The Boeing Connection To China?

A possible link to John Huang and the Chinese embassy

The name sounds innocuous enough--the Council on U.S.-China Affairs. But this now inactive group, created to improve China's image in the U.S., may provide insights into how John Huang, the Democratic fund-raiser, kept tabs on the efforts of U.S. corporations and the Chinese embassy to shape China policy. The council's role also raises questions about the use of foundations as a conduit for corporations who wanted to influence trade policy toward China.

The council was founded by Xue Haipei, a dissident who fled China after the 1989 Tiananmen Square massacre. Although ardently anticommunist, Xue believed that only by opening China economically would democratic reform be possible. In an ambiguous twist, the Chinese government seems to have tolerated and perhaps even assisted Xue's efforts. At the same time, Xue's organization received financial support from Boeing Co., which sees China as vital to its future.

"UPDATE." Case in point: A seven-page memorandum, dated Jan. 15, 1996, obtained from the Democratic National Committee files of Huang. The memo, intended to lay out details of the council's public-awareness strategy is from Xue and is addressed to Boeing and members of the Council on U.S.-China Affairs. Xue copied the memo to Huang, a former Commerce Dept. official and Lippo Group executive. Xue's note to Huang describes the attached memo as an "update on strategies and programs I drafted for discussion with our partners, like Boeing in this case and with the Embassy." While the embassy is not named, another part of the document states that "the council's China partners" would pay for expenses incurred by congressional delegations while visiting China as part of the council's program.

The document, obtained by BUSINESS WEEK, affords a glimpse at Huang's network. Former colleagues of Xue say they saw Huang at a council seminar for staffers on Capitol Hill last year. A Boeing representative also was present, according to one attendee.

A Boeing spokesman says the company never belonged to the Council on U.S.-China Affairs. But Boeing concedes it supported the group with a $10,000 grant. The aerospace giant felt a former dissident speaking out in favor of China-U.S. trade lent credibility to the cause of publicizing the benefits of closer relations with China. "His goal meshed with our goal," says Boeing spokesman Tim Neale. "But we weren't coordinating with each other." Boeing also denies that any of its efforts were planned in concert with the Chinese government or that it knew of Huang's dealings with Xue. The Chinese Embassy denies any connection with Xue's group. Council spokesman Ya Li says that the group, which has since closed its Washington office for lack of funds, never received money from the Chinese government.

Xue's whereabouts are now unknown to his former colleagues, who say

the council produced little in the way

of concrete results. Even though Xue was once an outspoken critic of Beijing, he returned to China as an environmental activist opposing the Three Gorges Dam project on the Yangtze River. He was permitted to return to the U.S.

The more that's being learned about Huang's China connections, the more nervous the pols become. BUSINESS WEEK has learned that Huang registered as an adviser to Lippo Group when he attended an April, 1996, International Finance Corp. global retailing seminar. Huang was a DNC Vice-Chairman at the time, and while he was allowed to have outside employment, he never informed his superiors that he was in Lippo's employ, according to a DNC spokeswoman. Justice Dept. and congressional investigators are looking into whether Huang was acting as a conduit for sensitive information that Lippo passed to China in order to curry favor. Huang's lawyer refused to comment.

As the investigations widen, policymakers are getting skittish about any actions that could be seen as a payoff to China's lobbying. Businesses may get caught in the backlash. Vice-President Al Gore, for example, has been invited by the Chinese government to officiate at the closing of a deal to sell Boeing 777s to China. Normally, Gore would jump at the chance to exploit the symbolism of a U.S. company besting Europe's Airbus Industrie for a lucrative deal. But some of Gore's aides are cautioning him to avoid anything that appears to endorse Boeing's pro-China position.

IN OVERDRIVE. Similarly, House Speaker Newt Gingrich (R-Ga.) is under mounting pressure to pull the plug on a planned China trip in March by him and nine other members. Representative Douglas Bereuter (R-Neb.), an ardent supporter of most-favored-nation status for China, has dropped out of a China jaunt.

Bringing members of Congress to China is a key part of Beijing's effort to lobby Washington. Ever since the controversial visit of Taiwan President Lee Teng-hui to the U.S. in 1995, Chinese officials have gone into overdrive to court policymakers. "The importance of the U.S. Congress in our relationship has been much more recognized, especially since Lee Teng-hui's visit," says Su Ge, a professor at Beijing's Foreign Affairs College.

Many corporations and nonprofit organizations are willing to spring for visits. The National Committe for U.S.-China Relations, which started sponsoring trips by congressmen last year, is using funds from the Freeman Foundation. The trust is financed by the Freeman family that founded American International Group, the first company to win a license to sell insurance in China. The trust sponsors cultural exchanges with Asian countries and is managed by Houghton Freeman. He resigned from AIG's board last year and still owns considerable stock. Both AIG and Freeman say the company has no relationship with the foundation. "There is a real lack of understanding among our politicians, and China's politicians don't understand our system," Freeman says. "I thought it would be a good idea to have an exchange."

Then there's the Better Hong Kong Foundation, begun a year ago by such Hong Kong tycoons as Li Ka-Shing and Sir Run Run Shaw. They're now sponsoring trips for congressional staffers to allay fears about the upcoming turnover of Hong Kong to the mainland. A Capitoline/MS&L public-relations specialist who won the account says the foundation gets no instructions from China on whom to invite. But "I'm sure the Chinese government is appreciative," he says.

Business interests defend this linkage of foreign policy and commercial interests as routine. But the lobbying efforts launched by corporations years ago may now actually provoke the anti-China backlash Corporate America has long feared.

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