A weapons proliferation nightmare is occurring in a nondescript factory complex in Fatehjung, a northern Pakistani town in the hilly plain of Punjab.

Using Chinese supplied blueprints and technology, Pakistan is nearing completion of a centre to produce a home-grown version of Beijing's M-11 ballistic missile, capable of carrying a nuclear warhead to a target some 300 Kilometres away.

China's help on the factory is part of a secret contract the two nations signed in early 1998. Under the pact, China also sold about 30 M-11s to Pakistan during the early 1990s, top U.S. officials believe. But teaching Pakistan to make its own missiles raises the proliferation problem to graver level, especially in volatile South Asia.

The history of the M-11 tells much about China's role in the global problem of weapons proliferation today. Once, China sold weapons mostly for money, or, in its Marxist heyday, for ideological reasons. That reputation for recklessness lingers.

But a close examination of the 10-year record of M-11 transfers to Pakistan shows that China now is a calculating, strategic proliferator. Russia often sells weapons technology because its economic crisis leaves officials and ministers grasping for chances to earn hard currency, and the U.S. leaks weapons know-how because it simply can't contain its explosion of technology. China, by contrast, more often exports high powered weapons and technology in a cool pursuit of specific policy goals.

Pakistan proves the point. China long ago concluded that Pakistan has a special role in the pursuit of Beijing's abiding foreign-policy goals. These include bolstering Pakistan's defences against India, China's neighbour and the South Asian regional power, and ensuring that Islamic Pakistan doesn't stir up already restive Muslims in China's nearby Xinjiang province.

"China sees a weak Pakistan as destabilising for the region," says Han Hua, a proliferation specialist at Beijing University.

Above all, China wants to use Pakistan as a buffer to thwart feared encroachment first from the old Soviet Union and, perhaps someday, from a resurgent Russia. U.S. analysts believe the 1998 contract to sell M-11s was drawn up in this context.

Over the years, China has shown remarkable persistence in its use of weapons sales to Pakistan to achieve its goals, regardless of world opinion or even the threat of sanctions. Occasionally, knowing it already has buttressed Pakistan with a considerable amount of arms and technology, China slows the pace or shifts tactics under international pressure.

If China is a strategic proliferator, both the Bush and Clinton administrations have been Beijing's enabler. Despite intense congressional opposition, both administrations have sought engagement with China and tried to avoid provocations that would endanger access by U.S. companies to China's vast markets. On two occasions, the U.S. has interpreted anti proliferation laws in a way that avoided imposing the most draconian sanctions on China.

China gives the U.S. the wiggle room to do this by walking up to the line of serious anti proliferation violations, but then either not crossing it or shrouding its actions in ambiguity. Several U.S. officials acknowledge privately that there is a fairly convincing evidence that Beijing probably has shipped some 30 M-11s missiles to Pakistan's Sagodha Air Base, west of Lahore - an action that would call for severest penalties under U.S. antiproliferation law. But the weapons remain in their crates more than five years after their arrival. This permits the administration to claim it doesn't have conclusive proof that they are there.

"There's been a tacit understanding that the M-11s wouldn't be taken out and tested," says Robert Oakley, a former U.S. ambassador to Pakistan.

Chinese officials won't comment on the M-11 transfers. But U.S. analysts say the M-11 is capable of carrying an 495 kilogram payload about 300 kilometres. Pakistan has the technology and the nuclear capability to arm the missile with a nuclear warhead.

The U.S. also used that wiggle room in late 1992, when a hot-button issue prompted China to ship what intelligence officials insist were 34 M-11s to Pakistan. President George Bush, in a tight re-election race and heeding pressure from Congress and the ailing post-Cold War U.S. defence industry, announced that he would sell F-16 aircraft to Taiwan, which China considers a runaway province. In response, the unhappy Chinese appeared to ship missiles to Pakistan.

Once more, there were protracted discussions and Chinese evasion. But now it was the Clinton administration that had to grapple with the problem.

It also had to deal with Republican Senate. Jesse Helms of North Carolina, who toughened the penalties for Chinese proliferation so that entire sectors of China's economy, not merely individual companies, would have to penalised for violations. Now, the most severe penalty would disrupt billions of dollars in trade.

One senior U.S. official concedes that this raised the stakes. It also increased the need for a high level of confidence in the information that officials used to make a determination. After a rancorous internal debate, the administration once more concluded that it was not absolutely certain that complete missiles had been shipped to Pakistan. And so, on August 24, 1993, the Clinton administration again imposed the milder level of sanctions on China.

China refused to discuss the issue until U.S. sanctions were lifted. Again, the U.S. gave ground. In late 1994, Secretary of State Warren Christopher and Chinese Foreign Minister Qian Qichen signed an agreement stating that the U.S. would waive the sanctions, and "once the United States lifts the sanctions, China will not export ground-to-ground missiles," such as the M-11.

Since then, the administration hasn't detected any more missile transfers to Pakistan, even though the 1988 contract with Pakistan called for the delivery of about 60 M-11 missiles. Perhaps with the Soviet threat gone, and a thaw with India, China decided to focus on its new interest in U.S. ties, officials say.

Lately, U.S. intelligence monitors have noticed a curious development at a M-11 factory in the small trading town of Fatehjung, off the main road from Islamabad to Peshawar. Although the U.S. had expected the turnkey project to be completed by now, it hasn't yet received certain important equipment from China needed to achieve that goal, according to people familiar with the situation. This could be the latest example that China will at least slow down when the risks of proliferation become too great. But whether it will stop is a question nobody in Washington can answer.