I am pleased to appear today before the U.S.-China Security Review Commission. The Commission has asked me to comment on China’s efforts to obtain sensitive technology from the United States, and on the effectiveness of export controls to protect U.S. national security.

I would like to begin with a few remarks about China’s current and projected strategic posture. In a report released earlier this month, the CIA observed that China has a long-running modernization program to develop mobile, solid-propellant ICBMs and that the intelligence community projects that by 2015, most of China’s strategic missile force will be mobile. The CIA also pointed out that China has had the ability to develop and deploy a multiple reentry vehicle system for many years, including a MIRV system. The CIA assessed that China could develop a multiple reentry vehicle system for its CSS-4 ICBM in a few years, although its pursuit of a multiple RV capability for its mobile ICBMs and SLBMs would encounter significant technical hurdles and would be very costly.

The intelligence community projects that the overall size of China’s strategic ballistic missile forces, over the next 15 years, will range from about 75 to 100 warheads deployed primarily against the United States. U.S. intelligence predicts that China will have about two dozen shorter range DF-31 and CSS-3 ICBMs that could reach parts of the United States, and an SRBM force of several hundred missiles by 2005.

Imports of high technology from the United States, such as high-performance computers, will undoubtedly help China reach these strategic goals.

I would like to direct the Commission’s attention to a report on sensitive – that is, strategically important – U.S. exports to China that my organization published in April 1999. The report covered the period from 1988 to 1998. The report found that the U.S. Commerce Department approved more than $15 billion worth of strategically sensitive U.S. exports to the People’s Republic of China. The exports included equipment that can be used to design nuclear weapons, machine nuclear weapon components, improve missile designs and build missile components.

Some of this “dual-use” equipment went directly to China’s leading nuclear, missile and military sites – the main vertebrae in China’s strategic backbone. And several of these Chinese buyers later supplied nuclear, missile and military equipment to Iran and Pakistan. It seems clear that China received American exports of great military and strategic value with the blessing of the U.S. government. Consider the following:

• The China National Nuclear Corporation was allowed to buy equipment useful for uranium prospecting. China National Nuclear then helped Iran prospect for uranium that U.S. intelligence believes will be used to make nuclear weapons.

• The China Precision Machinery Import-Export Corporation was allowed to buy equipment useful for building China’s new C-801 and C-802 anti-ship cruise missiles. China Precision then exported the missiles to Iran where, according to the U.S. naval commander in the Persian Gulf, they threaten U.S. ships and personnel.

• The Chinese Academy of Sciences was allowed to receive equipment to process data from a nuclear fusion research reactor. The Academy then exported the reactor to Iran, where it is used for training scientists believed to be working on nuclear weapons.

American equipment was also approved for the National University of Defense Technology, which helps the People’s Liberation Army design advanced weapons, for the University of Electronic Science and Technology, which helps develop stealth aircraft and advanced military radar, for the Beijing University of Aeronautics and Astronautics, which helps develop missiles and specializes in guidance, navigation, and flight dynamics. The licensing records do not reveal whether all the items approved were actually shipped, but it is safe to assume that virtually all of them were, otherwise it would not have been appropriate to apply for a license.

In preparation for this hearing, our staff has prepared a short table that brings the report up to date. The table contains data on U.S. exports approved for China for fiscal years 1998 and 1999. The exports during these two years followed essentially the same pattern that we observed during the previous decade. The table is attached to my testimony as Appendix A.

I would also like to direct the Commission’s attention to an export licensing case that has arisen since our report was prepared. The case shows that the Commerce Department has continued to favor exports to China that are highly likely to undermine U.S. national security.

I am sure the members of the Commission remember the indictment of CATIC, the China National Aero-technology Import-Export Corporation. CATIC was in indicted in 1999 for diverting American machine tools to a Chinese cruise missile and military aircraft plant. The powerful machines had produced parts for the B-1 strategic bomber and the MX nuclear missile, and CATIC was charged with lying to get the machines out of the United States in 1995 by promising to restrict them to civilian use.

Within two months or less of the indictment, however, the Commerce Department sought to allow one of CATIC’s sister companies to buy the same kind of American machine tool that CATIC was accused of diverting. The export was a five-axis milling machine similar to the machines listed in CATIC’s indictment. It was fully capable of making high-precision parts for China’s next generation of fighters, bombers and missiles.

A company in Milford, Massachusetts called Bostomatic requested permission to sell the machine to China’s Xian Aero-engine Company, which makes engines for China’s military aircraft, including the nuclear-capable H-6 strategic bomber. Xian Aero-engine promised to use the milling machine only to make civilian aircraft, but that is what CATIC promised. Xian, like CATIC, is owned by Aviation Industries of China. Since both companies belong to the same organization, no one should have been fooled.

To make matters worse, Bostomatic was purchased in 1999 by the Agie Charmilles Group, a Swiss concern. According to U.N. inspectors, eleven of Agie’s machine tools were found at five of Saddam Hussein’s leading nuclear weapon and missiles sites in 1992. And in January 1999, General Alexander Zdanovich, a spokesman for Russia’s foreign intelligence services, said that Agie had supplied Iran with equipment for making liquid fueled ballistic missiles.

The fact that the Commerce Department advocated the approval of this export shows that the Department was willing to promote trade no matter what the cost to U.S. national security. Fortunately, adverse publicity, together with opposition from other federal agencies, prevented the export from going forward.

Another subject I would like to discuss today is the export of supercomputers. Although he recently called for strengthening export controls, President George W. Bush announced on January 2 a further relaxation in controls on the export of American supercomputers. It will soon be possible for military entities in China to buy American computers performing 190 billion operations per second (190,000 MTOPS, or million theoretical operations per second), which is more than double the previous threshold of 85,000 MTOPS set by President Clinton on his last day in office.

The main argument for the recent relaxations is that higher computer speeds can be achieved by wiring together a number of slower computers. But this argument proves too much. It is obvious that if a number of computers, each operating at 190 billion operations per second, are grouped together, the resulting speed will be much higher than the speed achieved by combining a similar number of computers operating at 85 billion operations per second. We are rapidly reaching the point where no meaningful controls will be left on high-speed computers. The result is that America will have given up its advantage over other countries in a vital strategic technology.

Today, he who computes fastest wins wars. The United States has always used its most powerful computers for encryption and for designing nuclear warheads. In modern warfare, computers are used for surveillance, communications, targeting, and the precision-guiding of munitions. President Bush’s relaxation of controls ignored a December 2000 warning by the U.S. General Accounting Office to the Clinton administration cautioning that the decision had failed to assess “the national security impact on the United States of Russia, China or other countries obtaining high-performing computing.”

The Commission has also asked me to describe the technologies that the United States can still control. At a minimum, these are the technologies that we and our allies control under the various international export control regimes. Unfortunately, many of these technologies could be decontrolled if Congress passes S. 149, the pending bill to reauthorize the Export Administration Act.

One of the most alarming things about the bill is that it would decontrol a series of items that are used to make nuclear weapons and long-range missiles. It would do so by giving the items what the bill calls “mass market status.” The items include such things as electronic devices used to trigger nuclear weapons and materials used to build missiles and produce nuclear weapon fuel.

1. Nuclear weapon triggers

For at least twenty years, the United States has controlled for export the high-precision electronic switches needed to detonate nuclear weapons. These are key components in a nuclear weapon’s firing circuit and are popularly known as nuclear weapon “triggers.” In 1998, Iraq tried to provide itself with a supply of these switches under the guise of medical equipment. Iraq is allowed to import medical equipment despite the U.N. embargo, so Iraq bought a half dozen machines – called “lithotripters” – to rid its citizens of kidney stones. The lithotripter pulverizes kidney stones inside the body – without surgery. But each machine must be triggered by the same high-precision switch that triggers a nuclear weapon. Iraq tried to buy 120 extra switches as “spare parts.”

Iraq ordered the machines and switches from Siemens, in Germany, which sold the machines but passed the “spare parts” order to Thomson in France. The French government appears to have barred the sale. Siemens says that Iraq did get one switch with each machine and two more as spares, but to get any additional switches, Iraq will have to turn in a used switch for each new one and will have to allow the United Nations to inspect the use of the machines. The switches were controlled for export because they are on the control list of the Nuclear Suppliers Group, an international regime to which France, Germany and the United States belong.

These switches, however, would have “mass market status” under the bill and would be decontrolled for export by the United States. The switches meet all the criteria listed for such status and the bill says that the Secretary of Commerce shall remove them from the control list if they meet the criteria. They meet the criteria as follows:

• They are “available for sale in a large volume to multiple purchasers,” because they are used in radar, lasers and rockets as well as lithotripter machines and are advertised on the Internet by manufacturers in a number of different countries;

• They are “widely distributed through normal commercial channels,” because they are sold by the thousands each year, including the hundreds sent to hospitals to keep lithotripter machines running;

• They are “conducive to shipment and delivery by generally accepted commercial means of transport,” because they are small and easy to handle;

• They “may be used for their normal intended purpose without substantial and specialized service provided by the manufacturer,” because they need only to be connected into an electrical circuit by attaching the appropriate wires.

Any bill that decontrols nuclear weapon triggers must be seen as seriously flawed.

Despite the fact that these items are available in volume inside the countries that produce them, they are not easily available to countries that are trying to make nuclear weapons. The reason is export controls. If the United States were suddenly to decontrol them, it would dismay our allies and destroy our credibility on nuclear nonproliferation.

2. Glass and carbon fibers

Glass and carbon fibers are used widely in ballistic and cruise missiles. They go into solid rocket motor cases, interstages, wings, inlets, nozzles, heat shields, nosetips, structural members, and frames. Composites reinforced by carbon or glass fibers also form the high speed rotors of gas centrifuges used to enrich uranium for nuclear weapons.

In addition to these military applications, however, they are used in skis, tennis racquets, boats and golf clubs and are produced in a number of countries. This availability would give the fibers “mass market status” under the bill, despite the fact that they have been controlled for export since January 1981.

• They are “available for sale in a large volume to multiple purchasers,” because they are advertised on the Internet and can be ordered in large quantities by anyone;

• They are “widely distributed through normal commercial channels,” because they are shipped in large quantities to manufacturers of sporting goods;

• They are “conducive to shipment and delivery by generally accepted commercial means of transport,” because they do not require special handling except for refrigeration in some cases;

• They “may be used for their normal intended purpose without substantial and specialized service provided by the manufacturer,” because they can be incorporated in manufacturing processes in the form received.

In 1988, a California rocket scientist was arrested in Baltimore as he tried to illegally load 420 pounds of carbon fibers on a military transport plane bound for Cairo. The material was intended for the ballistic missile that Egypt was developing with Argentina and Iraq. The scientist was sentenced in June 1989 to 46 months in prison. It would be a big surprise to the world if the United States now decontrolled this material.

3. Maraging steel

Maraging steel is a highstrength steel used to make solid rocket motor cases, propellant tanks, and interstages for missiles. Like carbon fibers, it is used to make centrifuge rotors for enriching uranium for nuclear weapons. In 1986, a Pakistani-born Canadian businessman tried to smuggle 25 tons of this steel out of the United States to Pakistan’s nuclear weapon program. He was sentenced to prison as a result. Maraging steel has been controlled for export since January 1981.

This steel is produced by companies in France, Japan, Russia, Sweden, the United Kingdom and the United States and it meets all the criteria for “mass market status.” Several steel companies list maraging steel on the Internet and can produce maraging steel in multi-ton quantities. Over the telephone, two American companies and one British company explained to my staff how to order 25 ton quantities with delivery in less than a month. Maraging steel is bundled and shipped much like stainless steel, which it closely resembles.

4. Corrosion resistant valves

These special valves are essential components in plants that enrich uranium to nuclear weapon grade. Both Iraq and Iran are hoping to build such plants, and will need these valves in great numbers. The valves resist the corrosive gas used in the enrichment process.

These same valves are also used in the chemical, petrochemical, oil and gas, fossil power, pulp and paper, and cryogenic industries. Their size can range from very large gate valves down to tiny globe valves used in instrument and control lines. They are manufactured by companies in Australia, Japan, Russia, the United Kingdom and the United States. Smaller corrosion resistant valves have been controlled for export since October 1994, and larger valves have been controlled since October 1981.

These valves fit all of the criteria for “mass market status.” They are advertised on the Internet and are widely available to American buyers. A quick survey by my organization revealed that dozens of companies sell them in the hundreds per year. They would therefore be decontrolled by the new legislation.

I bring this point up in order to let the Commission know that if S. 149 is enacted, China will be able to import more sensitive American technology than it has in the past.

The United States can also control sensitive exports to specific buyers – to the Chinese firms known to be linked to nuclear weapon and missile development. I pointed this fact out in my testimony to the Commission in October. As I said then, the United States publishes a list of such firms in the Federal Register. This is essentially a warning list. Before selling any such company a product that could contribute to the spread of weapons of mass destruction, an exporter is required to obtain an export license. This allows our government to turn down dangerous sales without impeding innocent ones, and enables American industry to keep its competitive edge without arming the world. There will always be the buyer who smuggles, or uses a front company, but without an export license that buyer will find it harder to get the parts and service needed to keep a high-tech enterprise going.

The United States has not published a comprehensive, worldwide list of such buyers. The U.S. warning list for China contains only nineteen names. I would like to reiterate today the fact that scores, if not hundreds of firms in China are active in nuclear, missile and military production. It is silly to pretend we don’t know they exist.
As a first step in building a list, I have attached to my testimony as Appendix B the same list of 50 firms that I attached in October. These firms are well-known parts of China’s nuclear, missile and military complex. They have been selected on the basis of reliable, unclassified information. I recommend once again that the Commission submit these names to the Department of State, and ask for an opinion on whether the names should be included on the published U.S. export warning list. If the State Department judges that these firms should be included, then the Commission should ask the Commerce Department to add the names to the “entity” list in Part 744 of the Export Administration Regulations. American firms should not unwittingly make sales that undermine American security.

Appendix A to Testimony of Gary Milhollin before the U.S.–China Security Review Commission, January 17, 2002

Computers (4A001-003)

FY 1998, 242 approved, $110,248,696
FY 1999, 620 approved, $317,897,237


Dimensional inspection equipment (2B006)

FY 1998, 4 approved, $181,000
FY 1999, None


Fibrous and filamentary materials (1C010, 1C210)

FY 1998, 2 approved, $163,845,500
FY 1999,8 approved, $1,966,600


High-speed cameras (6A003, 6A203)

FY 1998, 30 approved, $1,101,956
FY 1999, 18 approved, $566,497


Isostatic presses (2B004, 2B104, 2B204)

FY 1998, 1 approved, $51,000
FY 1999,1 approved, $223,000

Mass spectrometers (3A233)

FY 1998, 2 approved, $518,000
FY 1999, 1 approved, $110,750


Neutron generators (3A231)

FY 1998, 1 approved, $306,000
FY 1999,1 approved, $500,000


Numerical control equipment (2B001, 2B290)

FY 1998, 4 approved, $1,883,830
FY 1999, 4 approved, $1,700,341


Oscilloscopes (3A292)

FY 1998, None
FY 1999, 1 approved, $140,000

Pressure transducers (2B230)

FY 1998, 13 approved, $620,982
FY 1999, 18 approved, $188,842


Equipment to manufacture and test semiconductors (3B001, 3B002)

FY 1998, 9 approved, $456,012,990
FY 1999, 1 approved, $6,279,000


Vacuum induction furnaces (2B226)

FY 1998, 3 approved, $609,000
FY 1999, 1 approved, $12,024,000


Vibration test systems (2B116)

FY 1998, 1 approved, $227,020
FY 1999, None

Appendix B to Testimony of Gary Milhollin before the U.S.–China Security Review Commission, January 17, 2002

22nd Construction and Installation Corporation (Yichang)
23rd Construction Corporation (Beijing)
Aviation Industries of China I and II (AVIC) (Beijing)
Beijing Institute of Aerodynamics (BIA) (Beijing)
Beijing Institute of Electromechanical Engineering (Beijing)
Beijing Institute of Electronic Systems Engineering (Beijing)
Beijing Institute of Nuclear Engineering (BINE) (Beijing)
Beijing Institute of Space System Engineering (Beijing)
Beijing Institute of Technology (BIT) (Beijing)
Beijing Research Institute of Uranium Geology (BRIUG) (Beijing)
Beijing Wan Yuan Industry Corporation (BWYIC) (also known as the China Academy of Launch Vehicle Technology [CALT]) (Beijing)
Chengdu Aircraft Industrial Corporation (CAIC) (Chengdu)
China Aerospace International Holdings Ltd. (CASIL) (Hong Kong)
China Aerospace Machinery and Electronics Corporation (CAMEC) (Beijing)
China Aerospace Science and Technology Corporation (CASC) (Beijing)
China Chang Feng Mechanics and Electronics Technology Academy (Beijing)
China Great Wall Industries Corporation (CGWIC) (Beijing)
China Haiying Electro-Mechanical Technology Academy (Beijing)
China Hexi Chemistry and Machinery Company (Beijing)
China Nanchang Aircraft Manufacturing Company (Nanchang)
China National Aero-Technology Import-Export Corporation (CATIC) (Beijing)
China National Aero-Technology International Supply Corporation (CATIC Supply) (Nanchang)
China National Nuclear Corporation (CNNC) (Beijing)
China North Chemical Industries Corporation (NOCINCO) (Beijing)
China North Industries Corporation (NORINCO) (Beijing)
China North Opto-electro Industries Corporation (OEC) (Beijing)
China Nuclear Energy Industry Corporation (CNEIC) (Beijing)
China Precision Machinery Import-Export Corporation (CPMIEC) (Beijing)
China Sanjiang Space Group (Wuhan)
Chinese Academy of Sciences (CAS) (Beijing)
Commission on Science, Technology and Industry for National Defense (COSTIND)
East China Research Institute of Electronic Engineering (ECRIEE) (Hefei)
Harbin Engineering University (Harbin)
Harbin Institute of Technology (HIT) (Harbin)
Hua Xing Construction Company (HXCC) (Yizheng)
Hubei Red Star Chemical Institute (also known as Research Institute 42) (Xiangfan)
Luoyang Electro-optical Technology Development Center (LEODC) (Luoyang)
Nanjing University of Science and Technology (Nanjing)
National University of Defense Technology (NUDT) (Changsha)
Nuclear Power Institute of China (NPIC) (Chengdu)
Research Institute 31 (Beijing)
Shaanxi Institute of Power Machinery (also known as Research Institute 41) (Shaanxi)
Shanghai Institute of Electromechanical Engineering (Shanghai)
Shanghai Power Equipment Research Institute (SPERI) (Shanghai)
Shanghai Xinfeng Chemical Engineering Research Institute (Shanghai)
Shanghai Xinli Research Institute of Power Equipment (Shanghai)
Shanxi Xingan Chemical Material Plant (Taiyuan)
Shenyang Aircraft Corporation (SAC) (Shenyang)
Shenyang Aircraft Research Institute (SARI) (Shenyang)
Xidian University (also known as the Xian University of Electronic Science and Technology) (Xian)