Saturday, July 2, 2011

Conversations With Chinese Intelligence Officials

Tape 12

Israeli and the relationship with China. The rationale for the Chinese to establish a close relationship with Middle Eastern Friends, especially the Arabs, was based on the concern, first of all with winning friends against the two superpowers infiltration, and to establish our own power base in the Middle East. China is not self sufficient in oil, but if you are going to get more oil, so much the better. But that is not the primary motivation. And that is why China is always regarded as a good friend, a clean friend in the Arab world. And it is regarded as a sort of anti-American and anti-Soviet heroic. China was a nation that is not afraid of either. That is why China keeps selling arms in the region, for making a profit, but for profit driven purpose was behind the deal. China was thinking of her own modernization program both in terms of defense and in terms of the national economy.

So Israel, the relationship began to forge, actually, during the Iran and Iraq war, when China began supplying to both sides. And Israel use to have a close relationship with Iran, and Iran served as a mutual channel both for China and for Israel, and actually, no matter how absurd it was, when I was first in Beijing I first heard of the military transactions between Israel and China and it was reconfirmed by one of my talks with a friend from the foreign office, foreign ministry, he mentioned to me the activities of the Israelis in the foreign field, and he told me that the Golden Triangle was the first place to make the first transactions between Israel and China.

I couldn't imagine that. You mean what. It was a place where individuals from both areas meet, and that was in the early 1970s, and at that time Israel began to deal with China in the region. I don't understand why the transactions took place there. Both were doing business there at the time. That is a good place to do it.

The first time when Israeli defense specialists traveled to China, holding Hong Kong passports, three of them, they were involved in the modification of the software, that was in 1986, soon after I started working for Poly, when they finished their project in China, they showed the Chinese customs their Hong Kong passports, and of course we liked that idea, holding a third country passport, but one of the things that we didn't know, was that all of the passports that they held were fake ones. The other two got out successfully while doing business in China. But the third one was detained in Hong Kong. That was kind of a scandal over there. They questioned him and he said that he was from Israel, and they wanted to know where he got the passport. He said he got it in Hong Kong and paid for it. China began to put immediate pressure on Hong Kong. The story was not even published in Hong Kong. China had a great influence over Hong Kong. The other Israeli friends immediately signaled Beijing saying that our friend is in trouble. Will you do something about it? And the foreign ministry immediately called Hong Kong, and they called and said, "This man is our friend. He is doing business here. Let him go. “He was held in temporary custody. He was detained for a couple of days, and because of pressure from the foreign ministry, the Israel friend was released.

I was shocked when I heard this at first, and I said, come on. Why should they be making deals in the Golden Triangle and I was told that was a good place to do business at the time.

Tape 13

Foreign ministry official. A minor mistake, I told X, not quite specifically say Israel, hat I was saying that South Africa and possibly Israel, those two countries, I was told that South Africa and China might be involved in activities that took place in Thailand, not necessarily the Golden Triangle, something vague. I was not sure. I am pretty sure that Thailand is sure where the Chinese and the Israelies met. The initial contacts were at a diplomatic level, it was just activities between the two countries national defense industries. Businessmen and those kinds of military professionals. Initiative for the initial contacts, I guess the Israelis made the initial move. Israel already always had the incentive to establish a good relationship with the PRC ever since the founding of the Republic, Israel was about the first to recognize China, but for some reasons, the formal diplomatic relations were not established formally. We moved toward the Arab countries. The business connection can be traced back to the early 1980s, but the diplomatic level connections are only very recent. Go-between, not any between the two countries as far as I know. But there was a got between in the two nations defense industry. I was, I used to be working for the Foreign Ministry, and as a functionary, I attended a conference in Italy, which was in 1987, and the conference was sponsored by the ISS in London, and during that conference I was the participant for the Chinese foreign ministry, although it was not a formal conversation, or I would not have participated, I was a researcher at that time affiliated with the ministry, during that conference, Israel, actually, a gentleman working for the I government came to me and said that he would like to talk some more. And he talked and kind of lobbying to me with intention of establishing a formal relation between the two countries between governmental think tanks. He knew where I was from, the Foreign Ministry. The Israelis were motivated, primarily, it seemed to us, since we were influencing the Middle East and Israel was isolated, by making friend with the people of the PRC, Israel may somehow had a better position.

So I believe that Israel hoped that they may establish if not diplomatic relations at least some kind of relations between the two questions. The two countries established their relations in the defense industry, and we could learn a lot from the technology transferred from Israel and they could get very sensitive materials from the US that we could not get from the US and that was useful and important to us. This was of course kept secret. That kind of thing could be dated back to the late 1970s. I know this is confidential information, but I am pretty sure about it.

Southern Air Transport. Dropped supplies from the PRC. Would private American pilots go to Kunming but I never heard anything like that. Although it might be possible, I would not totally rule out the possibility, however, I would guess that it would be embarrassing to lose Chinese personnel over a country like Laos or Cambodia or Thailand. But, your speculation might be one of the explanations. They were talented and it would be embarrassing for them to be shot down. Another reason, if they employed, if they were experienced in that jungle, if they experienced, then that makes sense and the Chinese are not confident enough to fly over that area.

What about accuracy of American reporters, the portrayal of China by American correspondents. I read the American press, the New York and Los Angeles Times, and I am upset a little. The stories are accurate, but they are not important. They often miss what is really happening in China. They don't have much access to the inner circles of power. I read them and often they add up to nothing, Newsweek and television and so on, they are stories that add up to nothing, even though the China hands know some things about China. Sometimes when Newsweek or Time carry a story about China, and I would write a report on those stories, those articles, I found, they would have to confirm their accounts with people like me. And they wanted to verify some of the stories, and that was something funny to me.

American scholarship and academics. They are wrong so much. And that doesn't seem to affect what they say or who listens to him. I don't think students who are China scholars here get a very good education in truth, in what to look for in China. What is the problem, the central problem? One of the reasons is that there are not really many good China hands here. China is now is behind another sort of bamboo curtain. Like the blind man and the elephant. And so the current China hands are blind or blinded and they don't seem to know it nor do their students. And big names individuals who war well claimed, they don't know much in truth about China. Michael Isenberg is now in the East West Center in Hawaii, and he was so wrong on Tiananmen. The one exception, I suppose, is John King Fairbank. He was very good. But nobody has replaced him. He was in China and he looked at it from a historical perspective, and that is why he could see through the curtain, through the curtains.

After initial contacts, Israelis had access to Am technology that Chinese didn't and so could give us that.

Modification kit for the Mig 21, kit is package of both hardware and software, software used to modify hardware, very expensive product. After Saudi sale, Syrian sale, was actually, not very much in the news. It was something that developed later on, much later on. It was years after the Iran and Iraq missiles sales. Syria remained a close friend of the USSR and depended on supplies from them. But like, the acquisition of the Saudi Arabian intermediate range missiles was a strong signal for the Syrians. They couldn't believe, apparently, that this sale would take place. Because the Russians had been telling them, don't believe the Chinese. The Chinese they are just, they will be able to provide you with nothing of value. But once the Saudis got the missiles, then the technicians came, and the Syrians became impatient. And the Russian diplomatic situation in the Middle East was unique. Although it claimed to be friend of Arab world, at the same time it never withdrew its recognition of Israel. And this is something that offended the Arabs. So Syrians believed that they were merely a card the Soviets played in the Middle East against the US. So the Syrians were interested in cultivating other sources in the area. That is the primary reason why Syria has, defense cooperation of Syria and China was mainly in the area of research funds. Like, the M Series, missiles, the research and development, China needed to do that. And China's research institutes lacked funds. So Syria expressed its interest and proposed they wanted an agreement, they would provide us with the funds, and most of the funds, and while once you have the missiles, they could buy them. Or have them, because they would provide huge research funds. That was common knowledge in defense circles in China. Without the research funds from Syria it would be impossible for China to produce the M11 or the M9, intermediate or short range ballistic missiles. Probably it would be much more difficult. Having the financial assistance from Syria would help solve the problem. For that reason, in the next year, 1985, the Syrians started providing funds to China for the research and development of the ballistic series missiles, for air defense and attack purposes. That project had been going on for maybe 3 to 5 years before it was finally discovered last year. So it was kind of unique. So a launcher was spotted, according to the news in this country, and launchers for M11s were spotting in Syria. Actually, though, not only launchers but missiles are already there. But China, probably due to international pressure, may have halted some of the later shipments of missiles. But if we just tend to believe that Syria has no missiles from China at all, then that makes no sense at all. So that is the Syrian defense cooperation with China. Now that was majorly in research and development for the intermediate and short range ballistic missiles. And for that reason, China was caught in a serious dilemma. On the one hand she had to give concessions to international pressure. On the other hand, Syria must have the missiles because they paid for the damn things. That is impossible for the Chinese to pay them back because one of the more unique things about this is that some of the funds, provided by the Syrians, are already rerouted for the construction of hotels, gymnasiums and other buildings by the research institutes in Beijing. Very prestigious research institutes in Beijing. And by some of the other research institutes too. They use the funds, not so much on the research and development of the missiles themselves. They say, this is an empty page, we really need to start from scratch, but actually, they are way beyond that level. But they lied to the Syrians, naturally, because money was involved. And they wanted it. So the Syrians believed that. It was stupid of them. And they provided whatever money we were asking for. And later on it’s discovered that a lot of funds. All of a sudden high rises getting up in the research institutes in Beijing. They were living quarters and office areas and recreation facilties, inside swimming pools and gymnasiums and hotels even. Very modernized hotels, they have research institutes have their own hotels. You can have a reception house, but a hotel is something special. And who lives in them, when they have important guests from foreign countries they reside in these at the research institute, and if there are no guests they open them to the public. One of the institutes that took the Syrian money, very prestigious, is called the Systematic Engineering Research Institute, and that is the primary institute responsible for the overall evaluation and design of the intermediate range ballistic missile, but not only the missile, they are also responsible for the design of warships, too. So long as they have something to do with systematic engineering. And they have their prestigious seventh research institute and the third research institute, and they all belong to the Aviation and Aeronautic Ministry. The hotels don't have names, at all. A tourist....

Israel expressed to China its concern with the Saudi Arabian purchase of missiles because they were within range. But they expressed their concern to China in private, but in public they protested only against the Saudi Arabians. They said they were going to operate surgical operations against this deployment of missiles, but they never did that. They just sent this threatening signal. While in pirate, the Chinese assured Israel that these missiles carried no nuclear warheads, and secondly they provided some detailed information on the technical characteristics of the , including the projectile characteristics, and this and all the other parameters of the missiles, to make sure that Israel could manage them. The reason that China provided this information to Israel was clear. You knew why the Chinese were doing this, and you didn't have to measure to Israel that the reason why we provided you with this information is so you can design something for us. And Israel said, "Well, thank you very much. These are the things we need. But still we don't want you to continue the deal. But the price for us to keep silent on that deal from the beginning is that they expected more concessions on the Chinese side. And now Israel and China recognize each other.

Tanks cannons. As far as I know most of the items that Israel cooperation with China were out of their own arms inventory. It might be true that China acquired some of the things that she could not acquire from the US, but if that is the case, as far as I know.... The main battle tanks, T59 and T69, and the cannon that they carry now is a 159 mm cannon, and that is an Israeli design, 152 and 159 and they not only provided the design of the cannons but they also transferred the license for production to China, so China now is able to produce the cannons in series and groups, to equip the whole tank divisions. This was all secret, of course. If you are involved in the defense business you knew.

Modernization of the Mig 21. They had been there for a time, heavily engaged with the PLA airforce, and one of the places where they performed a survey and the actual modification was primarily at the airforce airfields around Beijing and Shenyang. Because those planes belonged to the airforce and to the airforce of the Beijing military region. Each military region has its own independent air force. And to the Shenyang military region, and these are the primary areas where the Mig 21s are based, against the Soviet Union. In a strategic area. And the Israelis were technicians. They were able to fly and they took the planes for test flights. They were in civilian clothes.

Upgrade kit. You upgrade the accuracy precision, and the target tracking capability, for example, how many targets are you able to track simultaneously, using single radar, right, and just to upgrade your signal processing capabilities. And upgrade your fire control. And upgrade your communication command and what we call the C3i system that stands for Command, Control, Communication and Intelligence. And that is what they upgrade. So that is primarily the major field of Israel's defense cooperation with China.

The Project 851.

The Chinese couple who work with the French. Maybe we don't need that now. You already know the significant of those personnel. Maybe that is enough for now. Don't think that I am trying to hide something from you, and don't think that it is very realistic to include too much detailed information.

Profits from Kunming trafficking. Profits were huge, computers for automation, color Xerox machines, and they were a very restricted import item in China because they have the function to reproduce money. But to reproduce money you need to import from America the special paper for that. And the National Security Ministry and the Army Intelligence Department so far as I know are capable of doing that, and they do that. Not for market value but for research purposes. Since the machines are there and they have the paper but as to how and to what extent they use it, I don't know.

The CMC had no idea where the profits were going. In a sense they were beyond the control of the CMC. They could build dwellings for relatives of the KMT.

Part of the funds they have they use with friends in Canton to import the latest technology. And as for where those profits go, is anyone's guess. I don't know. I have little knowledge They did say that some of it goes into real estate in Hong Kong.

Disruption of the Citic Offices.People were not coming back to work. Some never left the building, they had no where to go and all the transportation stopped. And so later on, in the aftermath of the massacre, a lot of the employees of the other offices who were also in the building, some of them talked about what happened, and some of them were really infuriated. They had seen the helicopters and they knew that we had purchased them. And later on they kept talking about the unique position of poly technologies. Not because they just saw the helicopters, once they saw the helcopters, they had something else on their mind. They said, Poly is in this building, and these fucking guys have nothing to do with us, no wonder they are high up there in the building under no one's control. they were always under that impression towards us. In fact, anyone who came into the Citic building, or who was going to business with Poly, they were always stopped by the security guards at the lobby, and they were required to sign their names. A kind of procedure. They couldn't stop anyone, but people coming to Poly, were more required to sign their names, a sort of unfair and hostile treatment toward us, to show their grievances toward our company. You guys are special, right. And so we will give you a hard time. And on a couple of occasions. They sort of came into the office, gathered at the reception area near the front desk, they questioned the girls who didn't know what was going on, spread ink, shouted and they didn't break glass or anything but just shouted insults. And whenever there was an officer coming out of the office they stopped him or pointed their fingers in his face and cursed him, and threw a lot of accusations at them. They questioned the girls who knew nothing of what was going on, spread ink, shouted, and generally were a nuisance and they were embarrassing. They stopped people who came out of the office, or pointed their fingers in his face and cursed him. Incredible, a lot of vague as well as specific accusations. Poly moved soon after that.

The reason Poly moved from the 5th to the 17th floor was a coincidence with Tiananmen. It was not because of Tiananmen. They had been thinking about getting more office space for a long time. And this provided the pretext for it. They never said openly that the Tiananmen incident and the harassment that we received after that caused us to move. They would never say that. But it is an interesting coincidence, isn't it. What happened in the office areas was one of the things that facilitated the move. That makes more sense. In Chinese politics, anything that happens is never based solely on one thing. There are usually many factors contributing to the final result. That is a more rational way to look at China. But others might say that the storming of Poly after the massacre was the final push, the final element in the decision to move to the 17th floor.

|Relationship between Norinco and Poly. What can one do that the other cannot. In certain areas Poly is the most powerful. Restrictions on Norinco. Who is Norinco. They are separate companies. Norinco does not belong to the army, difference number one. Difference number two is that Norinco belongs to the ordnance department of the State Council, so they are able to have the excess of all the conventional weapons manufactured but not yet provided to the military service. And only if even then, they are, theoretically speaking, they are entitled to that access, but they are restricted. Poly often cuts them behind their back. But, Norinco was the original starter in the arms export business. And later on, once the Army found out selling arms could be a very profitable venture, once the army decided to get its hands into the arms trade business, and then Norinco was no match for them. For some of the missiles, that were to be sold to Iran, and Poly came up with the idea and they told the General Staff, and the General Staff told Norinco, all right, the Army wants the missiles, and they said, what for and the Army said it is none of your business. So they have to sell the arms to the general staff at an extremely low price and the PLA purchase level. And, later on, these missiles were sold by Poly. China Precision Import and Export Corporation, which sells the M Series Ballistic Missiles. Is this true? There is another understanding that needs to be made here. You cannot simply rely on published facts and figures. You lack a basic understanding of the entire defense system. Precision Corporation is an affiliate organization of Poly Technologies. For some of the things that Poly does not want to get deeply involved in, either due to the consideration of its reputation or for whatever reason, it redirects to Norinco and to Precision, but not as much as it does to Precision, which is more than Norinco. Machinery is an affiliated arms trade division of Poly and so is Catic. The other day I told you the admirals were caught in selling missiles to the US. But if they did that correctly in getting permission from Poly and the General Staff in the first place, then there is no problem. So who runs China Precision Machinery Import and Export. Not the same family members as Poly. If you go to Precision. That is in a large building but they occupy only one floor. They are affiliated also to the Aeronautic and Aerospace ministry. But their primary function is to import machinery. The only reason why they got involved in the arms trade business is because of the name. Machinery, that means a lot of things. It could be basically that. Everyone knows that this is a good place to cover some of the deals in the arms trade. And it is not the only company that does business for Poly or with the approval of Poly. But also other companies. There are several others too that work very closely with Poly. But on the other hand, these companies have a connection with Norinco too. Actually, Norinco and Poly are the two big companies. While under each echelon there are individual affiliated groups or trading companies. Does that make sense(no). Only in arms trading business. If you go to the head of these corporations, you never see anything unusual. They are exactly the civilian trade companies, except that there is always what we call Arms Items Office. It is a division; actually, you see the label. Arms Items Division that would be the direct translation of Jin Pin Bo. That means that these people are involved in the arms trade. And these people, even in those affiliated companies, enjoy privileges. That means that they only report directly to the boss. And.

Take the elevator from Poly to the top floor. There is no musak in the elevator. There are two on each side that go up to the restaurant. Everyone could not go on one elevator. The most important people always walk before the entire group. That day, though, everyone knew what was happening outside, so there was not a good mood, we were just pretending. French Aerospatiale said that they were pleased, but they were pleased more with what they could achieve at this critical moment in Chinese history and especially of the Communist Party than with the specifics of the deal itself. That means they were incapable of breaking through the Chinese ice from those days. That's right. The, we all knew, that the Communist regime was basically against the will of the people. Just look at the numbers of people in the streets. People were pouring out of their apartments. You saw the banners and the slogans every day. Everything looked white in the streets from the shirts of the marchers. And along the sides of the streets were small campus up and down the streets for university students from other provinces. They could not get into Tiananmen because the square was restricted to students, primarily, from the Beijing area. And those who couldn't make it in were on the sides of the street. Sometimes they slept in buses and never left the parking places. Some stood on top of the buses waving flags. And they stood around the army trucks, and they were full of army personnel and they could not mood and they were stranded by the masses of the people, day and night. And so nobody was sin the mood to do business. Except for the French arms traders. Only the French. I wanted them to just go home and let these things unfold. At first they came. When we first received the fax telling us the approximate date of arrival of the delegation. Actually, we were not very sure that they were serious. Were they just going through the motions, or in the midst of this were they really going on to negotiate this deal. When I was reading this fax, I couldn't believe my eyes. "What?" I remember saying. This isn't true. Can you guys be sure that the delegation is coming and that final stage preparations are going to take case in this atmosphere? This is impossible. This is incredible. I just couldn't believe it. That was at the beginning of May. At the end of April, if I remember it correctly, about ten or twenty days before the arrival of the delegations. And negotiations didn't start until the 26th of May. And the 27th was the day that the helicopters flew over the square and everyone could see these - Gazelles, sold to us by the same company, by the French. And so, sometimes, when I was, or when were we in the negotiations room, I looked at the faces of my section director, the deputy and the general manager of the company, and they were just stone faced. They smiled very naturally. But there was no enthusiasm and no sincerity in it. They smiled when they needed to smile. They controlled everything beautifully. It was as though nothing was going on outside. It was incredible. It was like a pathetic play. Everyone was nervous and glancing out the windows and then during the second day there were the helicopters flying by. Incredible. Nobody was in the mood to do business. I was not in the mood to do business and the only reason I was there was not because they needed me, but because at that time I was not translating, there were people there who were younger than me. So I was not doing that job. So I sat through the negotiations and observed them. I was one of the few who kept looking out the window to see what was happening. A lot. I never believed that the PLA was actually going to fire on the students. I couldn't believe that. I wondered of course what the solution to this problem was going to be and what it would mean for the party. It might be the end of it! I was almost convinced at the end of June that the end of communism had arrived. But still I looked at the deputy managers and ours section chief, and my God, you could detect any disbelieve in the communist party or the communist control. They looked very confident, if you judged only from their official expressions. Then you could draw the scientific conclusion that nothing was happening, business was normal and everything was as usual. Can you believe that? When you are sitting there in the building, looking at what is happening. Of course you could not see clearly into the square from where we were. You could see the treetops. And you knew what was happening outside. We could see down to the Beijing Hotel but not into the Square.

The French wore just short sleeved shirts inside. But they wore their business suits outside. And judging from my talk with one of the delegation members, they were watching too what was happening. But they cherished one thing, above all else, they believed that no matter what happened, the Chinese government was going in the end to control it. Nobody is going to change the course of communism in China. They believed that those in power would remain in power later on. They were very confident of that. Judging from their attitude and especially from their casual response and their behavior during the negotiations, I was convinced, my goodness, it was not the kind of expression you saw on foreigners wandering around the streets at that time. Everyone was sort of nervous, in a state of high excitement, and they were looking around to see who was following them. But not the French. No, not the French. And that is why the signature itself was more significant in the timing than the deal itself. So you must just hammer that home in your story. That is very important. That is the highlight. That is much more important than the kind of diner we had and the waitresses and so on. I don't believe there are a lot of people who could behave like that. I don't believe that. That’s the French, as I saw them.

I didn't know that much about them personally. They were representatives of the company, and that was it.

I never liked the French much. And I like them even less since Tiananmen. I dislike them now, intensely.

The elevators were modern, the building modern construction. You step out of the elevators and you are facing the other elevators, and you can go right or left into the dining hall. And you see the designated tables already reserved. Already there were about 9 or 10 reserved tables. Candlelight that night. That was special. Candles in a glass. The waitresses wore a traditional Chinese costume, what we call Chi pau, red with high collars. And some in green and some in black. There were not many waitresses that night. A Saturday. But they had difficulty getting there and so they were understaffed that night. We ordered champagne for toasts. Shark fin soup was the opening course. The service was slow, I recall. Because obviously they were understaffed. So there was more time to talk, more time to worry actually.

Strong flavored spicy food served that evening. There was beer and wine on the tables. The dinner didn't last that long, not as long as usual because of the situation outside. You watch the main table and when they are finished, you are finished, even if you are not.

We called the girls at the front desk and the drivers, and we reserved two tables for the what we call the staff members. We mean hostesses and the receptionists and the drivers. It was very dark when we finished, but some lights could be seen in the distance, off in the west toward Mu Xudi. The building was lit around the base. Around 10:30 the shooting started. And the dinner ended shortly before then. We made a point to make it very short that night. We left by 9:30, between 9 and 9:30. I stopped at the office on the way down, and collected some papers that night. And then had to see the guests off. And then took the elevator down. We said goodbye to them at the front entrance. They had embassy limousines that night as their transportation. Later on they changed hotels from Beijing to Kunlung. I had a bicycle parked nearby and rode home in the darkness. I could feel that night something in the air. It was humid. The soldiers I passed on the streets look so serious. But at that time I was preoccupied. Crowds of people were gathered all over the area. They were talking, smoking, laughing. Predicting the future. Sometimes there were many as a dozen. And they would be standing in a circle, arguing or listening to someone speaking. Some said that Communism was finished. But nobody believed that army was going to shoot. I even stopped my bicycle and listened to one of the conversations. And there was a many there, a veteran. And I remember him arguing, "The army may shoot. But they will shoot in the air if they do. It is the People's liberation army and they will only shoot into the air, they will never shoot the people."

Later, I don't know what happened to the French. I don't even know if they made it back to their hotel or if they stayed in Beijing. I didn't go to the office for the next several days. And not many of the staff members made it back to work.

The restaurant floor was hard wood, and you could hear the clicking of the shoes as the crowd crossed the floor. They had curtains on the windows. They have a separate room with a bar on the other side. The dining room is separate from the bar.

It was just a normal banquet. Everything was normal except the way that people were feeling. You could hear your feet click across the wooden floor.

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