A state-owned Chinese aerospace company acknowledges that a senior executive gave about $300,000 to Democratic Party fund-raiser Johnny Chung in 1996.
But the China Aerospace Corp. denies the funds from Liu Chaoying, the daughter of the then-highest ranking officer in the Chinese Army and a lieutenant colonel herself, were part of a Chinese conspiracy to influence the Clinton administration's foreign policy.
"This was done by Liu Chaoying acting as an individual," insists Zhang Lihui, a spokeswoman at China Aerospace in Beijing. "She used her own financing rather than China Aerospace funds."
Speaking in a Monitor interview, Ms. Zhang offered no explanation for the payment by Ms. Liu to Mr. Chung.
The revelation, however, is certain to add new fuel to allegations that China's Communist-run regime funneled illicit contributions to Democrats in the '96 United States elections in a bid to sway US foreign policy, including obtaining contracts for cheap satellite launches and American-made missile technology.
The allegations are certain to cast an unwanted cloud over next month's summit in Beijing between Chinese President Jiang Zemin and President Clinton. It will be their second meeting since Mr. Clinton began seeking to improve relations between the US and the world's most populous country.
The charges are being investigated by the Justice Department. It is illegal for foreigners to give donations to US political campaigns. The department is also looking into whether donations to Clinton's 1996 reelection campaign by an American aerospace executive may have led to a waive of a US ban on satellite technology exports to China.
Congressional committees are also probing the charges, which Clinton denied while welcoming the inquiries. After the G-8 summit in Birmingham, England, he said that "the decisions we made, we made because we thought they were in the best interests of the American people."
Chinese officials and independent China experts say it more likely that Ms. Liu's payment to Chung was part of a personal effort to end the ban on US satellite technology exports to Beijing decreed after the 1989 slaughter of pro-democracy demonstrators in Tiananmen Square.
"There is no evidence of an insidious plot," says a Western official in Beijing.
But congressional sources familiar with the probes say disclosures by Chung to Justice Department investigators and intercepts of Chinese communications by US intelligence agencies show that China sought to influence US policy with illegal campaign contributions.
"The bottom line that we can pull together ... is that there are very defined laws as to who you can accept money from, and it does appear that those laws were violated," says one congressional source.
The New York Times and Washington Post last week quoted Justice Department sources as saying that Chung told investigators that $100,000 of some $300,000 he gave to the Democratic Party in 1996 came from the Chinese Army and was funneled to him by Liu.
The funds were ultimately returned by the Democratic National Committee. As a Democratic fund-raiser, Chung once had regular access to the White House and accompanied Liu to a Clinton campaign event where she had her picture taken with the president.
A major focus of the Justice Department and congressional probes is whether Clinton's decision to grant the waiver to the satellite technology export ban to China was influenced by campaign contributions.
Since it was imposed, both the Bush and Clinton administrations have routinely approved waivers of the ban, allowing US firms to transfer rocket technology to China, and to contract China Aerospace to provide cheap launch services for American-made satellites.
The ban is subject to annual review by the president, and Chinese officials would like to have it permanently lifted. Some China officials and experts say that is what Liu may have hoped to achieve with the funds she gave to Chung.
"It's inconceivable that a weak country like China would try to influence a strong country like America with so little money," says Yan Xuetong, an analyst at the China Institute of Contemporary International Relations, in Beijing. "$100,000 won't even buy a two-bedroom house in America. Who would risk his political life for so little money?"
But the congressional source says China Aerospace's confirmation that Liu gave money to Chung represented "incontrovertible evidence" of a Chinese government influence-buying conspiracy.
The Clinton administration insists that the decision to waive the ban was part of a larger effort to improve relations with China, which is hungry for American high technology that it needs to for its industrial modernization efforts
Another focus of the investigations is whether the administration was influenced into waiving export ban by $600,000 in contributions to the Democratic Party from Bernard Schwartz, chairman of Loral Space and Communications Corp.
The waiver allowed Loral and another firm, Hughes Electronic Corp., to contact China Aerospace to launch US-made satellites atop its low-cost rockets. In doing so, the two firms may have provided advanced know-how to China that it used to improve the accuracy of its nuclear missiles, sources say.
"My understanding is that the Americans only helped tweak China's rocket technology rather than provide state-of-the-art guidance systems," says the Western official in Beijing.
But the congressional source says that to determine the impact of the know-how, congressional investigators need to review a classified Pentagon report the White House has refused to turn over.
"We have to look at the Pentagon report," he says. "But that is unfortunately one thing that the administration has been holding back."