CHINA'S NEW FRONTIER China finds launches lucrative

There also were accusations -- adamantly denied -- that Loral's chairman influenced a Clinton administration licensing decision with a hefty donation to the Democratic National Committee. License approval eventually was shifted from the Commerce Department to the more restrictive State Department.

The Clinton White House announced in November 2000 that it would resume processing export licenses and extend China's launch privileges through 2001 after Beijing agreed to a missile nonproliferation pact. But the Bush administration says outstanding issues remain in implementing the nonproliferation agreement. New satellite export licenses remain on hold. Sen. Jesse Helms, R-N.C., and three other lawmakers urged President Bush in July not to resume licensing under any condition.

Here in a sparkling showroom celebrating the achievements of Chinese rocket builders, representatives of the Great Wall Industry Corp. are showing off their wares to an international delegation from Iran, Thailand and Pakistan.

The pitch is clear: China has rockets for sale -- cheap. Beijing soon could be beating Western capitalists at their own game by grabbing a larger share of the lucrative yet cutthroat commercial-launch market. And China's efforts to land more of this business could directly impact jobs and profits in the United States.

Not so long ago, foreign visitors to this once-secret industrial complex in Beijing's southern suburbs would have been feared as potential spies. Today, the guests here at the China Academy of Launch Vehicle Technology are welcomed as potential customers.

In a building across the street from the sprawling aerospace campus's headquarters, the foreign delegation gathers around a conference table to watch a slick promotional video singing the praises of China's Long March rocket fleet. Glossy marketing brochures are distributed as the video's narrator breathlessly gushes in English about the rockets' high reliability.

When the video ends, a tour guide shows the group full-scale samples of the Long March line. The visitors are clearly impressed. The entire event is an investment for the future -- one China is counting on to pay big dividends in coming years. Foreign capital is critical to funding a variety of Chinese military and civil space projects. This is Beijing's plan for getting it.

Necessity has driven China's communist leadership to embrace once-alien concepts such as marketing and customer service. They are proving fast learners.

"We want to capture as much of the market as possible," said Chen Xing Quan, a rocket scientist at the Shanghai facility that designs systems for the Long March line.

As Long March reliability grows and prices shrink, Great Wall Industry Corp. is poised to do just that. But its gains almost certainly will come at the expense of the Western launch industry, including American companies such as Boeing and Lockheed Martin that operate at Cape Canaveral. U.S. government missions -- mainly military and science satellites -- usually are off-limits to foreign companies. But more than a third of all worldwide launches are commercial missions that are up for grabs.

Revenue from commercial launches averages more than $2 billion annually. According to the Federal Aviation Administration, the United States conducted 40 percent of the world's commercial missions from 1996 to 2000, Europe 27 percent, Russia 23 percent and China 6 percent. Forecasters predict an average of 30 commercial launches per year in the next decade.

Business plans are so tight that the loss of just two or three annual launches to Great Wall could hurt American companies. To complicate matters, the launch industry already is reeling worldwide.

There are too many rockets and too few satellites needing a ride to space. An expected boom never materialized as several satellite ventures went bust and spacecraft in orbit began lasting longer. In fact, the Teal Group, a Virginia-based aerospace-consulting firm, found a 27 percent drop in launches for the first half of 2001 compared with the same period for 2000. It's the sharpest drop in five years.

China's early forays into the commercial space market didn't exactly strike fear in the hearts of its competitors.

Great Wall first gained a toehold in the mid-1980s because of a U.S. rocket shortage after the 1986 Challenger accident. American booster assembly lines had become largely idle as satellite launches shifted to NASA's space shuttle. When the shuttle fleet was grounded, China and Europe moved to fill the vacuum.

China's first commercial mission -- launch of a communications satellite for a Hong Kong company -- was a success in April 1990. Things went smoothly for the next few flights. Then a series of catastrophes struck that the Chinese space industry still hasn't fully lived down.

In December 1992, an Australian television satellite mounted atop an American upper stage exploded inside a Long March nose cone and arrived in orbit as smoldering debris. The Chinese blamed the American rocket stage. The Americans blamed the Chinese rocket.

A more tragic failure occurred two years later when a communications satellite was lost aboard a similar Long March rocket with the same U.S.-built upper stage. This time, the rocket blew up shortly after liftoff from the Xichang Satellite Launch Center, raining debris on an inhabited area downrange. Official accounts put the human carnage at six people killed and 23 injured. Unofficial accounts put the death toll at more than two dozen.

An even deadlier disaster happened at Xichang on Feb. 14, 1996. The maiden flight of the Long March 3B rocket carrying a $60 million U.S. Intelsat communications satellite came to be known as "the St. Valentine's Day Massacre" among the launch's Western insurers.

Trouble began two seconds after liftoff when the rocket's navigation system failed and the booster veered to the side. It erupted in a massive explosion 20 seconds later. Chunks of rocket showered the area. Official accounts listed two people killed and 70 others injured. Unofficial accounts put the number of dead at more than 50.

The problems didn't end there. Six months later, the upper stage of a Long March 3 shut down early and marooned a Chinese television satellite in a useless orbit. Commercial missions aboard Long March rockets became almost uninsurable. Premiums soared to about 30 percent of the amount insured, about double the going rate at the time for Western launchers.

"We learned lessons from those incidents," said Luan Enjie, administrator of the China National Space Administration. "At that time, we realized that quality is the life of a space program."

Since the 1996 upper-stage problem, however, the Long March fleet has launched 28 consecutive times without a failure. Chinese officials attribute the stunning turnaround to reforms implemented after a top-to-bottom review of the program. There's more emphasis on quality control. Manufacturing processes have been modernized. Redundancy has been added to critical rocket systems. And more attention is being paid to selection and training of program managers.

A congressional panel chaired by U.S. Rep. Christopher Cox, R-Calif., attributed the turnaround to something else. Government investigators claimed the illegal transfer of technology from U.S. satellite makers helped Chinese engineers iron critical bugs out of their systems.

Loral Space & Communications and Hughes Electronics Corp. built satellites lost aboard Chinese rockets. Both U.S. companies were accused of violating export-control laws by sharing the findings of their internal accident investigations with China.

"Many of these technologies can be dual purpose -- used for both military and civil purposes," said Charles Vick, a China space analyst at the Federation of American Scientists in Washington. "It's a very serious issue."

Hughes and Loral reportedly entered discussions with the State Department on possible civil settlements last summer to end a criminal investigation by the Justice Department. The State Department also charged Lockheed Martin with 30 civil violations of the Arms Export and Control Act in April 2000 for providing an unedited technical report on another failure to Chinese engineers.

The technology clampdown and related foreign-policy issues pose a near-term threat to China's commercial goals. More than 80 percent of the world's commercial satellites are made in the United States. Export licenses are required to launch them aboard foreign rockets.

President Reagan gave the go-ahead in 1988 for a limited number of U.S.-built satellites to lift off from China. But licensing has been a political football ever since, periodically put on hold because of the bloody 1989 crackdown on pro-democracy demonstrators in Tiananmen Square and Chinese missile sales to other developing countries.

U.S. satellite makers, however, insist the restrictions are bad business. They point out China already has access to European satellite technology. American manufacturers fear that if licensing isn't relaxed, foreign companies eventually will fill the void. China will get the technology either way.

"Once the satellite enters Chinese territory, it is constantly monitored by the U.S. side," said Luan, who also is a member of China's governing Central Committee of the Communist Party. "We do not have the intention nor are we capable of obtaining any technology from these transfers."

If Sino-American relations continue to thaw, it's possible U.S.-built satellites will resume riding to orbit on Chinese rockets soon. If they don't, China's launch industry likely will ramp up anyway. China plans to launch up to 30 Chinese-built communications, weather, science and military satellites during the next five years. In comparison, the country has launched only 48 Chinese-built satellites since the first one in 1970.

Developing countries such as Pakistan, Iran and Thailand are moving ahead with their fledgling space programs as well. China is expected to land the vast majority of their launch business. Customers in the United States and Europe also are showing new interest in Long March after the rockets' trouble-free performance in recent years.

Western companies are interested for another reason, too: cost. Launches on Chinese rockets are often 15 percent to 30 percent cheaper than missions aboard Europe's Ariane fleet or American-made Boeing and Lockheed Martin boosters. That's despite U.S. export rules that keep some Chinese launch prices artificially high. Cheap labor, inexpensive raw materials and government pricing allow Great Wall Industry Corp. to undercut its competition worldwide.

China will become an even more formidable competitor when it adds a powerful new planned booster to its catalog in the next few years. It will allow Long March to go head to head for the heaviest payloads with the new Atlas 5 and Delta 4 rockets being built for the Air Force, as well as the Europeans' massive Ariane 5. The new booster will be equipped with safer new rocket engines that burn liquid hydrogen, liquid oxygen and kerosene instead of more-hazardous fuels.

While gloomy forecasts pervade many Western launch companies, there is a feeling of unbridled optimism here in China. The Chinese are close to mastering rocket science and marketing. Now, they're working on public relations.

"I am still not sure why the U.S. government is stopping satellites from being transferred to China for launching," Luan said. "I think at this stage, satellite technology should be open to all mankind, and all space agencies should cooperate very closely to achieve that goal."

Michael Cabbage can be reached at mcabbage@orlandosentinel.com or 321-639-0522.

Something to ponder:

(December 10, 2001)--VENEZUELANS TENSE AS STRIKE LOOMS: Business and labor challenge Chávez--On Sunday, Chávez remained defiant and encouraged supporters to confront the strike with a protest of their own. ``A revolution cannot depend on a single man -- it must depend on a nation,'' Chávez said on the weekly broadcast of his call-in show. ``This stoppage is not against me; it is against the people.''

Jiang Zemin and Hugo Chavez

_______________________________________________________

Hugo Chavez has been salivating over Guyana. China needs to place tracking stations (and launch ports) in places they don't now have access to.

A description of the area Chavez covets, before Beal pulled out of there.

WHY GUYANA? "A major advantage of the Guyana site for the spaceport is its proximity to the Equator. This makes it easier to launch satellites, as the satellites can use the centrifugal force of the Earth to get into orbit. According to the company, a rocket launching a satellite into geosynchronous orbit from a site on the equator uses about 10-20% less fuel than rockets launched from Cape Canaveral.

The country has two other geographical advantages. It has large remote areas suitable for an incredibly noisy activity like launching rockets. The second reason is the expanse of ocean to the east and north, which is important for safety reasons. All rockets carrying satellites into geosynchronous orbits will be launched to the east, and all other satellites will be launched to the north. Beal's rocket, like all current rockets capable of launching satellites, will have multiple stages. As these stages fall off, they can fall into an uninhabited area. Similarly, if a rocket has to be aborted, it is important that it can fall to earth without incurring any safety obstacles.

Other reasons cited by Beal are the site's location in an english-speaking country with a legal system not dissimilar from that of the USA. The country is also politically stable. [End of Excerpt]

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(July 23, 2001)--sohu.com--Venezuela calls for end to Guyana border dispute--[Full text below]

Pro-government Venezuelan lawmakers have called for a peaceful end to a century-old border dispute with neighboring Guyana, under which it claims some three-quarters of the former British colony.

The legislators visited settlements on the border with Guyana on Saturday to sign a declaration supporting President Hugo Chavez' position that a 1899 treaty giving a mineral-rich region called Esequibo to Guyana was "null and provocative."

The declaration also urged both nations to work for a swift solution to the dispute which would be "just, long-lasting and acceptable."

"We held a special session of the parliamentary Defense Committee and then we signed the document," legislator Saul Ortega told Reuters on Sunday.

Over the past two years, Chavez's nationalist administration has revived the border controversy over Esequibo, a sparsely inhabited jungle region of some 63,600 square miles (159,000 square km) in eastern Guyana.

During his weekly radio talk show "Hello President" on Saturday, Chavez pledged cooperation "with Guyana and with all the people which live in that immense territory."

"This cannot remain in limbo for much longer, we have to solve this situation," said Chavez, after talking by telephone with National Assembly President William Lara who headed the delegation.

Lara, a staunch Chavez supporter, insisted that "we do not have a hostile stance. This is not an unfriendly gesture toward Guyana or anyone."

In recent weeks, Chavez has also strongly defended Venezuela's sovereignty over a tiny island, the Isla de Aves, amid criticism from eastern Caribbean nations.

The desert island, which is only inhabited part of the year, lies some 350 miles (565 km) north of Venezuela's coast. [End Text]

"Here in a sparkling showroom celebrating the achievements of Chinese rocket builders, representatives of the Great Wall Industry Corp. are showing off their wares to an international delegation from Iran, Thailand and Pakistan. The pitch is clear: China has rockets for sale -- cheap.

(KEY ALLEGATIONS FROM LORAL SHAREHOLDERS CASE:

138. On February 15, 1996, a Chinese Long March 3B Rocket carrying a $200 million commercial communications satellite manufactured by Defendant Loral failed in midflight.

139. According to the Cox Report, the satellite on board the failed rocket was an Intelsat 708 satellite manufactured by Defendant Loral for Intelsat, the world’s largest commercial satellite communications services provider. In October 1988, Intelsat had awarded a contract to Loral to manufacture several satellites under a program known as Intelsat VII. That contract had a total value of nearly $1 billion dollars.

140. On information and belief, the failed launch had been undertaken by China Great Wall Industry Corporation, a state-controlled missile, rocket and launch provider, with reported ties to Chinese intelligence services.

141. The satellite on board the Chinese Long March rocket contained an encryption device on a circuit board that controls the satellite’s communications and movements in space.

142. On information and belief, similar encryption devices are used in U.S. defense satellites, and, consequently, the devices are highly classified secrets of the U.S. Government.

143. On information and belief, the circuit board from the highly classified encryption device in the satellite that was destroyed during the February 15, 1996 launch was missing when the Chinese returned debris from the explosion to U.S. authorities, even though a control box containing the circuit board was recovered intact.

144. People’s Liberation Army soldiers and other Chinese agents reportedly sorted through the debris while U.S. officials were kept away
from the crash site for five (5) hours.

145. U.S. officials have publicly stated that they suspect the Chinese authorities took the board.

146. After the crash, NSA reportedly changed the encoded algorithms used by U.S. satellites.

147. According to the Cox Report, China Great Wall Industry Corporation created two groups whose members were Chinese nationals to investigate the cause of the Long March 3B launch failure.

148. According to the Cox Report, on February 27, 1996, China Great Wall Industry Corporation reported that the Long March 3B launch failure was caused by a failure in the inertial measurement unit within the control system of the rocket. The inertial measurement unit is a component that provides an attitude reference for the rocket, basically telling it which way is up. This was not the true cause of the failure, however.

149. According to the Cox Report, in early April 1996, China Great Wall Industry Corporation invited both Defendant Loral and Hughes to participate in an Independent Review Committee ("IRC") that would review the Chinese launch failure investigation.

150. According to the Cox Report, Defendant Loral was aware from the start of the IRC meetings that it did not have a license for the IRC activity.

151. On information and belief, Defendant Loral and Hughes participated in at least two (2) rounds of IRC meetings.

152. According to the Cox Report, IRC meetings were not attended by any U.S. government monitors, as almost certainly would have been required had there been an export control license.

153. According to the Cox Report, Defendant Loral and Hughes were well aware that a State Department license was required to provide assistance related to the guidance system of a Chinese rocket. Neither company applied for nor obtained the required license. Defendant Loral was warned of the need for a license at the time it agreed to participate in the investigation, but took no action.

154. According to the Cox Report, Defendant Loral and Hughes also failed to properly brief participants in the failure investigation of U.S. export requirements, failed to monitor the investigation as it progressed, and failed to take adequate steps to ensure that no prohibited information was passed to the Chinese.

155. According to the Cox Report, Defendant Loral and Hughes submitted lengthy written materials analyzing the cause of the guidance system failure to the Chinese and other foreign nationals.

156. As reported by both The New York Times and The Washington Post, Defendant Loral faxed a twenty-five (25) page memorandum to the Chinese summarizing the conclusions of an independent review panel about the causes of the accident. (Elaine Sciolino and Jeff Gerth, "Scientist Who Led Missile Review Promised Help to China," The New York Times, June 6, 1998; John Minz, "Technology Transfer Probe is Widened," The Washington Post, June 24, 1998; John Minz, "Testimony: Export Watchdog Neutered," The Washington Post, June 26, 1998).

157. According to the Cox Report, Defendant Loral and Hughes also engaged in technical discussions, including discussions about the details and causes of the guidance system failure, that were most certainly recorded by the Chinese.

158. According to the Cox Report, neither Defendant Loral nor Hughes disclosed to export control officers of the U.S. Government their unlicensed activities until after they were contacted by U.S. Government licensing officials demanding an explanation for their conduct. The U.S. Government officials became aware of the improper activities through an article in a widely-read industry publication. This article also came to Defendant Loral’s attention prior to its disclosure to the U.S. Government.

159. According to the Cox Report, an aborted third round of IRC was scheduled for June 1996. However, the U.S. Government, upon learning of the IRC’s activities, issued a cease and desist letter to both Defendant Loral and Hughes, ordering the companies to stop all activity in connection with the failure review. The letter also requested each company to disclose the facts related to, and circumstances surrounding, the IRC.

160. According to the Cox Report, in August 1996 the Defense Department prepared a classified assessment of the IRC materials. That assessment reported that the Defense Department would have recommended against issuing a license for the sharing of technical information with the Chinese by Defendant Loral and Hughes.

161. According to the Cox Report, the August 1996 Defense Department assessment cited 18 violations that it believed had occurred during the IRC’s exchange of information with the Chinese.

162. According to the Cox Report, Defendant Loral and Hughes identified for the Chinese the true cause of the failure as a particular element within the Long March 3B’s rocket guidance system. As set forth in the Cox Report, the 1996 Defense Department assessment states: It is likely that the all-Chinese Failure Analysis Team pursued recommendations made by the Independent Review Committee in its draft report . . . and that the pursuit of these recommendations directly resulted in the Chinese team finding the correct cause of failure in the Long March 3B guidance system . . . .

163. As set forth in the Cox Report, the 1996 Defense Department assessment also states with regard to the IRC’s assisting the Chinese to learn the true cause of the failure:

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