Insecurity Complex.

Why Chinese spies love us.

America's most secret weapons designs have apparently been snatched by the Chinese. How did it happen? The story can be told in three parts: how competing interests within the U.S. bureaucracy created the conditions for espionage; how China uniquely is prepared to exploit those conditions at relatively low cost; and how the Clinton administration has handled the unfolding scandal and damage to national security.

Since the nuclear National Laboratories (Los Alamos, Lawrence Livermore, and Sandia) were established to meet the weapons needs of World War II and the Cold War, officials in charge have frequently confronted contradictory objectives. On the one hand, they need to attract the best possible talent with a campus-like atmosphere and the promise of full participation in the activities of the international scientific community; otherwise, they run the risk of attracting only the second-rate.

On the other hand, lab scientists are deeply involved in developing the nation's most sensitive weapons secrets, requiring extraordinary security arrangements. A slip of the lip, or of the computer keyboard, can wipe out an American nuclear advantage almost instantaneously. The labs' employees therefore are required to undergo extensive background checks, agree to monitoring of their communications, and adhere to strict rules about security.

Finding a balance here is difficult but not impossible. The labs enjoyed considerable autonomy and compiled a magnificent record during the Cold War. A big change, however, came when the oil shocks of the 1970s led to the creation of the Department of Energy, which subordinated the labs to a new Washington-based boss. This was never an easy arrangement.

As the Cold War ended and budgets tightened, the Energy Department not only sucked up resources that previously went directly to the labs, it tried to keep all three labs humming with less and less funding. Conflicts arose over priorities for spending and programs. For example, computers are indispensable to the labs, but government procurement seldom keeps pace with the state of the art, leading scientists to download their classified work onto faster, more convenient, but unsecured computers, producing new risks. In the labs, resentment against Washington festered.

It is against this background that the public squabble between the Department of Energy's former acting chief of intelligence, Notra Trulock, and the labs and FBI should be seen. Trulock has testified that he tried to tighten security but was resisted by the labs as they sought to maintain an atmosphere conducive to academic work. Trulock wanted to put Wen Ho Lee out of work before he did more damage. Los Alamos wanted to avoid rushing to judgment. The FBI wanted to keep an eye on him to see whether he would lead to others. The White House sided with the FBI, some say because it wanted to protect the newly improving relationship with China.

Whatever the motivation of all the parties to this affair, the bureaucratic structure of the labs and the Energy Department created a fertile environment for things to go wrong, and for everyone to blame everyone else. Weak and absent leadership at the department compounded the problem. And, as the forthcoming Cox Commission report on Chinese intelligence activities is likely to show, the situation at Energy is hardly unique.

Enter the Chinese, with their unusually configured intelligence- collection capability. Unlike other powers, the Beijing regime does not rely only on a cadre of professional intelligence operatives to collect targeted intelligence. Rather, it supplements the professionals, who focus primarily on intelligence collection, by recruiting relatively large numbers of experts in many and diverse fields who have only part- time responsibility to report back intelligence information.

By increasing the number of part-time agents moving about American society, China magnifies the challenge for American counterintelligence at low cost to itself. Chinese assets strain the limited U.S. resources dedicated to tracking, impeding, and countering Chinese collection efforts. The scale of the Chinese effort requires a countervailing willingness on the part of American citizens to be vigilant about Chinese visitors, something many-given our freedoms-are unwilling to do.

The FBI had a distinguished team of counterintelligence experts on China up to the 1980s. The Bureau is now said to have gone through a generational change in personnel that has weakened the effort against Chinese intelligence in the short run, with a view to building a new team of China experts for the long run. Moreover, Americans readily come to like their Chinese friends. It is difficult to think that the thoroughly pleasant, skilled, and hospitable colleagues they have come to know would pour extra drinks just to discover new facets of weapons miniaturization or the vulnerabilities of American aircraft carriers.

In addition, U.S. relations with China suffer mood swings. Sometimes we are very much at odds with each other; at other times, the emphasis is on "building a constructive strategic partnership." When the latter mood prevails, as now under the Clinton administration, the guard goes down for Americans, but China never loses its appetite for our secrets.

So, is China, with the opportunity to learn America's most valuable secrets and the means to exploit them, about to leap years ahead in development of its military capabilities? Yes and no.

Assume that we have given China virtually total access to our most important secrets about nuclear weapons and missiles. Assume the same for every other sensitive weapons and intelligence system. To do otherwise is probably foolish, given the record revealed so far.

Beijing still will not be in a position to meet U.S. power unit for unit, or technology for technology. Rather, given China's weaknesses and scarce resources, it will ferret out U.S. vulnerabilities and focus on those. Expect the Chinese to increase their efforts to develop sophisticated anti-ship cruise missiles and anti-stealth technologies. They will concentrate on exploiting the vulnerabilities of our "information warfare" in satellites and communications facilities.

The most prominent issue raised by the Los Alamos case is nuclear- weapons miniaturization. Next in rank is access to the "legacy codes" of accumulated nuclear-testing data. Together, these exposures of vital information to Chinese intelligence may lead to an increase of Chinese nuclear firepower mounted on intercontinental missiles that might be aimed at the United States.

So far, however, China has not transformed its missile strike force to reflect these intelligence gains. Possessing only about two dozen liquid-fueled intercontinental missiles that could threaten the U.S., China has yet to be seen to test and field "MIRVS" on mobile solid-fuel rockets. China has long had problems converting theory into reality in the arena of weapons.

How about the Clinton administration's responsibility? Or its allegations that responsibility really lies with the Reagan and Bush administrations? The evidence revealed so far suggests that there is plenty of blame for mismanagement and inattention to go around. Investigations of Wen Ho Lee began in 1984, yet he is accused of erasing sensitive computer files as late as this year.

Americans are likely to be subjected to further shocks as the extent of the security problem becomes clearer. Remedies will be sought. Sen. Richard Shelby, Republican of Louisiana, has introduced legislation banning foreigners from sensitive countries from visiting the National Laboratories. This seems a no-brainer, but would actually conflict with U.S. nonproliferation policy by prohibiting visits to the Cooperative Monitoring Center at Sandia, which coordinates supervision of the Comprehensive Test Ban Treaty, among other activities.

China, for its part, ought to take notice. If Beijing begins to try to leapfrog its weapons development with a view to developing a credible threat against the U.S., the American people will demand a response that could end up being very costly to both countries-and the United States starts with enormous advantages. In the intelligence business, they call this "blowback."

Mr. Paal is president of the Asia Pacific Policy Center in Washington, D.C.