CourcyInt

SPECIAL BULLETIN

TO: All Strategic Intelligence Forum members

FROM: JKC de Courcy, Chairman, Strategic Intelligence Forum

DATE: 30 May 2007

SUBJECT: US Defence Secretary's annual report on China's military power

The US Secretary of Defence has delivered his annual report to Congress on the “Military power of the People’s Republic of China”. The 2007 report underlines the two most important elements of the early 21st century global geopolitical scene.

China's rise

The first is that China is continuing to match its military power to its growing economic power. Analysis of China’s military budget data and GDP data from the International Monetary Fund (IMF) for the period 1996-2006 shows average annual inflation-adjusted GDP growth of 9.2% and annual inflation-adjusted defence budget growth of 11.8%.  In March, China said that it was increasing the military budget by 17.8% in 2007 to $45bn.  And its real level of military spending could be over twice the official level, according to the Pentagon which calculates it at somewhere between $85bn and $125bn.  

The report notes: “China’s near-term focus on preparing for military contingencies in the Taiwan Strait, including the possibility of US intervention, appears to be an important driver of modernization plans. However, analysis of China’s military acquisitions and strategic thinking suggests Beijing is also generating capabilities for other regional contingencies, such as conflict over resources or territory.”

It adds that China’s expanding military capabilities “will increase Beijing’s options for military coercion to press diplomatic advantage, advance interests, or resolve disputes”.

A commentary from the official Liberation Army Daily in April 2006 provides confirmation of China’s strategic thinking. It states: “As China’s comprehensive strength is incrementally mounting and her status keeps on going up in international affairs, it is a matter of great importance to strive to construct a military force that is commensurate with China’s status and up to the job of defending the interests of China’s development, so as to entrench China’s international status.”

US resistance

The second key geopolitical factor that the report reinforces is that the US does not consider it to be legitimate for China to develop military capabilities commensurate with its economic power, almost regardless of the nature of the regime or what its ultimate intentions might be.  Without recognizing it as such, the report does in fact point to a seemingly legitimate reason for China's developing military strength (it says that as China’s economy grows, dependence on secure access to markets and natural resources, particularly metals and fossil fuels, is an urgent strategic consideration, and “at present China can neither protect its foreign energy supplies not the routes on which they travel…”), which underlines the point that the US’s main problem is with the fact of China’s rise per se.

A passage in the report on the European Union arms embargo provides further confirmation that the US considers increasing Chinese capabilities to be self-evidently an undesirable outcome, regardless of the purposes to which they might or might not be put. It states:

“Lifting the EU embargo would likely contribute significantly to the PLA’s modernization goals. An end to the embargo would raise the possibility of competitive pricing for arms sales to China…Increased military-to-military exchanges consequent to arms sales resulting from lifting the embargo could also give the PLA access to critical military management practices, operational doctrine, and training. Finally, the transfer of sophisticated and dual-use technologies that China most likely desires from the EU…would advance PLA operational capabilities.”

Subsidiary to these two main points, the report contains a number of additional insights.

Concerns about the nature of the regime

Although our contention is that the US would find China’s rapid rise to power almost as hard to swallow even if its regime were more acceptable to Western eyes, the report does highlight genuine concerns about the nature and stability of the present regime.

The report states: “At the core of China’s overall strategy rests the desire to maintain the continuous rule of the Chinese Communist Party (CCP)”. It then notes that as a substitute for the failure of communist ideology, “the CCP has based its legitimacy on the twin pillars of economic performance and nationalism”, and it worries that domestic economic and social difficulties “may lead China to attempt to bolster support by stimulating nationalist sentiment which could result in more aggressive behaviour in foreign and security affairs…”

In another section, the report again worries that “underlying structural weaknesses threaten economic growth”, and it states: “Demographic shifts and social dislocations are stressing an already weak social welfare system. Economic setbacks or downturns could lead to internal unrest, potentially giving rise to greater reliance on nationalism to maintain popular support.” Non-traditional security challenges such as HIV, bird flu, corruption, crime, and environmental problems could also “exacerbate Chinese domestic unrest and serve as sources of regional tension and instability”.

On the military side, there are concerns that China is developing “a greater capacity for military pre-emption”, and there are continuing worries that the “no-first-use” pledge on nuclear weapons is ambiguous and subject to internal debate and evolution.

The danger of miscalculation is also a worry. As the PLA continues its modernization, the US sees the possibility that “twin misperceptions could lead to miscalculation or crisis”. These are that other countries could underestimate the extent to which the PLA has increased its capabilities and that, in the opposite direction, China’s leaders “may overestimate the proficiency of their forces by assuming new systems are fully operational, adeptly operated, adequately maintained, and well integrated with existing or new capabilities”.

One specific concern is that China is attempting to shift international opinion “in favour of a distorted interpretation of the UN Convention on the Law of the Sea” by moving scholarly opinion and national perspectives away from “long-accepted norms of freedom of navigation and toward interpretations of increased sovereign authority over the 200 nautical mile Exclusive Economic Zone, the airspace above it, and possibly outer space”.

The deterrent factor and Taiwan

On Taiwan, however, the report seems to be relatively sanguine. It worries that Taiwan has allowed its defence spending to decline in real terms, and it notes the growing and sustained Chinese military threat. On the other hand, the report is robust in restating the US’s commitment and ability “to resist any effort by Beijing to resort to force or coercion to dictate the terms of Taiwan’s future status”. And, on the Taiwan issue, it concludes:

“China is deterred on multiple levels from taking military action against Taiwan. First, China does not yet possess the military capability to accomplish with confidence its political objectives on the island, particularly when confronted with the prospect of US intervention. Moreover, an insurgency directed against the PRC presence could tie up PLA forces for years…Beijing’s calculus would also have to factor in the potential political and economic repercussions of military conflict with Taiwan…Finally, China’s leaders recognize that a conflict over Taiwan involving the United States would give rise to a long-term hostile relationship between the two nations – a result that would not be in China’s interests.”

END

The full Annual Report to Congress on the "Military Power of the People's Republic of China 2007" may be downloaded from the following link:

http://www.defenselink.mil/pubs/pdfs/070523-China-Military-Power-final.pdf