was no evidence that the PRC government had willfully aided or abetted Pakistan's nuclear weapon program through the magnet transfer. Thus, the State Department announced that sanctions were not warranted, and Export-Import Bank considerations of loans for U.S. exporters to China were returned to normal. On May 11, 1996, China's foreign ministry issued a statement that "China will not provide assistance to unsafeguarded nuclear facilities." In any case, since 1984, China has declared a policy of nuclear nonproliferation and a requirement for recipients of its transfers to accept IAEA safeguards, and China acceded to the NPT in 1992.

That year, Congress responded to the Administration's determination not to impose sanctions by adding language on "persons" in the Export-Import Bank Act, as amended by Section 1303 of the National Defense Authorization Act for FY1997 (P.L. 104-201), enacted on September 23, 1996.

Other Nuclear Cooperation. On October 9, 1996, the Washington Times reported that a CIA report dated September 14, 1996, said that China sold a "special industrial furnace" and "high-tech diagnostic equipment" to unsafeguarded nuclear facilities in Pakistan. In September 1996, PRC technicians in Pakistan reportedly prepared to install the dual-use equipment. The deal was allegedly made by the China Nuclear Energy Industry Corporation, the same firm which sold the ring magnets. Those who suspected that the transfer was intended for Pakistan's nuclear weapons program said that high temperature furnaces are used to mold uranium or plutonium. The CIA report was said to state that "senior-level government approval probably was needed" and that PRC officials planned to submit false documentation on the final destination of the equipment. According to the press, the CIA report said that the equipment was set to arrive in early September 1996. The Washington Post, on October 10, 1996, further reported that the equipment was intended for a nuclear reactor to be completed by 1998 at Khushab in Pakistan. On October 9, 1996, the State Department said that it had not concluded that China violated its promise of May 11, 1996. However, the State Department did not publicly address whether the suspected transfers occurred before May 11, 1996, violated the NPT, or contradicted U.S. laws (including the Arms Export Control Act, Export-Import Bank Act, and the Nuclear Proliferation Prevention Act).

Concerns have persisted about PRC assistance to Pakistan's nuclear facilities. As reported by Pakistani and PRC news sources in 1992, China began to build a nuclear power plant at Chashma and was suspected in 1994 of helping Pakistan to build an unsafeguarded, plutonium-producing reactor at Khushab, according to Nucleonics Week (June 19, 1997 and February 26, 1998). Operational since 2001, the Chashma reactor has IAEA safeguards but not full scope safeguards (Nucleonics Week, April 26, 2001; and IAEA, Annual Report 2001).

Referring specifically to Pakistan's efforts to acquire equipment, materials, and technology for its nuclear weapons program, the DCI's June 1997 report for the last half of 1996 (after China's May 1996 pledge) stated that China was the "principal supplier." Then, on May 11 and 13, 1998, India conducted nuclear tests, citing China's nuclear ties to Pakistan, and Pakistan followed with nuclear tests on May 28 and 30, 1998. China, as Pakistan's principal military and nuclear supplier, failed to avert the tests and did not cut off nuclear aid, but condemned the tests at the U.N. The Arms Control and Disarmament Agency's annual report on arms control for 1998 stated that "there continued to be some contacts between Chinese entities and Pakistan's unsafeguarded and nuclear weapons program."

In 2000, news reports said that some former U.S. nonproliferation and intelligence officials suspected that China provided equipment for Pakistan's secret heavy water production plant at Khushab, where an unsafeguarded reactor reportedly started up in April 1998 and has generated weapons-grade plutonium. Clinton Administration officials at the White House and State Department reportedly denied China's involvement but said that they did not know the origins of the plant. (1) The DCI reported in November 2003 that, in the first half of 2003, continued contacts between PRC entities and "entities associated with Pakistan's nuclear weapons program" cannot be ruled out, despite the PRC's 1996 promise not to assist unsafeguarded nuclear facilities. The Director of the Defense Intelligence Agency (DIA), Vice Admiral Lowell Jacoby, testified to the Senate Intelligence Committee on February 24, 2004, that PRC entities "remain involved with nuclear and missile programs in Pakistan and Iran," while "in some cases," the entities are involved without the government's knowledge, thus implying that there are cases in which the PRC government has knowledge of the relationships.

On May 5, 2004, China signed a contract to build a second nuclear power reactor (Chashma-2) in Pakistan. This contract raised questions because of continuing PRC nuclear cooperation with Pakistan and its signing right before a decision by the Nuclear Suppliers Group (NSG) on China's membership. With a pre-existing contract, Chashma-2 would be exempted from the NSG's requirement for full-scope safeguards (not just IAEA safeguards on the reactor). (2) (See Nonproliferation Regimes below for policy discussion.)

A. Q. Khan. China's past and persisting connections to Pakistan's nuclear program have raised questions about whether China had involvement in or knowledge about the long-time efforts, publicly confirmed in early 2004, of Abdul Qadeer Khan, the former head of Pakistan's nuclear weapon program, in selling uranium enrichment technology to Iran, North Korea, and Libya. DCI George Tenet confirmed A.Q. Khan's network of nuclear trade in open testimony to the Senate Intelligence Committee on February 24, 2004.

China's association can be raised particularly because China was an early recipient of the uranium enrichment technology Khan acquired in Europe. (3) Also, there are questions about whether China has shared intelligence with the United States about Khan's nuclear technology transfers. With the troubling disclosures, China might be more willing to cooperate on nonproliferation or might remain reluctant to confirm its involvement. A senior Pakistani diplomat was quoted as saying that, while in Beijing in 2002, PRC officials said they knew "A.Q. Khan was in China and bribing people, and they wanted him out." (4) Particularly troubling has been the reported intelligence finding in early 2004 that Khan sold Libya a nuclear bomb design that he received from China in the early 1980s (in return for giving China his centrifuge technology), a design that China had already tested in 1966 and had developed as a compact nuclear bomb for delivery on a missile. (5) That finding raised the additional question of whether Khan also sold that bomb design to others, including Iran and North Korea. DCI Porter Goss testified in February 2005 that the Bush Administration has continued to explore opportunities to learn about Khan's nuclear trade, adding that "getting

to the end of that trail is extremely important for us. It is a serious proliferation question." (6)

Missile Technology Sales to Pakistan

M-11 Missiles. Transfers of the PRC's M-11 short range ballistic missiles (SRBMs) or related equipment exceed MTCR guidelines, because the M-11 has the inherent capability to deliver a 500 kg (1,100 lb) warhead to 300 km (186 mi). Issues about U.S. sanctions have included the questions of whether PRC transfers to Pakistan involved M-11 missile-related technology (Category II of the MTCR) or complete missiles (Category I). Sanctions are mandated under Section 73(a) of the Arms Export Control Act (AECA) and Section 11B(b)(1) of the Export Administration Act (EAA) (as amended by the FY1991 National Defense Authorization Act).

In June 1991, the Bush Administration first imposed sanctions on entities in China for transferring M-11 technology to Pakistan. Sanctions affected exports of supercomputers, satellites, and missile technology. The Administration later waived the sanctions on March 23, 1992. On August 24, 1993, the Clinton Administration determined that China had again transferred M-11 equipment (not whole missiles) to Pakistan and imposed new sanctions (affecting exports of some satellites). On October 4, 1994, Secretary of State Warren Christopher and Foreign Minister Qian Qichen signed a joint statement, saying that Washington would waive the August 1993 sanctions and Beijing would not export "ground-to-ground missiles" "inherently capable" of delivering a 500 kg warhead 300 km. The Administration waived the sanctions on November 1, 1994.

However, contentious policy questions about imposing sanctions for the 1992 transfer of complete M-11 SRBMs (not just components) persisted until 2000. The Washington Times (March 14, 1997) said "numerous" intelligence reports indicated that M-11 missiles were "operational" in Pakistan, but these findings were disputed by some policymakers. Secretary of Defense William Cohen issued a Pentagon report in 1997 stating that Pakistan acquired "SRBMs" as well as related equipment from China in the early 1990s. (7) In a 1998 report to Congress on nuclear nonproliferation in South Asia, the State Department acknowledged its concerns about "reports that M-11 missiles were transferred from China to Pakistan" but added that it had not determined that such transfers occurred, "which would be sanctionable under U.S. law." (8) Gordon Oehler, former head of the CIA's Nonproliferation Center, testified on June 11, 1998, to the Senate Foreign Relations Committee that in November 1992, "the Chinese delivered 34 M-11s to Pakistan." In July 1998, the Rumsfeld Commission said that China had transferred complete M-11s to Pakistan. (9)

Some said that sanctions were not imposed for transfers of complete M-11s, because the missiles remained inside crates at Sagodha Air Base, according to the Wall Street Journal (December 15, 1998). Critics in Congress said the Clinton Administration avoided making determinations of whether to impose sanctions, by delaying tactics, re-writing reports, and setting high evidentiary standards. The Senate Foreign Relations Committee issued a report in September 2000, saying that the Administration avoided such determinations through the use of "bureaucratic maneuvers" to delay the drafting of "Statements/Findings of Fact" by the intelligence community and to not schedule interagency meetings to consider those findings. (10)

On September 9, 1999, the intelligence community publicly confirmed for the first time that "Pakistan has M-11 SRBMs from China" and that they may have a nuclear role. (11) However, the State Department argued on September 14, 1999, that it required a "high standard of evidence" and had not yet determined that Category I sanctions were warranted, despite the intelligence judgment. (Category I sanctions would deny licenses for exports of Munitions List items, among other actions, and Congress transferred satellites back to the Munitions List, effective March 15, 1999.) The Far Eastern Economic Review reported on May 18, 2000, that the Clinton Administration and Senator Helms of the Foreign Relations Committee struck a deal in 1999 that required a decision on sanctions for the PRC's M-11 transfer to Pakistan in exchange for the confirmation of Robert Einhorn as Assistant Secretary of State for Nonproliferation (approved on November 3, 1999). On November 21, 2000, the Clinton Administration said it determined that PRC entities had transferred Category I and Category II missile-related items to Pakistani entities, and sanctions would be waived on the PRC for past …