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China: U.S.-Chinese Company Might Dodge Export Controls A U.S. business owned by a consortium that includes two Chinese companies might threaten U.S. national security, Insight Magazine reported yesterday (see GSN, Oct. 1). Chinese entities San Huan New Materials and High-Tech Co., which was started and is still partially owned by the Chinese Academy of Sciences, bought into the U.S. company, Magnequench Inc., in 1995, according to Insight. Magnequench “is little more than a front for the P.R.C. [China],” a senior U.S. analyst said. The Chinese owners are using the company to obtain “state-of-the-art and emerging technology and [to] transfer it to the P.R.C. It’s just another form of espionage,” the analyst said. Magnequench produces rare-earth permanent magnets, which are used in missile guidance systems and in gas centrifuges used to enrich uranium, according to Insight. Normally, a U.S. company would not be allowed to export technologies and equipment for the magnets to China, but because Magnequench is a U.S. company, there is little control over how its technology is used, according to Insight. The Magnequench technology not only aids China’s nuclear weapons program, it also poses a proliferation risk, the analyst said (see GSN, Oct. 24). “It enables them [China] to produce super-high-quality rare-earth magnets/ring magnets for use in gas centrifuges to produce nuclear-weapons material,” the analyst said. “And in addition to enhancing their own nuclear weapons program, we know that China has already proliferated ring magnets to Pakistan, which played a critical role in developing Pakistan’s nuclear weapons.” In February 1996, the Washington Times reported that the CIA had discovered evidence that China was exporting nuclear weapons technology to Pakistan. Congress later confirmed that those exports had included 5,000 ring magnets, according to Insight. Magnequench President and Chief Executive Officer Archibald Cox said he does not think the company’s Chinese partners pose any threat to U.S. security. “There is no story about China stealing technology,” Cox said (Scott Wheeler, Insight Magazine, Oct. 30).
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