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China Denies Contribution Charges

By John Pomfret
Washington Post Foreign Service
Wednesday, May 20, 1998; Page A04

BEIJING, May 19—China labeled as "sheer fabrication" today a report that the daughter of a Chinese general funneled cash to the Democratic Party in an effort to buy policy concessions from the Clinton administration.

In two statements, the Foreign Ministry and China Aerospace Corp., which manufactures rockets and launches satellites, denied that army Lt. Col. Liu Chaoying, gave money to Democratic Party fund-raiser Johnny Chung in 1996. Chung has told the U.S. Justice Department that he received $300,000 from Liu to contribute to U.S. political campaigns, U.S. officials have said.

The Justice Department is investigating whether the Chinese government sought to buy influence with the Clinton administration by coordinating a plan to funnel as much as $2 million into American political campaigns. U.S. investigators have said Chung's testimony provided what appears to be the first money trail leading from China to the Democratic Party.

"Recently, some people and media in the United States speculated again about so-called participation by Chinese individuals in political donations during the U.S. elections," Foreign Ministry spokesman Zhu Bangzao said at a news briefing today. "It is sheer fabrication and is intended to slander China." Beijing, Zhu added, "has never, nor will we ever, use money to influence American politics."

Liu is the vice president for international trade of a Hong Kong-listed company that is controlled by China Aerospace Corp. and the daughter of Chinese general Liu Huaqing. A veteran of the Communists' Long March and the Korean War, Liu Huaqing retired last year as vice chairman of the Communist Party's powerful Central Military Commission.

A statement by China Aerospace Corp. said the firm had carried out an investigation of the matter and found that "none of the company's members had been involved in any way in political fund-raising."

"Liu herself," the statement said, "stated clearly that the accusations are groundless and based on rumor." The statement added that company employees are banned from involvement in "the politics of other countries."

At the Foreign Ministry, Zhu attributed the reports in the American media to a scheme by "some people who are not willing to see the improvement in U.S.-China relations. They went so far as to resort to rumors and lies. But their political plot will never get anywhere."

Chung, who pleaded guilty to U.S. campaign finance-related charges last March, has told federal investigators he received $300,000 in the summer of 1996 from Liu with the understanding that the money would be used to make contributions to Democratic campaigns, according to officials familiar with his disclosures. In July 1996, Liu accompanied Chung to a Los Angeles fund-raising event and was photographed with President Clinton.

Overall, Chung gave $366,000 to the Democratic National Committee during the 1996 election campaign, which was returned in full after the DNC determined it did not know the source of the money. About $100,000 of Chung's donations were made between June and August 1996, as he and Liu were trying to establish a business partnership in California. It is unclear how much of the alleged payment from Liu might have ended up in DNC coffers.

© Copyright 1998 The Washington Post Company

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