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The China Connection's Boeing Connection


News: Analysis & Commentary: DONORGATE

THE CHINA CONNECTION'S BOEING CONNECTION

A possible link between the plane maker and John Huang

The name sounds innocuous--the Council on U.S.-China Affairs. But this now-inactive group, aimed at improving China's image in the U.S., may provide insights into the extent to which John Huang, the ex-Commerce Dept. official and Democratic fund-raiser at the center of the Donorgate scandal, was involved with efforts of U.S. corporations and the Chinese embassy to influence China policy.

The council was founded by Xue Haipei, a dissident who fled China after the 1989 Tiananmen Square massacre. His goal was to keep China's economy open, in hopes that democratic reforms would follow. Xue's group got its funding from Boeing Co., which sees China as vital to its future. And Xue appears to have kept China's embassy and Huang informed about the council's activities.

"UPDATE." A seven-page memorandum from Huang's files at the Democratic National Committee lays out details of the council's public strategy. The memo, dated Jan. 15, 1996, is from Xue to both Boeing and members of the council. Huang's copy includes a cover note describing the memo as an "update on strategies and programs I drafted for discussion with our partners, like Boeing in this case, and with the Embassy." The memo doesn't spell out which embassy, but elsewhere, the document says that the council's "China partners" would pay expenses incurred by congressional delegations to China hosted by the council.

The document, obtained by BUSINESS WEEK, affords a glimpse of Huang's network. Former colleagues of Xue say Huang as well as a Boeing representative attended a council seminar for congressional staffers last year. Huang's lawyer refused to comment.

A Boeing spokesman says the company never belonged to the Council on U.S.-China Affairs. But Boeing concedes it gave the group a $10,000 grant, reasoning that a former dissident lent credibility to calls for giving China most-favored-nation status and entry into the World Trade Organization--which Boeing felt would help its China business. "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 synchronized with China's government or that they knew of Huang's contacts with Xue. Council spokesman Ya Li says the group, which has closed its Washington office for lack of funds, never received money from the Chinese government.

Any link to Huang would prove embarrassing to Boeing, given his growing Donorgate notoriety. 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--even though Huang was a DNC vice-chairman. In that post, he was allowed to have outside employment. But, a DNC spokeswoman says, he never told superiors he was working for the Indonesian banking group, which is owned by ethnic Chinese. Justice Dept. and congressional investigators are probing whether Huang helped Lippo pass sensitive information to China in order to curry favor.

TROUBLESOME. The escalating Donorgate scandal is clearly complicating U.S.-China relations. Vice-President Al Gore, who will visit Beijing on Mar. 24, is reconsidering plans to officiate at the contract signing for China's $1 billion purchase of Boeing 777s. Normally, Gore would jump at the chance to associate himself with Boeing's victory over Europe's Airbus Industrie. But Gore's aides are urging him to avoid appearing to endorse Boeing's pro-China positions.

Similarly, House Speaker Newt Gingrich (R-Ga.) is under mounting pressure to cancel a China trip he and nine other members are scheduled to take in late March. Representative Douglas Bereuter (R-Neb.), an ardent MFN supporter, and seven other congressmen have canceled a trip to China sponsored by a nonprofit foundation.

Sources close to the WTO negotiations say heightened tensions in Washington will make it difficult to complete a deal with China. And the scandal has turned the annual campaign to renew China's MFN trade status into a no-holds-barred battle. Businesses with links to China are watching carefully--fearing that they could get caught up in the mess.By Paula Dwyer, with Amy Borrus in Washington, Pete Engardio in New York, and Dexter Roberts in Beijing


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