China Watching

The Chinese government this week said it is "deeply disappointed and dissatisfied" that recent U.S. defense legislation relaxing export controls on satellites and related items excluded any benefit for China, according to a Jan. 6 statement by Ministry of Commerce spokesman Shen Danyang. As China Trade Extra reported yesterday:

In the 2013 National Defense Authorization Act (NDAA), which President Obama signed into law on Jan. 2, a provision gives back to the president the authority to move all satellites and related items from the U.S. Munitions List (USML), where even commercial satellites are considered military items, to the less-stringent Commerce Control List (CCL), provided they are not exported, re-exported or transferred directly or indirectly to China, North Korea or any country listed as a state-sponsor of terrorism.

The law also prohibits any satellite or related item to be launched from China or any restricted country or as part of a launch vehicle owned by the governments of one of these countries. The restrictions against China and other countries can be waived by the president if it is determined to be in the national interests of the United States.

Shen argued that China is "always exclude[d]" from the benefits of the U.S. export control reform initiative and the new measures will continue to "restrict China-U.S. Cooperation [in the] civil satellite field."

However, observers have said it would have been politically impractical to not exclude China from the NDAA provision due to the fact that a 1998 illegal diversion scandal involving China was the reason Congress revoked the president's authority over satellites in the first place.

Getting Congress to return the president's authority over satellites is one piece of the broader reform effort, which aims to move thousands of less significant items off the USML, primarily parts and components, to the CCL where they can be more easily exported to close allies.

The Obama administration has stressed that China will only benefit from the reform effort insofar as the export of a an item transferred to the CCL does not violate a rule that prohibits the sale of a dual-use item if it is intended entirely or in part for a military end use. There is a blanket prohibition on the export of any USML item to China.

U.S. officials have argued that the benefits China receives from the reform effort will be limited because most items transferred to the CCL will be “specially designed” for military end items on the USML, but not critical enough to remain under tighter USML controls. As a result, most of these items will not have a civilian end use and will not be eligible for export to China.

Despite this argument, Shen, in his statement, said the Chinese government hopes the U.S. can "change the discriminatory conducts against China, and pay attention to and address China's concerns and materially relax export control against China in its export control reform."