U.S. & Chinese Diplomatic Tensions

Title: China Detains Top Security Official Accused Of Being US Spy, Reports Say
June 2, 2012
Fox News

Abstract: A Chinese security official has been arrested on suspicion of spying for the U.S., Reuters reports.

Sources say both counties have made an effort to keep the case quiet for months. The official was detained earlier this year after allegedly passing along information to the U.S. regarding China's espionage activities. 

The New York Times said the official, was believed to be an employee in the Ministry of State Security, China's main intelligence agency.

The U.S. and Chinese governments have not given any hint publicly of the discovery of the spying suspect. Secretary of State Hillary Clinton, visiting Oslo on Friday, declined to comment on the reports (Fox News, 2012).

Title: Pentagon Contractor Caught Illegally Selling Military Technology To China
Date: July 6, 2012

Abstract: The Canadian arm of the aircraft engine manufacturer Pratt & Whitney closed a six-year U.S. government probe last week by admitting that it helped China produce its first modern attack helicopter, a serious violation of U.S. export laws that drew a multimillion dollar fine.

At the same time it was helping China, the company was separately earning huge fees from contracts with the Pentagon, including some in which it was building weapons meant to ensure that America can maintain decisive military superiority over China's rising military might.

The Chinese helicopter that benefited from Pratt's engines and related computer software, now in production, comes outfitted with 30 mm cannons, anti-tank guided missiles, air-to-air missiles and unguided rockets. "This case is a clear example of how the illegal export of sensitive technology reduces the advantages our military currently possesses," Immigration and Customs Enforcement Director John Morton said in a statement released on June 28.

The events are once again raising questions about the circumstances under which major defense contractors might be barred from government work. Independent watchdogs have long complained that few such firms have been barred or suspended, even for egregious lawbreaking, such as supplying armaments or related equipment to a hypothetical adversary.

Nothing in the settlement agreement, in which Pratt & Whitney and two related companies, United Technologies and Hamilton Sundstrand agreed to pay a total of $75 million for multiple violations of export rules, directly threatens Pratt's existing or future government contracting.

It's not the first time that United Technologies -- the parent company of Pratt -- has run afoul of government regulations. An SEC filing by the firm in February, in which the company disclosed the probe's existence, listed two earlier lawsuits filed by the government against the company over its defense-related work; both were listed as still pending in the courts.

The Project on Government Oversight, a nonprofit watchdog group in Washington, ranks United Technologies at number seven on a list of the top 100 contractors cited for misconduct since 1995.

"They've had a smattering of issues over the years -- everything from environmental violations to false claims made to the government," said Neil Gordon, a POGO investigator focusing on government contracting issues. "The military relies on too few companies for these weapons and services. So, they often have few other options when a provider is guilty of misconduct."

Since July 2006, when United Technologies filed statements about its assistance to China that it now admits were erroneous, the Pentagon has awarded more than $1.67 billion in contracts to Pratt and its affiliates, according to a search of the Federal Procurement Data System. And since Pratt & Whitney began its dealings with China in September 2000, the company has received $2.27 billion from the Defense Department.

One of Pratt & Whitney's principal contracts now is to supply jet engines for Air Force's F-35 Joint Strike Fighter jets. The Obama administration waged a major battle to make the company the sole provider of those engines over the last two years, writing General Electric's rival engine contract out of federal budgets in an effort to save money. The Pentagon explained in the White House's proposed fiscal year 2011 budget -- issued Feb. 1, 2010 -- that Pratt & Whitney's engine work was "progressing well," making GE's work superfluous. The Government Accountability Officessubsequently disclosed in December 2010 that engine costs for the jets have risen by 75 percent since 2001.

The jet is being developed in part to ensure that the U.S. military can prevail against any potential adversary, including major powers able to field multiple advanced aircraft. Though officials say there's no reason to expect a U.S. military confrontation with China, the Pentagon said this spring it was reorienting its forces to reassure allies worried about what they regard as a rising Chinese threat.

In addition to prosecuting firms in court, the U.S. government has three options for taking action against defense contractors. Suspension typically bars a company from receiving government contracts for 18 months, and debarment does the same for a longer period -- three years. The State Department can also choose to revoke a company's export license, blocking sales to foreign governments or corporations.

Cheryl Irwin, a spokeswoman for Secretary of Defense's office, said the Defense Department to her knowledge had not taken action against UTC and its affiliates or reviewed the company's contracts in light of last week's settlement.

The prosecution marked "one of the largest resolutions of export violations with a major defense contractor in the Justice Department's history," U.S. Attorney for Connecticut David Fein, who directed the prosecution, announced at a press conference last week. Assistant Attorney General Lisa Monaco, who spoke with Fein in Bridgeport, Connecticut said Pratt had compromised "U.S. national security for the sake of profits and then lie[d] about it to the government."

After closely examining company procedures and internal records, investigators concluded that United Technologies was responsible for a string of 576 export-related violations. What the Defense Department knew and when it knew it is not completely clear.

When the Justice Department launched its probe in 2006, it made no public announcement. DOJ spokesman Dean Boyd first said that to his knowledge, others besides the State Department weren't notified but later affirmed that the Defense Criminal Investigative Service, an arm of the Pentagon, had assisted the investigation. In the SEC filing [6], Pratt & Whitney said the Justice Department had been in discussions with the company about the violations since Nov. 2011.

In the settlement, Pratt admitted that some officials in its Canadian subsidiary were aware from the outset that the work with China was initially to be of military use. A marketing manager referred explicitly in an Aug. 2000 e-mail to the company's export officials to the task of making engines for an "attack helicopter," an agreed "Statement of Facts" accompanying the settlement recounted. The Chinese called the helicopter the "Z10."

The United States has had an embargo on military exports to China since the events in Tiananmen Square in 1989. But the company told the Canadian government that because the engines were already approved for civilian export, it needed no special permission for use on a military aircraft. Canadian regulators disagreed, and demanded that company request a permit.

After Pratt conveyed this news to the Chinese, China's Aviation Industry Corporation suddenly told the company it had begun developing a civilian variant of the military helicopter - the "Z10C," which it said would be used for sightseeing, business VIPs, and search-and-rescue missions.

Management within Pratt & Whitney was skeptical of the civilian helicopter program's "sudden appearance," according to United Technologies' deferred prosecution agreement. But the company nonetheless saw the claim as providing a useful opening: On November 13, 2000, a Pratt & Whitney manager for Asia Marketing emailed two other executives that whether the civil program was "real or imagined," the company could bid for an exclusive role.

Prosecutors, in a court filing, said the company turned a "blind eye" to any doubts because it was hungry to earn up to $2 billion from the civilian program. Canadian authorities, after being told about the parallel Z10C helicopter, approved the export of 10 engines.

Pratt & Whitney's Canadian subsidiary next asked its sister subsidiary Hamilton Sundstrand -- headquartered in the United States -- to write the software needed to control the engines, without saying that the purpose was to equip a military helicopter. From January 2002 to October 2003, Hamilton Sundstrand exported 12 versions of the software to Pratt & Whitney, which sent six of those on to China for use in the development model of the Z10 helicopter, according to the settlement agreement.

Pratt & Whitney executives also kept the military end-use of its engines and software secret from some of the company's engineers. When two were dispatched to China in March 2003 to observe the helicopters, one asked a Chinese official, "where are the other 10 seats," meaning those intended for civilian passengers? The helicopter they saw had only two seats in tandem -- typical of an attack model -- and mock weapons on the hull. According to federal prosecutors who interviewed the engineers, the Chinese official smiled and said, in effect, that it had always been an attack helicopter.

The engineers reported their observation -- and their concerns -- to Pratt & Whitney's manager for Asian marketing upon returning to the company's Montreal headquarters. But no restrictions were imposed by the firm and they kept working on the project.

When Hamilton finally discovered the military use of its software in Feb. 2004, it shut down its production in less than a week. Pratt, still holding out hope for the large civilian helicopter contract, picked up where Hamilton Sundstrand left off and exported its own versions of the software to China through June 2005.

United Technologies made a limited disclosure about its involvement to the State Department in 2006, after an institutional investor said it was researching the company's role in helping China's military and threatened to disinvest. The company has now admitted that disclosure -- which claimed the company believed at the outset there were dual civilian and military helicopter programs -- was inaccurate.

In the end, Pratt got little more for its troubles than a federal probe. In early 2006, China's Aviation Industry Corporation told Pratt & Whitney the supposedly parallel civilian helicopter development would be scrapped. Instead, China said it would instead build a much larger civilian helicopter, too large for the engines built by Pratt & Whitney.

According to the Justice Department's statement announcing the settlement, the first batches of the Z10 attack helicopter were delivered to the People's Liberation Army of China in 2009 and 2010.

UTC, a company with $58 billion in 2011 sales, told the Center through an email on Friday it was taking steps to improve oversight. Spokesman John Moran said UTC has established a new "Export Council" to internally inspect arms shipments and is now requiring online training for employees working with exports.

The company's deferred prosecution agreement also shows a lengthy list of reforms the company has promised in response to the exports violation, assigning 175 executives to keep an eye on export law compliance for UTC and its subsidiaries, along with requiring internal reviews of exports from all its subsidiaries, including Pratt & Whitney (Atlantic, 2012).

Title: FBI Targets Chinese Firm Over Iran Deal
Date: July 12, 2012
Smoking Gun

Abstract: The FBI has opened a criminal investigation targeting a leading Chinese telecommunications firm that allegedly conspired to illegally ship hardware and software purchased from U.S. tech firms to Iran’s government-controlled telecom company, a violation of several federal laws and a trade embargo imposed on the outlaw Islamic nation, The Smoking Gun has learned.

The federal probe, launched earlier this year, has also uncovered evidence that officials with the Chinese company, ZTE Corporation (ZTE), are “engaged in an ongoing attempt to corruptly obstruct and impede” a Department of Commerce inquiry into the tainted $130 million Iranian transaction, according to a confidential FBI affidavit.

Officials with ZTE allegedly began plotting to cover up details of the Iranian deal after Reuters reported on the transaction in late-March. The news agency revealed that the telecom equipment sold to Iran was a “powerful surveillance system capable of monitoring landline, mobile, and Internet communications.” Included in the material sent to Iran were products manufactured by U.S. firms like Microsoft, Oracle, Cisco Systems, Dell, and Symantec.

Concerned that they could no longer “hide anything” in the wake of the Reuters report, ZTE lawyers discussed shredding documents, altering records, and lying to U.S. government officials, according to an insider’s account provided to FBI agents by a Texas lawyer who last year began serving as general counsel of ZTE’s wholly owned U.S. subsidiary. ZTE, the world’s fourth largest telecom equipment manufacturer, is publicly traded, though its controlling shareholder is a Chinese state-owned enterprise.

The FBI probe is being run out of the bureau’s Dallas office by agents assigned to a counterintelligence and counterespionage squad. Like the Department of Commerce investigation (and a related congressional inquiry being conducted by the House Permanent Select Committee on Intelligence), the FBI opened its case following the March 22 Reuters story by reporter Steve Stecklow.

According to an affidavit sworn by FBI Agent Zachary Carwile, federal investigators have been provided incriminating details about the actions of ZTE officials by Ashley Kyle Yablon, a 39-year-old attorney who was hired by ZTE’s Dallas-based U.S. subsidiary in October 2011. Yablon, who previously worked as an in-house counsel for the Chinese telecom giant Huawei Technologies, a ZTE rival, has allowed the FBI to make a forensic copy of all files on his work computer.

In a brief phone conversation, Yablon, seen at left, said that he did not have time to speak with a reporter. The attorney, who still works for ZTE, did not respond to subsequent messages left at his office and on his cell phone. Asked about his client’s role in the FBI investigation, Thomas Mills, Yablon’s lawyer, said, “I can’t talk about that topic.”

During a May 2 interview with two FBI agents, Yablon provided a startling account of his interaction with ZTE representatives who were once eager to devise strategies that would allow them to sell phones containing U.S. made components to “banned” countries. But following the Reuters story, Yablon recalled, the Chinese officials sought to obscure details of the illegal backdoor Iranian deal and, in the process, stymie U.S. government investigators circling the multinational company.

The FBI affidavit reveals that ZTE recently informed the Department of Commerce that it would not comply with an administrative subpoena served on the company seeking records of the nine-figure Iran transaction. Yablon told the FBI that he learned that ZTE officials “had contacted the PRC [People’s Republic of China] government, which was prepared to advise [the company] that if it complied with the DoC administrative subpoena, it would be violating PRC law.”

Days after the Reuters story was published, Yablon recalled, he spoke with ZTE lawyer Xue Xing Ma (also known as “Marsha”), who said the company was concerned about how the news outlet obtained a copy of the 907-page packing list for the system shipped to Telecommunication Company of Iran (TCI).  “Marsha told Yablon the corporation was concerned because it could no longer ‘hide anything,’” reported Agent Carwile.

Yablon told investigators that, upon hearing this from Marsha, he responded that he would not engage in a “cover up,” and threatened to resign.

In late-March, at ZTE’s direction, Yablon retained the powerhouse law firm DLA Piper to handle the company’s response to the Department of Commerce subpoena (as well as to help prepare for a mid-April visit to ZTE’s Shenzhen headquarters by representatives of the House committee).

In early-April, Yablon traveled to China, where he conferred with assorted ZTE officials, several company attorneys, and two DLA Piper lawyers. As recalled by Yablon, during an April 11 meeting, a ZTE lawyer identified in the FBI affidavit as “Mr. Guo” “appeared to suggest several strategies for responding to the DoC subpoena,” including claiming that the packing list obtained by Reuters was “not the real document.”

Guo then asked Yablon and the DLA Piper attorneys what would happen if ZTE told U.S. government officials that the company “had not actually shipped the telecommunications system to Iran.” According to the FBI affidavit, Yablon replied that it appeared to him that ZTE officials were “suggesting potential scenarios that would obscure the fact that U.S.-made telecommunication equipment had been shipped to Iran.”

The day after Guo floated the cover-up trial balloon, Yablon and a DLA Piper lawyer met with two other ZTE officials, one of whom projected on a wall an image of the contract with the Iranian telecom company “for the sale of the surveillance system.” According to Yablon, “the contract essentially described how [ZTE] would evade the U.S. embargo and obtain the U.S.-manufactured components specified in the contract for delivery” to the Iranian company.

Yablon told the FBI that he believed ZTE established a separate company solely to buy “U.S.-made goods subject to the U.S. embargo,” and set up a second firm to “integrate the equipment for delivery to and installation in Iran.”

At another meeting on April 12, Yablon and DLA Piper lawyer Richard Newcomb presented ZTE officials with “a plan they had drafted for the company’s response to the DoC subpoena.” However, “none of the [ZTE] officials offered any substantive response to the plan.”

During the meeting, Yablon told the FBI, he watched as several company officials “huddled together in the corner of the room.” Yablon said that when he asked "Marsha" what was being discussed, she answered that “they were discussing shredding documents and changing the packing list.”

In late-April, Yablon noticed that he was no longer being copied on e-mail exchanges between ZTE and DLA Piper about the Commerce Department subpoena. During an April 26 conversation with John Merrigan, a DLA Piper partner, Yablon was told by Merrigan that he had spoken with ZTE officials the prior evening and that they said their firm “had never shipped the surveillance system equipment to Iran, and that the equipment either was in warehouses in the PRC or had been shipped to non-embargoed countries.”

Yablon recalled that he informed Merrigan that, weeks earlier, he had met with a ZTE lawyer who proposed a menu of possible stories to peddle to the DoC. The Chinese attorney said that U.S. investigators could either be told that telecom material had never been shipped to Iran, that the items actually went to a non-embargoed country, or that the shipment to Iran included only “de minimis” U.S. components not subject to the trade embargo.

According to Yablon, Merrigan said that a ZTE lawyer had directed him to omit Yablon from “all further communications regarding the company’s response to the DoC subpoena and other issues relating to the contract with TCI,” reported FBI Agent Carwile. Yablon, who had previously threatened to quit if asked to engage in a cover-up of the Iranian deal, appeared to have been totally frozen out by his ZTE superiors.

Merrigan, pictured below, did not respond to a phone message left at his Washington, D.C. office or an e-mail sent to his DLA Piper account. 

In the last conversation recounted in the FBI affidavit, Yablon recalled speaking on April 26 with a ZTE attorney who “relayed…instructions to gather all records he had related to the export issues, including documents and computer files.”

While the affidavit does not detail what the Chinese company planned to do with this incriminating material, ZTE certainly had no intention of providing it to U.S. authorities. In fact, the company subsequently advised DoC that they would not respond to the agency’s administrative subpoena.

Six days after being instructed to compile his work product about the Chinese firm’s deal with Iran, Yablon sat down for a lengthy interview with the FBI (it is unclear whether he reached out to the bureau). The “documents and files” Yablon was ordered to gather were stored on his laptop, an Asus model issued to him by ZTE.

On May 7, Yablon met with the FBI in his lawyer’s office and provided written consent for agents to take temporary custody of his computer so that a complete “forensic image” of the machine could be made.

Seeking to “preserve any evidence of a crime” on Yablon’s laptop, federal investigators had concluded that there was probable cause to believe that ZTE and its officers and employees had knowingly engaged in a conspiracy to illegally re-export goods to Iran, and were also involved in a “continuing and corrupt effort to obstruct and impede” U.S. government investigators (Smoking Gun, 2012).

Title: China Slams The Brakes On GM's Accelerating Car Sales
Date: July 12, 2012
Daily Finance

Abstract: At many times over the last few decades, it has seemed like General Motors (
GM) couldn't do anything right. The cars weren't competitive, the company's finances were a mess, and it often appeared as if GM's leaders were doing everything but mounting a credible challenge to the import brands that were eating its lunch.

We know where that all led: bankruptcy and the infamous taxpayer-funded bailout.

But lost in all that failure was a surprising success story: General Motors had become the No. 1 automaker in the world's largest auto market -- China.

GM's effort in China was one of its few bright spots in the last decade, and it has become a cornerstone of the new GM's global strategy. GM is still the leading automaker in China, and its market share continues to grow.

However, new government rules could put a damper on the General's success.

Taking Over Chinese Roads
Despite complex laws designed to favor local Chinese interests, GM has made itself a big player in China, which has grown to become the largest automotive market in the world. GM -- working together with Chinese joint-venture partners, as required by Chinese law -- has seen big success for its familiar Buick and Chevrolet brands, as well as with a hot-selling line of inexpensive commercial vans sold under the local Wuling brand.

Both China-only products like the Buick Excelle and familiar cars like the Chevy Cruze compact are regularly at the top of China's best-seller lists. In fact, GM and its joint-venture partners sold more vehicles in China last year than GM did here in the U.S.

GM is hardly the only Western success story in China, of course. Archrival Volkswagen's (
VLKAY) sales are a close second to GM's, and global giants like Toyota (TM) and Honda (HMC) have strong presences as well. A latecomer to the party, Ford (F), has invested more than $5 billion in local factories in an effort to catch up -- and it's off to a good start: Sales of its just-introduced Focus have been brisk.

But GM is the biggest player, and 
its market share has been growing recently as its sales growth has outpaced that of the overall market. And that means that new restrictions on auto sales in key Chinese cities could hit GM harder than others.

Government Stalls the Engine
Anyone who watches China knows that its government can take a heavy-handed approach to addressing perceived problems, and its solutions to the smog and gridlock in its biggest cities have been no exception.

Shanghai's city government limits the number of new-vehicle registrations to 20,000 per month. License plates are sold at auction, and the prices typically run well into the thousands of dollars.

Early last year, Beijing's city government adopted a similar rule. And more recently, the huge (population near 14 million) southern city of Guangzhou imposed an even sharper limit literally overnight: Late on June 30, the government announced that new-car sales would be limited to just 10,000 a month, starting July 1.

Sales in Guangzhou had been running at about three times that rate, and dealers stayed open until well past midnight to accommodate the sudden rush of orders, according to aBloomberg report. But Guangzhou's abrupt move raised a larger question: Would other Chinese cities adopt similar limits?

The growth of China's auto market has already fallen sharply. The 50%-plus growth rates that were routine until a couple of years ago are a fading memory now, with the market up just 2.9% through the first half of 2012. More limits on sales in cities could trim that growth rate further -- or, worse, send it into reverse.

GM said in a statement that it expects its growth in China to "remain steady in the second half" of 2012, driven by sales growth in interior provinces. The company has been investing heavily in new dealerships in China, hoping to find growth in areas outside of cities where car ownership is still less common.

That's good, because China is extremely important to GM's bottom line: While it splits profits with its joint-venture partners, 
GM still books well more than $1 billion a yearfrom its Chinese operations.

That strategy may work out for GM. But as rivals like Ford continue to ramp up their Chinese presence, it's clear that growth in China is going to be a lot harder for GM to find in the future
(Daily Finance, 2012).

Title: China Detains 2 In Attack On Japanese Envoy's Car
Date: September 4, 2012
Fox News

Abstract: Two Chinese men have been detained over an attack last week on the Japanese ambassador's car in Beijing in which a flag was ripped off of the front of the vehicle, Chinese state media reported Tuesday.

The men, aged 23 and 25, are being held for disturbing public order, and another man has been issued a warning, the official Xinhua News Agency said.

It said they admitted that they committed the Aug. 27 attack, which came during a flare-up in tensions over a disputed group of uninhabited islands in the East China Sea.

In the incident, Ambassador Uichiro Niwa's car was hemmed in by two other vehicles on one of Beijing's outer ring roads as he was returning to the embassy. A man then got out and ripped the Japanese flag off, damaging the vehicle's flagpole and prompting protests from Tokyo.

China's Foreign Ministry expressed deep regret over the incident and said authorities would work to prevent a recurrence. Beijing faces a constant struggle to contain anti-Japanese sentiment that could harm relations with Tokyo or turn on the rulers in Beijing. Many Chinese still resent Japan's brutal World War II occupation of much of China and are quick to take offense at perceived slights from Tokyo.

Anti-Japanese street protests broke out this summer after Japan detained and later released 14 Hong Kong activists who landed on the islands, called Diaoyu in Chinese and Senkaku in Japanese.

The islands are controlled by Japan but also claimed by China and Taiwan (Fox News, 2012).

Title: Territorial Tensions Ripple As Clinton Visits Beijing
Date: September 5, 2012

Abstract: U.S. Secretary of State Hillary Clinton arrived in Beijing for talks Tuesday, with competing maritime claims of China and its neighbors expected to dominate the agenda.

Tensions over territorial disputes have spiked this year between China and a string of countries around its coastline -- from Vietnam in the southwest to Japan in the northeast -- and the United States has been drawn into the fray.

Clinton met with Foreign Minister Yang Jiechi Tuesday. She is scheduled to hold a news conference with Yang Wednesday and meet with several leaders, including President Hu Jintao.

Yang welcomed Clinton and stressed "important progress in some areas" in their relationship, according to remarks released by the U.S. State Department.

"Maintaining the healthy and steady development of our relationship serves the fundamental interests of our two countries and two peoples and is conducive to stability, peace, and development in the Asia Pacific region and beyond," he said.

Clinton stressed "the importance of the practical cooperation that underlies our comprehensive relationship."

"We are committed to building a cooperative partnership with China; it is a key aspect of our rebalancing in the Asia Pacific. And we have had a lot of in-depth consultations and high-level meetings over the last three and a half years."

In Indonesia Monday, Clinton reiterated that "the United States does not take a position on competing territorial claims over land." Instead, the U.S. government is pressing China and other countries in the region to agree to a code of conduct and procedures for resolving disagreements peacefully.

But Beijing, which prefers to tackle the disputes bilaterally, has reacted angrily to Washington's involvement in the matter, accusing the State Department of "unfounded accusations" and showing a "total disregard of facts."

The Global Times, a Chinese newspaper affiliated with the ruling Communist Party, said in an editorial published Tuesday that Clinton's diplomacy in the region "has fomented frictions between China and some surrounding countries."

It called on her to "reflect upon the deep harm she is bringing to the Sino-US relationship."

Clinton will have to negotiate such Chinese hostility to U.S. efforts to address the tangle of tensions across the South China Sea and beyond.

Countries like Vietnam and the Philippines lay claim to some areas of the South China Sea, a 1.3 million square-mile patch of the Pacific Ocean dotted with hundreds of largely uninhabited islands and coral atolls. But China has declared "indisputable sovereignty" over large swathes of the area, which is rich in marine life.

The stakes are raised further by estimates that potentially huge reserves of natural gas and oil lie underneath the seabed.

The scope for conflict was demonstrated in April when a Philippine Navy vessel confronted Chinese fishing boats in a remote rocky outcrop claimed by both countries.

The resulting naval standoff between the two countries lasted for more than three months and aroused fears of an open conflict before the Philippines withdrew its ships in June, citing stormy weather. The issue of who the lagoon belongs to remains unresolved.

Analysts have expressed pessimism that the disputes in the South China Sea will be defused soon.

"While the likelihood of major conflict remains low, all of the trends are in the wrong direction, and prospects of resolution are diminishing," the International Crisis Group said in a July report.

Tensions have also flared recently over a long-running dispute concerning a group of islands in the East China Sea claimed by China, Japan and Taiwan.

Furious anti-Japan protests erupted across China last month when a Japanese group sailed to one of the disputed islets and symbolically waved Japanese flags.

And on Sunday, the controversial governor of Tokyo, Shintaro Ishihara, dispatched a team to survey the islands as part of an effort to purchase them from the private owners. Chinese state-run media immediately declared the survey "illegal."

The uninhabited islands are known in Japan as Senkaku and in China as Diaoyu, and are privately owned by a Japanese family (CNN, 2012).

Title: US Risks Drawing Beijing's Ire With Military Cruise In Disputed Waters
October 20, 2012

Abstract: USS George Washington enters South China Sea as display of naval strength and support of smaller Asian nations claims

A US aircraft carrier group cruised through the disputed South China Sea on Saturday in a show of American power in waters that are fast becoming a focal point of Washington's strategic rivalry with Beijing.

Vietnamese security and government officials were flown onto the nuclear-powered USS George Washington ship, underlining the burgeoning military relationship between the former enemies.

A small number of journalists were also invited to witness the display of maritime might in the oil-rich waters, which are home to islands disputed between China and the other smaller Asian nations facing the sea.

The visit will likely reassure Vietnam and the Philippines of American support but could annoy China, whose growing economic and naval strength is leading to a greater assertiveness in pressing its claims there.

The United States is building closer economic and military alliances with Vietnam and other nations in the region as part of a "pivot" away from the Middle East to Asia, a shift in large part meant to counter rising Chinese influence.

The Vietnamese officials took photos of F-18 fighter jets taking off and landing on the ships 1,000-foot-long flight deck, met the captain and toured the hulking ship, which has more than 5,000 sailors on board.

The mission came a day after Beijing staged military exercises near islands in the nearby East China Sea it disputes with US ally Japan. Those tensions have flared in recent days.

China claims nearly all of the South China Sea, where the US says it has a national interest in ensuring freedom of navigation in an area crossed by vital shipping lanes.

Vietnam, the Philippines and several other Asian nations also claim parts of the sea.

The disputes attracted little international interest until the late 1990s, when surveys indicated possible large oil reserves.

American rivalry with China has given the disputes an extra dimension in recent years.

The US navy regularly patrols the Asia-Pacific region, conducting joint exercises with its allies and training in the strategic region.

The trip by the George Washington off the coast of Vietnam is its third in as many years.

A second aircraft carrier, the USS John C Stennis, has also conducting operations in the western Pacific region recently, according to the US Pacific Fleet.

Captain Gregory Fenton said the mission was aimed in part at improving relations with Vietnam and ensuring the US had free passage in the South China Sea.

China's military buildup, including the launch of its own carrier last year and rapid development of ballistic missiles and cyber warfare capabilities, could potentially crimp the US forces' freedom to operate in the waters.

The United States doesn't publicly take sides in the territorial disputes among China and its neighbors.

"It is our goal to see the region's nations figure out these tensions ... on their own, our role of that to date is to conduct freedom of navigation exercises within international waters," Fenton said in an interview on the bridge.

Although claimant countries have pledged to settle the territorial rifts peacefully, the disputes have erupted in violence in the past, including in 1988 when China and Vietnam clashed in the Spratly Islands in a confrontation that killed 64 Vietnamese soldiers.

Many fear the disputes could become Asia's next flash point for armed conflict.

Vietnam is pleased to accept help from its one-time foe America as a hedge against its giant neighbor China, with which it also tries to maintain good relations.

Still, the Hanoi government reacted angrily to recent moves by Beijing to establish a garrison on one of the Paracel islands, which Vietnam claims. The United States also criticized the move by Beijing, earning it a rebuke from the government there.

"China will take this (cruise) as another expression by the United States of its desire to maintain regional domination," said Denny Roy, a senior fellow at the East-West Center in Hawaii.

"The US also wants to send a message to the region that it is here for the long haul ... and that it wants to back up international law."

While most analysts believe military confrontation in the waters is highly unlikely anytime soon, they say tensions are likely to increase as China continues pressing its claims and building its navy.

This article was amended on 22 October 2012 because the original said F-16 jets were on USS George Washington. This has been corrected to say F-18 jets (Guardian, 2012).

Title: China Rejects Sanctions, Use Of Force Against Iran
October 25, 2012
Press TV

China has rejected sanctions and the use of force against Iran over its nuclear energy program, warning that such coercive measures could have a negative impact on regional and global peace and stability.

Chinese Foreign Ministry Spokesman Hong Lei made the remarks at a regular press briefing on Thursday.

He added that the sanctions and use of force could not resolve the existing issue, calling for a peaceful settlement of the issue through dialogue and negotiations.

The Chinese official also expressed hope that a new round of talks between Iran and the P5+1 group would resume at an early date.

Iran and the P5+1 group comprising Britain, China, France, Russia, the US and Germany have held several rounds of talks over the Iranian nuclear energy issue.

Undersecretary of Iran's Supreme National Security Council (SNSC) Ali Baqeri said on October 22 that the six major world powers were planning to arrange a new round of talks with the Islamic Republic.

Baqeri noted that Helga Schmid, deputy to the EU Foreign Policy chief Catherine Ashton, who represents the P5+1, had called him earlier on the day to arrange for the talks.

The United States, Israel and some of their allies have repeatedly accused Iran of pursuing non-civilian objectives in its nuclear energy program.

Under the false allegation, Washington and the European Union have imposed unilateral illegal sanctions against the Islamic Republic.

Iran refutes the allegations and argues that as a signatory to Non-Proliferation Treaty and a member of International Atomic Energy Agency, it is entitled to develop and acquire nuclear technology for peaceful purposes (Press TV, 2012).

Title: China Blocks Web Access to Times After Article
October 25, 2012
New York Times

The Chinese government swiftly blocked access Friday morning to the English-language and Chinese-language Web sites of The New York Times from computers in mainland China in response to an article in both languages describing wealth accumulated by the family of the country’s prime minister.

The authorities were also blocking attempts to mention The Times or the prime minister, Wen Jiabao, in posts on Sina Weibo, an extremely popular mini-blogging service in China that resembles Twitter.

The Foreign Ministry spokesman on duty in Beijing early Friday morning did not answer phone calls seeking comment.

China maintains the world’s most extensive and sophisticated system for Internet censorship, employing tens of thousands of people to monitor what is said, delete entries that contravene the country’s extensive and unpublished regulations and even write new entries that are favorable to the government.

Rebecca MacKinnon, a senior fellow specializing in Internet free expression and privacy issues at the New America Foundation, a nonpartisan group headquartered in Washington, said that the Chinese interruption of Internet access was typical of the response to information that offended leaders.

“This is what they do: they get mad, they block you,” she said.

The English-language and Chinese-language Web sites of The Times are hosted on servers outside mainland China.

A spokeswoman for The Times, Eileen Murphy, expressed disappointment that Internet access had been blocked and noted that the Chinese-language Web site had attracted “great interest” in China.

“We hope that full access is restored shortly, and we will ask the Chinese authorities to ensure that our readers in China can continue to enjoy New York Times journalism,” she said in a statement, adding, “We will continue to report and translate stories applying the same journalistic standards that are upheld across The New York Times.”

Former President Jiang Zemin of China ordered an end to blocking of The New York Times Web site after meeting with journalists from The Times in August 2001. The company’s Web sites, like those of most other foreign media organizations, have remained mostly free of blocking since then, with occasional, temporary exceptions.

By 7 a.m. Friday in China, access to both the English- and Chinese-language Web sites of The Times was blocked from all 31 cities in mainland China tested. The Times had posted the article in English at 4:34 p.m. on Thursday in New York (4:34 a.m. Friday in Beijing), and finished posting the article in Chinese three hours later after the translation of final edits to the English-language version.

Publication of the article about Mr. Wen and his family comes at a delicate time in Chinese politics, during a year in which factional rivalries and the personal lives of Chinese leaders have come into public view to a rare extent and drawn unprecedented international interest.

The Times’s statement called China “an increasingly open society, with increasingly sophisticated media,” adding, “The response to our site suggests that The Times can play an important role in the government’s efforts to raise the quality of journalism available to the Chinese people.”

The New York Times is not the first international organization to run into trouble with Chinese censors. Google decided to move its servers for the Chinese market in January 2010, to Hong Kong, a semiautonomous Chinese territory outside the country’s censorship firewalls, after the company was unable to reach an agreement with the Chinese authorities to allow unrestricted searches of the Internet.

Bloomberg published an article on June 29 describing wealth accumulated by the family of Vice President Xi Jinping, who is expected to become the country’s next top leader as general secretary of the Communist Party during the coming Party Congress.

Since then, Bloomberg’s operations have encountered a series of problems in mainland China, including the blocking of its Web site, which is in English (New York Times, 2012).

Title: AIG Sale Of ILFC To China Submitted For National Security Review
Date: December 9, 2012

Abstract: AIG and the Chinese group that has agreed to buy AIG's aircraft leasing business ILFC will submit the deal to the Committee on Foreign Investment in the United States for review, AIG said on Sunday.

AIG is selling up to 90 percent of ILFC to the group, which intends to leave the company based in the United States. The inter-agency committee, also known as CFIUS, vets foreign deals for security concerns (Reuters, 2012).

Title: Family Of Engineer Who Died In Singapore After Warning Of Chinese Spying Wants Answers
Date: March 1, 2013
Fox News

Abstract: The family of an American who turned up dead in Singapore after expressing fear he was being duped by Chinese spies is calling for a congressional investigation into his death in Singapore.

Relatives of Shane Todd, 31, believe the Montana man — who was worried that his employers in Singapore were using him to help China get its hands on sensitive technologies to harm U.S. national security — was murdered to cover up his discovery of the purported plot.

“He told us that his life was being threatened,” Todd’s mother, Mary, told Fox News Channel on Friday.

Just two days after his final day of work in June and a going-away party with colleagues, his girlfriend found him dead in June 2012, hanging from his bathroom door. Police and the coroner believe Todd hanged himself in the bathroom, leaving two suicide notes on his computer, CBS News reports.

Mary Todd said she immediately doubted the authenticity of the note.

“My son did not write this note,” she continued. “He did not take his own life.”

Todd’s relatives have since been pressing U.S. officials to investigate the death following a lack of cooperation from Singapore authorities. They met with Sen. Max Baucus, D-Mont., in Washington on Friday.

A spokesperson for Baucus tells that he set up a meeting for the family with the State Department.  He will meet face-to-face with the Singaporean Ambassador to the U.S. next week and has personally weighed in on the issue with top White House officials.

Baucus had staff from his Finance Committee meet with U.S. embassy and Singaporean officials last week, the spokesperson said.

Shane Todd graduated in 2005 with a degree in electrical engineering from the University of Florida and later received his doctorate at the University of California-Santa Barbara. In 2010, he chose a job in Singapore because he was looking for adventure, he told his parents.

He took a position at the Institute of Microelectronics, a Singaporean government research institution, to work on cutting-edge technology involving powerful semiconductors. An investigation by the Financial Times magazine revealed that the technology has other applications desired by China, including applications that can be used to disrupt enemy radar and communications.

"What has to happen is we need a congressional investigation," Mary Todd said (Fox News, 2013).

Title: Chinese General Who Threatened US With Nuclear Strike Is Pentagon's Guest Of Honor
Date: March 5, 2013

Abstract: A Chinese general who once threatened to nuke the US is visiting Washington this week as part of a military exchange program with the Pentagon.

The Pentagon’s collaboration with Major Gen. Zhu Chenghu, head of China’s National Defense University, is surprising considering the threats the general made against the US in 2005.

“If the Americans draw their missiles and position-guided ammunition on the target zone on China’s territory, I think we will have to respond with nuclear weapons,” Zhu told a Financial Times reporter in 2005, describing his country’s predicted reaction if the US were to conflict with China over Taiwan.

A State Department official called the comment “highly irresponsible”. The comment closely reiterated similar statements Zhu had made in the past, describing his intentions to nuke the US if the US were to defend Taiwan in a conflict.

We Chinese will prepare ourselves for the destruction of all of the cities east of Xian,” he said in 1995. “Of course, the Americans will have to be prepared that hundreds of cities will be destroyed by the Chinese.”

But despite the Chinese general’s repeated threats to destroy the US, he has been invited by the Pentagon to visit the US this week as part of a military exchange program. Zhu and his delegation of 10 senior colonels from the Chinese military will visit Hawaii and Washington, DC. Later this year, US officials will visit China for a reciprocal exchange, according to the Free Beacon.

Sen. James Inhofe (R-Okla.), the ranking member of the Senate Armed Services Committee, told the Free Beacon that Zhu’s visit will allow the Pentagon to learn more about China’s nuclear weapons intentions, which the US has long struggled to understand.

“We do know, as the congressionally mandated US-China Economic and Security Review Commission reported last year, that ‘China has assumed a more muscular nuclear posture, which ongoing improvements will continue to enhance,’” he said.  “Before the president reaches out to Russia for yet another round of US nuclear reductions, we should know more about how such reductions will affect the nuclear balance with China.”

Zhu’s comments about China’s willingness to nuke the US may hold more truth than some would be inclined to believe: China specialists told the Beacon that no Chinese general would make such inflammatory statements unless they reflected official military policy, since inaccurate statements could get someone fired or reprimanded. Shortly after making the 2005 statement, Zhu was promoted.

“[This] should be a clear signal to American policymakers that Chinese state policy is to use nuclear weapons as an instrument of intimidation,” said State Department official John Tkacik, who specializes in China affairs (RT, 2013).

Title: FBI Arrests NASA Contractor Employee Trying To Flee To China
Date: March 18, 2013
Source: Washington Examiner

Abstract: Bo Jiang, the Chinese national scientist employed by a NASA contractor for work at the space agency's Langley Research Center, was arrested Sunday by the FBI at Dulles International Airport as he tried to flee to China, according to Rep. Frank Wolf, R-VA.

Wolf said during a Capitol Hill news conference today that Jiang’s work at the NASA facility had given him access to information that “would be of the greatest interest to foreign spies, including China.”

Wolf is chairman of a House Appropriations Committee subcommittee that has budget oversight authority for NASA.

He made Jiang's name public for the first time last week during a subcommittee hearing where he also charged that Jiang had taken “voluminous sensitive” NASA documents back to China on a trip in 2012.

Jiang was employed by the National Institute of Aerospace, a Hampton, VA-based NASA contractor. The position afforded Jiang virtually unlimited, unescorted access to the NASA Langley facility, which is the location for classified research programs related to U.S. space defense technologies.

Ronda Squizzero, an FBI Special Agent said in documents Wolf made available today concerning Jiang’s arrest that he “was leaving the United States abruptly to return to China on a one-way ticket.”

The FBI is “investigating conspiracies and substantive violations of the Arms Export Control Act,” according to the FBI’s arrest warrant.

Jiang also is charged with making a false statement to federal law enforcement agents, including his attempt to conceal a “laptop, and old hard drive and a SIM card,” according to the FBI agent.

The FBI said it “believes this to be material to the federal investigation, in that it was important to learn what electronic media Jiang was taking out of the United States.”

Wolf said the Chinese national’s activities came to his attention from whistleblowers who worked at NASA Langley.

“I want to credit the whistleblowers at NASA who brought Mr. Jiang’s security violations to my attention, which resulted in this investigation,” Wolf said at today’s news conference.

After learning about Jiang, Wolf met with the FBI’s counterintelligence office and called FBI Director Robert Mueller about Jiang.

Wolf said he hopes to learn more about the information contained on Jiang’s hard drive.  He said “we know that Mr. Jiang has in the past taken sensitive information back to China that he should not have been allowed to remove at Langley.”

Wolf also said he believes Jiang’s information “may pertain to the source code for high-tech imaging technology that Jiang has been working on with NASA.  This information could have significant military applications for the Chinese Peoples Liberation Army.”

Sensitive technologies that are supposed to be strictly limited by U.S. export control laws are essential to U.S. space defense programs, but Wolf said they could also apply to “unmanned aerial vehicles and other aerospace/aeronautic technologies.”

During the same hearing last week in which Wolf revealed Jiang’s name, NASA Inspector-General Paul Martin said he believes there are nearly 200 Chinese nationals working in positions that afford them significant access to the agency and its programs.

Wolf has long expressed concern about the security of space defense secrets and has complained of lax security at NASA Langley and NASA Ames Research Center.  NASA Ames is outside of San Francisco.

Wolf has said he believes NASA officials encouraged NIA to hire Jiang as a means to “circumvent” congressional restrictions on the hiring of foreign nationals by the space agency.

He released an internal NASA email that defended giving Jiang “an exception” to hire him.  “I think it would be in the government’s best interests to be able to continue our work with him,” a NASA Langely official wrote.

Before Jiang’s detention Sunday, the last time the FBI arrested a Chinese national in the U.S. on suspicion of espionage activity was 2006 in a case concerning aviation issues.

Doongfan “Greg” Chung, a former Rockwell Internationa and Boeing engineer was convicted in 2009 of economic espionage and acting as an agent of the Peoples Republic of China. 

An FBI search of Chung’s home in 2006 found 250,000 Boeing documents in his possession.

Jiang was to be arraigned today in a U.S. District Court for the Eastern District of Virginia in Norfolk, VA. Assistant U.S. Attorney Lisa R. McKeel will handle the prosecution case for the government (Washington Examiner, 2013).

Title: China Warns US Over Missile Defence Programme Against North Korea
Date: March 18, 2013
Source: Guardian

Abstract: Beijing says American interference could only make matters worse in sabre-rattling between Seoul and Pyongyang

China has said that US plans to bolster missile defences in response to provocations by North Korea would only intensify antagonism, and urged Washington to act prudently.

A Chinese foreign ministry spokesman, Hong Lei, made the comments at a daily news briefing.

He said: "Actions such as strengthening anti-missile [defences] will intensify antagonism and will not be beneficial to finding a solution for the problem.

"China hopes the relevant country will proceed on the basis of peace and stability, adopt a responsible attitude and act prudently."

The Pentagon said the US had informed China, North Korea's neighbour and closest ally, of its decision to add more interceptors but declined to characterise Beijing's reaction.

The US defence secretary, Chuck Hagel, announced plans on Friday to bolster American missile defences in response to "irresponsible and reckless provocations" by North Korea, which has threatened a pre-emptive nuclear strike against the US.

A senior US military official visiting Seoul sent a message to both Koreas: warning Pyongyang over recent threats and reassuring South Korea that military backing won't be hurt by a congressional budget debate.

The deputy secretary of defence, Ashton Carter, said on Monday that Pyongyang's threats would only deepen Washington's defence commitment to Seoul. He said that includes a "nuclear umbrella" security guarantee for Seoul, which doesn't have atomic weapons.

Ashton said deep US budget cuts won't alter Pentagon efforts to make South Korean security a priority.

Pyongyang is angry over USs-South Korean war games and UN sanctions meant to punish it for carrying out a third nuclear test. It has threatened nuclear attacks on Washington, though it isn't believed to have the weapons needed to do so.

Meanwhile, Taiwan's defence ministry has said it regretted the "not entirely objective" characterisation by the former top American diplomat on the island that declining military budgets have left it vulnerable to Chinese attack and made it easier for mainland spies to penetrate its armed forces.

The remarks from William Stanton constituted an unusually hard-hitting critique of Taiwan's national security posture, and stood in sharp contrast to repeated assertions of American support for President Ma Ying-jeou's five-year programme of seeking to lower tensions with the mainland, from which Taiwan split amid civil war in 1949.

A career diplomat, Stanton served as the head of the de facto US embassy in Taiwan from August 2009 to August 2012. His remarks came in a speech before a pro-independence organisation in Taipei on Friday.

His charge constitutes what is believed to be the first public acknowledgement from a US government official serving or recently retired that Chinese espionage against Taiwanese targets may be affecting America's willingness to provide security assistance to Taipei.

Responding to Stanton's charge, Taipei's defence ministry said it had been zealous in pursuing cases of Chinese espionage against the Taiwanese military, which proved its "credibility" in combating the Chinese spying threat.

"We will continue working on measures to safeguard our security," it said (Guardian, 2013).

Title: Contractor Accused Of Giving Info On US War Plans, Nuclear Weapons To Chinese Girlfriend
Date: March 19, 2013
Source: Fox News

Abstract: Federal authorities say a civilian defense contractor who works in intelligence at Pacific Command gave his Chinese girlfriend information on existing war plans and U.S. nuclear weapons.

Benjamin Pierce Bishop, 59, appeared in court Monday to face one count of communicating national defense information to a person not entitled to receive it and one count of unlawfully retaining national defense documents and plans. He was arrested March 15 at Pacific Command headquarters at Camp H.M. Smith in Hawaii.

Bishop gave information to the woman, a 27-year-old Chinese national, after meeting her at a conference on international military defense issues in Hawaii, according to the complaint filed in U.S. District Court in Honolulu. Authorities did not say when the conference took place but said she was in the U.S. on a student visa at the time.

The identity and whereabouts of the woman were not released. U.S. Attorney Florence Nakakuni didn't answer questions at a press briefing Monday.

U.S. authorities say Bishop divulged the information in an email in May, and also in a phone call in September, when he told the woman about the deployment of U.S. strategic nuclear systems and about the ability of the U.S. to detect other nations' low- and medium-range ballistic missiles.

Authorities did not say when Bishop met the woman, but alleged they began an intimate, romantic relationship in June 2011. The woman was in the U.S. on a J-1 visa, for people in work- and study-based exchange programs. It was not clear what institution she attended.

It's also not known which defense contractor employs Bishop.

Bishop is accused of hiding the relationship from the government even though his position and security clearance requires him to report contact with foreign nationals.

Authorities conducting a covert search of Bishop's home in Kapolei, a Honolulu suburb, in November found 12 individual documents marked "secret" even though he's not authorized to keep classified papers at home, court documents said.

The woman asked Bishop last month what western countries knew about "the operation of a particular naval asset of People's Republic of China," the complaint said, though the topic fell outside Bishop's regular work assignments. Bishop researched the issued using open source records and was observed collecting and reviewing classified information on the topic, the complaint said.

U.S. Magistrate Judge Richard Puglisi conditionally appointed Bishop an attorney after hearing arguments that his finances weren't sufficient to cover the costs of defending himself.

Bishop's court-appointed attorney, Birney Bervar, said Bishop is a lieutenant colonel in the U.S. Army Reserve.

"Col. Bishop has served this country for 29 years. He would never do anything to harm the United States," Bervar told reporters.

Bart DaSilva, a neighbor of Bishop's, said the man lived alone and was initially friendly when he moved in about three years ago. DaSilva said Bishop once brought over a woman and a girl he said were his wife and daughter from Thailand.

DaSilva said he never saw Bishop with other visitors.

Bishop increasingly began to keep to himself, DaSilva said. "I kind of felt, 'What did we do?'" DaSilva said. "It was almost like he switched off."

No one answered the door Monday at the brown, two-story home, which is in a hilly neighborhood overlooking Pearl Harbor and downtown Honolulu.

Bishop was scheduled to appear in court Friday for a hearing on whether he will remain in detention during the case. A preliminary hearing was scheduled for April 1 (Fox News, 2013).

Title: China, Pakistan Reach Secret Nuclear Reactor Deal For Pakistan
Date: March 21, 2013
Source: Washington Times

Abstract: China and Pakistan reached a formal agreement last month to construct a third nuclear reactor at Chashma that the Obama administration says will violate Beijing’s promises under an international anti-nuclear weapons accord.

According to U.S. intelligence and diplomatic officials, the secret agreement for the Chashma 3 reactor was signed in Beijing during the visit by a delegation from the Pakistan Atomic Energy Commission from Feb. 15 to 18.

The agreement calls for the state-run China National Nuclear Corp. (CNNC) to construct a 1,000-megawatt power plant at Chashma, located in the northern province of Punjab, where two earlier Chinese reactors were built.

China’s government last month issued an internal notice to officials within its nuclear establishment and to regional political leaders urging care to avoid any leaks of information about the nuclear sale that Beijing expects will be controversial, said officials who spoke on condition of anonymity.

The reactor deal had been in the works for several years and prompted high-level U.S. government efforts to block the sale because of concerns it will boost Pakistan’s nuclear weapons program.

The CNNC is China’s main nuclear weapons producer and has been linked in the past to Pakistan’s nuclear arms program by U.S. intelligence agencies. CNNC sold thousands of ring magnets to Pakistan during the 1990s that were used in centrifuges that produced highly enriched uranium for weapons.

Additionally, recent U.S. intelligence reports indicate that China, which supplied Pakistan with nuclear weapons design data and technology, is in the process of modernizing Islamabad’s nuclear arsenal, which is estimated to contain as many as 110 warheads.

The arms cooperation is said to include development of a new warhead for Pakistan’s growing missile arsenal as well as assistance in reprocessing spent nuclear fuel.

A Congressional Research Service report published Feb. 13 stated, “Pakistan’s nuclear arsenal probably consists of approximately 90-110 nuclear warheads, although it could be larger.”

Islamabad is producing fissile material, adding to related production facilities, and deploying additional delivery vehicles,” the CRS report said. “These steps could enable Pakistan to undertake both quantitative and qualitative improvements to its nuclear arsenal.”

The report warned that spent fuel from Pakistan’s Karachi and Chashma nuclear power plants are vulnerable to theft or attack.

Pakistan produced one of the most dangerous cases of nuclear proliferation in the early 2000s when weapons technology was supplied to Libya, Iran, and North Korea by the supplier group led by Pakistani nuclear scientist A.Q. Khan.

The Obama administration has not publicly contested the nuclear cooperation between the two countries in the past to avoid upsetting U.S. covert efforts against Islamist terrorism in the region.

The Beijing-Islamabad nuclear cooperation also has been limited as a result of U.S. efforts to win Chinese support for sanctions on Iran for its illicit nuclear program.

The new reactor sale also will undermine the Nuclear Suppliers Group, a voluntary association with no enforcement mechanisms that is viewed as a key tool in the administration’s effort to prevent the spread of nuclear weapons.

China in 2004 joined the group and agreed not to sell additional reactors to Pakistan beyond the two reactors sold earlier. China is not permitted under NSG guidelines to sell nuclear goods to any country that is not part of the International Atomic Energy Agency.

Two U.S. officials confirmed that the Chashma reactor deal was finally reached.

Spokesmen for the Chinese and Pakistani embassies could not be reached for comment.

A State Department official declined to provide details of the sale but said it is not permitted under the U.S. understanding of China’s admission to the nuclear group. That understanding is that China would not sell additional reactors to Pakistan’s Chashma complex.

Nuclear Suppliers Group (NSG) participating governments have discussed the issue of China’s expansion of nuclear cooperation with Pakistan at the last several NSG plenary sessions,” the official said.

“We remain concerned that a transfer of new reactors at Chashma appears to extend beyond the cooperation that was ‘grandfathered’ in when China was approved for membership in the NSG.”

The administration is expected to protest the sale at an upcoming NSG meeting in June.

Pakistan does not have full-scope IAEA safeguards in place, something that is required before China could provide the third Chashma reactor.

The 46-member NSG was formed in 1974 and its stated mission is to “contribute to the non-proliferation of nuclear weapons through the implementation of guidelines for nuclear exports and nuclear related exports.”

China agreed as part of its NSG membership that it would limit future reactor sales to Pakistan to the Chashma 1 and Chashma 2 reactors.

The officials said China specifically directed Pakistani officials not to make the latest reactor deal public. Beijing sought to avoid the negative publicity expected from the deal that could upset the leadership transition that took place last week at the National People’s Congress, the communist mock parliament that formally appointed top communist leaders to government posts, the officials said.

China also sought to keep the reactor agreement secret from the United States, which this year is serving as the rotating head of the NSG.

The Chinese also urged the Pakistani delegation from the Atomic Energy Commission to play down the recent transfer of control to a Chinese company of the key port of Gwadar that U.S. officials said likely will be used by Chinese warships for port calls.

The port is close to the Persian Gulf, where some 20 percent of the world’s oil is produced.

The deal for Chashma was announced in July 2010 during the visit to China by Pakistani President Asif Ali Zardari. However, the announced arrangement was limited to a memorandum of understanding (Washington Times, 2013).

Title: Wisconsin Researcher Accused Of Economic Spying For China
Date: April 2, 2013

Abstract: A
Medical College of Wisconsin researcher was charged with economic espionage for stealing a patented cancer-research compound to give to a university in China.

Hua Jun Zhao, 42, may have stolen the compound from a Medical College office in Milwaukee and taken steps to deliver it to Zhejiang University, according to a Federal Bureau of Investigation agent’s affidavit in support of a criminal complaint dated March 29.

Hua Jun Zhao may have stolen the cancer-research compound from an office at the Medical College of Wisconsin and taken steps to deliver it to Zhejiang University in China. Source: Milwaukee County Sheriff's Office via Bloomberg

A copy of the complaint against Zhao was obtained today from the office of Milwaukee U.S. Attorney James L. Santelle.

“There is probable cause to believe that Hua Jun Zhao has committed the crime of economic espionage,” FBI Special Agent Gerald Shinneman wrote in his nine-page affidavit.

Zhao joins a Motorola Inc. engineer and a researcher at Dow AgroSciences LLC who, in separate cases, have been accused by the U.S. of economic espionage or stealing on behalf of Chinese entities.

Zhao is in the Milwaukee County Jail and no bail has been set, said Fran McLaughlin, a spokeswoman for the Milwaukee County Sheriff’s Department.

Hearing Set
Dean Puschnig, a spokesman for Santelle, declined to comment on the status of Zhao’s case. Theft of trade secrets to benefit a foreign government is punishable by as long as 15 years’ imprisonment. A preliminary hearing for Zhao is set for April 11 before Magistrate Judge Patricia Gorence in Milwaukee.

Juval Scott, a federal public defender representing Zhao, said in a phone interview today that her office had no information beyond what is contained in the criminal complaint.

“We’re looking forward to discovery,” Scott said. “This is an unusual case. Nationwide there have only been a few cases.”

Hanjuan Jin, a former Motorola software engineer, last year was sentenced to four years in prison for stealing trade secrets from the company. While accused of planning to share that information with a company that had ties to the Chinese military, she was acquitted of economic espionage.

A former Dow AgroSciences researcher, Kexue Huang, was sentenced to seven years and three months in federal prison in 2011 after pleading guilty in two consolidated cases to stealing trade secrets to benefit a Chinese university.

Three Bottles
Zhao had been conducting pharmacology research at the university as an assistant to Dr. Marshall Anderson, according to Shinneman’s affidavit.

On Feb. 22, Anderson reported to university security that three bottles of a powdery compound identified only as C-25, for which he held the patent, had disappeared from his office, the FBI agent said. The vials were worth about $8,000, Shinneman said.

A review of security video showed Zhao was the only person to enter or leave Anderson’s office around the time the bottles disappeared, according to the affidavit.

University security also learned Zhao had been in China from December to February and stated on his resume that he was an assistant professor at Zhejiang University, Shinneman said.

Zhao also claimed on the website ResearchGate that he had discovered a cancer-fighting compound and wanted to bring it to China, the FBI agent said.

Plane Tickets
Federal agents, with a search warrant for Zhao’s residence on March 28, found a receipt for a package sent to his wife in China a month earlier, together with plane tickets for a flight from Chicago to China, scheduled to depart today, Shinneman said.

At a detention hearing yesterday in Milwaukee, Assistant U.S. Attorney Tracy M. Johnson told Gorence that Zhao had sold his car prior to his arrest. Johnson told the judge that in addition to his wife, Zhao has a son living in China.

While Zhao may not have known about the case, “he had an inkling there was a problem,” Gorence said at the hearing.

The case is U.S. v. Zhao, 13-mj-00220, U.S. District Court for the Eastern District of Wisconsin (Milwaukee) (Bloomberg, 2013).

Title: Chuck Hagel Rebuked By Chinese General Over US Buildup In Asia
Date: June 1, 2013

Abstract: US defence secretary
Chuck Hagel was challenged by a Chinese general Saturday to better explain the US military's Asia pivot, just moments after the Pentagon chief warned Beijing over cyberwarfare.

In a speech at a high-profile security conference in Singapore, Hagel said the US administration has concerns about "the growing threat of cyberintrusions, some of which appear to be tied to the Chinese government and military".

The rebuke – coming in China's backyard and in front of a Chinese delegation – was countered by questioning of America's intent in the region, following a reposition of its military strategy.

Major General Yao Yunzhu, director of the Center for China-America Defense Relations at the People's Liberation Army's Academy of Military Science, challenged Hagel to better explain America's military buildup across the region.

"Thank you for mentioning China several times," she said in the question-and-answer session after Hagel's speech.

She said the Obama administration's new focus on the Pacific has been widely interpreted as an "attempt to counter China's rising influence and to offset the increasing military capabilities of the Chinese PLA. However, China is not convinced."

In pointed remarks, she asked Hagel how he can assure China that the increased US deployments to the region are part of an effort to build a more positive relationship with Beijing.

"That's really the whole point behind closer military-to-military relationships," Hagel responded. "We don't want miscalculations and misunderstandings and misinterpretations. And the only way you do that is you talk to each other."

The Pentagon chief said the US welcomed a strong and emerging China that takes on responsibilities for security in the region, adding that the two countries have to be inclusive and direct with each other. "I think we've made continued progress," he said. "And we'll make more progress."

The comments come ahead of a meeting next week in California between President Barack Obama and Chinese President Xi Jinping. It will be their first meeting since Obama's re-election and Xi's promotion to Communist Party chief.

Cybersecurity is likely to be a focus of the heads of state meeting, following a spate of hacking attacks on US firms and news organisation that have been blamed on Beijing.

On Friday, it is believed Hagel raised the prospect of forming a cyberworking group in sideline talks with Chinese officials (Guardian, 2013).

Title: Obama Urged To ‘Punch’ China
Date: June 3, 2013
Washington Times

Abstract: A leading U.S. manufacturing group on Monday called on President Obama to take a tough line on
China when he holds his first summit with new Chinese President Xi Jinping at the end of the week in California.

Even as Chinese companies are stepping up their acquisitions in the American market, Scott Paul, president of the Alliance for American Manufacturing (AAM), suggested the Obama administration should “punch back hard” against the Chinese for recent national security and economic intrusions of U.S. military and business targets.

Mr. Paul expressed particular concern about China’s recent cyberthreats and suspected hacking of the U.S. military and American businesses, the military’s dependence on suppliers in China, and Beijing’s currency manipulation.

“Your meetings with President Xi come at a critical time, with an increasing number of issues on the bilateral agenda that put America’s economic and national security at tremendous risk,” Mr. Paul said in a letter to the White House.

Chinese officials have denied U.S. charges of cyberespionage.

Mr. Paul criticized Mr. Obama for going easy on China, and he called on the administration to take a harder line on economic issues with Mr. Xi.

“There’s a myth out there that we can’t get more aggressive with China, because China holds all the cards,” Mr. Paul said.

“I would urge the president not to take the advice of some who have suggested that in order to move forward with China we have to set some issues aside, because there will never be agreement,” he continued.

Mr. Obama “would be well advised to punch back hard on this, so there are some economic consequences, if this behavior continues,” he said.

Mr. Paul pointed to a report issued by his group early in May that contended that the U.S. military has a “dangerous dependence” on Chinese suppliers for important raw materials and parts used in weapons systems. The report found that American forces rely on China for key military components, such as Hellfire missile propellant, as well as for a so-called rare earth substance known as lanthanum, which is used in night-vision goggles like the ones the Navy SEALs use.

Mr. Paul also noted long-standing U.S. complaints about China manipulating its currency to improve its trade position, which he said has resulted in U.S. firms losing billions of dollars of exports to China, because now Chinese company can produce those products cheaper.

Mr. Paul warned that the Obama administration needs to respond to these threats with economic sanctions against China. They could include the U.S. government ceasing to purchase Chinese goods, naming China as a currency manipulator, and initiating broader trade cases against the country in the World Trade Organization.

“Unless you hit China in the wallet, it has no incentive to improve,” he said. “If there’s some economic consequence for China, I strongly believe the Chinese would respond” (Washington Times, 2013).