ANNEXURE II

Question: Any comment on the action taken by the Chinese with respect to nonproliferation?

Richard Boucher: I think our Deputy Secretary has had some comment out there.

Question: He said he didn't understand it.

Richard Boucher: I think he said he has not read the whole thing yet. I'll find it.

We welcome the publication and promulgation by the Chinese on August 25th of controls on missile exports.As you all know, we have been discussing with the Chinese for some time the Chinese commitments that they madein November of 2000 to put in place a comprehensive set of missile-related export controls. This ispotentially an important step. It may help advance China's efforts to prevent the proliferation of dangerousmissile technologies. It's also a good step in the run-up to the October summit, although I have to point outit's not the only step that needs to be taken. There have been a number of issues under discussion with theChinese, one of which is how they can make effective a system of export controls.

So the real measure of China's control over missile-related exports will be the effectiveness with whichcontrols like these are enforced, and a real reduction in problematic exports by Chinese entities. We wouldintend to continue our discussions with the Chinese on the November 2000 missile nonproliferation arrangement,and I'm sure that Assistant Secretary for Nonproliferation John Wolf will continue to be in touch with hisChinese counterparts and will be following up with them.

Question: Do you happen to know what -- the countries to which Chinese entities have sold problematic itemsin this regard are which?

Richard Boucher: I would have to go back to the actual sanctions, announcements that we've made. And I think insome, in many of those cases we were able to say, for example, some of those actions were taken under Iran andIraq nonproliferation sanctions; therefore, we indicated what countries they were. But you would have to giveme some time. I have to go back and see to what extent we are able to disclose the actual transactions, or atleast destinations of equipment.

Question: Can you say what impact this move would have in any way on sanctions that we have placed on someof these Chinese companies?

Richard Boucher: We'll have to see. As I said, there are a number of issues involved in our discussions withthe Chinese of how to implement the November 2000 framework agreement, the agreements of that time. It allinvolves the Chinese putting in place an effective system of controls over missiles exports and making thatsystem real -- take effect in a way that reduces proliferating activities by Chinese companies. So this willbe -- certainly it's a welcome step, it's a positive step and one of the things, one of the things, that we'vebeen looking for, and we'll follow-up in our discussions with the Chinese in the future on this topic.

Question: Can I get back to the missiles for one second? You say that this is -- you see this as positiveand it's a welcome step, but it's only one of the things. And I can't remember if someone asked you, whatsteps are you looking for further? Are you looking for the Chinese to punish these perpetrators, your friendQC Chen and others who keep getting slapped with sanctions? Or are you looking for steps beyond simply goingafter the violators of these provisions?

Richard Boucher: There have been a number of discussions with the Chinese about this whole area involvingdifferent steps. One that I want to put the emphasis on today is enforcement and actual real reduction inproliferating behavior by Chinese entities. That's where promulgation of regulations is an important step.There also needs to be enforcement of that and making the system effective.

Question: You don't want to go beyond, what other steps you're looking to see?

Richard Boucher: No, I won't go beyond that now. Sorry.

Question: I don't know if you can answer this, but what impact would this have on the sort of lingering andlonstanding issue of US licenses for American companies for satellites, I guess to help build satellites inChina?

Richard Boucher: Those are all part of the understandings that were reached in November of 2000, and as youknow, we haven't moved forward on licensing for US satellites because of our concerns that the Chinese havenot moved forward to put in place an effective system of missile controls. So this is a positive step towardsresolving those issues, but I wouldn't say it has any specific change in that regard right now.

Question: The enforcement, is there a time limit? Like you're looking into maybe two years of this act andthen decide?

Richard Boucher: No, I don't think we'll address it in those terms. We want to talk to the Chinese about thesteps that they'll be taking to enforce this, to make this an effective system, about the kinds ofinstructions they're giving, about the kinds of actions they're taking to make sure that there is -- in theend, the bottom line for all of us is to see a reduction in missile exports by Chinese entities, and we needto know the Chinese Government is doing everything it can to prevent those kind of exports.

Question: Is there anything you can say about what you're looking for in terms of verifiability now and theenforcement side on the missile exports, based on the fact that, I believe, that at least the State Departmentin the Clinton Administration believed they had commitments from the Chinese in November 2000 that obviouslydidn't work out very well.

Richard Boucher: We've always felt we had commitments from the Chinese in November of 2000 to implement aneffective system of controls on missile exports to curb any exports by Chinese entities that might violateinternational standards on missile exports. That continues to be our goal. Unfortunately, we have not seenthat carried out. We have seen activities by Chinese entities that don't respect international standards andwe've looked for action by the Chinese government to stop and curb those activities.

So we continue our dialogue with the Chinese on how to see these commitments effectively implemented. Wewill continue to discuss with the Chinese how these new regulations can be put in place, can be implemented,can be made effective and can result in a real result of curbing, stopping activity by Chinese entities thatwould violate international standards on missile exports.

So this is a step forward. It's an important part to have the regulations in place. It's an equallyimportant part to see that they are enforced, and we want to talk to the Chinese about the actions thatthey'll take to enforce them, the actions on they'll take. And we'll be watching. We always watch to see ifthere is, in fact, a real reduction in missile exports.

Question: Well, is it fair, then, to say that you really are not going to consider lifting sanctions onsome of these Chinese companies or processing some of their licenses for satellites until you see action,until you see enforcement? No longer are you looking for just commitments or, like, a very good regulatoryplan or something like that?

Richard Boucher: Well, part of the action we were looking for was the issuance of detailed regulations. So partof our discussion all along with the Chinese has been about their issuance of detailed regulations, and theyhave assured us, including in discussions with the Secretary, and others, that they were moving ahead on thatfront.

So we welcome this. This is a positive step, but it's one piece of the puzzle in getting the kind of resultthat we and the Chinese have both said we're committed to.