Taiwan Communiqué No. 81, June 1998

The Loral satellite launch scandal

Leaky America: exporting sensitive technology

The present scandal swirling around in Washington poses the question: was the Clinton Administration — softened up by donations from the daughter of China's top general through Johnny Chung and a total of a million plus dollars from Loral chief Bernard Schwartz — lax in its protection of sensitive space technology, and did it harm U.S. national security ?

According to still to be declassified U.S. Airforce and DOD's Defense Technology Security Administration's reports, it did. The information provided to the Chinese by Loral and Hughes after the February 1996 crash of the Long March 3-B reportedly allowed the Chinese to improve the guidance systems of the Long March, which is very similar China's long range DF-4 and DF-5 missiles: they have the same staging mechanisms, air frames, engines, propellants, similar payload separation procedures, and — most importantly — similar guidance systems.

The matter was first brought to light in a 4 April 1998 article by Jeff Gerth in the New York Times. A 13 April 1998 article by Gerth, titled "Aerospace firms's ties with China raise questions", gave further details.

In February 1998, in spite of ongoing investigations by the Justice Department into this matter, President Clinton approved a waiver for yet another launch of a Loral satellite by the Chinese, this time for Chinasat8, a communication satellite used both for expansion of the national telephone system and for improvement of the PLA's military communication system.

Loral chairman Bernard Schwartz was the largest individual contributor to the Democratic Party in 1996, raising questions in Congress of whether that influenced Clinton's decision to allow Loral to use a Chinese rocket to launch a satellite. Special presidential waivers have been required for such launches since the 1989 Tiananmen crackdown.

Chinese market distortions

One argument used by the Clinton Administration for allowing U.S. companies to use Chinese launchers is that "...it improves the competitiveness of U.S. industry."

Nothing could be further from the truth: the entry of China's launchers on the international commercial market has long been opposed by Western launching rocket manufacturers, such as Lockheed Martin, McDonnell Douglas and the European Ariane consortium. The reason is that China's Long March is heavily subsidized by the Chinese military, in order to get Western orders — and hard U.S. dollars.

A launch on a Chinese rocket generally costs about half of what the Western launcher service companies ask. Because of the cutting-edge technology and the high risks, launching a satellite is still an expensive business. Launching on a Chinese rocket thus undercuts U.S. and European launch service providers, and presents them with a distorted playing field, tilted heavily against them.

Psychological and other warfare

Since the 1996 Taiwan Straits missile crisis showed that a show of force and the threat of an invasion did not intimidate the people of Taiwan, the Chinese authorities and military are now apparently trying to achieve their goals through a combination of sweet-talking and psychological warfare.

On the one side, China is attempting to manipulate a gullible Clinton Administration into weakening its commitments to the defense of Taiwan, while on the other side it is slowly tightening the psychological and military noose around Taiwan in an effort to isolate the island.

A prime example was a recent Xinhua News Agency report announcing "...nationwide military exercises for fighting high-tech regional wars." President Jiang Zemin, said on the occasion that "... the military must master advanced technology in order to be able to win local wars" in an apparent reference to Taiwan.

The interesting aspect of the report was that international observers couldn't locate any exercises, and finally determined that the report was part of China's psychological warfare against Taiwan.

Another indication of China's changing tactics can be found in the Hong Kong-based Far Eastern Economic Review, which recently published two excellent articles on the matter.

In an article titled "Operations Mind Game", (FEER, 28 May 1998) reporter Bruce Gilley writes that Beijing's strategy has changed significantly during the past two years, away from consideration of an all-out invasion towards a strategy of repeated shows of military strength by the PLA, "...designed to wreak economic and social havoc on Taiwan."

Mr. Gilley writes that Beijing will on the one hand offer a peaceful dialogue, but use threats with missile tests, a sea blockade, combined forces drills, and a military build-up in a war of nerves designed to send the Taiwan stockmarket down, and demoralize the population of the island.

Mr. Gilley concludes his article by doubting the chance of success of the PLA strategy: it is built on the experience of the 1995-96 round of exercises and missile threats, which only succeeded in strengthening the resolve of the Taiwanese to vote for President Lee Teng-hui. He believes that the next time around, Taiwan will be much stronger in the face of the PLA threats, and that after much huffing and puffing, the PLA will "...blow nothing down."

Psychological warfare: who wins ?

The second article was titled "Defense Dilemma" (28 May 1998) in which FEER reporter Julian Baum views the situation from the Taipei perspective. He writes that the Taiwan military has recently gone through an

extensive exercise practicing defending Taiwan against an invasion from the mainland, but that many people wonder whether Taiwan is preparing for the right battle.

Mr. Baum expands on the points made in the earlier article by Mr. Gilley, and says that a more likely scenario would be for China to attempt surgical strikes by the PLA's ballistic missile units, threats to interdict Taiwan's sealanes by Chinese submarines, or combined forces drills.

Mr. Baum refers to the improvements the Chinese were able to make in the accuracy of their M-9 and M-11 ballistic missiles by equipping them with the American-made Global Positioning System (GPS), while the addition of Russian Kilo-class submarines to China's navy poses an obvious threat to Taiwan's shipping lanes.

The implication of Mr. Baum article is that Taiwan should better prepare itself for China's new tactics of intimidation and demoralization.