In an article Sunday Belgian sources in Peking were reported to have said that a contract signed by a Belgian affiliate of ITT Corp. to modernize China's telephone system did not have approval of Cocom, the western body that monitors the export of sensitive items to communist countries. According to the Belgian Embassy and the State Department, Cocom approval was granted last month on most aspects of the transaction.
A Belgian affiliate of ITT Corp. signed a contract here today to modernize China's archaic phone system with sophisticated digital equipment that Washington had warned could be converted to important military uses.
The project by Bell Telephone Manufacturing Co., a Belgian affiliate of the American company ITT, calls for the sale of about 100,000 digital lines and the construction of a factory in Shanghai that is expected to produce 300,000 lines a year beginning in 1985, according to Belgian sources.
Total value of the project, including computer-controlled telephone exchanges, reportedly will reach $350 million. It is one of the biggest joint ventures China has entered with a foreign company since inviting foreign investment in 1979.
Although the deal has been negotiated over the past four years, U.S. objections to some aspects were raised earlier this year in Cocom, the unofficial western watchdog body on exports of sensitive items to Communist countries.
Washington reportedly expressed fears that China could benefit militarily from computer software that is included in the deal and urged a reduction in the computers' memories as well as firmer Belgian controls over the software.
Belgian sources said today that the contract was signed without Cocom approval, which is recommended but not required.
"Very sophisticated computers with military application are involved, but the Belgian government has taken care of all necessary procedures and has assured the Chinese side that the contract will be fully executed," said an informed diplomat.
Western diplomats in Peking said U.S. opposition to the technology transfer had been dropped after the Reagan administration decided to liberalize its sales of sophisticated equipment to the Communist government here.
Even more liberal guidelines are now being drafted under a new order reclassifying China as a friendly country with the right to buy U.S. technology with potential military use.