Potent Office Weaves Web In China Arms
By NICHOLAS D. KRISTOF
Special to The New York Times
08/21/91

BEIJING, Aug. 20 — If Western leaders want to know what they face in trying to get China to restrain its weapons sales, they might drop by the secretive office of Poly Technologies on the 17th floor of the Citic Building in downtown Beijing.
The efficient, well-equipped office is at the core of a remarkable Chinese military-industrial complex. Western complaints to China's Foreign Ministry about arms deals are unlikely to impress this company, which in some respects is more powerful than the Foreign Ministry itself.
Among those who have been active in Poly Technologies in recent years are relatives of President Yang Shangkun, Vice President Wang Zhen and Deng Xiaoping, the nation's senior leader.
The family links between Beijing's arms dealers and its top rulers appear to be one reason why China's weapons industry has rapidly become a major exporter in recent years, and why it will be difficult to curb. The West's arms control debate with China, far more than with other countries, involves links of family and friendship that are the veins of power in China.

A Holdout on Pacts

While most major military powers seem to be moving toward agreement on curbs on the proliferation of arms, China stands out for its refusal so far to join the Missile Technology Control Regime, an agreement to curb the spread of missiles, although it says it is considering joining. China also has not joined the Nuclear Non-Proliferation Treaty, but said this month that it would do so.
In recent months, China is believed to have sent Pakistan M-ll missiles, which can carry nuclear warheads and could be used against India. Beijing may also be sending Syria its new M-9 missiles, which would be able to strike targets throughout Israel. The Far Eastern Economic Review of Hong Kong reports in its current issue that up to 24 of the M-9 launchers already have been spotted in Syria.
Such sales may have been arranged through companies other than Poly Technologies. The common denominator is that the aim of such deals is not to cultivate friends or spread Communism, but a more capitalist motive.
"In the United States, arms sales are an expression of your foreign policy," a Chinese official said. "But in China, the reason for arms sales is to earn money."
Xie Datong, the president of Poly Technologies, did not respond to requests for an interview. Citic, the Chinese investment company that on paper is the parent of Poly Technologies, also declined interviews.

Like a Military Outfit

Other Chinese with knowledge of Poly Technologies' operations were more forthcoming. In interviews recently, they portrayed a sophisticated company run like the military organization it is, where employees address one another other by army rank and where Hong Kong chefs provide catered lunches.
"It started because the army general staff department wanted to have its own arms trading company, but it thought that it wouldn't be appropriate to do this openly," said a Chinese familiar with the company. "So it approached Citic, and Poly Technologies was set up on paper as a subsidiary of Citic."
Poly Technologies was formally founded in January 1984 with the approval of the State Council, China's Cabinet. It is registered as a subsidiary of Citic. In fact, Chinese say, it reports to the armament department of the general staff of the army.
Poly Technologies seems to be authorized to sell virtually everything in the Chinese arsenal, although the Central Military Commission must approve politically sensitive deals.
The most important deal arranged through Poly Technologies was the sale to Saudi Arabia of about $2 billion worth of Chinese ballistic missiles with a range of about 1,600 miles. That transaction, arranged in 1985, came to light in 1988 and caused a wave of indignation in the United States.

Car Stoned in Myanmar

Among recent deals arranged by Poly Technologies was the sale of guns and ammunition to Myanmar, formerly Burma.
"Poly Technologies has an office in Myanmar, and when its car goes out on the street, it's sometimes stoned by the Burmese," said a Chinese who has worked for the company. "They think we're helping the Burmese Government suppress the people."
The first head of Poly Technologies was He Pengfei, son of a famous Chinese marshal. The son also rose in the army, and after heading Poly Technologies, he returned there, attaining the rank of major general and becoming director of the armament department, a vantage point from which he continued to oversee the company.
The next president of Poly Technologies was He Ping, who is married to Deng Rong, a daughter of Mr. Deng and now his personal assistant.
An article this spring in International Security, a scholarly journal, asserted that the Foreign Ministry had tried to restrain Poly Technologies but had had little success.
In one indication of where business is headed, Poly Technologies has recently expanded, taking up an entire floor in the Citic Building. Most of the employees are on loan from the army.
Morale is said to be high and job benefits substantial. The staff need not lunch in the regular Citic cafeteria, because the chefs of the Hong Kong-managed Windows on the World restaurant on the top of the Citic building send them lunches every noon. The price charged each employee is just nine cents a meal.