Executive Summary: China’s rapid rise as a regional political and economic power with growing global influence has significant implications for the Asia-Pacific region and the world. The United States welcomes the rise of a stable, peaceful, and prosperous China, and encourages China to participate responsibly in world affairs by taking on a greater share of the burden for the stability, resilience, and growth of the international system.

The United States has done much over the last 30 years to encourage and facilitate China’s national development and its integration into the international system. However, much uncertainty surrounds China’s future course, particularly regarding how its expanding military power might be used.

The People’s Liberation Army (PLA) is pursuing comprehensive transformation from a mass army designed for protracted wars of attrition on its territory to one capable of fighting and winning short-duration, high-intensity conflicts along its periphery against high-tech adversaries – an approach that China refers to as preparing for “local wars under conditions of informatization.” The pace and scope of China’s military transformation have increased in recent years, fueled by acquisition of advanced foreign weapons, continued high rates of investment in its domestic defense and science and technology industries, and far-reaching organizational and doctrinal reforms of the armed forces.

China’s ability to sustain military power at a distance remains limited, but its armed forces continue to develop and field disruptive military technologies, including those for anti-access/area-denial, as well as for nuclear, space, and cyber warfare, that are changing regional military balances and that have implications beyond the Asia-Pacific region.

The PLA’s modernization vis-à-vis Taiwan has continued over the past year, including its build-up of short-range missiles opposite the island. In the near-term, China’s armed forces are rapidly developing coercive capabilities for the purpose of deterring Taiwan’s pursuit of de jure independence. These same capabilities could in the future be used to pressure Taiwan toward a settlement of the cross-Strait dispute on Beijing’s terms while simultaneously attempting to deter, delay, or deny any possible U.S. support for the island in case of conflict. This modernization and the threat to Taiwan continue despite significant reduction in cross-Strait tension over the last year since Taiwan elected a new president.

The PLA is also developing longer range capabilities that have implications beyond Taiwan. Some of these capabilities have allowed it to contribute cooperatively to the international community’s responsibilities in areas such as peacekeeping, humanitarian assistance and disaster relief, and counter-piracy. However, some of these capabilities, as well as other, more disruptive ones, could allow China to project power to ensure access to resources or enforce claims to disputed territories.

Beijing publicly asserts that China’s military modernization is “purely defensive in nature,” and aimed solely at protecting China’s security and interests. Over the past several years, China has begun a new phase of military development by beginning to articulate roles and missions for the PLA that go beyond China’s immediate territorial interests, but has left unclear to the international community the purposes and objectives of the PLA’s evolving doctrine and capabilities.

Moreover, China continues to promulgate incomplete defense expenditure figures and engage in actions that appear inconsistent with its declaratory policies. The limited transparency in China’s military and security affairs poses risks to stability by creating uncertainty and increasing the potential for misunderstanding and miscalculation.

The United States continues to work with our allies and friends in the region to monitor these developments and adjust our policies accordingly.

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A Report to Congress
Pursuant to the National Defense Authorization Act
Office of the Secretary of Defense

Section 1202, “Annual Report on Military Power of the People’s Republic of China,” of the National Defense Authorization Act for Fiscal Year 2000, Public Law 106-65, provides that the Secretary of Defense shall submit a report “in both classified and unclassified form, on the current and future military strategy of the People’s Republic of China.

The report shall address the current and probable future course of military-technological development on the People’s Liberation Army and the tenets and probable development of Chinese grand strategy, security strategy, and military strategy, and of the military organizations and operational concepts, through the next 20 years.”

China’s Evolving Military Capability

Since the U.S. Department of Defense (DoD) submitted its first report pursuant to Section 1202 of the National Defense Authorization Act for Fiscal Year 2000, China has made considerable progress toward building and fielding credible and capable military power. The Department’s understanding of China’s military power has improved over the reporting period, but much remains to be learned about China’s national and military strategies, progress and trends in its military modernization, and the related implications for regional security and stability.

China has improved modestly the transparency of its military and security affairs, but until it begins to view transparency less as a transaction to be negotiated and more as a responsibility that accompanies the accumulation of national power, the insights reflected in this report will remain incomplete, bridged only by assessment and informed judgment. Several of these insights are highlighted below:

❏ Defense Budget Outpacing Economic Growth.

China’s sustained economic growth, from a Gross Domestic Product (GDP) of $1.95 trillion in 2000 to a projected $4.19 trillion in 2008 (in 2008 USD) has enabled China to focus greater resources on building, equipping, and training the PLA without overwhelming the economy. One measure of increasing resourcing for the PLA is the official budget, which has more than doubled from $27.9 billion in 2000 to $60.1 billion in 2008 (in 2008 USD). The budget, however, does not capture the totality of military expenditure.

Despite persistent efforts by the United States and others to gain greater clarity from China, or to improve estimates in the absence of such clarity, the Department of Defense’s understanding of the resources, funding streams, and accounting mechanisms used to guide investment in the PLA has not improved measurably.

❏ Strengthened Deterrent and Enhanced Strategic Strike.

Since 2000, China has shifted from a largely vulnerable, strategic deterrent based on liquid-fueled, intercontinental-range ballistic missiles (ICBMs) fired from fixed locations to a more survivable and flexible strategic nuclear force. The introduction of two new classes of ICBMs, the DF-31 and DF-31A, both road-mobile, solid-propellant systems (the latter capable of targeting any location in the continental United States) reflects this shift.

While there is no evidence that China’s doctrine of “no first use” has changed, the fielding of these forces, along with a projected new class of nuclear-powered ballistic missile submarine (SSBN)/submarine-launched ballistic missile (SLBM) in 2009-2010 enabling a credible sea-based deterrent, will give China’s leaders greater flexibility and options for strategic strike than previously available. While U.S. strategic forces still far outnumber those of China, China would be able to inflict significant damage on most large American cities with these survivable systems.

❏ Improving Anti-Access/Area-Denial Capabilities.

Since 2000, China has expanded its arsenal of anti-access and area-denial weapons, presenting and projecting increasingly credible, layered offensive combat power across its borders and into the Western Pacific.

China has or is acquiring the ability to: 1) hold large surface ships, including aircraft carriers, at risk (via quiet submarines, advanced anti-ship cruise missiles (ASCMs), wire-guided and wake-homing torpedoes, or anti-ship ballistic missiles); 2) deny use of shore-based airfields, secure bastions and regional logistics hubs (via conventional ballistic missiles with greater ranges and accuracy, and land attack cruise missiles); and, 3) hold aircraft at risk over or near Chinese territory or forces (via imported and domestic fourth generation aircraft, advanced long-range surface-to-air missile systems, air surveillance systems, and ship-borne air defenses).

Advances in China’s space-based reconnaissance and positioning, navigation, and timing, as well as survivable terrestrial over-the-horizon targeting, are closing gaps in the creation of a precision-strike capability.

❏ Regional Conventional Strike.

Since 2000, China has continued its build-up of conventional ballistic missiles, building a nascent capacity for conventional short-range ballistic missile (SRBM) strikes against Taiwan into what has become one of China’s primary instruments of coercion, not only of Taiwan but of other regional neighbors.

In 2000, China’s SRBM force was limited to one “regimental-sized unit” in southeastern China. China has expanded the force opposite Taiwan to seven brigades with a total of 1,050-1,150 missiles, and is augmenting these forces with conventional medium-range ballistic missile (MRBM) systems, such as the anti-ship ballistic missile, and at least two land attack cruise missile (LACM) variants capable of ground or air launch. Advanced fighters and bombers, combined with enhanced training for nighttime and overwater flights, provide the PLA with additional capabilities for regional strike or maritime interdiction operations.

❏ Competing for Dominance of the Electromagnetic Spectrum.

The 2000 edition of this report observed that China is “working to ameliorate weaknesses in C4I training and plac[e] increased emphasis on ‘electromagnetic warfare’ to degrade or destroy enemy operational systems.” At that time, the PLA’s electronic warfare (EW) systems were derived mostly from a combination of “1950s-1980s technologies.”

By the 2006 edition of this report, China’s investments in advanced EW programs had given the PLA Air Force “technological parity with or superiority over most potential adversaries.” By improving space-based and terrestrial C4ISR and by moving communications infrastructure to fiber, China is hardening its own capabilities while making gains in developing weapon systems (e.g., counterspace, computer network operations, and anti-radiation systems) to deny these capabilities to others.

The 2004 introduction of the PLA concept of “local wars under conditions of informatization” has guided development in this area, positioning the PLA to contest electromagnetic dominance in the early phases of future campaigns.

❏ Persistent Limitations.

As China’s capabilities for local and regional operations have increased in certain areas since 2000, a number of limitations appear to have persisted. The PLA has developed new doctrine for joint warfighting and implemented organizational changes, such as including service commanders on the Central Military Commission, to facilitate the transition to a more “joint” force. However, joint integration still lags. Similarly, PLA air and amphibious lift capacity has not improved appreciably since 2000 when the Department of Defense assessed the PLA as capable of sealift of one infantry division.

Likewise, China’s current ability to deliver about 5,000 parachutists in a single lift (less if equipment is carried at the same time) is similar to previous assessments. China’s at-sea replenishment has improved with experience since 2000, but the PLA Navy today remains limited by a small number of support vessels – much as it did then. In 2000, the Department of Defense projected aerial refueling as an operational capability by 2005.

Today, while China has a few aerial refueling aircraft, it does not have the number of tankers, properly equipped combat aircraft, or sufficient training to employ this capability for power projection.

❏ Shifting Dynamics in the Taiwan Strait.

Since 2000, there have been two peaceful political transitions on Taiwan and a gradual and steady maturation of Taiwan democracy. While Beijing’s strategy toward Taiwan appears to have shifted from seeking an early resolution of the Taiwan issue to one of preventing Taiwan’s de jure independence, by force if necessary, Beijing’s objective of unifying Taiwan with the Mainland has not changed.

Since 2000, the military balance in the Taiwan Strait has continued to shift in Beijing’s favor, marked by the sustained deployment of advanced military equipment to the Military Regions opposite Taiwan. In the 2002 report, the Department of Defense assessed that Taiwan “has enjoyed dominance of the airspace over the Taiwan Strait for many years.”

This conclusion no longer holds true. With this reversal, China has been able to develop a range of limited military options to attempt to coerce Taipei.

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