CHINA: 2009 COUNTRY REPORTS ON TERRORISM

UNCLAS SECTION 01 OF 02 BEIJING 003335

SIPDIS

S/CT: RHONDA SHORE AND NCTC: RUEILB

E.O. 12958: N/A
TAGS: PTER ASCE CH
SUBJECT: CHINA: 2009 COUNTRY REPORTS ON TERRORISM

REF: SECSTATE 122733


1. (U) SUMMARY: Below is China's submission for the 2009
Country Reports on Terrorism. The Embassy POC is Donna
Gorman, who can be reached via email at GormanDX@state.gov.


2. (U) China continued its counterterrorism cooperation with
the United States and other nations throughout the year. In
September, the United States and China held bilateral
counterterrorism talks in Washington, DC. Plans are underway
for multi-agency Track 1.5 talks (to include both government
and non-government actors) on counterterrorism. In November,
representatives from the Shanghai Cooperation Organization
(SCO) attended an international counterterrorism conference
in Kyrgyzstan. In July, China held a joint Sino-Russian
counterterrorism exercise in Jilin Province. In June, China
and Singapore conducted joint counterterrorism exercises in
Guilin.

3. (U) Implementation of the Yangshan Deep Water Megaports
project was resumed in July 2009 and is administered by the
Department of Energy (DOE). The General Administration of
China Customs requested that the scope of the Shanghai
Megaports project be expanded to 18 Nuctech Radiation Portal
Monitors (RPMs) instead of the original 12 RPMs. Because of a
global shortage of the helium isotope He3, DOE and Nuctech
have had to develop a design revision to accommodate this
increased project scope without increasing He3 demand. A
solution has been identified with final design contract
discussions planned for December 2009. Deployment of this new
design will begin in the summer of 2010.

4. (U) China's cash-based economy and robust cross-border
trade contributed to a high volume of difficult-to-track cash
transactions. Though mechanisms were in place for tracking
financial transactions in the formal banking sector, the
large size of the informal economy, prevalence of counterfeit
identity documents, and large numbers of underground banks
presented major obstacles to law enforcement authorities.
According to International Monetary Fund statistics, money
laundering in China may account for as much as $24 billion
per year.

5. (U) China's anti-money laundering and counter-financing of
terrorism (AML/CFT) system was significantly strengthened
during 2009, although several key deficiencies have yet to be
addressed. In July, at the US-China Strategic and Economic
Dialogue (S&ED) held in Washington, DC, the United States and
China agreed to strengthen their cooperation on AML/CFT,
including counterfeiting. In August, the Securities
Association of China provided AML/CFT guidelines to
securities firms in China, in an effort to cut off possible
sources of funding to terrorists. In November, the Supreme
People's Court released a judicial interpretation on money
laundering law. The interpretation further expands
application of the law to specific non-banking/financial
institutions and more widely covers terrorist financing
activities.

6. (U) Terrorist financing is a criminal offense in China,
however the government has yet to develop an asset freezing
and confiscation regime that meets international standards or
that adequately implements UN Security Council Resolutions
1267 and 1373, according to the Financial Action Task Force
(FATF). In addition, China's cross-border declaration and
disclosure system needs to be strengthened to better prevent
terrorist financing activity. China's Financial Intelligence
Unit (FIU),housed within the People's Bank of China, works
closely with the Financial Crimes Enforcement Network
(FINCEN) in the United States to develop its capabilities. In
addition to its domestic collection and analysis activities,
the FIU exchanged information with foreign FIUs on a
case-by-case basis. Coordination in the area could be further
enhanced through China's membership in the Egmont Group, an
umbrella body that coordinates the activities of over 100
FIUs worldwide. Though China has applied for membership in
the Egmont Group, political concerns about Taiwan's
participation in the organization have hampered membership
discussions.

7. (U) China expanded its role in international efforts to
combat terrorist finance and money laundering by becoming a
full member of the FATF in June 2007. Since 2004, China has
also been a member of the Eurasian Group (EAG),a FATF-style
regional body that includes China, Russia, and most Central
Asian countries. In June 2008, China also reactivated its
membership in the Asian Pacific Group (APG),the FATF-style
regional body serving countries primarily located in South
Asia and East Asia. In December, China hosted the EAG's
bi-annual plenary, providing China an opportunity to enhance
its leadership role in AML/CFT issues. The United States
actively participates in both the APG and EAG (as a member
state and an observer, respectively).

8. (U) Human rights organizations have accused China of using
counterterrorism as a pretext to suppress Uighurs, a

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predominantly Muslim ethnic group that makes up the majority
of the population within the Xinjiang Uighur Autonomous
Region (XUAR) of western China. After widespread rioting in
urban areas of Xinjiang in July and September, police moved
in and arrested more than 200 people, 17 of whom have so far
been sentenced to death. The Chinese government claims that
the riots were orchestrated from abroad and that they were
therefore terrorist attacks on China.

9. (U) Formally established in 2002, the FBI Legal Attach
Office in Beijing bolsters US-China cooperation on
counterterrorism investigations. During the 2008 Summer
Olympics, China provided substantive intelligence in some
cases, however, the bulk of intelligence information
regarding potential terrorist threats was provided by the FBI
to the Chinese. In 2009, the FBI legal attach and FBIHQ
Counterterrorism Division personnel participated in a round
table discussion with the China Institute of Contemporary
International Relations on terrorism issues. FBI personnel
also provided a general overview to Ministry of Public
Security Terrorism Department personnel on counterterrorism
investigations. Although more work remains to be done in
terms of depth and overall responsiveness to US requests, the
Ministry of Public Security has agreed to allow FBI agents
and other personnel to travel to China in 2010 to provide
training sessions on Investigating Terrorism Cases and
Policing and Terrorism Investigations.
GOLDBERG