The Chao 'connection'

PUBLISHED : Wednesday, 16 May, 2001, 12:00am
UPDATED : Wednesday, 16 May, 2001, 12:00am

WITH A FATHER who went to school with President Jiang Zemin and later worked for Tung Chee-hwa's family shipping company, the extensive Hong Kong and Chinese connections of United States President George W. Bush's Labour Secretary, Elaine Chao, are facing fresh scrutiny.

A recent issue of the centre-left The New Republic magazine has used Ms Chao's background, her fund-raising and relationship with husband Republican Senator Mitch McConnell in a bid to portray an American right-wing now too close to China in the wake of the recent Hainan Island spy-plane stand-off.

Central to the magazine's claims are Ms Chao's failure to disclose a seat on the board of a California company running a joint venture with a mainland state partner and Mr McConnell's shift from the Republican right to the more moderate pro-trade stance that has long pervaded the party's thinking on China. It extends the troika to the Heritage Foundation, a prominent right-wing Washington think-tank that Ms Chao joined in 1996 and that the magazine claims has softened its views towards China in recent years.

The article by John Judis, one of the magazine's senior editors, appeared amid a welter of opinion following the Hainan impasse. And although it has yet to generate much heat in Washington, it has stirred up a storm in Mr McConnell's home state of Kentucky. Apparently outraged, the Senator publicly warned of an outbreak of 'yellow fever'. He complains of a racist political vendetta linked to his marriage to a 'well-known American woman with a Chinese last name'.

Heritage Foundation President Edwin Feulner claimed the article was 'so full of holes it looks like defective Swiss cheese' and denied the think-tank had adopted a softer stance towards Beijing over the spy-plane stand-off and other issues. 'We didn't suggest dropping a 100,000-megaton letter of apology on downtown Beijing. But we did suggest a hardline US position,' Mr Feulner retorted, in a letter to The New Republic. 'Sure, we have toned down our rhetoric over the years . . . but that doesn't mean we're any less concerned about China's military'.

Acknowledging sources from 'conspiracy-minded' right-wing Web sites, Judis raises questions rather than confirms allegations on crucial points. 'Their shift toward accommodation with Beijing has happened quietly, with care to make sure connections between money and ideology are virtually impossible to trace,' he notes.

He traces links back to Ms Chao's Shanghai-born parents. Her father is James Chao, whose mother was from the Chu family that built a shipping empire in Hong Kong. Mr Chao attended Shanghai's Jiaotong University with Mr Jiang before working in the prominent China Maritime Trust Limited shipping company, which was founded by Mr Tung's father, the late Tung Chao-yung, more than 50 years ago and is now known as the Orient Overseas Container Line. The company shifted to Taiwan as the communists seized Shanghai in 1949, and the Chaos and the Chus followed.

Ms Chao was born on the island in 1953, eight years before the family emigrated to the US, where her father formed the Foremost Maritime Corporation. Having done much business with Taiwan, Judis writes, Mr Chao shifted the centre of his Asian operations to Hong Kong following the presidential victory of Lee Teng-hui in 1988 - a sign that native-born Taiwanese interests were on the rise.

He ordered two ships to be built at the state-owned shipyard in Shanghai during Mr Jiang's tenure as mayor. He started meeting Mr Jiang regularly, including three months after the Tiananmen Square crackdown in 1989, when most other American businessmen were avoiding the leadership. Later Mr Chao's business ties to Beijing would deepen as he started chartering his ships to mainland giants, such as Cosco and Sinotrans.

By this time, Mr Chao's daughter was rising in prominence in Republican and Asian-American circles, building a reputation as a formidable fund-raiser - a vital skill in the US political money-go-round - and serving as Peace Corps director in the administration of Mr Bush's father, former president George Bush.

Her social ties with Mr McConnell deepened and contributions started flowing from the Chao family and associates to his campaign coffers. The senator had started to shift from a hawkish stance aligned with arch-conservative Foreign Relations Committee chairman Jesse Helms to more moderate positions. After the 1994 senatorial elections, Mr McConnell took over the helm of the influential foreign-operations and export-financing subcommittee of the Senate Appropriations Subcommittee. It was a role which proved a magnet for future corporate donations from members of the US-China Business Council.

Judis claims Mr McConnell started reflecting the concerns of Asian-American elites over Hong Kong as he pushed provisions to expand immigration and became pro-trade. He launched the US-Hong Kong Policy Act to enshrine an active Washington relationship with the post-handover SAR - including a provision to allow for continued imports of strategic hi-tech imports into Hong Kong.

Ms Chao and Mr McConnell married in February 1993, and in December the pair met Mr Jiang in Beijing, joined by Ms Chao's father. Mr McConnell was the second Republican Senator to meet Mr Jiang since Tiananmen, a move which helped him build ties with senior mainland envoys in the US.

In October 1997, shortly after the handover, the couple privately met Mr Jiang again, this time in Washington. A month earlier, they had attended a private dinner with Mr Tung on his first post-handover mission to the US capital.

A year earlier, Ms Chao had been named a fellow at Heritage - the same year it opened an office in Hong Kong, Judis writes. Publishing no policy outlines or position papers, Ms Chao was largely a fund-raiser, escorting the foundation's major donors to the handover ceremony.

Judis claims Ms Chao made clear she was a proponent of 'Greater China' and keen to push the pro-engagement line. He also links Ms Chao to the dismissal of Richard Fisher, an expert on the mainland military who was then head of the foundation's Asian Studies Centre. A hawk who warned of China's military build-up and regional challenge to the US, he was dismissed within two weeks of first briefing of Ms Chao.

But Mr Feulner retorted the foundation had simply 'replaced one hardline director with another' - Larry Wortzel, an assistant army attache at the US Embassy in Beijing during the 1989 Tiananmen crackdown.

Judis claims his most 'troubling' question relates to Ms Chao's service on the board of the Multa Communications Corporation, a Californian Internet start-up, known as Multacom. The company runs direct Internet links between the mainland and the US in a joint venture with China Unicom. Her role does not appear in official disclosure documents filed before taking up her latest role in the Bush cabinet.

A spokesman for Ms Chao reportedly described the lack of disclosure as an inadvertent omission. He stated Ms Chao was only on the board briefly and 'never received any money from the company, and her only involvement was one half-hour conference call'.

Republican insiders hope The New Republic piece will die a swift death. Some describe it as a 'bizarre' hatchet job reflecting Democratic pique at a more 'sensible' Republican policy offering a tougher line against Beijing that still promises broad engagement reflecting US economic interests.

'It is highly ironic for the left to sneer that we should be even more staunchly conservative when it comes to China,' one veteran Republican lobbyist said. 'It actually reflects a fair degree of liberal fear. If we can pull off a balance between a more cautious approach and one that does not threaten future engagement, the Democrats will be cut off at the pass come the next election. That's what they are worried about. I'm sure they would all prefer us to be hardliners like Jesse Helms. But there has always been a lot more to the party than that.'

Others suggest it is merely more evidence of pressure Mr Bush faces as he tries to pull off a tricky domestic juggling act. Mr Bush must silence right-wing critics wanting far tougher action against Beijing on national security and human rights, yet pacify an extensive big-business lobby.

A wide range of foreign diplomats believe many of the Bush moves - from sweeping arms sales to Taiwan to reviews of official contacts with Beijing - reflect this. 'Not all of his statements over the last month or so have been directed only at Beijing,' said one administration source. 'There is a domestic gallery that he knows he must keep in its box. The fact that the hardliners did not cause him more trouble during the crisis shows this policy is working. We know it is going to require constant effort, mind you.'

The centrist policies of the administration of former president Bill Clinton made inroads into the traditional Republican corporate fiefdom, but the party retains the pro-business edge. Mr Clinton's effort to normalise the trading relationship with China as part of its future entry to the World Trade Organisation was pushed through largely by a prominent Republican voting block.

Many of the Bush team have prominent business - if not Wall Street - backgrounds, including Vice-President Dick Cheney, Defence Secretary Donald Rumsfeld and Treasury Secretary Paul O'Neill. Tax cuts, controversial environmental policies and increases in military budgets find favour with American business lobbies.

The controversy has been most keenly felt in the southern state of Kentucky, which Mr McConnell represents in the Senate. The Courier-Journal newspaper of Louisville gave extensive coverage to The New Republic piece, saying Mr McConnell had to answer legitimate public questions over his Chinese connections.

Saying he had to respond to the 'latest outbreak of yellow fever', Mr McConnell issued a blistering response to the Courier-Journal after it repeated the allegations. 'Even if one assumes all of the . . . facts are true, they have demonstrated nothing more than, at best, a naked political vendetta and subtle racism.'

Mr McConnell defended his wife as 'an American who was born in Taiwan and now serves as the Secretary of Labour for the United States'. He describes her father, James Chao, as someone 'who fled Communist China for freedom more than half a century ago' and who is 'surely as much of an American as members of the Courier-Journal's editorial board'.

The senator acknowledged meeting Mr Jiang and Mr Tung but said he had also met numerous other world statesmen. And he insisted he was no different from many other Senators in receiving campaign support from the US-China Business Council: 'The US-China Business Council is made up of mainstream American businesses, such as Coca-Cola, Levi's, Mary Kay and Sara Lee. What could be more American and less communist than Coca-Cola, blue jeans, make-up and apple pie?'

Greg Torode ([email protected]) is the Post's Washington correspondent