Inside the Ring

GE-CHINA VENTURE INVESTIGATED

The Pentagon is investigating the joint avionics venture between General Electric and a Chinese company that was linked in the past to U.S. arms proliferation sanctions.

“The [Defense] Department shares your concern over the transfer of our nation’s most sensitive technologies to foreign nations, including the People's Republic of China,” Frank Kendall, acting undersecretary of defense for acquisition, technology and logistics, stated in a letter to Rep. J. Randy Forbes, Virginia Republican.

• Click here to view the letter (PDF)

Mr. Kendall said he directed Brett Lambert, deputy assistant defense secretary for manufacturing, to conduct an interagency review of the deal between GE and the Aviation Industry Corp. of China, known as AVIC.

Meanwhile, U.S. officials said a new national security worry is emerging over a proposal by Honeywell to sell helicopter engines to China. The Pentagon thinks the engines will be used for a new Chinese military transport helicopter.

China currently is barred from buying U.S. military equipment under sanctions imposed following the Chinese military’s 1989 crackdown on unarmed protesters in Beijing's Tiananmen Square.

Honeywell spokesman Chris Barker said the company sells engines for China’s civilian AC311 helicopter but the engines are prohibited for use in the military version. Mr. Barker said he is not aware of any diversions by the Chinese of any engines.

The Pentagon has some power to review sensitive joint ventures involving high technology, and the GE-AVIC deal crosses several agencies’ authorities, Mr. Kendall said in his letter.

Mr. Kendall’s letter contradicted an earlier letter by Michele A. Flournoy, undersecretary of defense for policy, who said the Pentagon had no legal authority to review sensitive foreign joint ventures.

AVIC is a state-owned defense firm that produces fighters, nuclear-capable bombers and 90 percent of the aviation weapon systems used by the Chinese military, according to the Wisconsin Project on Nuclear Arms Control. An AVIC subsidiary, China National Aero-Technology Import & Export Corp., was under U.S. sanctions in 2008 for illicit arms sales to Iran and Syria.

Mr. Kendall wrote the letter in response to an earlier letter from Mr. Forbes to Defense Secretary Leon E. Panetta, asking whether the avionics deal was reviewed by national security officials.

Mr. Forbes said that “neither GE nor the Department of Commerce have asserted the necessity for an export control license for the joint venture between GE and AVIC, and that the Department of Defense may not have independent authority to pose a binding objection or block the transaction.”

Still, the Pentagon must advise Congress and U.S. defense contractors and the public to the dangers of such technology transfers, Mr. Forbes stated.

Mr. Forbes also asked Mr. Panetta to review a Defense Intelligence Agency report from Oct. 7, 2011, that said China’s civilian aircraft industry is “likely” to transfer foreign military technology to the Chinese military.

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