America's Future Update on China

Update on National Security

China is crushing freedom in Hong Kong. Ever since Britain surrendered Hong Kong to Communist China in 1997, Beijing has steadily tightened its grip. In the face of massive public protests, Beijing briefly backed away from tighter controls, but the Chinese government is now eliminating the assurances it gave Britain about respecting liberty. In 1997, the globalists predicted that Hong Kong would be a "freedom virus" that would infect the rest of China. Today that sounds like a pipe dream; if Hong Kong isn’t going to have democracy, then forget about the rest of China. Meanwhile, Communist China is actively threatening Taiwan. From Frank Gaffney Jr. in the Washington Times, 4-5-04

China’s military buildup is raising concerns in the United States, especially if there is a conflict about Taiwan. The House Armed Services Committee recently heard testimony that "a significant component" of China’s defense modernization strategy is more and more shaped "to fit a Taiwan conflict scenario and to target U.S. air and naval forces that could become involved." U.S. deputy Undersecretary of Defense Richard Lawless testified that China is expected to spend $50 to $70 billion on its military this year. We may be able to send only one aircraft carrier to Taiwan’s rescue. China Reform Monitor No. 541, 4-28-04

Update on Espionage

In a devastating spy case involving the theft of some of the most sensitive U.S. nuclear weapons secrets, former FBI counter-intelligence supervisor James J. Smith pleaded guilty before a federal judge in Los Angeles to lying about a 20-year sexual affair with Chinese double-agent Katrina Leung. In the same period of time, Leung had an off-and-on sexual relationship with former FBI counterintelligence agent Peter Cleveland in San Francisco. He recently resigned as chief of security at the highly classified Lawrence Livermore nuclear laboratory. In a devastating spy case involving the theft of some of the most sensitive U.S. nuclear weapons secrets, former FBI counter-intelligence supervisor James J. Smith pleaded guilty before a federal judge in Los Angeles to lying about a 20-year sexual affair with Chinese double-agent Katrina Leung. In the same period of time, Leung had an off-and-on sexual relationship with former FBI counterintelligence agent Peter Cleveland in San Francisco. He recently resigned as chief of security at the highly classified Lawrence Livermore nuclear laboratory."

Leung is a Chinese American recruited by Smith in 1982. The FBI thought she was one of its most valuable Chinese assets because she had contacts in the top ranks of the Chinese government. She gave the FBI information about Chinese military intelligence capabilities, political intentions, and efforts to influence politics, for which she was paid $1.7 million by her FBI handlers. All that information is now suspect. Leung is a Chinese American recruited by Smith in 1982. The FBI thought she was one of its most valuable Chinese assets because she had contacts in the top ranks of the Chinese government. She gave the FBI information about Chinese military intelligence capabilities, political intentions, and efforts to influence politics, for which she was paid $1.7 million by her FBI handlers. All that information is now suspect.

A special FBI inspection team is trying to assess her influence on two high-profile cases that foundered badly: Los Alamos scientist Wen Ho Lee and TRW Inc. contractor Peter H. Lee (who confessed in 1997 to transferring classified material to China involving aerospace and submarines). China Reform Monitor No. 545, 5-17-04

Update on Free Trade

The United States filed a complaint against China at the World Trade Organization, saying Chinese tax policies hurt U.S. semiconductor sales in the fast-growing market. "The bottom line is that China is discriminating against key U.S. technology products; it’s wrong, and it’s time to pursue a remedy through the WTO," said U.S. Trade Representative Robert Zoellick.

American industries and labor groups are complaining about rapidly rising imports from China, especially clothing, furniture and other manufactured goods. They say China uses an undervalued currency, represses wages, pirates music and software, and uses other methods to unfairly compete against U.S. companies. The semiconductor case focuses on preferential tax treatment China gives to domestically produced goods, while U.S. exports of semi-conductors to China are hit with a 17% value-added tax (VAT). Washington Times, 3-19-04



A massive buildup of U.S. dollars held by China, Japan and other Asian countries is causing unease among policymakers, who fear it poses risks to the American economic recovery and global financial stability. Asian countries hold foreign exchange reserves (mostly in dollars) valued at more than $2 trillion, nearly triple that of only seven years ago. Los Angeles Times, 4-6-04