THE TECHNOLOGY ISSUE IN US-CHINA RELATIONS

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP85M00363R000500990009-4
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 7
• Document Creation Date: December 20, 2016
• Document Release Date: July 30, 2007
• Sequence Number: 9
• Publication Date: December 8, 1982
• Content Type: REPORT

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Central Intdibcncc Agency
M'al~ D C2050S
DIRECTORATE OF INTELLIGENCE
8 December 1982
The Technology Issue in US-China Relations
During the past several months, Beijing has expressed
growing impatience with controls on US technology and it has
recently asserted that this issue is the most serious irritant in
US-China relations next to Taiwan. This line has been pushed by
senior officials--publicly and privately--at every opportunity.
We believe the Chinese are motivated by a clear need to obtain
advanced US technology, especially military related, for
modernizing Chira and )y domestic pressures to show proof of
Washington's long-term commitment to Beijing.
Chinese Expectations and Tactics
China has sought advanced US technology since 1972, and its
potential benefit for China's modernization program was a
fundamental factor in Beijing's decision to seek improved
relations with Washington. Current Chinese pressure on the
issue, however, is vreater than at any time during the past
Deng Xiaoping and other leaders have repeatedly highlighted
the discrepancy between US policy statements and performance on
the technology issue. The Chinese now look back to July 1979,
when Washington informed them of its decision to liberalize
export controls and grant China most-favored-nation status, as
the beginning of their problems with technology transfer. Six
months later, Defense Secretary Brown announced the US decision
to provide dual-use technology--previously denied--on a case-by-
case basis. Beijing welcomed the broader access to US
to
an , in fact, viewed Brown's visit as the first step
This memorandum was produced by
the China Division of the Offic or as Asian Analysis.
Questions and. comments are welcome and may be addressed to the
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d
ecision a clear signal that Washington wanted to improve the US-
China relationship "to the detriment of the Soviet Union."
Over the next 18 months, the number of approvals steadily
increased, as the United States put China into a separate
category for export licensing to distinguish it from the Soviet
Union and to facilitate licensing efforts. But the Chinese
continued to express dissatisfaction with what they still
considered an overly restrictive policy--they pointed to "unkept
promises" rather than the list of approvals. In June 1981,
former Secretary of State Haig traveled to Beijing to inform Deng
and other leaders of simplified procedures and further
relaxations in US export controls on high technology.
The Chinese have consistently attacked US export
restrictions in the context of US attitudes toward China. They
have argued that Washington, having granted most-favored-nation
status to China, should follow through and allow the Chinese
total and free access to US advanced technology. Although they
have acknowledged their separate licensing category, the Chinese
have stressed that current restrictions indicate that the United
States still treats China as a hostile.co.untry--like theSoviet
Union. Indeed, even after Washington took steps to expedite
licensing approvals last spring, Chinese leaders claimed to see
.no progress on the issue and no less ri idit in US restraints
over technology transfer.
Most West European States and the Japanese tend to follow
the US lead on technology transfer policy. Thus Beijing also
views liberalized US export controls as key to full access to
Western European and Japanese technology.
What China Wants
We believe that China's primary objective is to obtain
"dual-use" US technology--to serve military as well as civilian
modernization goals. This technology includes sophisticated
computers, teleconrnunications equipment, and integrated circuit
manufacturing technology--to name a few. In a number of cases
where the United States has granted exceptions to export dual-use
technology, we have evidence to show that the technology has been
diverted for use in areas currently proscribed by US
Deng has often complained that "the United States has never
given China any advanced technology" but the record and other
corr-nents by him And by other major senior officials make it clear
that they know Netter. US firms have already made available a
great deal of sophisticated technology for civilian application
to China ona non-restricted basis. China, since 1979, however,
has greatly cut back its imports of capital.equipment and, in so
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 'd o i n g Approved For Release 2007/08/04: CIA-RDP85M00363R000500990009-4 t h a t h a s
boen offered. Beijing, for instance, rejected an offer by which
a US company would provide sophisticated secondary and tertiary
recovery technology for China's biggest oilfield. US sales of
highly advanced measuring and control instruments totaled only
$41 million last year and $19 million in the first half of
1982.
In the case of offshore oil technology, however, Chinese
regulations require foreign contractors to transfer to China all
the technology that will be used off the China-coast. US firms
are concerned over the possible loss of proprietary techniques
and equipment.
Pressures from the Foreign Policy and Military Establishment?
We do not believe Deng Xiaoping is in danger of losing the
political initiative to his critics; nevertheless he may be
feeling increased pressure from those leaders who are skeptical
of the long-term value of the Beijing-Washington connection.
China's recent moves to distance itself more from the United
States and start a dialogue with the Soviet Union suggest a
significant modification of the US-oriented policy line
associated with Deng. Moreover, Chinese reluctance to pursue
strategic cooperation with the United States since the communique
on Taiwan arms sales suggests that Deng has become more sensitive
to his domestic constituencies. 25X1
There is also mounting evidence that China's current
campaign to acquire US technology is an outgrowth of a new,
expanded effort to modernize China's military with Western
V l ~ CL L. L 1 V G 1 is 0 1 1 v k.J tJ 1 ! 1 ~'
for Western weapons and technology over the past three months.
The appointment of Zhang Aiping, a career military science and
technology administrator, as the new Minister of Defense may also
reflect a new. priority on military modernization.
Deng Xiaoping, as well as others in the leadership who have
been associated over the past three years with restraining 25X1
investment in military modernization, may now be responding to
pressures from the PLA for more resources. Several high-ranking
PLA leaders have been particularly resistant, to Deng's succession
arrangements, and Deng may be increasingly willing to make policy
r-oncessions to the military in order to push through personnel
chrnnges vital to succession. In fact, this process apparently
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exiperienced its first major reshuffling of. senior appointments
since 1975. 25X1
Outlook
Beijing can be expected to continue to play up export
controls as a major political issue in US-China relations,
emphasizing that it regards Washington's restrictive policy as
undermining the expansion of bilateral ties. We believe that
China's arguments on technology transfer are intentionally
overdrawn as a tactic to push forward liberalization of US export
controls. This tactic has been successful, in that the Chinese
))) have received many items after complaining and have seen US
restrictions consistently loosened since normalization. Thus, we
L expect the pressure to continue.
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China: Disposition of US Export Cases
1979-82*
MTotal
C3Approvoclll
IZA
156
1979 1980 1981 1982
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China: Distribution of US Export Cases by Commodity Value
1979-82
C3Transportation Equipment
0 Electronic and Precision Instruments
M General industrial Equipment
C3 miscellaneous
Metal Working Machinery
Chemical and Petroleum Equipment
Electrical and Power Generating Equipment
metals, Minerals, and Manufacturers
s ? ?
Totals: ? 468,060,714
1982 data until
17 Dec 82
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