> May 30, 2007

The Honorable ROBERT BYRD

# President Pro Tempore of the Senate, Washington, D.C. 20510

The Honorable NANCY PELOSI

# Speaker of the House of Representatives, Washington, D.C. 20515

DEAR SENATOR BYRD AND SPEAKER PELOSI:

We are pleased to transmit the record of our March 29-30, 2007 hearing
on "*China\'s Military Modernization and Its Impact on the United States
and the Asia-Pacific.*" The Floyd D. Spence National Defense
Authorization Act (amended by Pub. L. No. 109-108, sect. 635(a))
provides the basis for our hearing, as it requires the Commission to
study China's military modernization. During the hearing, the Commission
heard from Representatives Dana Rohrabacher, Madeleine Bordallo, and Tim
Ryan, and received a written statement from Representative Duncan
Hunter. The Commission also heard the views of senior defense and
intelligence officials, including the Commander of the U.S. Strategic
Command, General James Cartwright, and DIA Senior Intelligence Analyst
Mark Cozad. An array of notable experts from outside the U.S. government
also participated in the hearing.[^1]

The hearing was timely, coming only three months after a successful
direct-ascent anti-satellite test by China that destroyed one of its own
aging weather satellites in low-earth orbit. This test was only the
third of its kind by any nation in history and served as a useful
reference point during the hearing to illustrate not only China's
advances in military capabilities, but also the extent to which China's
decision making process is still very much opaque. This incident raises
questions about Chinese intentions in space. The Commission will address
these questions as it continues to monitor developments.

The Commission took a novel approach to this hearing on China's military
modernization, its first on this topic in 2007. Using the threat
scenarios outlined in the Department of Defense's 2006 Quadrennial
Defense Review (QDR) as its analytical framework, the Commission
examined China's capacity to threaten the United States and its allies
in the domains of irregular warfare, traditional warfare, and disruptive
warfare. This approach generated testimony that illuminated many
important aspects of China's military strategy and modernization
programs, including the heavy emphasis China has placed on asymmetric
strategies and capabilities.

### 

### [China's Capacity for Irregular Warfare]{.underline}

Several experts testified that if China were to find itself in an armed
conflict with the United States and its allies such as that resulting
from a Taiwan dispute, China is likely to employ an array of irregular
warfare strategies against its adversaries. According to Michael
Vickers, Senior Vice President for Strategic Studies at the Center for
Strategic and Budgetary Assessments, a Chinese attack on Taiwan could
entail special operations and cyber attacks on U.S. regional bases in
Japan and South Korea, and might even include cyber attacks on the U.S.
homeland that target the U.S. financial, economic, energy, and
communications infrastructure.

China's search for asymmetric capabilities to leverage against U.S.
vulnerabilities represents a serious form of irregular warfare
preparation. China is convinced that, financially and technologically,
it cannot defeat the United States in a traditional force-on-force match
up. However, as Chairman of the Defense Science Board Dr. William
Schneider highlighted, if it can acquire niche weapons systems that are
relatively inexpensive and that can exploit U.S. vulnerabilities, it
stands a chance of deterring or defeating the United States in a limited
engagement. This strategy explains China's emphasis on acquiring
sophisticated ballistic and cruise missiles, submarines, mines, and
information and electronic warfare capabilities.

According to Dr. Derek Reveron, Professor at the U.S. Naval War College,
Beijing also engages in a much softer form of irregular warfare through
its perception management operations, both in times of tranquil
relations and in times of crisis. Perception management is not unique to
China -- all nations have similar international perception goals.
However, because the Chinese Communist Party maintains tight political
and media controls, Chinese perception management campaigns are more
tightly coordinated with diplomacy.

China has worked diligently over the last two decades, as Dr. Reveron
stated, "to promote a non-aggressive image of itself through a policy of
non-interference, outreach to foreign publics and governments through
public works projects, participation in the international system, and
comparisons to the United States, which it characterizes as a hegemon on
the offensive." This is in keeping with an internal and foreign policy
statement made in 1991 by Party Chairman Deng Xiaoping when he put
forward that China should, "Observe calmly; secure our position; cope
with affairs calmly; hide our capacities and bide our time; be good at
maintaining a low profile; never claim leadership."

Similarly, Dr. Reveron noted that in times of crisis China has sought to
manipulate information in order to cast itself in a positive light or as
the victim of U.S. aggression. He illustrated his point by recounting
China's response to the crisis that ensued when a Chinese fighter
collided with a U.S. EP-3 reconnaissance aircraft in international
airspace in April 2001. The damaged EP-3 was forced to land on China's
Hainan Island. By holding the crew in isolation for the first three days
and monopolizing information, by characterizing the EP-3 as a spy plane,
and by charging that the U.S. had violated China's sovereignty by
landing the aircraft on Hainan Island, Chinese leaders were able to
portray the United States as the aggressor in the crisis and elicit a
statement of regret for the loss of the Chinese pilot.

***[China's Traditional Warfare Capabilities]{.underline}***

Western literature on Chinese military modernization, as well as Chinese
national defense white papers, acknowledges that China is presently in
the midst of a lengthy round of holistic military modernization begun in
1992 with the aim of creating a professional, high-technology fighting
force equal to those of the world's best militaries. To this end it has
raised its defense budget 10 percent or more each year over the last 11
years. This March, Beijing announced that its 2007 defense budget would
rise by 17.8 percent to total \$44.94 billion. The Pentagon believes
this figure is significantly understated and that China's actual defense
budget is closer to two or three times this amount, or \$90-\$135
billion. Because of the opacity of Beijing's expenditures, particularly
those that are military-related, it is difficult for analysts to agree
on precise amounts. Nonetheless, the increasingly sophisticated
capabilities purchased with such expenditures are readily demonstrated.
In his testimony, Defense Science Board Chairman Schneider illustrated
the benefit of looking at capabilities rather than budgets by saying, "I
think looking at it from an output perspective may in some ways be more
informative than trying to calculate how the inputs are measured."
Therefore, while larger defense budgets do not necessarily reflect an
increase in capabilities, in the case of Beijing's funding of the PLA
there is a strong correlation in this regard.

According to the testimony of LTC (Ret.) Cortez Cooper of Science
Applications International Corporation, China's weapons acquisitions and
training are guided by an overall strategy of preparation to win
"informationized wars" -- or wars that are heavily reliant on computers
and information systems. He also noted that Beijing's strategists
believe that, in the future, conflicts that involve China will be
limited in geographical scope, duration, and political objectives, and
will be highly dependent upon command, control, communications, and
computer (C4) systems.

As China surveys scenarios of potential future conflict, one of the most
likely is a conflict over Taiwan in which the United States and/or Japan
might intervene. This understanding has guided China's financial
investment in the military over the last 15 years, during which the
majority of the resources for weapons acquisition has gone to the Navy
and Air Force rather than the land forces. Nonetheless, the pattern of
military modernization and acquisition by China suggests the possibility
it is consciously preparing for other types of and locations for armed
conflict (or efforts to deter conflict with shows of force).

[Navy]{.underline}

The PLA continues to modernize its Navy with an emphasis on those
platforms that are best suited for littoral or "green water" operations.
China has completed the acquisition of its fleet of a dozen Kilo-class
submarines from Russia along with a complement of advanced SS-N-27
"Sizzler" supersonic anti-ship missiles. These low altitude sea-skimming
missiles were specifically designed for attacking U.S. aircraft carriers
by defeating the Aegis anti-missile system. Simultaneously, it is
launching ever-larger numbers of indigenously developed Song and
Yuan-class submarines, the latter of which may be equipped with an
air-independent propulsion system for improved endurance.

The PLA Navy surface fleet has also made substantial progress in raising
its air defense and surface warfare capabilities. Its three newest
classes of surface combatants, the Luyang II and Luzhou-class destroyers
and Jiangkai II-class frigate, are all equipped with sophisticated air
search and missile guidance radars and long-range, vertical launch,
surface-to-air missiles. However, the anti-submarine warfare
capabilities of these vessels are weak -- as was the case with their
predecessors.

In the assessment of Dr. Andrew Erickson, Professor at the U.S. Naval
War College, naval power projection remains lower on the PLA Navy's list
of priorities than littoral operations in the near term. Despite their
latent production capacity, China's shipyards have not engaged in the
serial production of replenishment-at-sea ships, considered essential
for the re-supply of surface action groups engaged in blue water
operations. Similarly, even though China has benefited from close to two
decades of aircraft carrier design study, it still has not produced a
single operational carrier platform. However, there are indications that
the PLA Navy soon may refurbish the Russian carrier Varyag that it
acquired from Ukraine and place it in an operational state.

If China launches ten of its new nuclear-powered Shang-class submarines
by the end of 2008, as posited by Mr. Cooper, this would reflect a new
emphasis on blue water naval capabilities on the part of Chinese
strategists. In fact, so substantial have been Chinese advancements in
naval modernization that they are leading some to begin to consider
China as a partner, along with the U.S. Navy, in protecting freedom of
navigation and maritime security on the high seas. During the hearing,
RADM (Retired) Eric McVadon, former U.S. Defense Attaché in Beijing,
suggested that, "\[i\]t is reasonable to envision the PLA Navy as part
of our thousand ship navy concept, described by the U.S. Chief of Naval
Operations as an international fleet of like-minded nations
participating in security operations around the world. U.S. policies can
foster, if not ensure, a favorable outcome." There may be problems in
building such a partnership with China, however. Among those is the fact
that, according to section 1203 of the National Defense Authorization
Act for Fiscal Year 2000, the U. S. Navy likely would not be permitted
to engage in the forms of operational information sharing with the PLA
that would be required for such military-to-military collaboration.

[Air Force]{.underline}

China has always considered air superiority over the Strait as a
necessary precondition to successful invasion and to this end has funded
the PLA Air Force heavily over the last 15 years. In the early 1990s,
China abandoned its hope of building an advanced fleet of fighter
aircraft through only indigenous means and instituted a two track system
of acquiring advanced types from abroad while continuing to pursue
parallel domestic programs. Today, the PLA Air Force possesses close to
300 of the Russian Sukhoi family of aircraft, including fourth
generation, imported Su-27 and Su-30s, and licensed, co-produced Su-27s,
designated the "J-11." It is also manufacturing its first indigenous,
light-weight, fourth-generation fighter, the J-10, in increasing
numbers.

China continues to rely primarily on foreign purchases to fulfill its
requirements for strategic lift and aerial refueling. The IL-78 still
serves as the mainstay for PLA Air Force aerial refueling, though it has
been supplemented by H-6 bombers reconfigured for this purpose.
According to Mr. Cooper, China recently agreed on a deal to purchase
additional IL-76 transport aircraft that would increase its lift
capacity for airborne forces by as much as 150 percent.

As evidenced by its modernization trends, the PLA Air Force understands
the importance of developing a fleet with information systems that can
be integrated into a theater-wide command, control, communications,
computer, intelligence, surveillance, and reconnaissance (C4ISR) system.
It has sought to install data links in all its advanced fighter aircraft
and to build or acquire airborne early warning aircraft. China's handful
of Y-8 and KJ-2000 aircraft fulfill this latter requirement to a limited
degree. The second of these is China's answer to the United States
blocking the \$1 billion deal for China to purchase Israel's "Phalcon"
system in 2000. The KJ-2000 system is based on the Russian A-50 airframe
and uses an indigenous phased array radar.

[Army]{.underline}

Despite the fact that China's defense budget has favored the Navy and
Air Force over the last decade and a half, the modernization of China's
ground forces continues to constitute an important component of the
overall development of China's armed forces. The Army continues to train
in combined arms warfare and to focus on improving the quality of its
infantry, armor, and artillery operations. It also conducts joint
operations with the Navy and Air Force to train in the types of air
mobile and amphibious assault operations that it would be called upon to
undertake in a potential conflict over Taiwan. According to Mr. Cooper,
about a quarter of the PLA's maneuver divisions and brigades focus on
training for amphibious operations at four or more major amphibious
training bases.

Even though training across the Army continues to lag behind that of the
Navy and Air Force, in recent years the U.S. Defense Department has
witnessed significant efforts dedicated to improving the professionalism
and effectiveness of all PLA services. These efforts include developing
a professional non-commissioned officer corps, improving the
professional military education programs for officers, reforming and
improving the quality of training, raising the pay of enlisted
personnel, and emphasizing integration of information technology in
daily operations.

[Second Artillery]{.underline}

Development continues on both the nuclear and conventional components of
China's strategic missile forces, otherwise known as the Second
Artillery. Presently, China's land-based, solid-fueled, road-mobile
DF-31 intercontinental ballistic missile constitutes its sole means of
nuclear deterrence. However, with the introduction of the DF-31's naval
counterpart, the JL-2, on the Jin-class submarine, China will possess an
even more survivable nuclear deterrent.

China's conventional force, consisting of medium and short-range
ballistic missiles, constitutes a crucial component of the deterrent
force arrayed against Taiwan and is expected to fulfill an important
theater-level precision strike role for China if armed conflict should
arise. Presently, the Second Artillery's arsenal of 850 short-range
ballistic missiles is being augmented at a rate of roughly 100 missiles
per year. Additionally, the lethality of these missiles has increased
through the development of more sophisticated warheads.

One other development in China's conventional missile force is
noteworthy. The Second Artillery is designing a variant of the DF-21
intermediate-range ballistic missile with a maneuverable reentry vehicle
(MaRV). This weapon will be very difficult to defend against due to its
extremely high terminal speed. According to Mr. McVadon, if this
capability is achieved, U.S. carrier groups responding to a Taiwan
crisis may need to operate much further from China's coast, increasing
the difficulty of air operations over the Strait.

[The Taiwan Strait]{.underline}

Contingencies involving Taiwan remain the focus of Chinese planning and
force acquisitions in the near term. The goals of PLA strategists are to
deter Taiwan from declaring independence and to deter or delay the
arrival of intervening third party forces, such as those of the United
States or Japan. According to Dr. Bernard Cole, professor at the
National War College, while Taiwan's armed forces are arguably better
trained than their mainland counterparts, they also are under-armed in
every service. Cole emphasized the importance of this by noting that if
armed conflict were to break out between the two, it is unlikely that
Taiwan could withstand the pressure from the mainland for more than a
few weeks. He also remarked that, even with the addition of the defense
systems that would be funded by the Special Budget that has been held up
in the Legislative Yuan for more than five years, Taiwan's armed forces
still would face a significant challenge defending the island. Indeed,
it has become the consistent criticism of the United States government
over the past decade that Taiwan is not preparing sufficiently for its
own defense and is too reliant on the potential intervention of U.S.
forces.

Chinese strategists are well-aware of the historical precedent of U.S.
armed intervention on behalf of Taiwan and are developing strategies and
capabilities to deter or delay the arrival of such forces in the
theater. Chinese doctrine in this area stresses the use of pre-emptive,
decisive strikes on forward bases and staging areas, such as Guam and
Okinawa, and employment of a variety of platforms to deny the
operational use of the waters in the Chinese littoral. Presently, the
PLA possesses the capabilities to maintain sea denial operations out to
400 miles from China's coastline for a period of days. By 2010 China is
expected to be able to sustain such operations for a period of weeks.

***[China's Capabilities to Execute Disruptive Warfare]{.underline}***

Disruptive warfare is a form of non-traditional warfare with the aim of
undermining the qualitative advantages of an opponent. Usually, fielding
these asymmetric capabilities does not involve as much research and
development or fiscal investment as traditional capabilities. Thus,
developing disruptive capabilities is a strategic choice for a nation
with a nascent military force preparing for conflict with a
comparatively advanced adversary.

As evidenced by the trajectory of its military modernization, Chinese
defense planners are seeking to accomplish the goal of undermining the
U.S. military's technological edge through a variety of disruptive
means. Among these is cyber warfare. USSTRATCOM Commander General
Cartwright testified before the Commission that China is actively
engaging in cyber reconnaissance by probing the computer networks of
U.S. government agencies as well as private companies. The data
collected from these computer reconnaissance campaigns can be used for
myriad purposes, including identifying weak points in the networks,
understanding how leaders in the United States think, discovering the
communication patterns of American government agencies and private
companies, and attaining valuable information stored throughout the
networks. General Cartwright testified that this information is akin to
that which in times past had to be gathered by human intelligence over a
much longer period of time. He went on to say that in today's
information environment, the exfiltration that once took years can be
accomplished in a matter of minutes in one download session.

Speaking of the magnitude of the damage cyber attacks could cause,
General Cartwright said, "I think that we should start to consider that
regret factors associated with a cyber attack could, in fact, be in the
magnitude of a weapon of mass destruction." Here, by "regret factors,"
General Cartwright was referring to the psychological effects that would
be generated by the sense of disruption and chaos caused by a cyber
attack.

One subsequent panelist posited a mitigating analysis. James Lewis from
the Center for Strategic and International Studies testified that
asymmetric attacks, including cyber attacks, are more likely to solidify
the resistance of the targeted population than to cause real damage.
Speaking about the practical outcomes of asymmetric attacks, Lewis said,
"The effect is usually to solidify resistance, to encourage people to
continue the fight, and if you haven\'t actually badly damaged their
abilities to continue to fight, all you\'ve done is annoy them, and what
many of us call cyber attacks \[are\] not weapons of mass destruction
but weapons of mass annoyance." Despite the different estimates of
potential damage from cyber attacks, all the panelists agreed that
developing asymmetric capabilities is a primary focus of the PLA's
military modernization endeavor.

This modernization also includes efforts to build competitive space and
counter-space capabilities, the latter demonstrated by the January 2007
anti-satellite test. According to Hudson Institute Research Fellow Mary
FitzGerald, Chinese military strategists and aerospace scientists have
been "quietly designing a blueprint for achieving space dominance" for
more than a decade.

##### Recommendations

Based on the information presented at the hearing, we offer the
following four preliminary recommendations to the Congress:

1)  In order to minimize the possibility of miscalculation and conflict,
    the Commission recommends that Congress urge the Administration to
    press Beijing to engage in a series of measures that would provide
    more information about its strategic intentions and the ultimate
    purpose of its increasing military expenditures.

2)  To further facilitate mutual understanding and avoid conflict
    resulting from inaccurate perceptions of interests or values by
    either nation, and to establish relationships that could prove
    critical for de-escalation of crises, the Commission recommends that
    Congress call on the Defense Department to develop a strategic
    dialogue whereby the senior military staff from the United States
    and China can discuss potentially contentious issues of the day such
    as non-interference in other nations' satellite activity and
    protocol for the use of nuclear weapons.

3)  The Commission recommends that Congress ensure the adequate funding
    of military and intelligence agency programs that monitor and
    protect critical American computer networks and sensitive
    information.

4)  The Commission recommends that Congress give high priority to the
    support of American space programs that ensure continued freedom of
    access to space and the safety of space-based commercial and
    defense-related assets. This would include hardening satellites,
    maintaining quick-launch replacement satellites, and other defensive
    measures called for by the Operational Responsive Space framework.

The transcript, witness statements, and supporting documents for this
hearing can be found on the Commission's website at
[www.uscc.gov](http://www.uscc.gov/). We hope these will be helpful as
the Congress continues its assessment of China's military modernization.

Sincerely yours,

> ![](media/image1.png){width="3.2506944444444446in"
> height="0.7708333333333334in"}![](media/image2.png){width="2.872916666666667in"
> height="0.9166666666666666in"}

Carolyn Bartholomew Daniel Blumenthal

*Chairman Vice Chairman*

*cc: Members of Congress and Congressional staff*

[^1]: An electronic copy of the full hearing record is posted to the
    Commission's web site:
    <http://www.uscc.gov/hearings/hearingarchive.php#hearings2007>