Saturday, July 2, 2011

Conversations With Chinese Intelligence Officials

The second chance for China came in 1979. When Anwar Sadat and Menachim Begin signed the Camp David Accords in late 1978, the Soviet Union found itself left out in the cold in the peace-making process. The Soviets were unhappy with the agreement and so exploited Arab discontent over Sadat's bold move. Sadat was denounced by many Arabs as a traitor to all Arabs since he'd made concessions to the Israelis, a common enemy. Egypt suddenly found itself isolated in the Arab world. In 1979 Lybia was threatening Egypt by massing its forces along the border between the two nations. Sadat was isolated internationally and the US said a lot at that moment but did very little. The Soviets championed the cause of the other Arab states and so Egypt turned to the Chinese for supplies and support. The Egyptians were low on revenue for arms after purchasing fifty 5FEs from the US. So at that time, Egypt was in need and and China stepped in. The Chinese provided 80 China-made MIG 21 fighters to the Egyptians air force, almsot without charge. What the Chinese wanted in return from the Egyptians was a single Soviet version of the Mig 23, which the Egyptian Air Force possessed. China at the time did not have a copy of the aircraft of the Mig 23 or what we call the F8. The Chinese did not have a copy of that airplane. As a friendly gesture this was done, a sort of hostage exchange, really, 80 planes for one. So it was nothing. But the one plane was what China needed, exactly, for study purposes, in order to see how advanced the Soviets were since the China are very good at copying advanced technology, especially from the United States. So, through this deal, China successfully secured it foothold in the region. The next step for the Chinese in the region came in 1980.

The general manager of the company, use to be Wang Jung, the son of Wang Zhen, a very powerful person in the arms trade. Now the general manager is He Peng, a very powerful person in the arms trade. His wife is no longer involved in the business. He is not a general. And He Peng Fei, he was the director, now is the director of the general staff of armaments equipment department, that is a major general.
For these people, they had special privileges, but you had to be at the very top to have the special privileges. Now I was really small potatoes at the company, and began as a translator for the company, only, but later on I was promoted to a project manager. This special privileges were not granted to everyone, of course. These people that I mention by name, on the surface, of course, they didn't earn much more than we did. But actually, in reality, they had all the privileges and access to almost anything that they wanted to have. Like a car, and a nice apartment. They had several apartments for themselves, they wanted perhaps to sleep with one woman tonight and another woman on another night, dividing up night by night and they had those apartments at their disposal. And they had these apartments then at their disposal. While the other girls friends and the wife would have no idea where they spent the night before, naturally. If you look at...well, they had a lot of apartments. And they owned, virtually owned, one car. That was not a very luxurious car, of course, that people would point out. Not like a Rolls Royce, but it would be down a level to a Mercedes Benz. Now he might own one for himself, but he would have access to several others and they would be owned by the company. Now these were really powerful people. That is why arms trafficking in China is really so hard to control. We had special ;business rooms, negotiations ;rooms and business rooms for associations at the various good hotels in Beijing. And the advance reservations were guaranteed at the Beijing Hotel, the Jianguo, the Great Wall, the Sheraton. Poly used to have a permanent suite in the Beijing Hotel, but then it moved to the CITIC building.
How did you get the job. YOu didn't have to be a party member, that was absolutely not required. Sometimes we had rooms for business negotiations, and we had the advanced reservations for the big hotels, and so on. All the hotels. Our company has...once we had a permanent office we no longer had permanent suites. Then we moved to the CITIC building.
Getting the job. Once you had the party membership, of course, so much the better. But this, in nature, was a business company. This is a company that never worries about money. That is the significant distinction between our company and all the other business companies in China. Government owned companies. We never worried about making a profit. That was unnecessary. That is one of the reasons why I chose to come to the US to study. I really came to hate the company. This is, for example, they spent money almost randomly, just to spend it. For example, if we wished to purchase a wine glass, our job was never to determine which manufacturer made it cheaper or of top quality, all our concern is that we have to spend this amount of money before the end of the year. And the decision that we made, which company we had to purchase it from, was based purely upon which kind of company is offering us personally more profit, or to put it another way, which company is offering us a personal bribe. Do you see that. So to speak.
For example, we are going to purchase a set of glasses and we want to spend $500 but this kind of money must be spent before the end of the year.So we are in a hurry to sign the contract. And on the other hand, we are not looking for quality, really. We are just trying to base our decisions on which company better serves us, personally. If we want to purchase something from west Germany, we send a delegation to that company, and in return this company offers us luxurious hotels, luxurious cars, nice food, women, everything you can imagine. Not drugs, however, Never drugs.
So, you are offered this, and despite the fact that we know that this company is not good at producing quality, but who cares about that, as long as have this glass, it is all right. Nobody is going to question how good it is. If my superior one day comes in and says how good is this glass, I just say, Well, this is good.
What about public officials executed for corruption in China. Why did they do that? Because that individual is a convenient scapegoat. For scapegoat catching you have to look toward one particular type of individual. This individual might just be symbolic. On the surface, he holds a high position, very persuasive to ordinary people. But on the other hand, he holds no real power. Just superficially is he somebody. Once that individual is involved in bribery, this individual is the kind who can very easily be caught and then made a scapegoat, cut his throat, and that will serve to show the public that the government is concerned with bribery. This will show everyone, publicly, that the government is clean and clear, but actually, he is just a scapegoat.
As far as drugs go, there are two lines of business in our company. One is official. That's business. The other is personal. Some of the arms exports, such as the DF5, the missile that we sold to Saudi Arabia, the long range surface to surface missile, we just handled them through underground channels. And underground channel, is this, we received some information from the Saudi Arabian government. They told us that they were shopping for surface to surface missiles at the cheapest price. And the signal was sent, or conveyed to the company through a middle man either in Hong Kong or in Pakistan. Some times from our friends in Iran. We have lots of them. Iranians and sometimes foreign businessmen stationed in Iran in Beshawar or in Rawalpindi in Pakistan. These individual actually gave us a lot of help. We got this information, through a back channel connection, and through the personal connection that our guys maintained with the CMC top officials, the Central Military Commission, the number one organization in China that controls the military. Like Deng Xiaoping used to be the chairman of the commission. Their sons and grandsons part of them actually work for our company. We don't know what happened. We know only that one day someone comes to us, and the word seemed to come through family connections, they had heard at home, that Saudi Arabia had missiles to sell. Now the money that we could make through something like this would serve China. For full modernization drive. And then the fathers would say, All right, that sounds good. Go ahead. Actually, they didn't have to talk to their fathers directly. All they need to talk is to ask his father's secretary, because the father's secretary could be in a very powerful position. So the son could just pick up the telephone and give the equipment department of the army a call, and tell them, all right, now I need three missiles. And I need them at a certain place. And they say, All right, since you are the son of this or that individual, of course, you have permission. Now this happens without written permission, of course. A lot of fields of the arms trade in China, without written permission, without records. Everything was done on the telephone, and the liens could not be tapped. No they, used, when they talk with each other they use secure lines. Secure machines, a big black machine, and once they become clear, secure, two buzzes, and I used these a lot. But the people you are talking to have to have the same machine, otherwise they cannot hear you. First of all, they send a clear, and you say, first I would like to talk to you, so please press. And so the guys press secure at the same time, and if you do not have a secure machine, then all you can hear is something scrambled. Maybe the CIA could tap these lines, but presumably this was clean.
Who pays for the official life style in Poly. Nobody really cares where the money comes from in Poly or when an official has it. What is important is the authority and the profits.
There are many deals. Like Sweden, Kemawa Company, we had business with them. We bought arms from them. That was a ship propulsion system, too. That was the big contractor and there were subcontractors from other countries too. But they were the biggest contractor for destroyer propulsion systems. That was in 1988, but the contract was signed in 1987. We paid a visit to the firm in 1988. In stockholm, the firm was not there. We invited some people from the General Staff and the CSSC, the China Shipbuilding Company, And they were hand picked by the company, and they just flew them around in helicopters when they were there, to stockholm, and took them to an island resort, and led them to the mountain tops there and so on. I was in West Germany at that time, since a certain company there was a subcontractor.
As far as I know they did not provide female escorts. They knew that we were from socialist countries and so presumed that we were not interested in women. Souvenirs when left the country. They provided souvenirs that were easy to carry when we left, wristwatches from the companies we did business with, for example. This kind of stuff, for people of middle rank and for translators and so on, then bigger gifts for other individuals.
Nothing romantic in my experience in the arms trade. Not in western European countries. Well, like Asian countries, like Pakistan, Iran, Thailand, yes, they provided women and escorts for visitors.
Kemawa was a big contract. That was below 30 million, about 24 million as I remember it. Contract was signed in Sweden with them.
So the arms sales in the Middle East served two functions. First, of course, it is the most important one, it generated huge revenues for the PLA itself for the modernization drive. We used those profits to purchase high-tech weapons from the US and from Britain. Like the missiles we sold to Saudi Arabia, that was quite advanced missiles, that was in 1985, but negotiations ftered in Washington between the two embassies. At that time it was Han Xu who was the spokesman for the Chinese government to the UN. He was quietly approached by the prince of a Saudian Arabian royal family. But equal important,ce China always used these advantageous positions toward foreign policy in the Middle East, it was basically against first the US and then Russia. China's relationship with Middle Eastern countries began, actually, in 1985, during the Bandung Conference in Indonesia. It was at that time that Premier Zhou Enlai met Gamal Abdel Nassaer. And these two during the meeting formed a very good personal relationship. But at that time China was clearly a very good ally of the Soviet Union. So, China'`s relationship with the two superpowers basically determined its relationship in the Middle East. China, although it was a great power, never defined its international relations and its revolutionary obligaionts within the borders of other countries. They said, we are also a third world country, we are poor, and we are of equal footage with Middle Eastern countries.
The only reason why were in the middle east is so that we can help you guys. Virtually out of nothing. And a lot of countries in the Middle East bought that idea, that China had nothing to gain in the Middle East except to help its friends. It had no hidden agenda, no secret plan to exploit the friendships. And that is why China retains friendly relationships with middle eastern countries. One of the advantageous positions that China takes is that, ok, they could just very effectively explain to the Middle Eastern countries, explaining that we actually don't depend on the Middle East, unlike the USA and then the Soviet Union, for either oil or strategic position. We have no selfish means there. The US depends on the oil and the Russians depend on the desire from the Czar period, had always cherished the ambition of occupying Eastern countries in order to gain access to warm water ports facing the Indian Ocean. And the guys based upon my experiences having to do with guys stationed in the middle eastern countries like Iran and Iraq, when I talk with them they all agree with me. China is selfless, that is her position. She was seen as a selfless friend, not selfish. But in actuality it was very selfish. They served two functions. Diplomatically, the arms sales position was based on a lock in strategy, procedure. That is, perfect example comes in 1974, after the war against Israel in the Middle East, and Egypt was defeated in the Sinai Peninsula. But at that time, Egypt, in order to win the war, borrowed a lot of money from the Soviet Union. But China was not involved in the process at that time. So, Egypt borrowed arms and lost the battles, then the Russians, then after the war, just did what they did to the Chinese after the Korean War. China was fighting a war for the Soviet Union and for itself, and it borrowed a lot of arms from the Soviet Union. After the war was over, well, the Russians, they refused to clear the deck. They asked us to pay back what they had lent to us with high interest. And that is something that the Chinese never forget, never. So China remembered that after the Korean War. The hundreds of millions of Chinese were forced to tighten their belts for the next three years because of the Russian demands, and they understood that and they did not forget that. Chairman Mao said, "All right, we are going to do that. Because I will be the last one to see us in debt to a foreign country. The people suffered and the children born in that time were ill nourished and suffered from a lack of everything at that time.
Then the same thing happened in Egypt. Egypt was very angry, the Russians demanded to be paid back with high interest after they fought the Isarealies. At that time the Egyptian Air Force was ready to buy 50 American F5E fighter planes. The contract was singed and everything. So Egypt was very angry. They saw themselves in some ways as a proxy y army. But then, because of the Russian debt, all right, because of the debt, they could not pay for these planes. Interestingly enough, the US, prior to the war, had agreed to provide $1.5 billion in military aid to the Egyptian Air Force to pay for these planes and supplies. But after the war, the US changed it's ideas, it didn't want to help a defeated friend, and besides it's best friend in the Middle East was Israel. Prior to the war the Egyptian Air force knew they were going to buy these air planes from the Americans. Later on, interestingly, Egypt turned to Saudi Arabia for money. Their military, Saudi, was extremely weak. They to some extent had depended on Nasser, and depends on and Sadat, and they really depend on Egypt for national defense. They were rich and they agreed prior to the war to provide $5 billion US military aid for financial assistance to purchase the fifty airplanes. But after Egypt was defeated, they refused to do that. And so it was at that time, Egypt was in a terrible position, and Sadat was so angry, that he expelled all the Russian military advisors, technicians and diplomats out o f Cairo and sent them back to the Soviet Union. At this point China stepped in. China provided 50 Mig fighter engines, free of Charge and then committed itself to the maintenance and repair of hundreds of grounded Soviet War planes that were lacking parts and needed repairs and so on. The Chinese sent teams of technicians and military experts to help maintain the soviet planes, because they were the one basically that the China used at that time, so they are familiar and they have sufficient parts to supply to the Egyptian airforce and they helped keep the Egyptian airforce going.
So when Sadat was assanniated, actually, later one, the relationship between the two countries was so close, in fact, that he was assassinated in 1981 in Cairo during a parade. The relationship between China and Egypt was so close, by that time, that the reviewing stand for the vips, and Sadat was sitting in the front row, of course, and immediately behind him and sitting in one corner, there were nearly a dozen Chinese military advisors, including a top airplane technicians, one of them, actually, was my classmates father. One of them, he was, the last name was Chou, and he was wounded in that attack. He was later flown back to China, and several others were wounded, also. He returned and he came to our school to see his son, and we had a talk. That shows how close the relationship between the two countries was.
If Saudi Arabia is friendly, then China could gain politically and strategically in the region. Not necessarily economically. China made its maneuver by arranging secret meetings in Washington between the two embassies in a dialogue with the Prince, Prince Bandar Bin Sultan Ibn Abd al-Aziz. Later he visited Beijing, also on a secret trip, and signed a memorandum of understanding or a letter of intention. So the deal was reached, an agreement. And so China begins selling missiles to Saudi Arabia. This is the most significant thing about Poly Technologies. This is what is important about Poly because they are the only company that is entitled to sell arms strategic arms, including nuclear technology, to foreign countries. In this regard, both Norinco and the other defense industrial groups have no power, really. So poly is involved in this and the contract is signed. It was for $3 billion. China earned a lot money from this deal. So starting from 1985 China starts shipping the missiles, called the DF3. EAst Wind(Deng Fan) a single stage single warhead missiles, originaly deployed along the Sino-Soviet border and all of them were targeted on Moscow. Or Leningrad. The range is intermediate range, IRBM, a range of over 1,700 miles. So they are capable of hitting anywhere in Israel. At that time China developed a new series of strateic arms, and nuclear missiles. So these were to be phased out. So, what to do with them? Sell them? Sell to what or to whom? Sell them first of all for money and for profits and secondly sell them for political purposes. They wanted to secure their influence in the last country with which they have no influence in the Middle East. And through Chinese eyes this is the most important country to gain and to win friends from. So this is the biggest political gamble China made since it was founded in in 1949. First of all, becdause first of all this is the first time China took something out of its strategic inventory, which was virtually deployed at that time. It was not something that was sitting in a depot, it was something that was deployed in the field. So China took the missiles out, took the nuclear warheads out and put a dummy warhead on it and said, "OK, you can put what you want in this in the way of conventional explosives," then they shipped the missiles to the Saudi ARabians. By ship.
Technicians and Chinese soldiers, by the thousands, accompanied these missiles, but on a rotation basis. Roation basis, if 500 people in the first group to go, and later on, after two years, they return to China and they are replaced by another gorup of 500. It was about a two year rotation. The chief liaison officer was my classmate and had a talk with me in Beijing. So, the reason why I say this, is for the first time we sold stategic arms deployed in the field, to a country, a capitalist country, with whom China has no diplomatic relations. We did not hae an embassy there. This is a political gamble China played. But all great secrecy and in silence. The US knew but it didn't protest. The Isareli's also knew, and they were upset. At that time they quietly approached China.

Poly performs the duties that the General STaff cannot perform. It is not stronger than the General STaff it is the well camouflaged right hand of the general staff, that is why we carry a dagger, too. Cloak and dagger. The iron fist in the velvet glove, that is us.
The Life styles of the individuals in Poly. They have their own cars. But you never know where they got their cars from. Mercedes or Rolls, they are miported from Hong Kong. There are a lot of cars registered with the Army, the license plates are all white.
The life styles of the individuals. It is not related. What are the pers. How many girl friends they have. They can have as many as they want. They have money and power. They don't live like westerners. They behave themselves in China. They have orderly families. Personnally I didn't visit their families We never formed close friendships. The friendships were based on consent and understanding.
Apartments were quite luxurious, even by western standards, and when they come to the the US they also have good quarters. They have their friends buy homes for them in the US, they are taken care of by friends here in America, under the friends names. But they make a point of not showing these things off in China. They are in control there.
One thing, they are well educated and culture individuals. I consider myself one of them. But they are more civilized than I am. They know how to behave themselves. They are discreet. They are image conscious. But at the same time they know how to have a good time without taking risks. If they want to enjoy themselves, then they go to the west. The dangers. Say, ifyou own three cars in Beijing, or you committ a lot of crimes, and say you assault or rape a lot of girls. Then someone is going to bring charges. Your enemies will make use of that information, especially when they have evidence. Unless you are extremeley powerful you will be vulnerable to one degree. So whenever there is a trial, against misbehavior of the companyt, not an individual. If you are the boss, and there is a trial, then the influential individual disappears for a time, and a nother individual is put in that post, and this is the individual who is blamed for all the misbheavior. Oncxe that is over, than then the son returns. This is a practical case.
Basically, what is important in China, if you have a mistress or two or three, thetre is no problem. Som oe fht officers have a telephone list. And we would be a dinner and they would bring a young beaautiful woman. Nobody bothers about that. YOu may not accept this. As long as you are ina a good position, we never look into your pvivate life. These women may have children. They may have husbands also. They are simply service people. They make use of each other. I will oepn a bank account in Hong Kong if you sleep with me, for example.
Clothes, suits, that is not important. I wear certain things that are not expensive. In the high position, of course, it is required that you have a good suit, and shirts and shoes. But who bothers about this, who is envious or surprised. They don't have inexpensive things, let me put it that way. Everything for these individuals is guaranteed by the state. We go to the Army hospital if we are ill. The best medical care. We are not interested in the opera, that is for westerners. That is for tourists. We are interested in naked women, belly dancing. That is the sort of thing wer are interested in. This would occur at some of the hotels in Beijing or Guanzhou. These would be Chinese women, I realize the tate of these individuals. They are interested in Mainland girls, not Taiwan, Thailand, Singapore. That is bullshipt. We Chinese, think ourselves, from the Northern part, we are the genuine chinese, the Hans. And we get what we want. There are skirmishes over some women that is what we call them. Skirmishes. Once in the office wer are in business and that does not intrude there.
The only thing that could cause you to resign would be an economic scandal. Then a deal exposed to the public would mean that an idnvidiaul whould have to be punished. If an individual womanized too much or drank too much then you would have to step down. But that has never happened. Once in power you know how to control yourself. I know how to control myself also.
There are some powerful women in the company, too. They the women enjoy the power of their husband. They enjoy the conveniences, the travel, and the money.
Disagreements within the company? Of course, many individuals struggling for the same power, what we call the strategic turnover, individuals try to undercut your influence. Within the company, everythihg is pretty cldan, you are not going to change much. But everywhere else we see corruption, bribery, whatever. Why not?
Im not talking about people from Poly. Private companies, other organizations, these are the places that are dirty. But the higher you are, the more purified you are. Purity is there at the top. The more methodical you are. The more in a position you are that is advantageous, and you form another perspective toward the whole world.
In China people develop in sevveral stages. Lowest class, could be enlightened, agriculture class. Once they are enlightened they become educated. Then the become civilized and then they become cycnical. Then there is something beyond that, and that is your break through cynicism, and you develop into reponsiblity people, beyond cycnicism. Nixon and Kissinger were these individuals. That is why they were accepted in China. AFter you are too cynical, you become more realistic, you want to do something for the world, get things done. These are the people we recruit. These are the people who can look at things philosophically. Then you transcend politics. Then you can form understandings and relationships with individuals no matter what thir politics. You share a perception with people who are the same as you. Mao, Zhou and Nixon and Kissinger, talking in private. They had so much in common. They were beyond cynicism. Cynics complain. Those beyond it do things and deal in the realms of pure power. That is what these leaders do. Beyond politics and beyond ideology.
I was chosen by individuals in the company. File evaluated. Interviewed. Hired. There is no family succession in the company. FAmily employment is there, but not succession. MOst imporatant people in the company are still in 50s and 60xs. Their children are not in company but are eduated. They do not want to make it too obvious. It is like in the army, when it is not obvious.lx You take care of my children and I take care of yours. If I am the Bewijing Commander and you are the Nanjing Commander, we watch over and take care of each others children. That is how it is in the company. Like the Chinese military, that is how poly is. You send your son to me and we take care of each other's families. You promite my son and I promote yours. So people working under me never know exactly where the power threads go. You don't want people to complain about this or know about this every day.
I never questioned what they did for their children. They could provide chances for foreign study for their children. but you never find out how they did this. The son may perform extremely well academically, of course.
It is young and so it is still a two generation business, fathers and sons, and so the two generations stay in the business. But we never know the relationship of individuals. They never in the office question your family background. They know where you are from, somewhere, but they never question it. It is like 1984 with the Inner and the Outer party. This is the Inner Party. We have our own private library, and that is where we keep all the information books publishes in the West, time and newsweek and Janes Fighting ships. But not Playboy. We are a socialist country. These things are not encouraged openly. But everyone has them at home, under the pillow. They like the Hong Kong version, in Chinese with Chinese women. That is there taste. They do not have western tastes in women.
SAudi Arabia was the perfect deal, the biggest deal that Dhina every signed. France was a tiny company, deal, spending money does not make you feel glorious. But when you generate revenue, you are a hero. That is the distinction that we always make. Making money is gloirous
We keep the commision, officially. And we have the right to that. But the major revenue goes back to the PLA. They use that for the payment of American arms and technology. Like the $500 million deal we signed with Grumman. That is where the F8 is modernized. We bought 50 modification kits. So don't worry we have money to spend in America and we get it in the MIddle EAst. It is also important that the whole PLA delegation went to Grumman. We send delegations back and forth to the defense universities.
The Poly, aside from being unique in the field, also looked after impots, and it is the only company in China authorized to purchase arms for the PLA. No other company can do that. There are many funny stories behind that.

Some other companies have very nice connections. With the overseas defense firms in Britain or in Germany. And through sources they found out what the PLA airforce or the Navy needed and they privately or independently approached foreign defense firms, saying that they had a client looking for some product. Then, upon their return to China, they approached the PLAS without approaching Poly, saying that, "We know that you need this and we can get this for you. And due to arrangements we have made, a huyge delegation from Germany arrived in Beijing. That comapny booked hotels and conference rooms for several weeks and they invited individuals from the PLA and from another company. And they introduced their technology and products to the PLA. And this process went on for several months.

So, and all these activities conducted at the expense of the company. They expect a lot out of this. They know that this business can be successful in China, because they knew this company owned something that the PLA really needs. So, there must be a deal later on. They were right. Later on there was a deal. The PLA later on filed a report saying yes, really, this is exactly what we need, and we need hard currency around so many millions and they read their expectations, and the PLA general staff ratified that, saying it was all right, that they would appropriate the money to buy, but the deal could only be made through Poly Technologies. And that meant that from that point on, that company had nothing to do with the deal. Leave it alone. And so they lost whatever time and money they had previously put into it. So Poly guys, and I was involved in this on a couple of occsaions, personally, my boss threw some files on my desk, relating the technological specifications and the inquiries and the equipment, which I knew little about, specifications, inquiries, introductons about equipment. So from that point on I am the middle man. I am the man. Who is going to supervise the entire deal. I felt very strange and unique about this, when I stepped into the big conference room with all of the guys there, with the foreigners sitting on one side of the table and the Chinese on the other and they are all in uniform. But I was in a conspicuous position since I was representing Poly, the foreigners were totally baggled. They didn't know what was going on. They asked, "Where are our friends?" They wanted the representatives from the previous company. But they no longer showed up. All of a sudden it was turned over to poly by the General STaff, the individuals who have the money. They said no problem. You need the money. We'll give you the money. But only Poly could spend the money. So that company was left out, and that means seventh months of their activities were in vain. But that is the way it works. When the results are ready to be produced, then Poly steps in and takes over. Now they were extremely angry at this.
The point is that the General Staff, the reason why they did this, was not simply because they wanted Poly to profit, but the secone and the most important consideration, was that they wanted to make sure that everyone obeyed the rules, that only Poly is entitled to arms imports and arms production for abroad for the PLA. And that means that only Poly can spend the money for the PLA and for the PLA, buying things from abroad. No other company can do that. There were other countries involved in the feud was that they knew tha the PLA had money. Any business company, they tend to look after the rich client, who ever has the money and is a good customoer for the company. A lot of people tried to get involved in the business, but they found that they could not.
So, because of that, the other companies were involved in exports, and not imports. And that explains why these companies have been active in the arms export business. Because this is the only channel for their profits. While Poly they could very comfortably spend the money for the PLA.
Competition in selling Arms? Since that was the case, a lot of companies want to proceed. And they said, OK, from now on only Poly will deal with this area. When Poly saw the possibilities of profits from arms sales to the MIddle East or the third world, they want to have a hand in that, and take care of extremely sensitive items. Not the ordinary, conventional arms, like the AK47, that isn't a problem. Poly does not want to intervene in those areas. But when it comes to selling things from the PLA inventory or from the PLA equipment itself, in order the General Staff wanted to make a point for that.
So they misperceived, and Poly would only look after the imports, some felt, but Poly perceived potential profits out of arms sales, so they managed to get involved successfully in arms exports too. This resulted in strong competition among all the arms exports companies. Poly had strong backup of the general staff and so was able to win contracts and power. That means they were entitled to selling arms directly out of the PLA arms inventory will look after the selling of sensitive items, such as ballistic missiles to foreign countries. There is one indication, a detailed stor6y, about this.

3. When the war between Iran and Iraq began, it presented, in 1980, a golden opportunity, literally, for Poly Technologies and for Norinco as well. Poly handled the most sophisticated wepaons sales, like long range bombers, the H-6 bomber, andintermediate range missiles. Silkworms were sold to both sides by Norinco. The Chinese Aerospace and Aeurnautic ministry, as it is called now. At that time Chinese Aerospace and Aronatuic were separte?)
At that time, in 1984, the ministry really wanted to sell the missiles to Iraq in order to generate profits. But, the PLA intervened. They said the PLA Navy wanted the missiles. So, the ministry had no choice but to sell the missiles to the Navy at the price of 0.97 million renminbe each. And later on, Poly Technologies directly sold these missiles to Iraq at a price of 1.2 million US dollars. That is why the Aerospace related defense industries in China were angry. But they could do nothing. And this is one of the rationales for the establishment of Poly Technologies. Because after all, it is only a trading company. The uniformed military could not do business with foreigners, but a trading company could and then the profits would be channeled directly back into the military through the General STaff. Because Poly basically belongs to the General STaff. In doing the arms tracde befcause of the unique position that Poly held, it was never betaten by any domestic and international rivalries in the arms trade. Until, in the middle of the 1980s, the Shangri La deal. This was a humiliating blow to Poly.

Now, turning to Saudi Arabia, China made a huge gamble because Saudi Arabia was the only country in the Middle East that did not have diplomatic relations with China. And probably Saudi Arabia was the most important country in the region because of its oil and its money. Strategic position and size. It was important not because of oil for China, which buys very little oil in the Middle East, but because of its strategic importance.

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