NCPA - National Center for Policy Analysis

Americans Building The Chinese Army

May 14, 1997

Chinese government banks and state-owned enterprises with close ties to the People's Liberation Army and the Chinese military-industrial complex have been issuing bonds in the United States, specialists warn.

Purchase of these bonds by pension funds and other investors here is helping a potential enemy to arm, experts say. Moreover, they are lousy investments in an unstable government which might not be able to honor its obligations.

  • More than $6 billion in bonds have been offered to investors in recent years.
  • Chinese banks issuing the bonds include the Bank of China, China Investment Bank and China International Trust and Investment Corp. (CITIC).
  • Financial institutions such as these are used by Chinese intelligence to fund operations and/or serve as a cover for operations, according to Defense Intelligence Agency analysts.
  • The banks could also provide financing for Chinese arms sales to developing countries.

Some of the individuals involved with these banks are notorious. CITIC's chairman Wang Jun once tried to smuggle $4 million worth of AK-47s to sell to California street gangs. His father was a leader of the hard-line faction that ordered the massacre at Tiananmen Square.

Even though such well-known firms as Goldman Sachs and J.P. Morgan have been more than willing to serve as managers for the bond deals, the banks are "unstable and mired in debt," according to The Economist. Half the loans these banks have made may have gone bad -- even though the Chinese government will admit to only 20 percent losses.

Source: Peter Schweizer (Hoover Institution), "You, Too, Many be Funding China's Army," USA Today, May 14, 1997.


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