International Business : Ex-Im Bank Suspends China Loan Guarantees

The Export-Import Bank is suspending until March 27 new loan guarantees for U.S. projects in China, a move that could hurt American investors as well as China’s economy.

The bank acted Wednesday at the request of Secretary of State Warren Christopher. It gives the Clinton administration time to obtain Beijing’s explanation for reports that it sold technology to Pakistan that can be used in making nuclear weapons.

As much as $10 billion in loan guarantees could be delayed, said Harry Phillips, spokesman for the independent federal agency. But he said $4 billion to $4.5 billion in guarantees approved before Christopher’s letter reached the bank Tuesday will proceed, including loans not yet executed.

President Clinton is weighing whether to impose other economic sanctions on China. Christopher has yet to submit a recommendation, but Glyn Davies, a State Department spokesman, said a decision is expected soon.

One reason the bank complied with the request is the possibility that Clinton will decide to take other actions against Beijing, Phillips said.

“It was not a directive,” he said. “It was a request.”

The suspension could delay the Three Gorges Dam project on the Yangtze River that is to provide hydroelectric power to replace coal-fired generators for about 9% of China’s population. The bank had hoped to act on credit requests by the end of 1995, but the backup caused by the partial U.S. government shutdown delayed processing of these and other requests.

The move gives China more time to make a case that it did not violate the Nuclear Non-Proliferation Treaty aimed at deterring the spread of atomic weapons. It also gives the administration time to evaluate the Chinese claims.

White House spokesman Mike McCurry said the administration has not determined whether China violated the law by selling nuclear technology to Pakistan. He said U.S. officials asked Beijing for more information.

If China does not make a persuasive case, Clinton still could find sanctions other than suspending loan guarantees, a penalty that falls heavily on American businesses trying to develop a foothold in what promises to be the 21st century’s fastest-growing major economy.

An administration official said Clinton wants to “send a signal” to Beijing in consultation with his national security advisors.

The CIA has concluded that China last year sold Pakistan specialized ring magnets for uranium enrichment plants. China has acknowledged cooperating with Pakistan, but said it was for peaceful uses of nuclear energy.

Describing ring magnets as parts “in a gray area” of nuclear technology, the administration official said top Chinese representatives are expected to come to Washington for high-level meetings in an attempt to resolve the dispute.