FBI PROBES POSSIBILITY CHINA GAVE MONEY TO DEMOCRATS.

Byline: Tim Weiner The New York Times

The FBI is examining whether Chinese officials or their agents may have used people close to President Clinton to secretly give money to the Democratic Party over the past five years, government officials said Thursday.

As part of that inquiry, the bureau is investigating connections between the Chinese government; the Lippo Group, part of a $12 billion empire based in Indonesia and run by the Riady family, longtime campaign contributors to President Clinton, and the Democratic fund-raiser John Huang, once Lippo's top American executive.

``It would be a very serious matter for the United States if any country were to attempt to funnel funds to one of our political parties for any reason whatsoever,'' Clinton said Thursday after being asked about the FBI investigation. ``So I think we have to let the investigation proceed.''

The FBI investigation was spurred by a request last month from Rep. Gerald B.H. Solomon, R-N.Y. Solomon asked the FBI to find out whether campaign contributions financed ``economic espionage'' - whether China, by funneling money through politically connected people, had bought access to sensitive, commercially useful U.S. government information.

The investigation is at a very early stage and has uncovered no hard evidence tying Chinese government money to the 1996 campaign, government officials said. The Washington Post reported Thursday that the investigation was focusing on the Chinese Embassy. The spokesman for the Chinese Embassy, Yu Shuning, described that assertion as ``groundless'' and U.S. officials said that FBI counterintelligence agents assigned to watch the embassy are not part of the investigation.

The ties binding the Riadys, Huang, the Democratic Party and Clinton are strong. So are the ties between the Chinese government and the Riadys. But no one has connected those two sets of relationships.

Clinton first met James T. Riady, now one of Lippo's top executives, nearly 20 years ago, when Riady was a trainee at Stephens Inc., the most powerful financial institution in Arkansas. In the 1980s, the Riady family set up an international trade operation in Little Rock, Ark.

The Riadys and one of their U.S. companies gave the Democrats at least $225,000 for the 1992 elections and assigned Huang, then their senior American executive, to raise money for the campaign, according to campaign records and an associate of the Riadys. Riady and Huang contributed $100,000 more for Clinton's 1993 inaugural celebration.

Shortly after Clinton was elected, Riady urged the president to renew China's status as a most-favored nation for U.S. trade, according to a Riady associate. During the 1992 campaign, Clinton said President George Bush was ``coddling dictators'' by granting China most-favored-nation status.

The Riadys' Chinese dealings include real estate, department stores, electronics plants, a small bank - the first licensed to exchange foreign currencies - and a huge tourism complex on an island in Fujian, the province that was once home to the Riady family.

On May 28, 1993, Clinton reversed his campaign stance and renewed China's most-favored nation status. A few weeks later, China Resources (Holding) Co., one of the Chinese government's oldest and most powerful trading companies, acquired 50 percent of Lippo's holdings in a Hong Kong bank where Huang had been a vice president.

China Resources has occasionally served as cover for espionage activities by the Chinese, some intelligence analysts said.

In September 1993, Huang asked Commerce Secretary Ron Brown to meet with Shen Jueren, the chairman of China Resources, Commerce Department records show. Commerce officials said Thursday that apparently the meeting never happened.

CAPTION(S):

Photo

PHOTO John Huang

Fund-raiser investigated