WASHINGTON -- Shortly after he took office in 1993, President Clinton traveled to Silicon Valley to lay out his vision of a robust American economy buoyed by high-technology companies that could compete anywhere in the world.

The night before his speech, Clinton went out to dinner with two dozen executives, some of whom complained bitterly about Government rules impeding the overseas sale of computers and other cutting-edge technologies.

Clinton grabbed a pad, furiously took notes, and promised relief, one executive recalled.

Over the next five years, the President delivered, personally presiding over what industry executives and Government officials agree was one of the most sweeping relaxations of export restrictions in American history.

"These reforms," Clinton said in a 1993 letter detailing the changes to a leading computer executive, "can help unleash our companies to compete successfully in the global market."

In the years that followed, the new rules helped Clinton fulfill his vision of a centrist Democratic Party with close ties to American business. Grateful high-technology companies showered the Democratic Party with campaign contributions, cementing a new financial base for a party that has historically struggled to raise money from corporate America.

Administration officials portray the initiatives as one of Clinton's most lasting legacies, saying it bolstered national security by helping to make America's economy the world's strongest. The flood of new exports also created high-paying jobs at home.

But critics, including Republicans in Congress and some former Clinton Administration officials, argue that the high-technology exports had a serious side effect, strengthening countries like China, which some view as a potential adversary. Clinton, they contend, was blinded by his enthusiasm for securing this country's global edge and insufficiently attentive to his policies' effect on America's long-term national security.

House and Senate committees are examining whether China took advantage of the looser rules on exports to enhance its military and to obtain technology that it passed on to rogue states, including North Korea. The Senate Intelligence Committee and a special House panel, which are scheduled to report their findings in early 1999, have held a series of closed-door hearings this fall.

An examination by The New York Times of the Administration's export policies on China, based on interviews as well as Government and industry documents, shows that the looser regulations enabled Chinese companies to obtain a wide range of sophisticated technology, some of which has already been diverted to military uses.

The new rules allowed American companies to sell a host of products without prior Government approval, from high-speed computers to machine tools to communications gear subject to restrictions during the cold war. While the regulations fostered trade, they made it much harder for intelligence agencies to track how American equipment was used overseas, Administration officials said.

Until 1993, most sales to China of goods with possible military uses required American companies to obtain a Government license naming both the customer and the location in which the equipment would be installed.

Senior officials acknowledge that President Clinton decided to change the rules without a rigorous review by intelligence officials or other national security experts.

In 1995, Central Intelligence Agency analysts wrote a report warning of the military implications of technology transfers to China, but it never became an official assessment because senior aides felt it was "not well done and lacked analytical depth," an American official said.

The Government's last serious examination of technology sales to China, they said, had been conducted by the Reagan Administration in 1984 at a time when the United States was trying to build up China as a counterweight against the Soviet Union.

Since then, the Soviet Union has collapsed. And China has been caught selling missile equipment to nations like Iran and Pakistan while using its new access to Western technology to expand its economic and military power.

Paul Wolfowitz, a former official in the State and Defense Departments who participated in the 1984 study, asserted that international developments since then argue for a tightening of controls on sales to China, not a loosening.

"There is an urgent need for a fundamental review of export policy to China especially because China is in the process of becoming -- albeit still quite slowly -- the major strategic competitor and potential threat to the United States and its allies in the first half of the next century," said Wolfowitz, who is dean of the Paul H. Nitze School of Advanced International Studies at Johns Hopkins University.

But another China expert sees Beijing's improvement of its technologically backward military as more benign.

"Its overall policy is not to be a trouble maker," said A. Doak Barnett, a professor emeritus at Johns Hopkins, who added that "gradually building up its defense establishment is something I would expect it to do but in my view it's not threatening."

Whatever China's intentions, the Clinton Administration over the last five years has approved export to China of $3 billion in technology with military or civilian applications, about 5 percent of overall American sales to China.

A report prepared for the Commerce Department last December concludes that the Administration has little means of knowing whether this equipment is harming American national security or being used by Chinese industries to challenge American competitors and jobs.

"It may be too late by the time that U.S. industry and/or Government realize there is a problem emerging in either of these areas," the confidential report says.

American intelligence agencies are trying to assess how much the Chinese military has gained from the imports. Officials say they have already concluded that China's army gained access to some of the high-speed computers sold to civilian customers since 1996, when the rules on computer exports were eased. The officials said the agencies were unable to assess how the equipment was being used because they lacked basic information about the deals.

Clinton Administration officials said that the Chinese have returned the one computer that was improperly diverted and that a new agreement between the two countries will improve the ability of American officials to check the whereabouts of equipment exported to China.

Representative Christopher Cox, the Southern Californian Republican who heads the select House panel on technology transfers to China, said, "There's always been a tension within the Government about which exports are proper."

But, he added, "these days without question the overriding impulse to sell, sell, sell is in the ascendancy."

THE OLD SYSTEM

Cold War Rules Get New Scrutiny

The United States and its Western allies zealously guarded their technological edge during the cold war, forbidding the sale to Communist bloc nations of any item with a conceivable military use. Military contractors did not chafe too much under the restrictions because the Pentagon had a seemingly limitless budget for their wares.

In 1983, Chinese leader Deng Xiaoping complained bitterly about the restrictions on technology exports, prompting the Reagan Administration to ease some of the rules for China. It was seen in America's interest, Wolfowitz recently told Congress, to help Beijing develop the military muscle needed to counter the "formidable threat" from the Soviet Union. In addition, he said, China had been helpful in arming the Afghan rebels.

But the United States maintained tight controls over what he termed the most sensitive technologies -- those that could improve China's missiles or anti-submarine capabilities.

The fall of Communism brought a precipitous drop in the Pentagon budget, prompting the defense industry to scramble for new markets. Companies that once made spy satellites for American spy agencies began making equipment for cellular networks that served China or Russia.

They quickly confronted a significant obstacle to making money on sales to former adversaries. The cold war-era rules remained largely in effect, and they were being interpreted by career officials who had devoted their lives to blocking exports to Russia and its allies.

Enter Bill Clinton. His 1992 campaign had been driven by the slogan "It's the economy, stupid." Aides say Clinton's views on foreign policy were framed by his experiences as a governor of Arkansas, a poor state that looked overseas for investments and markets, and he arrived in Washington determined to expand trade.

In an immediate sign of this policy's political importance, Clinton sent the Democratic Party's chief fund-raiser, Ronald H. Brown, to take over the Commerce Department, which promotes American exports.

The Pentagon was traditionally the strongest voice against technology exports, and Clinton made several appointments calculated to change the culture. William J. Perry, an executive at a Silicon Valley company who was vocally opposed to the existing system of export controls, was named Deputy Defense Secretary and then Defense Secretary. John M. Deutch, a professor with similar views, was named to a senior post at the Pentagon, and then became Director of Central Intelligence.

Perry, testifying at his confirmation hearing to be Deputy Defense Secretary, told senators in February 1993 that controlling dual-use technology is "a hopeless task." He continued, "It only interferes with our companies' ability to succeed internationally if we try to impose all sorts of controls in that area."

Perry said, "We really need to bear down" on controlling the most critical components necessary to build weapons.

President Clinton took a personal interest in the new policy. Shortly after he returned from his foray to Silicon Valley, he spelled out his intentions in a letter to Edward McCracken, the chief executive officer of computer maker Silicon Graphics. Company officials had complained to Clinton over dinner about export rules.

"One reason I ran for President was to tailor export controls to the realization of a post-cold war world," Clinton wrote.

After noting the need to retain strong controls in some areas to combat the spread of nuclear, chemical and biological weapons, Clinton detailed his intention to "unleash our companies to compete successfully in the global market." The United States, he said, would slash red tape and loosen controls on the overseas sale of computers, telecommunication equipment and machine making tools.

THE NEW SYSTEM

Relaxed Rules Benefit Chinese

Those restrictions were an integral part of the cold war. For decades, every proposed export of technology was weighed by a committee of Western nations. It had authority to block sales involving military hardware or so-called "dual-use" equipment that had military or civilian applications.

Even before the committee disbanded in 1994, the Clinton Administration moved to ease restrictions on the sales of many dual-use items. The new rules allowed companies to export many categories of technology without applying for a Government license.

American companies were delighted with the new system, which relieved them of a time-consuming and frustrating process. But the benefits came with a cost. Because sales could be made without export licenses, the Government and its intelligence agencies no longer had a record of many deals that involved dual-use equipment. There was no way to trace patterns of sales, to know, for example, how many decoding devices were being sold to a particular country.

Commerce Department internal documents show that China has been a major beneficiary of this policy. According to a 1995 estimate, more than $1.9 billion in annual trade with China had been removed from Federal scrutiny.

A ban remains in effect on the sale to China of the most militarily potent technologies, like ballistic missiles, spy satellites and advanced fighter aircraft. Beijing buys those weapons from Russia, Europe and Israel.

"China has benefited more than any other country from U.S. decontrols on certain dual-use commodities enacted in late 1993 and early 1994," one Commerce Department document says. "There has been a 60 percent decrease in the number of individual export licenses required for trade with China (from 2,229 in 1993 to only 925 in 1994)."

The rules shifted much of the burden for controlling exports to the companies making the deals.

Previously, the applications for licenses to sell sophisticated electronic equipment overseas were scrutinized by Pentagon and intelligence analysts. One crucial question was whether the customer was really a "front" for military users barred from buying such equipment.

The Clinton Administration's new policy relied on industry executives to raise questions about their own sales. They were required to seek a Commerce Department license only if they believed the equipment would end up in military hands.

Aerospace officials say they are ill-equipped to make such evaluations.

Last year, the Administration began making public the names of questionable customers, to warn exporters. But industry officials said the list of about a dozen nuclear production facilities was a tiny slice of what was available and ignored entities involved in missile activity.

The problem is particularly acute, industry executives said, when the deals involved China, where the military has long played a role in commercial ventures and where it is difficult to distinguish between military officers' personal and professional dealings.

One of the first deals under the new rules, a 1994 sale of telecommunications equipment to China, illustrates the complexities. The Commerce Department's decision to allow such exports without a license made it easier for AT&T and other American companies to sell hundreds of millions of dollars in sophisticated equipment to Chinese companies building civil telecommunication networks.

An examination of the deal by the General Accounting Office, the audit arm of Congress, found that the equipment was sold to a Chinese-American joint venture, Hua Mei, "without Commerce review, even though the company was partially controlled by several high-level members of the Chinese military."

AT&T officials in turn told the audit agency that "they did not ask the Commerce Department to determine if Hua Mei was a civil end user, nor were they required to."

It is not known whether the company has put the equipment to military use. But Pentagon officials told the G.A.O. that in 1994, China's army was seeking to buy this same type of technology as it moved to improve its communications networks.

THE REASSESSMENT

A Computer Sale Sets Off Alarms

By 1995, the Pentagon was urging Congress to look more closely at export policy. Military officials noted that the effect of technology was cumulative, and that while individual sales might appear benign, a combination of cutting-edge acquisitions would allow an adversary to build much better bombs or radars.

President Clinton, documents show, was moving in the opposite direction.

According to a 1995 Commerce Department document, the President "made clear," in private conversations he had with Brown, that "he does not believe we have done enough to streamline and liberalize."

The document mapped out how Brown should lobby high-level Administration officials to ease controls on computer exports and shift items like communications satellites, engine technology and commercial data-scrambling devices. Such items were on a list of equipment that required a State Department license, and companies believed they could close more deals if authority over the exports were moved to Brown's Commerce Department.

Their enthusiasm for the Commerce Department was well grounded.

When it comes to proposed sales of an item regulated by the State Department, the Pentagon holds a virtual veto, a privilege it exercised regularly during the cold war.

The Commerce Department is responsible for promoting American exports. When it weighs an overseas deal, the Pentagon has only one vote out of five agencies, and the right to appeal if its objections are overruled, which has been rarely used.

Secretary of State Warren Christopher insisted that his department retain jurisdiction. He was overruled in early 1996 by Clinton, opening the way to billions of dollars of satellite sales to Chinese companies.

At about the same time, the Administration was weighing whether to lift restrictions on the export of some advanced computers. Officials asked outside consultants to study the issue, and they came back with a report that asserted the controls were pointless. The powerful computers manufactured by American companies would soon be widely available from foreign competitors, the report said.

The Administration asked the consultants to assess whether computer sales could pose a threat to the American military. Their report did not take a position, saying the Government did not have enough information to draw a conclusion.

This left the issue to Clinton, who decided to fulfill his pledge to the Silicon Valley executives and relax the restrictions.

"The President made a judgment on what the threat was, and the President's judgment was reflected in his decision," said William A. Reinsch, Under Secretary of Commerce for Export Administration. The new rules took effect early in 1996.

Soon after, Chinese companies bought 77 of the high-speed computers, which can be used to predict weather patterns but can also scramble secret communications or design powerful nuclear weapons.

Disclosure of those sales prompted Congress to reinstate license requirements for some advanced computers.

This year, the Central Intelligence Agency and other Federal agencies concluded that at least some of those computers are being used by China's military. The details of their use remain unclear, officials said.

A review by the G.A.O last month called into question the Administration's basic assumptions in lifting the controls on computers. Contrary to what the consultants said in their report, the international market for advanced computers remains strongly dominated by American companies.

Congress acted after The New York Times reported that two American aerospace companies were under investigation to determine whether they went too far in sharing rocket technology with Chinese scientists seeking to determine the causes of a failed satellite launching in 1996. The inquiry, which continues, has since been broadened to include a failed launching in 1995. Rocket technology for ballistic missiles is similar to that used to send satellites into orbit. Both companies have denied wrongdoing.

Just this month, Congress reversed Clinton's 1996 decision and returned satellite exports to the State Department. At the same time, lawmakers created a senior Pentagon position for technology security after concluding military officials' role in controlling exports to countries like China had been "significantly and improperly reduced over the years."

THE FALLOUT

Report Cites a Loss of Oversight Role

The military significance of America's exports to China is hotly debated.

China's army is in the throes of modernization. For now, Beijing is more of a regional power than a global threat.

A commission headed by former Defense Secretary Donald H. Rumsfeld concluded last July that the looser controls on exports, coupled with lax enforcement, had increased the possibility that rogue nations like Iran or North Korea would build ballistic missiles that could hit the United States.

China "poses a threat to the United States" by supplying technology to these pariah states, the report said.

Commission members said they were startled at how much the Government had freed the export of dual-use technology and how little American officials could do to track its use or assure it was not diverted to terrorists or foreign militaries.

"What's particularly troubling," said R. James Woolsey, a commission member who was Clinton's first Director of Central Intelligence, "is that the massive decontrol in the last few years of the export of dual-use technology in general, and specifically to China, has made it almost impossible for the U.S. to monitor where such technology has gone much less exercise any control over it."

Another commission member, Barry Blechman, said technology transfer "is a central reason why we reached our conclusion."

Blechman is president of DFI International, the Washington consulting firm that prepared a confidential report for the Commerce Department last December on technology transfers to China.

The report concludes that China does not pose a direct threat to American competitiveness in high technology. But it might in the future, especially in areas like electronics, which by 1996 had become China's top export back to the United States.

Then President Clinton's policy might wind up being turned upside down with China jeopardizing the same high-paying jobs that President Clinton used to justify increasing exports to China.

According to the report, the concern is that "as Chinese manufacturing becomes more sophisticated and technical in nature" -- thanks in part to American and Western exports of that technology -- "Chinese high tech products could potentially undercut such products (and therefore jobs as well)."