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S E C R E T SECTION 01 OF 03 BEIJING 002614 
 
SIPDIS 
 
DEPT FOR ISN/CB, EAP 
 
E.O. 12958: DECL: 06/26/2033 
TAGS: PARM KSTC PREL PGOV ETTC ETTRD BEXP CH
SUBJECT: AUSTRALIA GROUP'S OUTREACH TO CHINA ON 
NONPROLIFERATION 
 
Classified By: Acting Political Section Chief Ben Moeling.  Reasons 1.4 
 (b/d. 
 
Summary 
--------- 
 
¶1. (S) In a June 25 meeting with Australia Group (AG) Chair 
Ian Biggs, PRC MFA Deputy Director General for Arms Control 
Li Song objected to news that an AG representative would be 
dispatched to Taiwan "shortly" as part of the AG's outreach 
program.  Biggs said that China should not be surprised by 
this as an AG representative visited Taiwan following the 
2006 outreach meeting between China and the AG.  Biggs told 
Li he would relay China's objections regarding Taiwan to the 
AG Plenary.  Li stated that China fully supports 
nonproliferation regimes such as the AG, Missile Technology 
Control Regime (MTCR) and the Nuclear Suppliers Group (NSG), 
and is fully compliant with the standards set by these 
international groups.  Li reiterated China's support for the 
AG and similar regimes, and looked forward to continued 
dialogues and exchanges with the AG.  One MFA official noted 
that China had recently levied a monetary fine on a company 
found to have illegally produced and exported glass line 
equipment to Iran.  End Summary 
 
AG Outreach to Taiwan 
--------------------- 
 
¶2. (C) Poloff was invited to attend a June 25 outreach 
meeting between the AG Chairman and Chinese Government 
representatives.  Biggs provided Li with an update on the 
outcome of the AG's 2008 plenary meeting and told Li that the 
AG would send a representative to Taiwan following the 
plenary meeting.  Li expressed surprise and said he 
understood AG membership to be open to states and outreach 
conducted to state actors exclusively.  Taiwan is an 
extremely sensitive topic to China, continued Li, and China 
hopes that the AG's actions in sending a representative to 
Taiwan "will not have a negative impact on relations between 
the AG and China."  China is confident, said Li, that it can 
implement international standards on nonproliferation for all 
of China, including Taiwan.  He emphasized that the AG should 
not talk to a local office (meaning Taiwan) without first 
consulting the Central Government.  Li said he "did not like" 
the practice of the AG sending a representative to Taiwan and 
that the AG should be more careful in dealing with such 
sensitive issues.  In a sarcastic tone, Li said that he hoped 
that there were no more surprise announcements by the AG 
Chair. 
 
¶3. (S) Apparently caught off-guard by Li's strong statements, 
Biggs responded that Taiwan is a large chemical producer and 
that the AG's decision to send a representative to Taiwan is 
not intended to make a political statement but is merely a 
means of sharing information.  Though the AG does not conduct 
outreach with any other non-state actors, the exchange with 
Taiwan is on a different level than other outreach programs 
aimed at states.  Biggs said that he was surprised at Li's 
reaction because, in the name of transparency, China was 
informed by the then-AG Chair that a representative would be 
sent to Taiwan immediately following its outreach meeting 
with China in 2006.  Biggs told Li that he would share 
China's concerns about Taiwan with the AG Plenary. 
 
China's Compliance with International Standards 
--------------------------------------------- -- 
 
¶4. (S) Li stressed the high degree of importance that China 
places on preventing the proliferation of WMD, adding that 
China views proliferation as a strategic issue which affects 
international and national peace, security and social 
development.  China has a clear policy to oppose any form of 
proliferation and not to assist any country seeking to 
proliferate or acquire WMD, Li added. China has improved its 
efforts to prevent proliferation and has promulgated specific 
laws and regulations on export controls.  China continues to 
commit greater resources to its efforts to deal with changing 
technologies and markets and seeks out opportunities to work 
with other countries.  To demonstrate China's commitment on 
nonproliferation, Li pointed out the 2004 China-European 
Union Joint Declaration on Arms Control, China's application 
for admission into the Missile Technology Control Regime and 
its involvement with the Nuclear Suppliers Group.  Li 
highlighted the importance of such exchanges to China and 
expressed his hope for continued cooperation and further 
development of these relationships.  Li also proposed that 
 
BEIJING 00002614  002 OF 003 
 
 
the AG and China co-chair seminars or forums on 
nonproliferation in the future. 
 
¶5. (S) Yang provided examples of China's statutory 
nonproliferation updates, such as the January 2006 statutory 
update on dual-use items, the July 2006 update of the 
national control list and November 2006 addition of nuclear 
and dual-use items to the national control list based on NSG 
criteria.  Yang added that in August 2006, authority over all 
unlisted items was transferred to the provincial level to 
allow greater efficiency and flexibility.  Recently, said 
Yang, an interagency team on export controls, consisting of 
officials from MFA, Ministry of Commerce (MOFCOM), Customs 
and other Chinese organizations, was formed to rapidly 
respond to emergency situations involving proliferation 
concerns.  Yang added that the team has the ability, on very 
short notice, to stop a shipment from leaving China.  The 
team responds mostly to leads based on intelligence gathered 
and is statutorily required to adjudicate the issue within 45 
days. 
 
¶6. (S) MOFCOM Deputy Director Sun Jian said MOFCOM has 
responsibility for regulating the export of all categories of 
dual-use items and is responsible for the issuance of all 
export licenses in China.  For conventional arms, approval is 
required from the newly formed Bureau for National Defense 
Technology before MOFCOM can issue the license.  For chemical 
exports, the Chemical Weapons Convention (CWC) of the 
National Development Reform Commission (NRDC) is the 
approving authority for the export of 54 chemical items, 
while MOFCOM retains authority over 10 chemical items. 
MOFCOM generally issues export licenses for the one time 
export of specific items, but also issues general and bulk 
licenses on a case-by-case basis, Sun stated.  Moreover, 
MOFCOM issues exemptions where no export licenses are needed, 
for example in the case of commercial jet engines.  In 
issuing export licenses, MOFCOM also incorporates a 
"catch-all" provision as well as China's new regulations on 
intangible technology transfers.  In 2007, Sun summarized, 
MOFCOM issued approximately 12,000 export licenses. 
Approximately 10 percent, or 1,200, were chemical exports, 
mostly consisting of sodium sulfide used in leather tanning. 
Approximately 0.4 percent, or 48 licenses, were biological 
exports focusing mainly on freeze drying equipment. 
 
¶7. (S) Zhao Yinong from the CWC Office of the NDRC said that 
all chemical producers are required to have in place an 
Internal Control Program (ICP) before his office issues a 
chemical producer's license.  The ICP, once in place, must be 
reviewed every five years and the control list used in the 
ICP is updated every two years.  At a minimum, the ICP must 
include the following: 1) a leader or responsible party, 2) 
review of procurement orders, 3) records of customer orders, 
and 4) internal training.  Currently, Zhao offered, 60 
percent of all chemical producers and 80 percent of all 
chemical exporters have in place an ICP program.  Several 
major producers have implemented comprehensive ICP programs 
which include a CWC office and ICP branch offices at each 
location, Zhao said. 
 
¶8. (S) Zhou Yahan from China General Administration of 
Customs (Customs) outlined China's enforcement efforts. 
Customs has 50,000 national and local officers who are 
responsible for 245 ports of entry within China.  Zhou 
stressed that Customs is an independent organization with no 
outside reporting responsibilities.  Throughout China, 
Customs operates four chemical exam centers, 55 container 
examination machines, 193 vehicle identification devices, 568 
electronic strobes, 808 container identification devices, and 
652 x-ray machines.  Customs works closely with MOFCOM in 
enforcement efforts and in keeping their national control 
list up to date, Zhou said. 
 
Enforcement Action 
------------------ 
 
¶9. (S) When asked by Poloff regarding recent enforcement 
actions, Li deferred to Yang.  Yang said that China recently 
levied penalties in an export enforcement case.  Yang said 
that a "company" (Note: MFA officials confirmed on 27 June 
that this case referred to Zibo Chemet) was found to have 
illegally produced and exported glass lined equipment to 
Iran. The information was provided to China in 2006 by a 
"friendly nation" and investigations began thereafter.  In 
December 2007, MOFCOM, after determining that the company's 
Iran-related export activities were in violation of China's 
 
BEIJING 00002614  003 OF 003 
 
 
export laws, fined the company approximately RMB 45,000 (USD 
6,569)(the Chinese participants were unsure of the exact 
amount of the fine).  Li and Zhou added that Customs is still 
investigating to see if anti-smuggling charges apply.  When 
asked by Poloff if criminal punishments might apply, Li and 
Zhou replied that criminal punishment is a possibility. 
 
¶10. (U) Participants: 
 
AUSTRALIA 
-- Ian Biggs, Chair of Australia Group and Assistant 
Secretary, Australian Ministry of Foreign Affairs and Trade 
-- Nick Purtell, Second Secretary, Australian Embassy 
-- Murray Edwards, Counsellor, Australian Embassy 
 
UNITED STATES 
-- William Oh, Second Secretary, Embassy Beijing 
 
CHINA 
-- Li Song, Deputy Director General, Department of Arms 
Control and Disarmament, MFA 
-- Yang Yi, Deputy Director, Department of Arms Control and 
Disarmament, MFA 
-- Jiang Bo, Attache, Department of Arms Control and 
Disarmament, MFA 
-- Sun Jian, Deputy Director, Ministry of Commerce 
-- Zhao Yinong, National Implementation Office for CWC, 
National Development Reform Commission 
-- Zhou Yahan, General Administration of Customs 
 
RANDT