INQUIRY FINDS NEW EVIDENCE CHINA DIVERTED EQUIPMENT.(MAIN)

Byline: New York Times

WASHINGTON -- A federal criminal inquiry has uncovered new evidence, including U.S. satellite photos, suggesting that a state-owned Chinese company had all along intended to divert U.S. machine equipment to a military plant that builds missiles and fighter aircraft, intelligence officials say.

The equipment, bought in 1994 by one of China's most powerful state-owned corporations, Catic, was supposed to be used solely for civilian purposes.

Now, as a year-old inquiry accumulates more evidence of a diversion, the Clinton administration is faced with the question of how to proceed if it is proved that Catic knowingly misled U.S. …