What does the evolution of strategic transfers from China, and China’s illicit procurement of U.S. technology, tell us about the export control policies of Chinese state-run firms?
In the latest issue of the Strategic Trade Review, the Wisconsin Project argues that although private firms, front companies, and brokers have increasingly taken a more prominent role, state-run firms remain involved. They are the primary beneficiaries of dual-use technology illicitly exported from the United States and the Chinese government has adopted a lax enforcement approach when it comes to punishing WMD-related proliferation from China to Iran and elsewhere.
Below is a summary of the article. The full article may be viewed in the latest issue of the Strategic Trade Review, the leading refereed journal dedicated to strategic trade, export controls, and sanctions.
China’s role in proliferation to other countries has evolved over the past 40 years. During the 1980s-1990s, proliferation from China took the form of large, complete weapon systems transferred by the government itself. For example, during this period China sold nuclear-capable ballistic missile systems to both Saudi Arabia and Pakistan, flouting international norms.
By the 2000s, Beijing had begun to adhere to the guidelines of the Missile Technology Control Regime and other multilateral control regimes, and proliferation from China became less clearly state directed, although it did not stop. With the rise of private enterprise in the 1990s, non-state companies took the lead in exporting components and materials that could be used in weapons of mass destruction programs. While these firms were repeatedly sanctioned by the United States their activity was largely ignored by the Chinese government. This trend has continued into the current decade.
Since 2000, the vast majority of Chinese entities sanctioned by the U.S. government have been private companies or individuals and there are very few instances of export enforcement by the Chinese government. As a result of this shift, the outward proliferation threat from China today is less likely to be a state-owned defense company than a savvy businessperson with international connections and a willingness to risk prosecution for a profit.
Similarly, there has been a shift in the prominence of Chinese state-run companies in violations of U.S. export controls. During the 1980s and early 1990s, these firms violated U.S. export control laws in the context of joint projects with major American firms, leading to unauthorized transfers of U.S. technology or equipment. In the 2000s, these violations were more characterized by the use of small companies in the United States – often run by Chinese nationals – that made illegal exports of U.S.-origin components directly to state-owned Chinese research institutes and companies. In the current decade, U.S. items illegally exported to China are often part of a more complex arrangement, sometimes involving multiple private actors in several countries, the use of front companies, and other evasive techniques to mask the true destination of the goods. Participation by state-owned firms in these transactions is not as obvious as it was in decades past; however, it is clear that they continue to be the ultimate beneficiaries of many of these illicit transfers.
China’s new Draft Export Control Law would replace a patchwork of lists and regulations with a comprehensive export control system. While it contains some positive elements, will the new law change decades of lax export enforcement by the Chinese government or the persistent violations of U.S. export control rules by state-run firms for technological and commercial gain? Our review of the past four decades of Chinese state trade policy leaves reason to doubt.