China: Economic Sanctions

CRS Report for Congress
China: Economic Sanctions
Updated February 1, 2006
Dianne E. Rennack
Specialist in Foreign Policy Legislation
Foreign Affairs, Defense, and Trade Division

Congressional Research Service ˜ The Library of Congress

China: Economic Sanctions
Summary
The United States currently maintains the following economic sanctions against
China:
^!limits on U.S. foreign assistance;
^!U.S. “No” votes or abstention in the international banks;
^!ban on Overseas Private Investment Corporation programs;
^!ban on export of defense articles or defense services;
^!ban on import of munitions or ammunition;
^!ban on procurement of goods and services listed on the munitions
list in the International Trafficking in Arms Regulations;
^!denial of Generalized System of Preferences status;
^!substantial export controls on dual-use items, particularly satellites,
nuclear technology, and computers;
^!suspension of export licenses for crime control and detection
instruments and equipment;
^!export and licensing restrictions on targeted entities found to have
engaged in proliferation of missiles and weapons of mass destruction
(or related technology); and
^!Presidential authority to restrict Chinese military companies and
Chinese government-affiliated businesses from developing
commercial activities inside the United States.
Human rights conditions in China and the threat of proliferation of weapons of
mass destruction resulting from China’s lack of export controls or lack of cooperation
with international export control standards continue to be the main foreign policy or
national security issues that hold these economic restrictions in place.
The influence of Congress on U.S. policy toward China, once significant
because so much hung on the annual possibility that favorable trade terms could be
suspended, has more recently been diffused. Sanctions that remain in place today can
all be modified, eased, or lifted altogether by the President, without congressional
input (though some changes would require that the President notify Congress).
Congress and the Administration each recognize the importance of China’s emerging
ability to consume and to produce, and China has become an increasingly important
trading partner of the United States. Several recent national security developments
— North Korea’s pursuit of nuclear weapons and crises brought before the United
Nations Security Council — have strained U.S.-China political relations. China, as
North Korea’s benefactor and primary trading partner, is the power most likely to
keep that country at the bargaining table over its nuclear intentions. In the U.N.
Security Council, both the United States and China, as permanent members, have the
ability to block any proposed action. China has emerged as a contrarian when
economic sanctions might be considered in the Security Council.
This paper will be updated as events warrant.

Contents
U.S. Economic Sanctions Currently in Place Against China.............1
Tiananmen Sanctions...........................................2
Foreign Aid..................................................3
Arms Sales...................................................5
Trade .......................................................6
Generalized System of Preferences............................6
Export Controls Applied to U.S.-China Trade...................7
Proliferation-Related Sanctions...............................9
Satellites ................................................10
Presidential Prerogative .......................................10

China: Economic Sanctions
U.S. Economic Sanctions Currently in Place Against China
U.S.-China relations, since 1969, when the process of normalization began
under President Nixon, have advanced to a point that relatively few restrictions
remain.¹ Today, U.S. economic sanctions against China include:
^!limits on U.S. foreign assistance;
^!U.S. “No” votes or abstention in the international banks;
^!ban on Overseas Private Investment Corporation (OPIC) programs;
^!ban on export of defense articles or defense services;
^!ban on import of munitions or ammunition;
^!ban on procurement of goods and services listed on the munitions
list in the International Trafficking in Arms Regulations;
^!denial of Generalized System of Preferences status;
^!substantial export controls on dual-use items, particularly satellites,
nuclear technology, and computers;
^!suspension of export licenses for crime control and detection
instruments and equipment;
^!export and licensing restrictions on targeted entities found to have
engaged in proliferation of missiles and weapons of mass destruction
(or related technology); and
^!Presidential authority to restrict Chinese military companies and
Chinese government-affiliated businesses from developing
commercial activities inside the United States.
Many of these sanctions are imposed as a U.S. response to the Chinese
government’s crackdown against a fledgling democracy movement in the spring of
1989. The incidents at Tiananmen Square upended what had been two decades of
cautious but positive steps toward full and unfettered economic relations between the
United States and China.
U.S.-China relations have also been impeded by China’s willingness, some
would say eagerness, to export nuclear materials and goods and technology related
to missile proliferation. The early 1990s can be noted for reports that China assisted
Pakistan, Iran, and North Korea in their pursuit of the acquisition of weapons of mass
destruction. The 2000s continue to be marked by the imposition of sanctions
restricting procurement contracts because of Chinese companies’ trade in goods and
technology related to proliferation. China has also been categorized annually as a
“country of particular concern” under the International Religious Freedom Act since

¹ For a discussion of U.S. sanctions in place against China from 1949 to 1997, see Rennack,
Dianne E. China: U.S. Economic Sanctions. CRS Report 96-272 F. October 1, 1997. 51
p.

1999 (the first year reports were required under the law), and is cast as an abuser of
international human rights standards in the State Department’s annual report on that
issue.
Tiananmen Sanctions
In 1990, in the wake of the 1989 Tiananmen Square crackdown in China,
Congress passed legislation to reenforce interim economic and diplomatic sanctions
that President George H.W. Bush had implemented earlier to express U.S.
disapproval of the Chinese government’s actions. The Tiananmen Square sanctions,
as they are popularly called, included:²
^!a continuance of the suspension of Overseas Private Investment
Corporation financing (imposed earlier by the President);
^!a continuance of the suspension of U.S. Trade and Development
Agency (USTDA) financing (imposed earlier by the President);
^!a continuance of the suspension of export licensing for defense
articles and defense services on the U.S. Munitions List, including
helicopters and helicopter parts (imposed earlier by the President);
^!a continuance of the suspension of export licenses for satellites
contracted to be launched in China (imposed earlier by the
President);
^!a suspension of export licenses for crime control and detection
instruments and equipment;
^!a denial of export licenses for any goods or technology used in
nuclear production, if the President finds that such products could be
diverted to the research or development of a nuclear explosive
device; and
^!U.S. opposition to multilateral efforts to liberalize the application of
export controls that limited goods or technology to China.
The legislation included waiver authority provisions, authorizing the President to end
the sanctions if he determined either that (1) China’s progress in instilling certain
human rights standards warranted a change, or (2) it was in the U.S. national interest
to do so. It should be noted that “national interest” is considered the easiest standard
to meet in legislation that requires or authorizes the imposition of sanctions (by
comparison to what many consider the most rigorous standard, that a sanction not be
waived unless it is “essential to national security interests”). President Bush and his
successors have exercised the waiver on a case-by-case basis, in instances of satellite
exports and items related to counter-terrorism, or wholesale, in the case of restoring
USTDA funding, nuclear cooperation, and liberalization of export controls. In 1998,
however, Congress reenforced a portion of the Tiananmen Square sanctions, by
requiring that the President provide a detailed justification before he waived
restrictions on the export of any satellite of U.S. origin or related items.³

² Section 902 of the Foreign Relations Authorization Act, Fiscal Years 1990 and 1991 (P.L.

101-246; 22 U.S.C. 2151 note).

³ Section 1515 of P.L. 105-261 (112 Stat. 2177; 22 U.S.C. 2778 note).

Foreign Aid
U.S. foreign aid to China “is limited to assisting Tibetan communities, an
HIV/AIDS regional program operating in the two southern provinces of Guangxi and
Yunnan, and support for American Schools and Hospitals abroad” (ASHA). While
China is not explicitly denied U.S. foreign assistance, in recent past years, the U.S.
Agency for International Development (USAID) has noted that “[t]he Chinese
Government does not share core American values on human rights, religious
freedom, and democracy. The United States and China also disagree on the best
policies for Taiwan and Tibet.”⁴ Each of these could be grounds for denying U.S.
foreign assistance.⁵ Even where foreign aid is denied, however, aid may be made
available for many reasons, particularly for emergency food aid, child survival and
health, disaster assistance, or environmental preservation programs.
In the past eight years, the United States has taken steps to make some aid
available to China. Since the late 1990s, for example, the United States has
supported medical projects through its American Schools and Hospitals Abroad
program. In 2000, in the same measure that authorized the extension of normal trade
relations, Congress established the means to provide assistance to support rule of law
programs in China.⁶ Beginning with the Fiscal Year 2002 foreign aid appropriations
measure, Congress removed China from the list of countries prohibited from
receiving U.S. indirect foreign assistance. China had been prohibited from receiving
such funds since FY1993, although the prohibition had little effect since the
President waived it each year. In the FY2002 appropriations measure, Congress also

⁴ U.S. Agency for International Development. Fiscal Year 2004 Budget Justification to the
Congress: Annex II — Asia and the Near East. p. 39-44.
⁵ For example, for human rights, consider secs. 116, 239(I), and 502B of the Foreign
Assistance Act of 1961 (22 U.S.C. 2151n, 2199(I), and 2304, respectively), in which human
rights violations are grounds for denying economic assistance, Overseas Private Investment
Corporation programming, and military assistance, respectively. Sec. 701 of the
International Financial Institutions Act (22 U.S.C. 262d) requires that human rights be taken
into consideration when evaluating multilateral bank loan votes. Sec. 2(b)(1)(B) of the
Export-Import Bank Act of 1945 (12 U.S.C. 635(b)(1)(B)) authorizes the President to deny
Bank support if it is in the U.S. national interest in various areas, including human rights and
child labor. Title IV of the International Religious Freedom Act of 1998 (22 U.S.C. 6441
et seq.) authorizes the President to restrict foreign aid if he finds certain conditions exist.
Other laws provide for foreign aid restrictions if specific aspects of human rights are
substandard. Finally, annual foreign assistance appropriations bills have, for many years,
required international family planning programs to meet stringent conditions relating to
abortion, involuntary sterilization, and coercive family planning in developing countries.
The United Nations Population Fund (UNFPA) lost $34 million in each of the past four
fiscal years when, beginning in FY2002, the Secretary of State determined that the
organization engaged in coercive family planning in China. Most recently, see U.S.
Department of State. FY 2005 Funding for the UN Population Fund (UNFPA). Press
Statement, September 17, 2005. See also: CRS Report RL32919, Foreign Operations
(House)/State, Foreign Operations, and Related Programs (Senate): FY2006
Appropriations, by Larry Q. Nowels and Susan B. Epstein; and CRS Report RL32703, The
U.N. Population Fund: Background and U.S. Funding Debate, by Larry Q. Nowels.
⁶ P.L. 106-286, particularly title V (114 Stat.903; 22 U.S.C. 6961 et seq.).

put not less than $10 million in Economic Support Funds toward “activities to
support democracy, human rights, and the rule of law in the People’s Republic of
China,” of which $5 million was specifically earmarked for the State Department’s
Human Rights and Democracy Fund. Of that $5 million, $3 million “may be made
available to nongovernmental organizations located outside the People’s Republic
of China to support activities which preserve cultural traditions and promote
sustainable development and environmental conservation in Tibetan communities in
Tibet.”⁷ The FY2006 Foreign Operations Appropriations Act provides up to $5
million to American educational institutions for programs and activities in China
relating to the environment, democracy, and the rule of law, and not less than $4
million in Economic Support Funds for nongovernmental organizations committed
to preserving cultural traditions, promoting sustainable development and
environmental conservation in Tibetan communities in China.⁸
Since 1989, the Overseas Private Investment Corporation (OPIC), an export
promotion program that is considered foreign aid, has not provided coverage or risk
insurance for U.S. investments in China. President George H.W. Bush required
OPIC and the U.S. Trade and Development Agency (USTDA), which finances
feasibility studies of U.S. overseas investments, to close their China offices and
programs after the Tiananmen Square crackdown. In the waning days of his term,
President Clinton notified Congress that it was in the U.S. national interest to
terminate the suspension of USTDA funding to China.⁹ USTDA officials

⁷ Secs. 523 and 526 of P.L. 107-115 (115 Stat. 2146, 2147). See also sec. 511 of P.L. 106-
286 (22 U.S.C. 6981), granting normal trade relations for China, in which the Secretary of
Commerce is authorized to establish a program to conduct rule of law training and provide
technical assistance related to commercial activities, and in which the Secretary of State is
similarly tasked to create a program aimed at the development of China’s legal system and
civil society. USAID provides assistance to the Tibetan population in the Tibet
Autonomous Region and the Tibet Autonomous Prefectures and Counties in the provinces
of Qinghai, Gansu, Sichuan, and Yunnan. USAID supports HIV/AIDS work of
nongovernmental organizations in Guangxi and Yunnan. American Schools and Hospitals
Aborad (ASHA) has been engaged for eight years with the Center for American Studies at
Fudan University, Shanghai, and more recently with the Hopkins-Nanjing Center for
Chinese and American Studies, Nanjing, and with Project Hope in support of the Shanghai
Children’s Medical Center. U.S. Agency for International Development. Budget
Justification to the Congress: Fiscal Year 2006. p. 246-247. Beginning in 1993, China also
hosts Peace Corps volunteers to teach English and environmental studies in universities
(estimated FY2006 request: $1.8 million). A Legacy of Service and Compassion: Peace
Corps Congressional Budget Justification, Fiscal Year 2006. p. 89.
⁸ Secs. 534(I), 575 of P.L. 109-102 (119 Stat. 2210, 2230).
⁹ Compilation of Presidential Documents: Administration of William J. Clinton. “Letter to
Congressional Leaders Transmitting a Report on Funding for the Trade and Development
Agency With Respect to China.” January 15, 2001. p. 128. In fact, many policy analysts
expected President Clinton to resume both OPIC and USTDA programs in China prior to
his state visit in mid-1998. Even as the Administration was preparing for the summit,
however, Members of Congress were calling for an investigation of satellite exports to
China, and several departments and agencies within the executive branch began to scrutinize
technology transfers that exceeded licensing limits or took place altogether outside legal
(continued...)

subsequently signed operating framework agreements with China’s Ministry of
Foreign Trade and Economic Cooperation and several other government offices, and
opened its grant assistance program on July 31, 2001. USTDA awarded China its
“Country of the Year” honor in 2002, and obligated more than $10 million toward
projects and events in the country that year. In FY2005, USTDA committed nearly
$4.8 million toward projects in China, largely relating to environmental
improvements and energy and aviation infrastructure. In its 2005 annual report,
USTDA declared “China will likely remain USTDA’s most active portfolio in
Asia.”¹⁰
The United States generally continues to abstain from or vote “No” in the
international financial institutions when loans for projects in China are on the table.
From January 2005 through October 2005 (with no data for July 2005), the World
Bank, International Finance Corporation, Asian Development Bank, and Asian
Development Fund considered 31 loan or restructuring requests for various projects
in China, totaling some $2,246.4 million. Of these, the United States abstained from
or voted “No” in all but 3 instances. The United States gave its support only where
programs would meet basic human needs, or in circumstances where impact on the
human environment was not significantly damaging. In the 33 instances where the
United States abstained or voted “No” for human rights reasons globally in this
period, 30 of those votes were on loans to China or regional projects that included
China.¹¹ Once a loan is brought up for a vote, however, no one country holds
singular power to block a loan.
Arms Sales
The United States government maintains a prohibition on exporting defense
articles and defense services to China under the general authority granted to the
President and Secretary of State to control the import and export of such goods and
services in the context of U.S. foreign policy, as well as pursuant to the Tiananmen
sanctions.¹² The export of defense articles and defense services has been prohibited

⁹ (...continued)
bounds. See CRS Report 98-485, China: Possible Missile Technology Transfers from U.S.
Satellite Export Policy — Actions and Chronology, by Shirley A. Kan.
¹⁰ “China Receives USTDA 2002 Country of the Year Honors,” Trade and Export News
(press release). April 23, 2003; Annual Report 2005: Building Prosperity Through
Partnership. p. 30, 40.
¹¹ Department of the Treasury. Office of International Affairs. Multilateral Development
Institutions: Loan Review Votes. Data reporting bank activity from January 2005 through
October 2005 (with no data for July).
[http:// www.treasury.gov/ offices/international-affairs/ multilateral_banks/data.shtml ].
¹² Sections 2, 38, 40, 42, and 71 of the Arms Export Control Act (22 U.S.C. 2752, 2778,

2780, 2791, and 2797). Restrictions are stated at 22 CFR 126.1: Department of State:

Prohibited exports and sales to certain countries. The European Union also imposed an
arms embargo on China in the wake of the Tiananmen Square crackdown. For some time,
the EU has debated lifting its embargo. See CRS Report RL32870, European Union’s Arms
Embargo on China: Implications and Options for U.S. Policy, by Kristin Archick, Richard
(continued...)

or limited to varying degrees as U.S.-China relations have thawed and shifted since

1949.

The United States also prohibits the import of munitions and ammunition from
China. President Clinton announced the sanction on imports in May 1994, along
with the announcement that he would renew Most-Favored-Nation trade status for
China for another year.¹³ Congress enhanced this prohibition in 2005, with
enactment of the National Defense Authorization Act for Fiscal Year 2006, wherein
the Secretary of Defense is prohibited from procuring goods or services, “through a
contact or any subcontract (at any tier) under a contract, from any Communist
Chinese military company.” Goods or services are defined as goods or services on
the munitions list of the International Trafficking in Arms Regulations. Exceptions
are allowed for goods or services procured in the course of a vessel or an aircraft
visiting China, procurement related to testing purposes, or related to intelligence
gathering. The Secretary also is authorized to waive the prohibition if he finds it
necessary for national security purposes.¹⁴
Tr ade¹⁵
Generalized System of Preferences. Imports from China are denied duty-
free treatment afforded to certain imports from other developing countries under the
U.S. Generalized System of Preferences (GSP). The Trade Act of 1974, which
authorizes the GSP, requires a communist country to meet certain conditions before
the President may designate it as a “beneficiary developing country” to become
eligible for preferential trade treatment. The first set of bases for ineligibility are
applicable to communist countries and include ineligibility for normal trade relations
(formerly Most Favored Nation) and nonmembership in the World Trade
Organization (WTO) and International Monetary Fund (IMF). China cleared these

¹² (...continued)
F. Grimmett, and Shirley Kan.
¹³ In 1993, President Clinton linked the annual renewal of Most-Favored-Nation trade status
for China to improved human rights conditions there. One year later, he de-linked human
rights from trade, but imposed the import restriction as an expression of continuing concerns
over human rights. He also announced increased Radio Free Asia and Voice of America
broadcasts to China, support for nongovernmental organizations working on human rights
in China, and the “development with American business leaders of a voluntary set of
principles for business activity in China.” “The President’s News Conference: May 26,

1994,” in Public Papers of the Presidents of the United States: William J. Clinton. vol. I, p.

991. See munitions import restrictions stated at 27 CFR 447.52 (redesignated from 27 CFR

47.52 on January 24, 2003; 63 F.R. 3744), Bureau of Alcohol, Tobacco and Firearms,

Department of Treasury; and arms embargo stated at 22 CFR 126.1, Department of State.
¹⁴ Sec. 1211, P.L. 109-163 (119 Stat. 3461; 10 U.S.C. 2302 note).
¹⁵ The sanctions discussed here are applied for foreign policy or national security objectives
but affect trade. Trade-related sanctions — including those imposed for intellectual
property rights issues or unfair market practices, for example — draw from a different body
of law and are not addressed in this paper. For trade related issues, see CRS Report
RL31403, China’s Trade with the United States and the World, by Thomas Lum and Dick
K. Nanto; and CRS Issue Brief IB91121, China-U.S. Trade Issues, by Wayne M. Morrison.

hurdles when China joined the WTO in 2001, the United States granted normal trade
status in 2002, and China has been a member in good standing in the IMF since 1980.
The third condition to be met by communist countries is that the country in question
“is not dominated or controlled by international communism.” Conditions applicable
to communist countries are not waivable. China may be denied for its political
system or for a number of other reasons stated in the law, including intellectual
property rights protection or workers’ rights.¹⁶
Export Controls Applied to U.S.-China Trade. Export regulations are
constructed to implement U.S. law and various international control regimes to which
the United States is a party (i.e., the Missile Technology Control Regime, or the
Nuclear Suppliers Group). They generally are not cast as economic sanctions
because their goal is not to change the particular objectionable behavior of a targeted
country but to meet U.S. legal and international obligations. The application of
export controls, however, can have the same appearance and effect as an economic
sanction imposed for foreign policy or national security objectives.
Though several departments and two commissions have export control¹⁷
responsibilities, the lion’s share is assigned to the Department of Commerce’s
Bureau of Industry and Security (BIS). BIS promulgates the Export Administration¹⁸
Regulations (EAR). The EAR include the Commerce Control List, which
categorizes all goods, services, and technology for which export licenses are required
for a range of national security and foreign policy reasons.
An export license is required for commercial goods, services, or technology
intended for China for reasons of: chemical and biological weapons proliferation,
nuclear proliferation, national security, missile technology, regional stability, and
crime control.¹⁹ This means that exporting most items on the Commerce Control List

¹⁶ Title V of the Trade Act of 1974 (P.L. 93-618; 19 U.S.C. 2461-2466), particularly sec.

502(b), (c), and (d).

¹⁷ As detailed in 15 CFR Part 730, Suppl. No. 3: the State Department oversees defense
articles and defense services. Department of Justice handles most controlled drug issues,
including related chemicals and precursor agents. Department of Health and Human
Services (Food and Drug Administration) manages the export of other drugs, biologics,
medical devices, and investigational drugs. Department of the Interior oversees fish and
wildlife controls and endangered species. Department of the Treasury (Office of Foreign
Assets Control) controls the flow of financial transactions and foreign access to assets in,
or of, the United States. Department of Energy scrutinizes exports related to gas, electricity,
and nuclear technology, technical data for nuclear weapons and special nuclear materials.
Department of Transportation oversees the use of U.S.-flagged vessels. Two independent
commissions, the Nuclear Regulatory Commission and the Federal Maritime Commission,
keep track of nuclear materials and equipment, and ocean freight forwarders, respectively.
In each department or commission, it is possible that punitive restrictions — sanctions —
could be imposed on licensing to further national security or foreign policy goals.
¹⁸ 15 CFR Subchapter C (Parts 730-799).
¹⁹ The suspension of export licenses for crime control and detection instruments and
equipment was first imposed as a “Tiananmen Square sanction” under the Foreign Relations
(continued...)

to China would require a license. For some goods and services, further guidance is
provided in the form of license exceptions. Computer equipment, assemblies and
components, for example, are controlled for national security reasons, but trading
partners are sorted into two groups or tiers. China is listed in the more restricted Tier
3, for which a computer may be sold and shipped if it is a slower processor, if the
end-user is clearly identified, and if the end-use does not pertain to nuclear, chemical,
biological, or missile activities.²⁰ Each license application is thus scrutinized by the
Department of Commerce, and may be reviewed by the Departments of State,
Defense, or Energy.
The United States’ trading partners are also sorted into four country groups.²¹
Country Group A is reserved, mostly, for countries that are participants in the
Nuclear Suppliers Group, the Australia Group, and the Missile Technology Control
Regime. The most restrictive group, Country Group E, is reserved for those
countries identified by the State Department as supporters of international terrorism.
China is in Country Group D for national security and for proliferation of chemical
and biological weapons and missile technology. A Country Group D listing further
limits the likelihood of export licenses being granted for China for most Commerce
Control List items, though for China the general policy is to approve licenses except
in certain, very specific, instances. For example, it is general policy to deny licenses
to any national security-listed country where the export “would make a significant
contribution to the military potential of any other country or combination of countries
that would prove detrimental to the national security of the United States.” In the
case of China, however, only exports that “would make a direct and significant
contribution to electronic and anti-submarine warfare, intelligence gathering, power
projection, and air superiority receive extended review or denial...Items may be
approved even though they may contribute to China’s military development or the
end-user or end-use is military.”²²

¹⁹ (...continued)
Authorization Act, Fiscal Years 1990 and 1991, which cites sec. 6(n) of the Export
Administration Act of 1979 as authority. The Department of State’s International Religious
Freedom Report 2005, issued by the Bureau of Democracy, Human Rights, and Labor on
November 8, 2005, however, states that “Economic measures in effect against China under
the IRFA [International Religious Freedom Act] relate to restriction of exports of crime
control and detection instruments and equipment (Foreign Relations Authorization Act,
Fiscal Years 1990 and 1991, P.L. 101-246).” The International Religious Freedom Act of
1998 (P.L. 105-292; 22 U.S.C. 6401 et seq.) authorizes the President to impose a range of
economic and diplomatic sanctions on any country of concern, which China has been
identified as since 1999. No other sanctions have been imposed, however, as a result of this
designation.
²⁰ Tiers are at 15 CFR Part 740.7.
²¹ 15 CFR Part 740, Supplement 1.
²² 15 CFR Part 742.4(a) and 742.4(b)(7).

Proliferation-Related Sanctions.²³ China is a signatory of the Nuclear
Nonproliferation Treaty, the Comprehensive Nuclear Test Ban Treaty, and the
Chemical Weapons Convention; is a member of the Zangger Committee (pertaining
to nuclear trade); and has issued export control regulations to demonstrate its
commitment to follow the guidelines of the Missile Technology Control Regime.
Nonetheless, entities and individuals in China have been found to be in violation of
U.S. laws pertaining to proliferation of weapons of mass destruction. China has been
linked to sales or transfers of controlled nuclear and missile technology to Iran, North
Korea, Libya, Syria, and Pakistan. As a result of violating U.S. laws intended to
staunch international proliferation of weapons of mass destruction, the charged
Chinese entities have been denied:
^!U.S. government contracts relating to missile equipment or
technology (unlikely to occur in any event),
^!licenses to transfer controlled materials (also unlikely in any
circumstance),
^!the right to import any products into the United States,
^!U.S. government sales or transfers of items controlled on the U.S.
Munitions List,
^!access to U.S. foreign assistance, and
^!any U.S. (government or commercial) sales or transfers of dual-use
items on the Commerce Control List (for which China is already²⁴
heavily restricted).
At the close of 2004, the Beijing Alite Technologies Company Limited, China Aero-
Technology Import Export Corporation, China Great Wall Industry Corporation,
China North Industry Corporation (NORINCO), Ecoma Enterprise Co., Ltd.
(Taiwan), Q.C. Chen, Wha Cheong Tai Company, Zibo Chemet Equipment
Corporation Ltd., and a North Korean entity were found to be in violation of the Iran
Nonproliferation Act of 2000.²⁵ At the close of 2005, China Aero-Technology
Import and Export Corporation, China North Industries Corporation (NORINCO),
Hongdu Aviation Industry Group, LIMMT Metallurgy and Minerals Company Ltd.,
Ounion International Economic and Technical Cooperation ltd., and Zibo Chemet

²³ For further discussion, see CRS Report RL31555, China and Proliferation of Weapons
of Mass Destruction and Missiles: Policy Issues, by Shirley A. Kan.
²⁴ For U.S. Munitions List items: sec. 38 of the Arms Export Control Act (AECA) (P.L. 90-
629; 22 U.S.C. 2778); for missiles: sec. 73 of the AECA (22 U.S.C. 2797b), and sec. 11B
of the Export Administration Act of 1979 (EAA) (P.L. 96-72; 50 U.S.C. app. 2410b). For
chemical weapons: sec. 81 of the AECA (22 U.S.C. 2798), sec. 11C of the EAA (50 U.S.C.
app. 2410c), and sec. 3 of the Iran Nonproliferation Act of 2000 (P.L. 106-178; 50 U.S.C.

1701 note). For all manner of WMD proliferation: Executive Order 12938 (November 14,

1994; 50 U.S.C. 1701 note), wherein the President has the authority to control any relevant
item, deny procurement contracts, foreign aid, importation, support in the international
financial institutions, credit in other fora, and landing rights to an entity or country.
²⁵ Department of State, Bureau of Nonproliferation. Imposition of Nonproliferation
Measures Against Nine Foreign Entities, Including a Ban on U.S. Government Procurement,
and Removal of Penalties from One Entity.” Public Notice 4946, December 27, 2004 (70
F.R. 133).

Equipment Company, were all found to be engaged in prohibited transactions with
Iran (along with Indian and Austrian entities).²⁶
Satellites.²⁷ President George H.W. Bush suspended export licenses for
satellites contracted to be launched in China after the Tiananmen Square crackdown
in 1989, an action reenforced by Congress a few months later when it enacted the
Tiananmen Square sanctions in 1990. The restriction remains in law but was waived
on a case-by-case basis by Presidents George H.W. Bush and Clinton, who each
found it in the U.S. national interest to do so. Following several controversial
issuances of export licenses for satellites during the Clinton Administration, since
1998, the President has been required to provide a detailed description and
justification of each waiver applicable to satellites or related items. The State
Department suspended the processing of export licenses for satellites to China in
February 2000. Each year since FY2002, Congress has enacted legislation to require
15-days advance notification of any licensing for export to China of satellites or
satellite components.²⁸
Presidential Prerogative
Effective since October 1998, the President is authorized to freeze the assets of,
prohibit any transactions with, and impose other restrictions (except those related to
importation) afforded his office under the International Emergency Economic Powers
Act on any Communist Chinese military company, or any company controlled by or
affiliated with the People’s Liberation Army, a Chinese government ministry, or an
entity affiliated with the defense industrial base of China, that are operating directly
or indirectly in the United States. To trigger this, the Secretary of Defense is required
to identify the company or entity and notify Congress, the Director of Central
Intelligence, the Attorney General, and Secretaries of State, Treasury, Commerce,
and Energy.²⁹ To date, the President has not used this authority.

²⁶ Department of State, Bureau of International Security and Nonproliferation. Imposition
of Nonproliferation Measures Against Foreign Entities, Including a Ban on U.S.
Government Procurement, and Removal of Penalties from One Entity.” Public Notice 5257,
December 21, 2005 (70 F.R. 77441).
²⁷ For further discussion, see CRS Report 98-485, China: Possible Missile Technology
Transfers From U.S. Satellite Export Policy — Actions and Chronology, by Shirley A. Kan.
²⁸ Most recently in the Department of State and Related Agency Appropriations Act, 2006
(title IV of P.L. 109-108; 119 Stat. 2320).
²⁹ Sec. 1237 of the Strom Thurmond National Defense Authorization Act for Fiscal Year
1999 (P.L. 105-261; 50 U.S.C. 1701 note), as amended. As enacted, the law required the
Secretary of Defense to publish a list of Chinese companies in the Federal Register
annually. The Secretary notified Congress that the task exceeded his office’s intelligence
capabilities. The law was amended the following year to require the Secretary to notify only
the Committees on Armed Services and the above-noted administration officials. For
complete statement of the President’s authority under sec. 203 of the International
Emergency Economic Powers Act, see P.L. 95-223 (50 U.S.C. 1702). For further discussion
of the People’s Liberation Army’s commercial interests inside the United States, see CRS
Report 98-197, China’s Military-Owned Businesses, by Shirley A. Kan.

In 2000, Congress enacted legislation to improve U.S.-China relations, primarily
by setting in motion the means to grant China permanent normal trade relations once
it joined the World Trade Organization.³⁰ Prior to that, human rights conditions in
China had been subject to regular scrutiny by both the Legislative and Executive
Branches, with the two bodies often not in agreement. China continues to be so
scrutinized for human rights, religious freedom, labor rights, use of prison labor, and
proliferation issues. But the power of Congress, once significant because so much
hung on the annual possibility that favorable trade terms could be suspended, has
been diffused. The sanctions that remain in place today can all be modified, eased,
or lifted altogether by the President, without congressional input (though some
changes would require that the President notify Congress).
Congress and the Administration each recognize the importance of China’s
emerging ability to consume and to produce, and China has become an increasingly
important trading partner of the United States. At the same time, because of the
unrelenting tension between the United States and the Peoples Democratic Republic
of Korea over the latter’s interest in developing nuclear weapons capability, and
because of China’s longstanding relation with North Korea as a primary trading
partner and benefactor, the United States’ relations with China are crucial. More
recently, Iran’s emerging interests in pursuing nuclear energy and perhaps nuclear
weapons amplifies the importance of the U.N. Security Council, where China and the
United States have disagreed on the use of economic sanctions and other matters.
These issues of foreign relations and trade challenge U.S. policy makers when faced
with implementing current U.S. laws that would impose economic sanctions on
China.

³⁰ P.L. 106-286 (114 Stat. 880, enacted October 10, 2000).