Flourishing U.S. Satellite Business May Be Grounded by Curbs on China

The Clinton Administration’s imposition of trade sanctions against Chinese aerospace and defense industries was intended as a slap against China for allegedly violating an international arms accord by supplying missile components to Pakistan.

Among the first likely to suffer from the sanctions, however, is not the Chinese government but the Los Angeles-based Hughes Aircraft Co. and its subsidiaries, which over the past two years have built a business of several hundred million dollars selling communications satellites to China and launching them into space on Chinese rockets.

It is precisely this satellite trade that was the focus of the narrow, two-year sanctions imposed Wednesday on China by the Administration. State Department spokesman Mike McCurry said the sanctions would primarily affect sales of satellites--possibly worth $400 million to $500 million--and transfers of satellite technology, both areas dominated by Hughes and other American companies.

“This is not going to help our business,” complained Michael K. Sun, the Beijing-based vice president of Hughes Network Systems, a subsidiary with several major satellite communications contracts pending with the Chinese. “I have a big contract that I could lose because of this. Every time I meet with Chinese officials they give me a 15-minute lecture complaining about American policy. I support the American government, but sometimes you have to ask the question why you as an American company get hit more than anyone else.”

Sun was not the only member of Beijing’s American business community to complain.

“What I regret most,” said another American attracted to China by the booming business climate, “is non-commercial issues spilling over and affecting our commercial environment.”

The partnership between Hughes Space and Communications, the world’s largest producer of commercial satellites, and the state-owned China Great Wall Industry Corp., which makes the Long March 2-E rocket used to launch the satellites, is a great source of national pride for the Chinese.

Each launch is followed with the intensity that attended the initial space missions in the United States. Successful satellite missions are followed by celebratory banquets in grand hotels.

The partnership has also been a spectacular source of profit for Hughes, which hoped to benefit even more from China’s ambitious goals to launch 20 more satellites by the year 2000.

But among the other products manufactured by the giant China Great Wall Industry Corp. are the short-range M-11 missiles and components that U.S. intelligence agencies say China is secretly selling to Pakistan. As a result, both the Clinton Administration and the George Bush Administration seized on the satellite trade as a weapon in their attempts to curb Chinese behavior on weapons proliferation and human rights.

Chinese Foreign Ministry spokesman Wu Jianmin on Thursday described the sanctions as “entirely unjustifiable.”

The Chinese Embassy in Washington issued a statement denouncing the sanctions as “a wrong judgment based on inaccurate intelligence.”

After the Tian An Men Square crackdown in June, 1989, President Bush froze all military sales to China. In May, 1991, citing Chinese exports of missile technology to Third World countries, Bush refused to grant waivers to American companies, including Hughes, that wanted to sell components for China’s domestically produced satellite, Dong Fang Hong 3.

But Bush reversed himself 15 months later and granted waivers for the Dong Fang Hong 3 and five other satellite projects involving China.

Bush said the decision was based on assurances from Chinese authorities that they would adhere to the Missile Technology Control Regime guidelines limiting exports of missiles and missile technology.

In this improved business climate, Hughes Network Systems, a subsidiary specializing in digital communications equipment and closed satellite communication networks, was among many American and Western firms that opened offices in the high-rise complexes sprouting on the edges of Beijing.

In the past year, Hughes Network has negotiated contracts with the Chinese state oil ministry and state banking systems for interactive communication systems.

Among the other tenants in the office complex that houses Hughes executive Sun, an American citizen born in Beijing and raised in Taiwan, are Canadian and French firms vying for the same Chinese communication satellite business. In the wake of the latest in the series of U.S. sanctions, Sun is afraid they might get it.

“If U.S. policy continues to act like a yo-yo,” Sun said, “it just gives another excuse for those who do not want to buy from us.”