http://washingtontimes.com/specialreport/2...6747r_page2.htm

Thefts of U.S. technology boost China's weaponry

By Bill Gertz

THE WASHINGTON TIMES

June 27, 2005

Part I: Chinese dragon awakens

Second of two parts.

China is stepping up its overt and covert efforts to gather intelligence and technology in the United States, and the activities have boosted Beijing's plans to rapidly produce advanced-weapons systems.

"I think you see it where something that would normally take 10 years to develop takes them two or three," said David Szady, chief of FBI counterintelligence operations.

He said the Chinese are prolific collectors of secrets and military-related information.

"What we're finding is that [the spying is] much more focused in certain areas than we ever thought, such as command and control and things of that sort," Mr. Szady said.

"In the military area, the rapid development of their 'blue-water' navy -- like the Aegis weapons systems -- in no small part is probably due to some of the research and development they were able to get from the United States," he said.

The danger of Chinese technology acquisition is that if the United States were called on to fight a war with China over the Republic of China (Taiwan), U.S. forces could find themselves battling a U.S.-equipped enemy.

"I would hate for my grandson to be killed with U.S. technology" in a war over Taiwan, senior FBI counterintelligence official Tim Bereznay told a conference earlier this year.

The Chinese intelligence services use a variety of methods to spy, including traditional intelligence operations targeting U.S. government agencies and defense contractors.

Additionally, the Chinese use hundreds of thousands of Chinese visitors, students and other nonprofessional spies to gather valuable data, most of it considered "open source," or unclassified information.

"What keeps us up late at night is the asymmetrical, unofficial presence," Mr. Szady said. "The official presence, too. I don't want to minimize that at all in what they are doing."

China's spies use as many as 3,200 front companies -- many run by groups linked to the Chinese military -- that are set up to covertly obtain information, equipment and technology, U.S. officials say.

Recent examples include front businesses in Milwaukee; Trenton, N.J.; and Palo Alto, Calif., Mr. Szady said.

In other cases, China has dispatched students, short-term visitors, businesspeople and scientific delegations with the objective of stealing technology and other secrets.

The Chinese "are very good at being where the information is," Mr. Szady said.

"If you build a submarine, no one is going to steal a submarine. But what they are looking for are the systems or materials or the designs or the batteries or the air conditioning or the things that make that thing tick," he said. "That's what they are very good at collecting, going after both the private sector, the industrial complexes, as well as the colleges and universities in collecting scientific developments that they need."

One recent case involved two Chinese students at the University of Pennsylvania who were found to be gathering nuclear submarine secrets and passing them to their father in China, a senior military officer involved in that country's submarine program.

Bit by bit

To counter such incidents, the FBI has been beefing up its counterintelligence operations in the past three years and has special sections in all 56 field offices across the country for counterspying.

But the problem of Chinese spying is daunting.

"It's pervasive," Mr. Szady said. "It's a massive presence, 150,000 students, 300,000 delegations in the New York area. That's not counting the rest of the United States, probably 700,000 visitors a year. They're very good at exchanges and business deals, and they're persistent."

Chinese intelligence and business spies will go after a certain technology, and they eventually get what they want, even after being thwarted, he said.

Paul D. Moore, a former FBI intelligence specialist on China, said the Chinese use a variety of methods to get small pieces of information through numerous collectors, mostly from open, public sources.

The three main Chinese government units that run intelligence operations are the Ministry of State Security, the military intelligence department of the People's Liberation Army and a small group known as the Liaison Office of the General Political Department of the Chinese army, said Mr. Moore, now with the private Centre for Counterintelligence Studies.

China gleans most of its important information not from spies but from unwitting American visitors to China -- from both the U.S. government and the private sector -- who are "serially indiscreet" in disclosing information sought by Beijing, Mr. Moore said in a recent speech.

In the past several years, U.S. nuclear laboratory scientists were fooled into providing Chinese scientists with important weapons information during discussions in China through a process of information elicitation -- asking questions and seeking help with physics "problems" that the Chinese are trying to solve, he said.

"The model that China has for its intelligence, in general, is to collect a small amount of information from a large amount of people," Mr. Moore said during a conference of security specialists held by the National Security Institute, a Massachusetts-based consulting firm.

In the learning phase

Mr. Szady acknowledges that the FBI is still "figuring out" the methods used by the Chinese to acquire intelligence and technology from the United States.

Since 1985, there have been only six major intelligence defectors from China's spy services, and information about Chinese activities and methods is limited, U.S. officials said.

Recent Chinese spy cases were mired in controversy.

The case against Katrina Leung, a Los Angeles-based FBI informant who the FBI thinks was a spy for Beijing, ended in the dismissal of charges of taking classified documents from her FBI handler. The Justice Department is appealing the case.

The case against Los Alamos National Laboratory scientist Wen Ho Lee, who was suspected of supplying classified nuclear-weapons data to China, ended with Mr. Lee pleading guilty to only one count among the 59 filed.

The FBI has been unable to find out who in the U.S. government supplied China with secrets on every deployed nuclear weapon in the U.S. arsenal, including the W-88, the small warhead used on U.S. submarine-launched nuclear missiles.

"I think the problem is huge, and it's something that I think we're just getting our arms around," Mr. Szady said of Chinese spying. "It's been there, and what we're doing is more or less discovering it or figuring it out at this point."

Mr. Bereznay said recently that Chinese intelligence activities are a major worry. FBI counterintelligence against the Chinese "is our main priority," he said.

In some cases, so-called political correctness can interfere with FBI counterspying. For example, Chinese-American scientists at U.S. weapons laboratories have accused the FBI of racial profiling.

But Mr. Szady said that is not the case.

China uses ethnic Chinese-Americans as a base from which to recruit agents, he said.

"They don't consider anyone to be American-Chinese," Mr. Szady said. "They're all considered overseas Chinese."

So the answer he gives to those who accuse the FBI of racial profiling is: "We're not profiling you. The Chinese are, and they're very good at doing that."

Pushing an agenda

China's government also uses influence operations designed to advance pro-Chinese policies in the United States and to prevent the U.S. government from taking tough action or adopting policies against Beijing's interests, FBI officials said.

Rudy Guerin, a senior FBI counterintelligence official in charge of China affairs, said the Chinese aggressively exploit their connections to U.S. corporations doing business in China.

"They go straight to the companies themselves," he said.

Many U.S. firms doing business in China, including such giants as Coca-Cola, Boeing and General Motors, use their lobbyists on behalf of Beijing.

"We see the Chinese going to these companies to ask them to lobby on their behalf on certain issues," Mr. Guerin said, "whether it's most-favored-nation trade status, [World Health Organization], Falun Gong or other matters."

The Chinese government also appeals directly to members of Congress and congressional staff.

U.S. officials revealed that China's embassy in Washington has expanded a special section in charge of running influence operations, primarily targeting Congress.

The operation, which includes 26 political officers, is led by Su Ge, a Chinese government official.

The office frequently sends out e-mail to selected members or staff on Capitol Hill, agitating for or against several issues, often related to Taiwan affairs.

Nu Qingbao, one of Mr. Su's deputies, has sent several e-mails to select members and staff warning Congress not to support Taiwan.

The e-mails have angered Republicans who view the influence operations as communist meddling.

"The Chinese, like every other intelligence agency or any other government, are very much engaged in trying to influence, both covertly and overtly," Mr. Szady said.

Taking technology

The real danger to the United States is the loss of the high-technology edge, which can impair U.S. competitiveness but more importantly can boost China's military.

Immigration and Customs Enforcement (ICE), a part of the Department of Homeland Security, is concerned because the number of high-profile cases of illegal Chinese technology acquisition is growing.

"We see a lot of activity involving China, and I think it would be fair to say the trend is toward an increase," said Robert A. Schoch, deputy assistant director in ICE's national security investigations division.

Mr. Schoch said that one recent case of a South Korean businessman who sought to sell advanced night-vision equipment to China highlights the problem.

"We have an awesome responsibility to protect this sensitive technology," he said. "That gives the military such an advantage."

ICE agents are trying hard to stop illegal exports to China and several other states, including Iran and Syria, not just by halting individual exports but by shutting down networks of illegal exporters, Mr. Schoch said.

Another concern is that China is a known arms proliferator, so weapons and related technology that are smuggled there can be sent to other states of concern.

"Yes, some of this stuff may go to China, but then it could be diverted to other countries," Mr. Schoch said. "And that is the secondary proliferation. Who knows where it may end up."

As with China's military buildup, China's drive for advanced technology with military applications has been underestimated by the U.S. intelligence community.

A report prepared for the congressional U.S.-China Economic and Security Review Commission found predictions that China was unable to advance technologically were false.

In fact, the report by former Pentagon official Michael Pillsbury highlights 16 key advances in Chinese technology -- all with military implications -- in the past six months alone.

The failure to gauge China's development is part of the bias within the U.S. government that calls for playing down the threat from the growing power of China, both militarily and technologically, Mr. Pillsbury stated.

"Predictions a decade ago of slow Chinese [science and technology] progress have now proved to be false," the report stated.

Unlike the United States, China does not distinguish between civilian and military development. The same factories in China that make refrigerators also are used to make long-range ballistic missiles.

At a time when U.S. counterintelligence agencies are facing an array of foreign spies, the Chinese are considered the most effective at stealing secrets and know-how.

"I think the Chinese have figured it out, as far as being able to collect and advance their political, economic and military interests by theft or whatever you want to call it," Mr. Szady said. "They are way ahead of what the Russians have ever done."

China's rise leaves West wondering

By Carrie Gracie

BBC News

China's leaders have talked about a "peaceful rise"

China is overtaking the world's major economies one by one. It leap-frogged Britain in 2005 and now has Germany and Japan in its sights.

Its growing economic muscle is bringing diplomatic and military strength.

So should the rest of the world be worried?

Robert Kaplan, visiting professor at the United States Naval Academy, said the growth of Chinese power would affect the US, the current superpower.

"For the last 50 years the US Navy has more or less owned the Pacific Ocean as its own private lake," he said. "That is not going to hold for the next 50 years."

Mr Kaplan said the Chinese defence budget has been growing much faster than the economy in general. Spending has been closely targeted at developing missiles and buying submarines, with the specific aim of constraining the US Navy off Chinese waters.

However, Sha Zukang, China's ambassador to the United Nations in Geneva, insisted there was no cause for concern.

If you read China's 5,000-year-long history, he said, "it's not difficult to discover that China basically is a peace-loving nation".

US rival

The Bush administration came to power convinced that China was America's strategic competitor. But then came 9/11. To Beijing's enormous relief, Washington's focus shifted to terrorism, and there was less attention on China's discreet military build-up.

The US accuses China of under-reporting its military spending

Nevertheless, Pentagon planners are concerned about developments, and US Defence Secretary Donald Rumsfeld has said much of China's arms spending is being concealed.

Ambassador Sha responded strongly to the allegations. "It's better for the US to shut up," he said. "Keep quiet. It's much, much better."

This is a crucial question for China's future. Will it be just an economic superpower content to sell the world shoes and washing machines? Or will it have the military muscle to protect its new interests around the world?

After two centuries of feeling victimised by the West and then Japan, China chafes under a Pax Americana. At present it is keen to protect the economic achievements of the past 30 years and to avoid confrontation with Washington.

However, the issue of Taiwan could still provide a flashpoint. Ambassador Sha said there could be no compromise on this vital national interest. "For China, one inch of territory is more valuable than the life of our people," he said.

Most mainland Chinese I know are equally passionate about Taiwan. Nationalism has replaced Communism as the glue that holds China together.

The other key is prosperity. China is turning a nation of subsistence farmers into a 21st century industrial workforce. That has created an enormous demand for resources and much of China's foreign policy is now focussed on securing supplies, especially of oil and gas.

Global push

In Africa the impact is particularly stark. Garth Shelton of South Africa's Wits University welcomes the attention, saying there is a lot of optimism about the renewed Chinese interest in his continent.

"If we deal with the United States or West European governments they would bring a list of 33 items requiring restructuring of your democracy, your human rights issues," he said. "China would arrive and say we accept you as you are. And that's a refreshing change."

China has invested heavily and offered aid to many African countries, especially those with energy resources. It now is a major consumer of oil from Angola and gets 7% of its oil from Sudan.

Chinese investment is welcome in Africa

There is international criticism that China has blocked UN resolutions criticising the Sudanese government over actions in Darfur, and that it has helped prop up regimes like those of Robert Mugabe in Zimbabwe.

Senegalese journalist Adama Gaye, who has just written the first book by an African about China's new influence on the continent, accuses the Chinese of practicing "cynicism at the highest level".

He questions whether the investment is in Africa's long-term interests. "The moment they no longer need Africa they may disappear overnight and Africa will be left dry under the sun," he said.

Mr Gaye also voiced wider concerns that regimes would be attracted to a "Beijing Model" of economic development without democratic elections.

For Jing Huang of the Brookings Institution in Washington, this is the real threat to the West from China.

"What it really challenges is a value system. Who we are and what we want to be," he said.

However, China's problems remain immense and it needs markets and resources around the globe to sustain its economic growth. We can only hope the enmeshed interests of this century prevent the great wars of the last.

But even without armed conflict, the rise of this first giant of the global era will surely expose the developed world to the culture and values of a billion strangers. A sudden intimacy that may make both rich together, but may also make the West more vulnerable.

Carrie Grace presents "Analysis: What China Wants" on BBC Radio 4 at 8.30 pm Thursday August 17th

http://news.bbc.co.uk/1/hi/world/asia-paci...fic/4797903.stm

Pentagon report to portray China as emerging rival

By Demetri Sevastopulo in Washington

Published: May 24 2005 22:22 | Last updated: May 25 2005 00:25

The Pentagon is preparing to release a report on the Chinese military that warns the US that it should take more seriously the possibility that China might emerge as a strategic rival to the US, according to a senior government official.

The report has generated controversy in the Bush administration because of earlier drafts that concerned National Security Council officials by painting what they saw as an overly antagonistic picture of China, according to two people with knowledge of the report.

There were also concerns that the report could complicate US efforts to work with China to encourage North Korea to return to the negotiating table over its nuclear programme.

Late on Tuesday a senior government official said the controversy did not concern content but only its “presentation”.

He said it was important to emphasise that the report presented a “range of outcomes” that could materialise along with China's economic growth.

President George W. Bush came to office in 2001 calling China a “strategic competitor” rather than a “strategic partner”, the term favoured by the Clinton administration.

But US-China relations have improved markedly since the 2001 al-Qaeda attacks on the US as China has co-operated in the US “war on terror”.

Two sources said the report would mention “assassin's mace” strategies a term employed during China's warring-states period that referred to secret weapons and strategies used to deceive and defeat enemies quickly which the People's Liberation Army could be developing for use against Taiwan.

The report is expected to emphasise “known unknowns” including the lack of US knowledge about the actual size of theChinese defence budget and its future military strategy.

The language is an attempt to emphasise that the US should not acceptat face value China'sstatements that it intendsto emerge as a peaceful power.

One source defended the original report, saying the Pentagon was simply responding to congressional pressure. He said Duncan Hunter, the chairman of the House armed services committee, and China hawks on the Senate armed services committee were concerned that previous reports had been too soft in assessing China's future strategies.

In recent months, senior US officials, including Donald Rumsfeld, the defence secretary, and Porter Goss, the Central Intelligence Agency director, have voiced concerns about the rapidly expanding Chinese military.

The administration has also criticised China's new anti-secession law, which compels the military to attack Taiwan if it appears to be moving towards independence.

http://www.ft.com/cms/s/e1d67dda-cc83-11d9...000e2511c8.html

A spate of recent spying cases opens the lid on China's aggressive military buildup. What's most troubling: It is based largely on U.S. technology.

BY SIMON COOPER

Published in the August, 2006 issue.

On a hot Florida day late in 2005, Ko-Suen "Bill" Moo was preparing for the endgame of a covert operation he'd been orchestrating for nearly two years. He had arrived in Fort Lauderdale at 5 am on Nov. 7, as the city was recovering from the onslaught of Hurricane Wilma two weeks earlier. Moo checked into a $350-a-night room at the plush Harbor Beach Marriott Resort & Spa, and now, a day after arriving in town, the Korean-born businessman was ready to sign what promised to be a lucrative contract. In a few days, he'd head back to Hollywood International Airport to see off a plane, chartered for $140,000 to carry a special package. Moo would catch a commercial flight and meet up with his cargo in Shenyang, a city in northeastern China. The cargo was costing him nearly $4 million, but it was worth it. He would clear $1 million in profit once he made the delivery to his clients, senior officials in the Chinese People's Liberation Army.

Moo's package was an F110-GE-129 afterburning turbofan engine, built by General Electric to power America's latest F-16 fighter jet to speeds greater than Mach 2 (1500 mph). Over lunch in the Marriott's restaurant, 58-year-old Moo told the arms dealers who had arranged the purchase that he would soon be looking for additional engines--or even an entire F-16. But what the Chinese army wanted most of all was an AGM-129A, the U.S. Air Force's air-launched strategic nuclear-capable cruise missile. The stealth weapon, which flies at 800 miles per hour, can deliver a 150-kiloton W80 warhead to a target 1800 miles away.

Like everything else Moo was shopping for, the missile is guarded by at least three laws forbidding its sale or the transfer of its design details to foreign countries without government permission. Moo knew this quite well. In addition to working as a covert agent for China, he had a day job in the U.S. aerospace industry. For more than 10 years Moo had been an international sales consultant for Lockheed Martin and other U.S. defense companies in Taiwan. He was arguably the Taiwanese air force's most critical arms broker.

Scouring the Globe

According to U.S. counterintelligence agents, Bill Moo was one player in a sprawling, decentralized network. "They are scouring the globe on behalf of the Chinese government, vacuuming up every shred of technology information or hardware they can get their hands on," says former FBI officer Ed Appel.

A press officer at the Chinese embassy in Washington, D.C., calls that accusation "groundless," saying that "the Chinese government does not have activities in espionage in the United States." However, Appel and others say that extensive Chinese spying is indicated by a sampling of cases that have recently come to light in the United States.

South Korean arms dealer Kwonhwan Park was sentenced in August 2005 for exporting Black Hawk helicopter engines and night vision equipment to China. Ting-Ih Hsu, a naturalized U.S. citizen, and Hai Lin Nee, a Chinese citizen, illegally exported 25 low-noise amplifier chips that have applications in the Hellfire air-to-ground missiles carried by Apache and Cobra helicopters. New Jersey firms Manten Electronics and Universal Technologies sold China millions of dollars' worth of restricted computer chips. Eugene You-Tsai Hsu, a retiree living in Blue Springs, Mo., tried to buy a critical encryption device tightly controlled by the National Security Agency. Additional accused Chinese operatives have been sent to prison in cases involving Generation III night vision equipment and computer chips used in advanced radar and navigation systems.

None of the spies acted in concert, according to U.S. counterintelligence sources. Like Moo, they were freelancers, operating at what Appel calls a "deniable distance" from their Beijing bosses. However, they did share much of their quarry--items on shopping lists that included some of America's most sophisticated weaponry.

Sights on Taiwan

On Feb. 28, 1991, the United States and its allies called a halt to combat operations in the Persian Gulf War, just four days after U.S. tanks started to roll across the desert, and a few weeks after launching an air campaign. "The Chinese watched with dismay the ease of the U.S. victory over Iraq," says Toshi Yoshihara, visiting professor at the Air War College in Montgomery, Ala. In response, he says, modernizing the country's vast but primitive arsenal became a top priority for Chinese officials.

According to U.S. deputy undersecretary of defense Richard Lawless, China's sense of urgency stems partly from concern over the future of Taiwan. In testimony before the Senate Foreign Relations Committee, Lawless said that China wants "a variety of credible military options to deter moves by Taiwan toward permanent separation or, if required, to compel by force the integration of Taiwan" with the mainland.

Since the United States has pledged to defend Taiwan, that means China is seeking the ability to go toe-to-toe against America's best weaponry. Some U.S. officials argue that China's ambitions go beyond Taiwan to encompass the global stage.

Rather than trying to address all its military shortcomings at once, Yoshihara says, the Chinese government focused on obtaining "leap ahead" technologies already in use by the United States. Former Chinese leader Jiang Zemin called these technologies "shashoujian," translated variously as "assassin's mace" or "silver bullet." They ranged from advanced communications equipment to long-range missile systems.

A Credible Threat

The result of China's 15-year effort has been "the largest military buildup the world has witnessed since the end of the Cold War," says Richard Fisher, a China specialist for the International Assessment and Strategy Center (IASC), a Virginia-based think tank. China is now termed a "credible threat to other modern militaries operating in the region" by the Department of Defense, despite languishing perhaps 25 years behind the States in a number of areas. By next year, Chinese nuclear missiles could have the capability to hit any target in the United States from launch sites on mainland China. By 2008, the country is expected to possess submarine-launched nuclear missiles, giving it global strike capabilities.

The nuclear arsenal is backed by an increasingly sophisticated navy and air force. Currently on Chinese military drawing boards are plans for combat aircraft, the Chengdu J-10 and Xian JH-7A fighter jets; a combat helicopter, the Z-10; advanced warships; and even space-based weapons designed to knock out communications satellites. U.S. observers fear that much of this will be made possible by espionage.

In June 2005, China began sea trials of its new Luyang II guided-missile destroyers. When the armaments were unveiled, jaws clenched in the Pentagon. The ships were equipped with a knockoff of the latest version of the U.S. Navy's Aegis battle management system, a critical command-and-control technology. The technology enables U.S.--and now Chinese--forces to simultaneously attack land targets, submarines and surface ships. It also runs fleet defense tactics to protect against hostile planes and missiles. Federal sources insist that the only way the relatively backward Chinese military could have developed such a system was by copying it.

Into the Arms Bazaar

Anthony Mangione is a quiet-spoken man in his mid-40s whose office in Fort Lauderdale's federal courthouse is decorated with old newspaper cuttings celebrating the D-Day landings, two fish tanks (one full, one empty) and a door covered with dozens of curling Post-it notes.

As the assistant special agent in charge of the Fort Lauderdale department of Immigration and Customs Enforcement (ICE), Mangione heads a team of undercover agents who have spent years infiltrating what he terms a global "arms bazaar." The agents are assigned to ICE's Arms and Strategic Technology Investigations (ASTI) unit, which has operations in 43 countries as well as in the United States. Last year, ASTI agents conducted more than 2500 investigations worldwide, many of them involving China.

The Moo case got under way after two arms dealers, who also work as paid informants, introduced some of Mangione's undercover agents to a French middleman, Maurice Serge Voros. During a phone call on Feb. 26, 2004, Voros asked the agents, who were posing as arms dealers, for help obtaining engines used in the U.S. Black Hawk combat helicopter. The engines, manufactured by General Electric, are on the U.S. Munitions List, a catalog of restricted arms and technology administered by the State Department's Bureau of Political-Military Affairs. It is illegal to export Munitions List items without a special government license.

Over the following year, ASTI learned that Voros represented Moo, and that Moo in turn was working for the People's Liberation Army. In a Dec. 4, 2004, e-mail, Moo wrote that China did not want its name on any of the contracts.

"These cases take a long time," says Mangione. "It can be frustrating. But you have to let the game play." In March 2005, Voros told the undercover agents that Moo had now shifted priorities. His new top goal was to buy an F-16 engine--and, said Voros, Moo had been given "the green light" to make a deal.

Lethal Shopping Lists

Moo's destination last November was Shenyang Aircraft Corp., which lies a few miles from Taoxian International Airport. It's the site where, in cooperation with Russia, China developed its first homegrown fighter engine, the Lyulka AL-31 turbofan engine. But the Lyulka provides a Pontiac Firebird level of performance compared to the Formula One-worthy engine that Moo was set to deliver. U.S. officials believe that China planned to copy the F-16 engine for its own prototype fighter.

China has managed to "reverse-engineer some of [America's] most modern rifles, cannons and guns and produce them domestically," says Larry Wortzel, chairman of the U.S.-China Economic and Security Review Commission, which reports to Congress. However, Chinese expertise in engine manufacturing has lagged, according to Wortzel, who spent 25 years working in military intelligence. "This is one of their biggest espionage targets," he says.

"There are characters out there with laundry lists of stuff like this," says Mangione. Moo's list included nuclear missiles and jet engines, and also called for the "urgent procurement" of "2 to 4 sets" of a "Nuclear Submarine (nuclear reactor should be one unit, no noise) including ALL nuclear weapon systems." Acquiring an entire submarine might be a long shot, Mangione says, but "any specs, any photos, any anything they can get is more than they had before."

China's efforts amount to a worldwide "market intelligence program," says former FBI analyst Paul D. Moore. "The reality is that China does not practice intelligence the way God intended," he jokes. America's intelligence structure arose during the Cold War to contain the Soviet Union. "In our model, professional intelligence officers go out and do the job," Moore says. "In China's model, anyone and everyone is a potential intelligence asset."

The system is chaotic and inefficient but also highly effective. According to Moore and others, it relies on "guanxi," a system of social networking with deep cultural significance. "The process for finding the best restaurant in Seattle is exactly the same as finding out what nuclear technology America has," Moore says. "You ask your friends. Eventually, you're introduced to someone who can help."

Guanxi could explain why Chi Mak, a naturalized American citizen who spent years as a naval engineer for U.S. defense contractors, finds himself in jail, accused of secretly working for the Chinese government. "When someone reaches out to you," Moore says, "it can be very hard to say no."

According to a 42-page FBI affidavit, Mak was the lead engineer on a highly sensitive U.S. naval project: the Quiet Electric Drive. The FBI says it recorded Mak copying Navy secrets, and later found Chinese-language wish lists in his home that included propulsion and command-and-control technology.

According to his lawyer, Ronald Kaye, Mak acknowledges "engaging in a technology exchange" with China. But, Kaye says, none of the material was classified. "It's unfortunate that so quickly people came to perceive something criminal." A trial is set for this November.

The Endgame

After a series of meetings in London and Orlando, Fla., Bill Moo, Voros and the ASTI agents agreed on a price of $3.9 million for one F-16 engine. On Oct. 5, 2005, Moo transferred the money into a Swiss bank account he controlled. One month later, he flew from Taipei to San Francisco and then to Miami. By now, he was being shadowed by ASTI investigators.

On Nov. 8, Moo was driven to a quiet hangar in Homestead and shown his prize, an F-16 engine. He had already wired $140,000 from a bank account in Singapore to an account run by an ASTI front company to cover shipping costs to China. Moo asked to photograph the engine but was rebuffed. Nevertheless, he now authorized payment of the $3.9 million. According to an ICE official, Moo told the undercover agents that after he returned to China he would want to buy an entire aircraft. "Then [the] customer [will] have a confidence on you, okay? So they will be planning [to buy] the two-seat F-16." Moo also said he would want to purchase cruise missiles.

Mangione decided it was time to bring the operation to an end. "People like Moo don't have their lists out to one person," he says. "If he's dealing with us he's dealing with 10 other people. We couldn't take the risk that one of these other sellers might give him what he was after."

Agents moved in and arrested Moo in his hotel room on Nov. 9. After six months in jail--during which he tried to bribe both an assistant U.S. attorney and a federal judge to let him go--he pleaded guilty to multiple offenses; a sentencing hearing was set for this summer. Voros is still at large, the subject of an international arrest warrant.

Modern Smuggling

Technology espionage can be difficult to prevent. As Lockheed Martin's representative in Taiwan, Moo had successfully passed a "rigorous" vetting procedure dictated by U.S. government rules, according to company spokesman Jeff Adams. Yet, U.S. officials say he may have transferred restricted technology to China before the investigation began.

More typical cases are even harder to detect. ASTI agents often navigate the murky area of dual-use technologies, where pressure sensors could be used either for bombs or for washing machines, where computer chips with missile applications might actually be destined for in-car navigation systems. Furthermore, thousands of items prohibited for export can be bought over the Internet, shipped to a U.S. address, then simply mailed to China in a padded envelope. Such materials supply the building blocks needed for complex armaments.

In other cases, technology is smuggled out to an approved country using fake end-user certificates. For instance, Kwonhwan Park shipped his Black Hawk engines to Malaysia before sending them on to China. And, advanced technology such as the F-16 fighter has been sold to countries from Bahrain to Venezuela where controls may be less stringent than in the United States.

The situation outrages U.S. Rep. Frank Wolf (R-Va.), who successfully fought recent plans by the State Department to use Chinese-built computers for classified material. He says too little attention is paid to China's "aggressive spying program against the U.S." The legal deterrents to espionage are weak, says Wolf, who chairs a subcommittee overseeing security and technology. "In the Cold War people went to jail for a long time" for spying, he says, but today's "negligible penalties" are more appropriate to low-level embezzlement than military spying. Park was unusual in receiving a 32-month prison term and a deportation order; in contrast, Ting-Ih Hsu and Hai Lin Nee were each sentenced to three years of probation.

Meanwhile, says the IASC's Richard Fisher, a "battle is being waged. The Chinese have established a vast collection system that by the end of the decade will have helped them to become a global military power." While concern grows among policy-makers and wonks, Mangione and his team still labor in the shadows of the worldwide arms bazaar. They hope to prevent the day when U.S. troops could find themselves staring down the barrel of a high-tech weapon marked "Made in America."

http://www.popularmechanics.com/science/de...html?page=5&c=y