> http://www.popularmechanics.com/science/defense/3319656.html
>
> China's Secret War
>
> http://media.popularmechanics.com/images/PMX0806CHINA001_large.jpg
> Iluustration by David M. Brinley.
>
> A spate of recent spying cases opens the lid on China's aggressive
> military buildup. What's most troubling: It is based largely on U.S.
> technology.
>
> BY SIMON COOPER
> Published in the August, 2006 issue.
>
> On a hot Florida day late in 2005, Ko-Suen "Bill" Moo was preparing for
> the endgame of a covert operation he'd been orchestrating for nearly two
> years. He had arrived in Fort Lauderdale at 5 am on Nov. 7, as the city
> was recovering from the onslaught of Hurricane Wilma two weeks earlier.
> Moo checked into a $350-a-night room at the plush Harbor Beach Marriott
> Resort & Spa, and now, a day after arriving in town, the Korean-born
> businessman was ready to sign what promised to be a lucrative contract.
> In a few days, he'd head back to Hollywood International Airport to see
> off a plane, chartered for $140,000 to carry a special package. Moo
> would catch a commercial flight and meet up with his cargo in Shenyang,
> a city in northeastern China. The cargo was costing him nearly $4
> million, but it was worth it. He would clear $1 million in profit once
> he made the delivery to his clients, senior officials in the Chinese
> People's Liberation Army.
>
> Moo's package was an F110-GE-129 afterburning turbofan engine, built by
> General Electric to power America's latest F-16 fighter jet to speeds
> greater than Mach 2 (1500 mph). Over lunch in the Marriott's restaurant,
> 58-year-old Moo told the arms dealers who had arranged the purchase that
> he would soon be looking for additional engines-or even an entire F-16.
> But what the Chinese army wanted most of all was an AGM-129A, the U.S.
> Air Force's air-launched strategic nuclear-capable cruise missile. The
> stealth weapon, which flies at 800 miles per hour, can deliver a
> 150-kiloton W80 warhead to a target 1800 miles away.
>
> Like everything else Moo was shopping for, the missile is guarded by at
> least three laws forbidding its sale or the transfer of its design
> details to foreign countries without government permission. Moo knew
> this quite well. In addition to working as a covert agent for China, he
> had a day job in the U.S. aerospace industry. For more than 10 years Moo
> had been an international sales consultant for Lockheed Martin and other
> U.S. defense companies in Taiwan. He was arguably the Taiwanese air
> force's most critical arms broker.
>
> Scouring the Globe
> According to U.S. counterintelligence agents, Bill Moo was one player in
> a sprawling, decentralized network. "They are scouring the globe on
> behalf of the Chinese government, vacuuming up every shred of technology
> information or hardware they can get their hands on," says former FBI
> officer Ed Appel.
>
> A press officer at the Chinese embassy in Washington, D.C., calls that
> accusation "groundless," saying that "the Chinese government does not
> have activities in espionage in the United States." However, Appel and
> others say that extensive Chinese spying is indicated by a sampling of
> cases that have recently come to light in the United States.
>
> South Korean arms dealer Kwonhwan Park was sentenced in August 2005 for
> exporting Black Hawk helicopter engines and night vision equipment to
> China. Ting-Ih Hsu, a naturalized U.S. citizen, and Hai Lin Nee, a
> Chinese citizen, illegally exported 25 low-noise amplifier chips that
> have applications in the Hellfire air-to-ground missiles carried by
> Apache and Cobra helicopters. New Jersey firms Manten Electronics and
> Universal Technologies sold China millions of dollars' worth of
> restricted computer chips. Eugene You-Tsai Hsu, a retiree living in Blue
> Springs, Mo., tried to buy a critical encryption device tightly
> controlled by the National Security Agency. Additional accused Chinese
> operatives have been sent to prison in cases involving Generation III
> night vision equipment and computer chips used in advanced radar and
> navigation systems.
>
> None of the spies acted in concert, according to U.S.
> counterintelligence sources. Like Moo, they were freelancers, operating
> at what Appel calls a "deniable distance" from their Beijing bosses.
> However, they did share much of their quarry--items on shopping lists
> that included some of America's most sophisticated weaponry.
>
> Sights on Taiwan
> On Feb. 28, 1991, the United States and its allies called a halt to
> combat operations in the Persian Gulf War, just four days after U.S.
> tanks started to roll across the desert, and a few weeks after launching
> an air campaign. "The Chinese watched with dismay the ease of the U.S.
> victory over Iraq," says Toshi Yoshihara, visiting professor at the Air
> War College in Montgomery, Ala. In response, he says, modernizing the
> country's vast but primitive arsenal became a top priority for Chinese
> officials.
>
> According to U.S. deputy undersecretary of defense Richard Lawless,
> China's sense of urgency stems partly from concern over the future of
> Taiwan. In testimony before the Senate Foreign Relations Committee,
> Lawless said that China wants "a variety of credible military options to
> deter moves by Taiwan toward permanent separation or, if required, to
> compel by force the integration of Taiwan" with the mainland.
>
> Since the United States has pledged to defend Taiwan, that means China
> is seeking the ability to go toe-to-toe against America's best weaponry.
> Some U.S. officials argue that China's ambitions go beyond Taiwan to
> encompass the global stage.
>
> Rather than trying to address all its military shortcomings at once,
> Yoshihara says, the Chinese government focused on obtaining "leap ahead"
> technologies already in use by the United States. Former Chinese leader
> Jiang Zemin called these technologies "shashoujian," translated
> variously as "assassin's mace" or "silver bullet." They ranged from
> advanced communications equipment to long-range missile systems.
>
>
>
>
>
>
>
> http://media.popularmechanics.com/images/PMX0806China011_small.jpg
>
> Black Hawks are workhorses, able to fight from the air, transport an
> 11-member infantry squad or airlift the wounded. PHOTOGRAPH BY
> REUTERS/LANDOV.
>
>
>
>
> http://media.popularmechanics.com/images/PMX0806china007a_small.jpg
> Kwonhwan Park smuggled Black Hawk engines to China.
>
>
>
>
> http://media.popularmechanics.com/images/PMX0806ChinaChipsSmall.jpg
>
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> Low-noise amplification chips are used with the Hellfire air-to-ground
> missiles that arm Apache helicopters (top). The chips also have
> nonmilitary applications. PHOTOGRAPHY BY CORBIS (APACHE).
>
>
>
> http://media.popularmechanics.com/images/PMX0806ChinaSmugglersSmall.jpg
>
> Ting-Ih Hsu and Hai Lin Nee listed the chips as inexpensive
> "transistors" on U.S. shipping documents.
>
>
> A Credible Threat
> The result of China's 15-year effort has been "the largest military
> buildup the world has witnessed since the end of the Cold War," says
> Richard Fisher, a China specialist for the International Assessment and
> Strategy Center (IASC), a Virginia-based think tank. China is now termed
> a "credible threat to other modern militaries operating in the region"
> by the Department of Defense, despite languishing perhaps 25 years
> behind the States in a number of areas. By next year, Chinese nuclear
> missiles could have the capability to hit any target in the United
> States from launch sites on mainland China. By 2008, the country is
> expected to possess submarine-launched nuclear missiles, giving it
> global strike capabilities.
>
> The nuclear arsenal is backed by an increasingly sophisticated navy and
> air force. Currently on Chinese military drawing boards are plans for
> combat aircraft, the Chengdu J-10 and Xian JH-7A fighter jets; a combat
> helicopter, the Z-10; advanced warships; and even space-based weapons
> designed to knock out communications satellites. U.S. observers fear
> that much of this will be made possible by espionage.
>
> In June 2005, China began sea trials of its new Luyang II guided-missile
> destroyers. When the armaments were unveiled, jaws clenched in the
> Pentagon. The ships were equipped with a knockoff of the latest version
> of the U.S. Navy's Aegis battle management system, a critical
> command-and-control technology. The technology enables U.S.--and now
> Chinese--forces to simultaneously attack land targets, submarines and
> surface ships. It also runs fleet defense tactics to protect against
> hostile planes and missiles. Federal sources insist that the only way
> the relatively backward Chinese military could have developed such a
> system was by copying it.
>
> Into the Arms Bazaar
> Anthony Mangione is a quiet-spoken man in his mid-40s whose office in
> Fort Lauderdale's federal courthouse is decorated with old newspaper
> cuttings celebrating the D-Day landings, two fish tanks (one full, one
> empty) and a door covered with dozens of curling Post-it notes.
>
> As the assistant special agent in charge of the Fort Lauderdale
> department of Immigration and Customs Enforcement (ICE), Mangione heads
> a team of undercover agents who have spent years infiltrating what he
> terms a global "arms bazaar." The agents are assigned to ICE's Arms and
> Strategic Technology Investigations (ASTI) unit, which has operations in
> 43 countries as well as in the United States. Last year, ASTI agents
> conducted more than 2500 investigations worldwide, many of them
> involving China.
>
>
> The Moo case got under way after two arms dealers, who also work as paid
> informants, introduced some of Mangione's undercover agents to a French
> middleman, Maurice Serge Voros. During a phone call on Feb. 26, 2004,
> Voros asked the agents, who were posing as arms dealers, for help
> obtaining engines used in the U.S. Black Hawk combat helicopter. The
> engines, manufactured by General Electric, are on the U.S. Munitions
> List, a catalog of restricted arms and technology administered by the
> State Department's Bureau of Political-Military Affairs. It is illegal
> to export Munitions List items without a special government license.
>
> Over the following year, ASTI learned that Voros represented Moo, and
> that Moo in turn was working for the People's Liberation Army. In a Dec.
> 4, 2004, e-mail, Moo wrote that China did not want its name on any of
> the contracts.
>
> "These cases take a long time," says Mangione. "It can be frustrating.
> But you have to let the game play." In March 2005, Voros told the
> undercover agents that Moo had now shifted priorities. His new top goal
> was to buy an F-16 engine-and, said Voros, Moo had been given "the green
> light" to make a deal.
>
> Lethal Shopping Lists
> Moo's destination last November was Shenyang Aircraft Corp., which lies
> a few miles from Taoxian International Airport. It's the site where, in
> cooperation with Russia, China developed its first homegrown fighter
> engine, the Lyulka AL-31 turbofan engine. But the Lyulka provides a
> Pontiac Firebird level of performance compared to the Formula One-worthy
> engine that Moo was set to deliver. U.S. officials believe that China
> planned to copy the F-16 engine for its own prototype fighter.
>
> China has managed to "reverse-engineer some of [America's] most modern
> rifles, cannons and guns and produce them domestically," says Larry
> Wortzel, chairman of the U.S.-China Economic and Security Review
> Commission, which reports to Congress. However, Chinese expertise in
> engine manufacturing has lagged, according to Wortzel, who spent 25
> years working in military intelligence. "This is one of their biggest
> espionage targets," he says.
>
> "There are characters out there with laundry lists of stuff like this,"
> says Mangione. Moo's list included nuclear missiles and jet engines, and
> also called for the "urgent procurement" of "2 to 4 sets" of a "Nuclear
> Submarine (nuclear reactor should be one unit, no noise) including ALL
> nuclear weapon systems." Acquiring an entire submarine might be a long
> shot, Mangione says, but "any specs, any photos, any anything they can
> get is more than they had before."
>
> China's efforts amount to a worldwide "market intelligence program,"
> says former FBI analyst Paul D. Moore. "The reality is that China does
> not practice intelligence the way God intended," he jokes. America's
> intelligence structure arose during the Cold War to contain the Soviet
> Union. "In our model, professional intelligence officers go out and do
> the job," Moore says. "In China's model, anyone and everyone is a
> potential intelligence asset."
>
> The system is chaotic and inefficient but also highly effective.
> According to Moore and others, it relies on "guanxi," a system of social
> networking with deep cultural significance. "The process for finding the
> best restaurant in Seattle is exactly the same as finding out what
> nuclear technology America has," Moore says. "You ask your friends.
> Eventually, you're introduced to someone who can help."
>
> Guanxi could explain why Chi Mak, a naturalized American citizen who
> spent years as a naval engineer for U.S. defense contractors, finds
> himself in jail, accused of secretly working for the Chinese government.
> "When someone reaches out to you," Moore says, "it can be very hard to
> say no."
>
> According to a 42-page FBI affidavit, Mak was the lead engineer on a
> highly sensitive U.S. naval project: the Quiet Electric Drive. The FBI
> says it recorded Mak copying Navy secrets, and later found
> Chinese-language wish lists in his home that included propulsion and
> command-and-control technology.
>
> According to his lawyer, Ronald Kaye, Mak acknowledges "engaging in a
> technology exchange" with China. But, Kaye says, none of the material
> was classified. "It's unfortunate that so quickly people came to
> perceive something criminal." A trial is set for this November.
>
> The Endgame
> After a series of meetings in London and Orlando, Fla., Bill Moo, Voros
> and the ASTI agents agreed on a price of $3.9 million for one F-16
> engine. On Oct. 5, 2005, Moo transferred the money into a Swiss bank
> account he controlled. One month later, he flew from Taipei to San
> Francisco and then to Miami. By now, he was being shadowed by ASTI
> investigators.
>
> On Nov. 8, Moo was driven to a quiet hangar in Homestead and shown his
> prize, an F-16 engine. He had already wired $140,000 from a bank account
> in Singapore to an account run by an ASTI front company to cover
> shipping costs to China. Moo asked to photograph the engine but was
> rebuffed. Nevertheless, he now authorized payment of the $3.9 million.
> According to an ICE official, Moo told the undercover agents that after
> he returned to China he would want to buy an entire aircraft. "Then
> [the] customer [will] have a confidence on you, okay? So they will be
> planning [to buy] the two-seat F-16." Moo also said he would want to
> purchase cruise missiles.
>
> Government documents, including a federal indictment, arrest warrant and
> criminal complaint (below), allege that Taiwan-based arms broker Bill
> Moo secretly attempted to buy an F-16 engine for Chinese officials, and
> planned to follow up with further purchases of airplane and missile
> technology. Moo pleaded guilty to multiple offenses in May of this year.
>
> http://media.popularmechanics.com/images/PMX0806China013a_small.jpg
>
> F-16 engine: U.S. agents say Chinese officials wanted to
> reverse-engineer this engine. PHOTOGRAPH BY TIME LIFE PICTURES/GETTY IMAGES.
>
> http://media.popularmechanics.com/images/PMX0806china010_small.jpg
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> http://media.popularmechanics.com/images/PMX0806china005_small.jpg
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>
> AGM-129A: The air-launched stealth missile Moo sought can carry nuclear
> warheads. PHOTOGRAPH BY U.S. AIR FORCE.
>
> http://media.popularmechanics.com/images/PMX0806china009a_large.jpg
>
> Ko-Suen "Bill" Moo, aka Mike Hwang, was a top arms broker in Taiwan.
>
> http://media.popularmechanics.com/images/PMX0806china002_small.jpg
>
> http://media.popularmechanics.com/images/PMX0806ChinaShoppingSmall.jpg
>
> On China's Shopping List: Armaments recently sought by Chinese
> intelligence, according to U.S. investigators, include (from left):
> parts for the F-14, Generation III night vision gear that can intensify
> light by a factor of 30,000, and AIM-120 air-to-air missiles.
> PHOTOGRAPHS BY CORBIS (F-14), MOROVISION NIGHTVISION, INC. (NIGHT VISION
> GEAR), GETTY IMAGES (AIM-120).
>
> Mangione decided it was time to bring the operation to an end. "People
> like Moo don't have their lists out to one person," he says. "If he's
> dealing with us he's dealing with 10 other people. We couldn't take the
> risk that one of these other sellers might give him what he was after."
>
> Agents moved in and arrested Moo in his hotel room on Nov. 9. After six
> months in jail--during which he tried to bribe both an assistant U.S.
> attorney and a federal judge to let him go--he pleaded guilty to
> multiple offenses; a sentencing hearing was set for this summer. Voros
> is still at large, the subject of an international arrest warrant.
>
> Modern Smuggling
> Technology espionage can be difficult to prevent. As Lockheed Martin's
> representative in Taiwan, Moo had successfully passed a "rigorous"
> vetting procedure dictated by U.S. government rules, according to
> company spokesman Jeff Adams. Yet, U.S. officials say he may have
> transferred restricted technology to China before the investigation began.
>
> More typical cases are even harder to detect. ASTI agents often navigate
> the murky area of dual-use technologies, where pressure sensors could be
> used either for bombs or for washing machines, where computer chips with
> missile applications might actually be destined for in-car navigation
> systems. Furthermore, thousands of items prohibited for export can be
> bought over the Internet, shipped to a U.S. address, then simply mailed
> to China in a padded envelope. Such materials supply the building blocks
> needed for complex armaments.
>
> In other cases, technology is smuggled out to an approved country using
> fake end-user certificates. For instance, Kwonhwan Park shipped his
> Black Hawk engines to Malaysia before sending them on to China. And,
> advanced technology such as the F-16 fighter has been sold to countries
> from Bahrain to Venezuela where controls may be less stringent than in
> the United States.
>
> The situation outrages U.S. Rep. Frank Wolf (R-Va.), who successfully
> fought recent plans by the State Department to use Chinese-built
> computers for classified material. He says too little attention is paid
> to China's "aggressive spying program against the U.S." The legal
> deterrents to espionage are weak, says Wolf, who chairs a subcommittee
> overseeing security and technology. "In the Cold War people went to jail
> for a long time" for spying, he says, but today's "negligible penalties"
> are more appropriate to low-level embezzlement than military spying.
> Park was unusual in receiving a 32-month prison term and a deportation
> order; in contrast, Ting-Ih Hsu and Hai Lin Nee were each sentenced to
> three years of probation.
>
> Meanwhile, says the IASC's Richard Fisher, a "battle is being waged. The
> Chinese have established a vast collection system that by the end of the
> decade will have helped them to become a global military power." While
> concern grows among policy-makers and wonks, Mangione and his team still
> labor in the shadows of the worldwide arms bazaar. They hope to prevent
> the day when U.S. troops could find themselves staring down the barrel
> of a high-tech weapon marked "Made in America."
>
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