How China's Army Stocked American Shelves

A stroll down the aisles of a discount store in downtown Manhattan reveals many Chinese-made products for sale: an "emergency poncho" for $1.09 and a "two-piece storm suit" for $21.99 in the sporting-goods section, as well as a "Clear Choice automatic night light" in housewares for $3.99.

This is nothing surprising. Chinese goods line the shelves in many American stores. But what if buying them means doing business with companies owned by the People's Liberation Army (PLA) and the People's Armed Police (PAP) in China?

US retailers large and small are selling merchandise such as toys, clothing, and housewares manufactured by the Chinese Army, according to a report released last year by an AFL-CIO labor group, the Food and Allied Service Trades (FAST) Department.

"Most Americans do not know anything about such Chinese military exports. It's outrageous that the American people are unwittingly supporting the PLA and PAP," says Jeffrey Fiedler, president of FAST.

Fueling an old trade debate

At a time when any trade with China is controversial, many human rights and other groups feel that business with military-owned companies is clearly in violation of American ideals. According to Mr. Fiedler, the Army "is the single most important factor in the Chinese Communist Party's ability to maintain hold on its power."

Since the Army's crackdown on Tiananmen Square pro-democracy demonstrations nine years ago, the annual congressional vote over Most Favored Nation trade status for China has been hotly debated.

And last year, a Gallup poll showed that 55 percent of Americans think the United States should link human-rights issues in China with US-China trade policy, even if doing so hurts US economic interests. President Clinton de-linked MFN status from human rights in 1994.

Congressional disapproval of China's human rights record has recently grown with the help of such new allies as right-wing religious and anti-abortion groups, which have joined more traditional supporters of sanctions against China.

Rep. Christopher Cox (R) of California, chairman of the House Republican Policy Committee, spearheaded legislation that passed in the House last November "to deny normal commercial status to the Communist Chinese Military." It requires the government to publish a list of Chinese military companies operating in the US and enhances the president's authority to monitor, and even ban, PLA companies.

Congress found that "The People's Liberation Army is the principal instrument of repression within the People's Republic of China."

Origins tough to trace

Kmart Corp. of Troy, Mich., was one of the businesses formerly buying goods from PLA-owned firms. Their experience illustrates the difficulty companies can have in tracking the origin of the goods that ultimately end up offered to consumers.

Public shipping records show that in fall 1996, 73 tons of rain gear were shipped to Kmart by China Tiancheng Corp. In a 1995 study, the US Defense Intelligence Agency confirmed that Tiancheng is owned by the PLA's General Political Department.

"China Tiancheng is a military-owned company whose production has been converted to civilian output," a spokesman at Tiancheng's headquarters told the Monitor. And Cheng Ying, an executive at Tiancheng's trading department, says, "Tiancheng has engaged in business with American companies in the past," and adds that "the only potential problem in importing Tiancheng's products would be US quotas on textiles and clothing."

Chinese human rights activist Harry Wu, a leader of the prodemocracy movement and former political prisoner who now lives in the US, confronted Kmart's chairman about his company's relationship with the PLA-owned company in May 1997.

The chairman, Floyd Hall, reportedly told Mr. Wu that Kmart would investigate the allegations, and a spokesman later said that the company would sever ties with Tiancheng if the charges were true.

Kmart had previously denied ties with the PLA in a 1994 letter written to the AFL-CIO; the vice president of labor relations wrote that Kmart had "never had any dealings with the People's Liberation Army nor do we intend to ever have dealings with them."

Recently, Kmart spokeswoman Mary Lorencz said that they did investigate Wu's claims and found that "Kmart had the rainwear in question manufactured in China by companies owned by individuals and collectives who have nothing to do with the military force. Kmart does not do business with the Chinese military."

She added that Tiancheng "may have shipped merchandise." She went on to say that she did not know the names of specific companies with which they are now doing business, since vendors, who change from manufacturer to manufacturer, place Kmart's orders.

But Ms. Lorencz later acknowledged that since last year, "we learned that Tiancheng was PLA-owned. Our firms [have not been] using Tiancheng since December." Kmart has been using an importer called Orient Trading this year.

A well-connected partner

Still, it is not surprising that many companies are eager to enter into joint ventures with the PLA or simply buy their products.

An entrepreneurial Army, it is referred to as "PLA Inc." by some China watchers. The PLA has the connections necessary to make business run smoothly in China. Advocates have said that the PLA is the best partner you could ask for.

Victor Kiam has been one of them. He was once president of Remington, a company known for electric razors, and familiar to some Americans from television advertisements in which he said, "I liked the shaver so much, I bought the company."

By his own account, Mr. Kiam embraced trade with PLA-linked companies as a founding partner of ITI China Holdings, a company that distributes US-made and other Western-made goods in China.

"One of our Chinese partners, China Xinxing [Group] Corp., is among the largest companies affiliated with the PLA," Kiam said in a statement to the Senate Foreign Relations Committee during a Novermber 1997 hearing on "the Commercial Activities of China's People's Liberation Army."

Kiam looked at such business relationships as "the best way to penetrate China and help the balance of trade of the United States."

As far as the US government is concerned, unless there are questions about forced or child labor, or the importing of illegal products, it's laissez faire.

"To my knowledge, the US doesn't track ownership of the source of goods importing to the US. We don't investigate legitimate companies and products," says David DiGiovanna of the State Department's Office of Chinese and Mongolian Affairs.

Where the money goes

Tai Ming Cheung, a Hong Kong-based PLA expert, estimated in 1997 that there were 15,000 to 20,000 military enterprises with annual revenues of $10 billion. Other recent estimates by experts extend the range to 30,000 businesses.

Where does that money go? Most agree that it does not go directly to arms, but instead is used to support the soldiers.

One of Kiam's partners, for example, the Xinxing Group, reports to the General Logistics Division of the PLA. This division takes care of basics such as providing clothing and feeding the troops.

Perhaps the biggest problem with analyzing the situation is that Chinese companies and their connections are so elusive, says Orville Schell, China expert and dean of the Berkeley (Calif.) Graduate School of Journalism. "It's impossible to know who is what in China," said Mr. Schell.