A China Connection?

FOR A YOUNG POLITICO ON THE make in Washington, there are some customary stops: the lobbyist-filled restaurants on K Street, the catered fund-raisers on Capitol Hill, maybe even a receiving line at the White House. One locale not normally on the grip-and-grin tour is the Chinese Embassy, a grim, 1950s-style pile on Connecticut Avenue. But John Huang, an official at the Commerce Department and a frequent visitor to the Oval Office, visited the embassy at least twice, even putting the cab fare on his expense account.

Now many people, including the Justice Department and the FBI, are eager to know what, exactly, Huang was doing with the Chinese. Their curiosity was fueled by a Washington Post article reporting that the embassy had been used to direct contributions ""from foreign sources'' to the Democrats. The information came from ""electronic eavesdropping conducted by federal agencies.'' The Chinese denied the story. But the top byline on the Post story--Bob Woodward, the reporter who helped break Watergate--caused a stir. The White House claimed to have known nothing about the electronic intercepts. Still, administration sources confirmed to NEWSWEEK that the Justice Department was looking into the allegations, and the president acknowledged that ""it would be a very serious matter for the United States if any country were to attempt to funnel funds to one of our political parties for any reason whatsoever.''

It will be a very serious matter for Clinton personally if the Chinese government joins the cast of characters associated with the scandal over the president's fund raising--a tangled web stretching from Little Rock to Washington to the Far East. So far, the focus has been on Huang, who brought in more than $1 million in questionable campaign contributions. He once worked for the Riady family of Indonesia and Arkansas, the owners of a Jakarta-based conglomerate, the Lippo Group. Investigators are already looking into allegations that foreign interests bought access and perhaps policy favors. With the news that China may have been buying influence in the capital, the Feds must examine the possibility that the fund-raising scandal could turn into an espionage scandal. Huang's lawyers dismiss the notion that he was a spy, but the FBI is trying to decide whether Huang was used, knowingly or unknowingly, by Beijing.

The Chinese deny even having an intelligence service. But China has been spying on America for decades with agents run by the so-called Investigative Department of the Party. A classic technique is to use Chinese nationals who have made their fortunes abroad--and thus gained access to the ruling establishments of capitalist countries. Beijing recruits these EmigrEs, either on a friendly, informal basis as ""agents of influence,'' or more directly as ""control agents'' who are paid to steal secrets. The relationship of the Riady family and Huang to the Chinese government is still unknown. But intelligence experts say they fit a profile that could have attracted the attention of spymasters in Beijing.

After Clinton's election in 1992, the Chinese were eager to find a way to deal with the new administration. Beijing had openly favored George Bush, who had been envoy to China in the '70s. Clinton, on the other hand, had accused Bush of ""coddling dictators,'' and he was threatening to cut off normal trade relations with Beijing to punish the Chinese for human-rights abuses. An obvious Clinton contact with the Chinese community in America was the ethnic-Chinese Riady family. Buying into one of Arkansas's biggest banks in 1984, the Riadys became well-known to Clinton. When the governor went on a state trade mission to Hong Kong in 1985, his host was a young Lippo executive named John Huang.

It may or may not be a coincidence that on Nov. 7, 1992, four days after Clinton was elected president, a company owned by the Chinese government, China Resources (Holding) Co., bought a 15 percent stake in a Hong Kong bank owned by Lippo. According to U.S. intelligence sources, China Resources is routinely used as a front by Beijing to run spy operations. The relationship between China Resources and Lippo may be innocuous. But there is no question that the Chinese were eager to beef up their influence-peddling in the United States.

Lippo certainly had access to the White House. On March 9, 1993, Mochtar Riady, the Lippo boss and family patriarch, sent a ""personal and confidential'' letter to Clinton urging him to drop his threat to restrict trading ties with China. A month later, on April 19, Mochtar's son James, accompanied by Huang--now Lippo's vice chairman in the United States--visited Clinton in the Oval Office. White House records show that they discussed ""U.S.-Chinese relations.'' Lippo was hardly the only company pressing Clinton to back normal trade relations with China. Lobbying by companies like Boeing and American Express, who need access to global markets, played a key role. In any case, in May Clinton decided to renew China's ""most favored nation'' trading status. (In July China Resources increased its stake in Lippo's Hong Kong bank to 50 percent, paying $164 million--some 50 percent above the bank's net worth.)

In September Huang suggested in a letter to Commerce Secretary Ron Brown that he meet ""a very good Chinese businessman'' named Shen Jueren--the chairman of China Resources. Though this meeting never took place, Huang was well-known to the Clintonites, not only because of his acquaintance with the president but because he and James Riady had contributed $100,000 to Clinton's Inaugural in 1993. Lippo's ties to the Clintonites grew stronger in July 1994, when Huang was hired to be principal deputy assistant secretary of commerce for international economic policy.

Huang was given top-secret clearance. In 18 months he attended 37 intelligence briefings at Commerce. On Jan. 27, 1995, two days after receiving a secret briefing on China, he recommended delaying a program to expand trade with Taiwan, then in a period of escalating tensions with Beijing. ""We are quite sensitive to the current events going on with China right now,'' Huang said in a note to one of his superiors. Records also show that he requested documents stamped SECRET the day he was scheduled to see the Chinese ambassador, on May 10.

While Huang was helping shape U.S. trade policy, he was regularly talking to his old bosses at Lippo and to Democratic Party money men. Government officials are sharply restricted in the ways they can deal with their former employers or participate in political fund raising, but Huang's lawyer, Ty Cobb, denies any wrongdoing by his client. In the Oval Office in September 1995--he saw Clinton 15 times during 94 visits to the White House--Huang told the president he could serve him better by raising money for the party. Clinton named Huang to be vice chairman of the Democrats' campaign-cash operation. Huang then tapped a wide range of Asian contacts. The culmination was a $12,500-a-ticket dinner with Clinton at the Sheraton Carlton Hotel on May 13. Huang's guests included Charlie Trie, the Little Rock restaurateur who brought hundreds of thousands of dollars in mysterious contributions to Clinton's legal-defense fund--and brought a Chinese arms dealer to a coffee with the president.

One senior Justice official cautions that the electronic eavesdropping cited by the Post does not directly implicate anyone. ""It's not as if they've got John Huang on the phone,'' said this official. Still, intelligence experts have no doubt that the Chinese are aggressively seeking to steal American secrets. Intelligence sources tell NEWSWEEK that U.S. investigators have identified ""nearly 1,000'' American companies that are being used by the Chinese either for espionage activities or to illegally acquire American technology. These sources say intelligence agencies have complained to the Clinton administration about Chinese espionage, but that officials haven't been paying much attention. They are now.

MAP: The Widening Asian Web

Investigations into improper foreign donations will focus on interests in the East and whether campaign cash has influenced U.S. policy:

China. Charles Trie and John Huang raised money for the DNC and urged Clinton to improve relations with China.

Thailand. The DNC returned $253,000 from a Thai businesswoman who visited the White House 26 times.

India. A $325,000 gift from the head of a Gandhi peace foundation was returned when its source couldn't be verified.

Indonesia. Home of the Lippo group, the company that once employed DNC fund raiser John Huang.

Russia. At a 1993 DNC fund-raiser Clinton was photographed with a man with reputed ties to the Russian mob.

South Korea. A $250,000 contribution to the DNC had to be returned when it was discovered that it had come from a South Korean company.

Taiwan. The Commerce Department admits Huang had a role in shaping U.S. policy toward Taiwan.

Hong Kong. Asians who dined here with former DNC chairman Ron Brown in 1995 said they felt pressured to give.

Vietnam. In 1994 Clinton lifted an embargo against Vietnam. Lippo did business here and urged the policy change.