Manufacturing Processes

Summary

Machine tool and jet engine technologies are priority acquisition targets for the PRC. This chapter presents two case studies relating to the PRC’s priority efforts to obtain such technology — its 1994 purchase of machine tools from McDonnell Douglas, and its efforts in the late 1980s and early 1990s to obtain jet engine technology from Allied Signal’s Garrett Engine Division.

McDonnell Douglas Machine Tools

In 1993, China National Aero-Technology Import and Export Corporation (CATIC) agreed to purchase a number of excess machine tools and other equipment from McDonnell Douglas, including 19 machine tools that required individual validated licenses to be exported. CATIC told McDonnell Douglas it was purchasing the machine tools to produce parts for the Trunkliner Program, a 1992 agreement between McDonnell Douglas and CATIC to build 40 MD-82 and MD-90 series commercial aircraft in the PRC.

During the interagency licensing process for the machine tools, the Defense Technology Security Administration sought assessments from the Central Intelligence Agency and from the Defense Intelligence Agency, because of concerns that the PRC could use the McDonnell Douglas five-axis machine tools for unauthorized purposes, particularly to develop quieter submarines. Since the PRC wishes to enhance its power projection capabilities and is making efforts to strengthen its naval forces, the five-axis machine tools could easily be diverted for projects that would achieve that goal.

Initially, CATIC told McDonnell Douglas it planned to sell the machine tools to four factories in the PRC that were involved in the Trunkliner commercial aircraft program. When those efforts reportedly failed, CATIC told McDonnell Douglas it planned to use the machine tools at a machining center to be built in Beijing to produce Trunkliner parts for the four factories.

In May 1994, McDonnell Douglas applied to the Commerce Department for licenses to export the 19 machine tools to the PRC. Even after it became apparent that only 20 of the 40 Trunkliner aircraft would be built in the PRC, the U.S. Government continued to accept McDonnell Douglas’ assertion that the machine tools were still required to support the Trunkliner production requirements. Accordingly, Commerce approved the license applications in September 1994 with a number of conditions designed to limit the risk of diversion or misuse.

In April 1995, the U.S. Government learned from McDonnell Douglas that six of the licensed machine tools had been diverted to a factory in Nanchang known to manufacture military aircraft and cruise missile components, as well as commercial products. However, Commerce’s Office of Export Enforcement (OEE) did not initiate an investigation of the diversion for six months.

The Commerce Department declined an Office of Export Enforcement Los Angeles Field Office request for a Temporary Denial Order against CATIC. The case remains under investigation by OEE and the U.S. Customs Service. With the approval of the U.S. Government, the machine tools have since been consolidated at a factory in Shanghai.

Garrett Engines

The PRC has obtained U.S. jet engine technology through diversions of engines from commercial end uses, by direct purchase, and through joint ventures. Although the United States has generally sought to restrict the most militarily sensitive jet engine technologies and equipment, the PRC has reportedly acquired such technologies and equipment through surreptitious means.

Prior to 1991, Garrett jet engines had been exported to the PRC under individual validated licenses that included certain conditions to protect U.S. national security. These conditions were intended to impede any attempt by the PRC to advance its capability to develop jet engines for military aircraft and cruise missiles.

The 1991 decision by the Commerce Department to decontrol Garrett jet engines ensured that they could be exported to the PRC without an individual validated license or U.S. Government review. In 1992, the Defense Department learned of negotiations between Allied Signal’s Garrett Engine Division and PRC officials for a co-production deal that prompted an interagency review of Commerce’s earlier decision. The interagency review raised a number of questions regarding the methodology Commerce had followed in its decision to decontrol the Garrett jet engines.

The PRC continues its efforts to acquire U.S. jet engine production technology. The PRC may have also benefited from the direct exploitation of specially designed U.S. cruise missile engines. According to published reports, the PRC examined a U.S. Tomahawk cruise missile that had been fired at a target in Afghanistan in 1998, but crashed en route in Pakistan.

Manufacturing Processes PRC Efforts To Acquire Machine Tool and Jet Engine Technologies

The People’s Republic of China’s long-term goal is to become a leading power in East Asia and, eventually, one of the world’s great powers. To achieve these aims, the PRC will probably enhance its military capabilities to ensure that it will prevail in regional wars and deter any global strategic threat to its security.1

From the PRC’s perspective, the 1991 Gulf War was a watershed event in which U.S. weapons and tactics proved decisive. The war provided a window on future warfare as well as a benchmark for the PRC’s armed forces.2

After the Gulf War, senior PRC military leaders began speaking of the need to fight future, limited wars “under high-tech conditions.” 3 Senior PRC political leaders support the military’s new agenda.4

In a 1996 speech, Li Peng, second-ranking member of the Politburo, then-Prime Minister, and currently Chairman of the National People’s Congress, said:

We should attach great importance to strengthening the army through technology, enhance research in defense-related science, . . . give priority to developing arms needed for defense under high-tech conditions, and lay stress on developing new types of weapons.5

Senior PRC leaders recognize that enormous efforts must be made to “catch up” militarily with the West.6 According to the Defense Intelligence Agency, the PRC’s ability to achieve this goal depends in part on its “industrial capacity to produce advanced weapons without foreign technical assistance.” 7

Two technologies that have been identified as priority acquisition targets for the PRC are machine tools for civil and military requirements, and jet engine technology.8 This chapter presents two case studies relating to the PRC’s efforts to obtain such technologies — its 1994 purchase of machine tools from McDonnell Douglas, and its efforts in the late 1980s and early 1990s to obtain jet engine technology from Allied Signal’s Garrett Engine Division.

These case studies illustrate the methods the PRC has used to acquire militarily-sensitive technologies through its skillful interaction with U.S. Government and commercial entities.

However, the case studies do not assess the degree to which the PRC has enhanced its aerospace and military industrial capabilities through the acquisition of U.S. technologies and equipment.

A third technology priority for the PRC — composite materials — is discussed in the Technical Afterword to this chapter.