EU ATTEMPTS TO LIFT ARMS EMBARGO ON CHINA ANDSECURITY BALANCE IN EAST ASIA:
IMPLICATIONS FOR EAST ASIAN INTEGRATION PROCESS*
Olena Mykal**“Observe coolly; react calmly;
solidify our foothold; never reveal our talents;
strengthen our defence; and never take the lead”
Den Xiaoping
This paper aims at examining whether arms embargo is a necessaryand efficient tool to keep the balance of power in East Asia. Here it isargued that even despite the fact that arms embargo remains intact,
the balance of East Asia is already being changed in favour of China.
To illustrate it, firstly the paper will briefly examine the EU attempts tolift embargo, nowadays situation, and outlines some future trends.
Secondly, it will study China’s trends in terms of military budget,
military capabilities, research and development expenditures andtechnology transfer from Europe.
Key words: EU, China, arms embargo, East Asia, security balance

1. INTRODUCTION
It goes without saying that East Asian integration is an enormous and vague project, where
hardly anybody can determine its scope and limits. However, sound Sino-Japanese relations
are a keystone to a successful implementation of an integration process in the region. Leaving
apart economic calculations and discourse on history and how it affects the prospects of theintegration, this paper delves into security matters, specifically into the issue of arms embargo
on China imposed by the European Union and discusses whether the lifting would affect thebalance of power in East Asia.
While the EU argues that the lifting would not affect regional security environment,
the US and Japan insist that lifting arms embargo on China would cause a shift in the balanceof power in East Asia. On the other side, Beijing has been arguing that arms embargo is aremnant of the past1 and by being remained intact, the embargo is a political leverage. From* This paper is an updated and revised version of report ‘EU Attempts to Lift Arms Embargo on China andSecurity Balance in East Asia: Implications for East Asian Integration Process’ delivered at the Summer
Institute on Regional Integration 2008 at Waseda University organized by Global Institute for Asian Regional
Integration [GIARI], 25-30 August 2008. I would like to express my gratitude to the supervisors and doctoral
students who participated in the Summer Institute for their comments and observations. My thanks also go tonumerous anonymous officials who made this paper possible. I am also indebted to Professor Tsuneo Akaha forhis comments and suggestions.
** Chief advisor, National Institute for Strategic Studies of Ukraine, Email: olena.mykal@gmail.com
1
Ting Wai, EU-China Relations: Economic, Political and Social Aspects, Report delivered at the Third
European Union Studies Association Asia-Pacific Conference, Keio University, Tokyo, 8-10 December 2005, p.
21.

the discussion it is clear that while for Japan and the US it is a matter of hard security, for the
EU it is a matter of trade and multilateral world.2
Meanwhile the European Union does mot make attempts to lift embargo and quite on
the contrary, it calls China to improve the situation with human rights, especially after
China’s passing of the anti-secession law in March 2005 (clearly aimed at Taiwan) and during
the escalation of the situation in Tibet and worsening Beijing-Lhasa relations before theOlympic games 2008.3
This paper aims at examining whether arms embargo is a necessary and efficient tool
to keep the balance of power in East Asia. Here it is argued that even despite the fact that
arms embargo remains intact, the balance of East Asia is already being changed in favour ofChina. To prove it, firstly the paper will briefly examine the EU attempts to lift embargo,
nowadays situation, and outlines some future trends. Secondly, it will study China’s trends interms of military budget, military capabilities, research and development expenditures andtechnology transfer from Europe.
To address above issues Realism theory of International Relations and Constructivist
approach are used in the paper. In authour’s opinion Realism is most applicable for this study
insomuch as there are not many liberals or constructivists among decision-makers in theinstitutions like the European Commission, Ministry of Foreign Affairs of Japan, Pentagon,
etc. Constructivist method makes possible to interpret security in a wider scope as an area
associated not strictly with military and power performance. 4 Besides, it would make possible
to point out and analyse the problems in the security dialogue and give some prescriptions
keeping in mind that benefits of cooperation are not always material.
The authour describes and analyzes a variety of primary documents, interview
materials (with Japanese and European officials) and secondary sources revealing the policy
practices, of China and relationship and activities between the EU, China, the US, Japan andtheir individual and joint policy practices. The issue of the EU arms embargo on China wastouched upon in the works of Nicola Casarini, Marcin Zaborowski, Jonathan Holslag, Ting
Wai and others.5 However, to the authour’s knowledge, there has not been a paper focused
exclusively on this issue from the perspective of integration in East Asia and therefore thisarticle can be regarded as a case-study to test the possibility of East Asian integration.

2. ARMS EMBARGO ISSUE: HISTORY AND PRESENT SITUATIONThe EU imposed embargo on arms exports to China in 1989 after Tiananmen Square incident,
and in 2003 – when the security issues were either absent or certainly not at the forefront of
2

Personal consultations with the Japanese and European Commission officials, Brussels, September 2008;
Europeans favour multilateralism that means rule of international law whilst “multipolarity” means the rule offew big, powerful states and instability.
3
See: European Parliament resolution of 10 April 2008 on Tibet (No. P6_TA(2008)0119); European Parliament
resolution of 10 July 2008 on the situation in China after the earthquake and before the Olympic Games (P6_TAPROV(2008)0362).
4
For details, please see: Barry Buzan, Ole Waever, and Jaap de Wilde. Security: A New Framework for Analysis.
London: Lynne Riener Publishers, London, 1998.
5
See for instance: Marcin Zaborowski, EU-China Security Relations, Paris: EU Institute for Security Studies,
February 2008; Jonathan Holslag, “The European Union and China: The Great Disillusion,” European Foreign
Affairs Review, No. 11, 2006, pp. 555-580; Ting Wai, EU-China Relations: Economic, Political and Social
Aspects, Report delivered at the Third European Union Studies Association Asia-Pacific Conference, Keio
University, Tokyo, 8-10 December 2005; Nicola Casarini, “The Evolution of the EU-China Relationship: from
Constructive Engagement to Strategic Partnership,” Occasional Paper (Paris: European Union Institute for
Security Studies), No. 64, 2006.
2

European considerations - it decided to re-consider this issue due to global changes that took
place since that time. 6 In addition, in the same year the EU and China agreed to form a
strategic partnership. Europe grasped China as a new opportunity to achieve multilateralworld order.7 The strategic partnership with China and lifting arms embargo were attempts tocounterbalance US unilateral policy especially in the light of the outbreak of war in Iraq. In
December 2003 during the Italian presidency the European Council gave mandate to theEuropean Commission and institutions concerned “to re-examine the question of the embargoon the sale of arms to China.”8 Ex-president of France Jacques Chirac and ex-chancellor ofGermany Gerhard Schroeder were particularly enthusiastic about lifting the embargo, as it
might facilitate the selling of their arms to China, while arguing that they are not going toexport high-tech weapons. In June 2004 during the Irish Presidency, the European Council“invite[d] the Council to continue its consideration of the arms embargo in the context of the
EU’s overall relations with China.” 9
The European plans, however, have led to a sharp criticism from Japan and the US.
Australia also opposed EU decision.10 Japan strongly opposed this attempt motivating it by“delicate East Asia’s security balance.”11 In the US both the Republicans and the Democrats
have argued that the proposal to lift the arms embargo is cynical ploy to open doors for theEuropean defence industry and that, even if arms sales remain limited, the EU is casting aside
more than a decade of human rights concerns for economic gains. 12 The US House ofRepresentatives voted to pass a resolution condemning the EU’s moves toward lifting its arms
embargo on China. The resolution alleged that lifting the embargo could destabilize theTaiwan Strait and put the US Seventh Fleet at risk. Moreover, the US policy-makers adopted
a series of initiatives clearly indicating the US opposition to the lifting and some of themwarned that if the EU ignores US security concerns the US will place restrictions ontechnology transfers to EU member states. 13 And it is a threat for European defence
companies since they are still largely dependent on the US defence technologies, not tomention the importance of the US market for them. American retaliation could have taken theform of sanctions targeting specific defence contractors that sell sensitive military-use
technology of weapons systems to China. Undoubtedly, possible US restrictions ontechnology transfers to Europe were a serious warning for European defence industry.
Perhaps the main mistake European Union made was absence of prior consultations
with the US on the lifting embargo. It was only after the public announcement of theEuropean Council on the embargo Annalisa Giannela, Javier’s Solana Personal
6

Marcin Zaborowski, EU-China Security Relations, Paris: EU Institute for Security Studies, February 2008, p. 1.
Jonathan Holslag, “The European Union and China: The Great Disillusion,” European Foreign Affairs Review,No. 11, 2006, p. 569.
8European Council, Brussels European Council, Presidency Conclusions, No. 5381/04, Brussels 12-13
December 2003, p. 19.
9European Council, Brussels European Council, No. 10679/2/04 REV2, 17-18 June 2004, p.16, item 77.
10Interview, Delegation of the European Commission in Japan, 26 June 2007.
11
See for instance: Japan-France Summit Meeting and Dinner Hosted by Prime Minister Koizumi, 27 March
2005. http://www.infojapan.org/region/europe/france/summit0503.html; Japan lodges fresh protest to EU plan tolift China arms embargo, 16 September 2005, EU business website.
http://www.eubusiness.com//Trade/050916160630.2zdp4yfa
12
Ellen Bork, Human Rights and the EU Arms Embargo, Memorandum of Opinion leaders, Washington, Project
for the New American Century (PNAC), 22 March 2005 cited in Nicola Casarini, “The Evolution of the EUChina Relationship: from Constructive Engagement to Strategic Partnership,” Occasional Paper (Paris:
European Union Institute for Security Studies), No. 64, 2006, p. 35.
13
Unites States Senate, Republican Policy Committee (John Kyl, Chairman), US Generosity Leads the World:
The Truth about US Foreign Assistance, 22 Febraury 2005. cited in Nicola Casarini, “The Evolution of the EUChina Relationship: from Constructive Engagement to Strategic Partnership,” Occasional Paper (Paris:
European Union Institute for Security Studies), No. 64, 2006, p. 35.
73

Representative on Non-Proliferation of Weapons of Mass Destruction, visited US, Japan,
Australia and other concerned countries to explain why the Europeans were considering
lifting the EU arms embargo on China. 14 After all, this attempt to lift embargo weakened
relations of the EU with the US and, moreover, negatively influenced on the image of theformer as independent and unified unity in the eyes of China.
To improve the situation in December 2004 the European Council stressed that arevised and stricter Code of Conduct will be put in place. Adopted in 1998, the EU Code of
Conduct on Arms exports lays down eight criteria against which member states assess
applications to export military equipment. Among the criteria several take into accountconcerns expressed by some partners of the EU, especially the US. 15 In October 2005, the EU
member states adopted a User’s Guide to the EU Code of Conduct on Arms Exports aiming tohelp members states (especially export licensing officials) apply Code of Conduct. 16 Yet, theCode of Conduct is not legally binding and the Council in its Sixth Annual Report of the EU
Code of Conduct on Arms Exports declared that a number of EU members states havepartially sidestepped the embargo by supplying China with components for militaryequipment, particularly engines for aircraft, frigates and submarines. The report shows thatthe values of licenses for arms exports to China increased from 54 million Euro in 2001 to
210 million Euro in 2002 and 416 million in 2003. France, Italy and the UK accounted foralmost all of the sales. 17 Thus, notwithstanding the embargo, some EU governments havebeen able to sell components for arms and the European Parliament urged to make Code of
Conduct legally binding for all EU member states.18
Though officially not legally binding, the embargo remains intact and after 2005
elections in Germany when Angela Merkel became the Chancellor of Germany attempts to lift
embargo have actually disappeared from the European agenda. In the meantime, it is clearthat the European and American security perspectives on China are not identical and indeed
they are increasingly divergent. Recently the continuing development of the EU as a global
security actor as well as the European security interests and the expansion of China’s interests
overlap in the some areas and regions (Africa, Middle East).19 As it will be demonstrated
below, such overlapping of interests have not brought an awareness on the European side that
China becomes global and possesses both opportunities and risks inasmuch as European
companies continue exporting technologies to China being attracted by Chinese market andconsumption capacity.
Being directly involved in the maintenance of balance of power in East Asia especiallywith regards to cross-straits relations, the US and Japan act much stricter towards mainland
China trying to avoid arms race between Beijing and Taipei.
For the Europeans the US remains staunchly opposed to any policy change on theembargo and the EU is concerned about making a move that could undermine the post-Iraq
transatlantic rapprochement. “However, the importance of transatlantic considerations in this14

Interview, Delegation of the European Commission in Japan, 26 June 2007.
Council of the European Union, EU Code of Conduct on Arms Exports, Brussels, 8 June 1998.
16
Council of the European Union, User’s Guide to the EU Code of Conduct on Arms Exports, 13296/05, PESC
853, COARM 43, Brussels, 14 October 2005.
17
Council of the European Union, Sixth Annual Report of the EU Code of Conduct on Arms Exports, Brussels,
November
2004;
see
also:
SIPRI,
TIV
ofarms
imports
toChina,
1993-2006(http://www.sipri.org/contents/armstrad/output_types_TIV.html), whereby France, Germany and UK sells arms
to China.
18
European Parliament, European Parliament resolution of 13 March 2008 on the EU Code of Conduct on Arms
Exports – failure of the Council to adopt the Common Position and transform the Code into a legally binding
instrument, Strasbourg, P6_TA(2008)0101.
19
Marcin Zaborowski, EU-China Security Relations, Paris: EU Institute for Security Studies, February 2008, p.
1.
15

4

decision seems exaggerated if not misjudged. After all, America’s other close allies,” - notes
Marcin Zaborowski, - “Israel and Australia are selling arms to China, which so far has not led
to any major friction in Washington’s relations with these states.”20 Yet, according to SIPRI
estimations neither Israel, nor Australia sell weapons to China. Israel made its last transaction
in 2001. 21
Japan, the US on one side and Europe on the other look differently at the issue of arms
embargo on China. While for Europe lifting arms embargo is connected with human rights
and multilateral world system, for Japan and the US it is a matter of hard security.22 When theword “China” is mentioned in Europe, the first reaction that a European has is “violation ofhuman rights” but not “threat to won security.” Here lays the main divergence in the views on
China, its military budget and capabilities.
In the meantime China possesses three risks. 23 The first risk is a threat to direct
neighbours, i.e. hard security. The second is the export of Chinese arms model abroad. There
are already some precedents, like Sudan and Zimbabwe. On one side China does not interfere
into domestic politics of countries. On the other it exports its military model there ignoring
the issue of human rights and democracy. The third risk is environment and economy. The
Europeans are concerned with the second and the third risks inasmuch as it relates to theirinterests in Africa and on the globe. At the same time, as Japanese diplomats note, Europe
does not take seriously the security environment in East Asia. 24 Unfortunately it is notpossible to find any sources that could shed the light on the progress of East Asia Strategic
Dialogue between the EU and Japan launched in 2005. For Europeans it is a forum toexchange opinions and understand each other’s positions on security balance in East Asia notnecessary leading to operational conclusions 25 while Japanese do consider this dialogue soefficient since everybody holds own position and is not ready to change it. 26
Moreover, Japan does not believe that there will be transparency in China’s military
budget.27 At least it does not count that it will be achieved in the near future. As such, Japan
has made steps towards closer cooperation but China remains a non transparent country interms of military expenses. In addition, Japan views China as a rising and non-transparent
country with big population, big territory, control of the party, strong army. 28 And the mainconcern of Japan is to know true intentions of China to modernizes its army. 29
Europe assumes that economic cooperation will foster convergence on other issues aswell. By increasing China’s dependence on European capital, consumers and technologies, it
aspires to achieve a spill-over of influence to other domains. This liberalist approach implies
that interdependence will make China automatically a responsible stakeholder in world peaceand stability. Moreover, developing China as a trading nation also has to trigger an interior
evolution that eradicates the germs of nationalism and xenophobia. Aside from this rather
spontaneous fine-tuning, commercial ties permit active steering as well. As China’s
development relies increasingly on Europe, economic sanctions and cooperation become more
powerful tools for influencing its transition. Thus, economic, political and societal linking issought to smooth differences in other domains, but it is also expected to add to Europe’s
20

Ibid, p. 4.
SIPRI,
TIV
ofarms
imports
toChina,
1993-2006(http://www.sipri.org/contents/armstrad/output_types_TIV.html).
22
Interview, Delegation of Japan to the European Commission, September 2008.
23
Ibid.
24
Ibid.
25
Interview, Delegation of European Commission to Japan, 26 June 2007.
26
National Institute for Defense Studies, Ministry of Defense of Japan, 27 September 2007.
27
Personal consultations with Japan’s high-rank military officer, Tokyo, 27 August 2008.
28
Ibid.
29
Interview, National Institute for Defense Studies, Ministry of Defense of Japan, 27 September 2007.
21

5

active-steering capacity. 30 However, such active entrepreneurial approach of Europe in the
military sphere has created a situation when Europe is starting to fear the reborn state inwhich it infused substantial investments, aid, political efforts, and patience. 31
All in all, though officially embargo stays intact, there are some cases of selling theweapons from EU member states (namely France, Italy, the UK) to China. We may say that
US and Japan uphold realistic approach and oppose the lifting while the EU advocates liberalview on relations with China in military sphere. Now it is worth examining the China’s
military budget.

3. CHINA’S CURRENT TRENDS
3.1. China’s military budget
In 2008 China’s defence budget increased by 17.6% and composed $59 billion (Figure 1),
which is 1.7% of China’s GDP, and $45 per capita. Jiang Enzhu, a spokesman for the
National People’s Congress, said that the 2008 budget would fund only a “moderate increase”
in weapons purchases. Most of the additional funds would go toward higher military salaries,
rising oil costs and training programmes, he said. He noted that the country has a longstanding plan to modernize its forces. 32 From 2003 to 2007, China’s national defence
spending increased by an annual average of 15.8%, while government revenue increased byan annual average of 22.1%.33 Hence, China argues that its military budget is mainly spent onarmy modernization and on salaries. However, Beijing does not specify the number and typeof People’s Liberation Army (PLA) armaments, which causes speculations in other countries,
especially the US, on that point.
The US places China’s military expenditures for 2008 between $97-$139 billion,
where the higher estimate is around 4% of China’s GDP. Regardless of the exact figure,officials from the US Pentagon intelligence service consider that the Chinese defence budget
remains the second largest in the world. The Japanese Ministry of Defence shares concerns
over China’s military budget non-transparency with the US. The Pentagon report said China’s
near-term focus remains on preparations for potential problems in the Taiwan Strait.
Moreover, China’s nuclear force modernization, its growing arsenal of advanced missiles andits development of space and cyberspace technologies are changing military balances in Asiaand beyond34 Accordingly, though the embargo remains intact, the security balance is alreadybeing changed in favour of China in East Asia.
Figure 1. Defence Expenditures of China: 1996-2007

30

Jonathan Holslag, “The European Union and China: The Great Disillusion,” European Foreign Affairs Review,No. 11, 2006, p. 567.
31
Ibid, p. 578.
32
“China’s Official Military Budget to Grow by 17.6% in 2008,” Defense Industry Daily, 6 March 2008.
33
Ibid.
34
Office of the Secretary of Defense, Annual Report to Congress: Military Power of the People’s Republic ofChina 2008, p. 29.
6

The US Defense
department argues theresourcesfor
PLA
modernization include
domestic
defenceexpenditures,indigenous
defenceindustrial developments,
dual-use technologies,
and foreign technology
acquisition – all ofwhich are driven by theperformance of theeconomy. 35 As China’s
industries
Source: Office of the Secretary of Defense, Annual Report to Congress: defence
Military Power of the People’s Republic of China 2008, p. 29. The graphic develop, the PLA is
depicts China’s official defense budget since 1996, and associated Department
relying on acquisition ofof Defense estimates of actual defense expenditures. Announced budgets are foreign weapons andfrom State Council announcements during the annual National People’s
technology, primarily
Congress meeting. Department of Defense estimates include projected
expenses for strategic forces, foreign acquisitions, military research and from Russia, to fillnear-term
capability
development, and paramilitary forces. All figures are in 2007 US dollars.
gaps.
China
also
harvests spin-offs from foreign direct investment and joint ventures in the civilian sector,
technical knowledge and expertise of students returned from abroad, and state-sponsoredindustrial espionage to increase the level of technologies available to support military research,development, and acquisition. Beijing’s long-term goal is to create a wholly indigenous
defence industrial sector able to meet the needs of PLA modernization as well as to compete
as a top-tier producer in the global arms trade. China is already competitive in some areas,such as communications, with leading international defence firms. 36 As it will be described
below, the primary goal of China is to develop domestic space industry that would allow
China to achieve hegemony both in civilian and military domains. Nonetheless, the US
already regards China’s modernized PLA being already a competitor to the US army incommunication technologies.
At the same time, a slightly different take comes from the Stockholm International
Peace Research Institute (SIPRI), which placed China behind the United States and Britain in
total defence spending in 2007, but 2nd to the United States in purchasing power parity at$140 billion to Washington’s $547 billion.37 According to SIPRI estimates in 2007 China’s
military expenditures reached $58.3 billion, which is 5% of world share military expenditures.
The modernisation and the growth of China’s Peoples Liberation Army (PLA) does
not raise the same concern in the EU as it does in the US. The EU recognises that China’s risemust inevitably be reflected in the military and defence spheres. However, whilst the growthof China’s military spending does not alarm the Europeans, Brussels is increasingly
concerned about the lack of transparency in this process. In particular, the EU is sceptical
about the actual level of the PLA’s budget and its military objectives. Consequently, the EU
has taken steps to develop its capacity to assess the PLA and China’s defence policy. 38 While35

Ibid, p. 31.
Ibid, p. 31.
37
See: SIPRI, Military Expenditure: SIPRI Yearbook 2008: Armaments, Disarmament, The 15 Major SpenderCountries in 2007.
38
Marcin Zaborowski, EU-China Security Relations, EU Institute for Security Studies, February 2008, p. 4.
36

7

the US debate remains focused on the rapid growth in China’s defence spending, theEuropeans point out that even if China spends twice as much as it declares this is still a small
fraction of the Pentagon’s nearly $500 billion budget. 39
Unfortunately, it was not possible to get information on European assessment ofChina’s military defence budget, but it is clear that it views it not as sensitively as the US.
Europeans take the increase of China’s military budget as necessity to modernize the PLA.
Contrary to the US, they are worried not so much about the increase of expenditures as about
non-transparency of the military budget. While China explains increased military budget byrising oil costs and training programmes as well as increased military salaries, the US regards
China’s domestic defence expenditures, along with indigenous defence industrial
developments, dual-use technologies, and foreign technology acquisition as main sources for
the PLA’s modernization, which enable China’s modernized nuclear force, advanced missiles
as well as space and cyberspace technologies to change the security balance in East Asia.
3.2. China’s military capabilities
The military budget is directly linked with China’s military capabilities. Due to nontransparency of the budget it is hard to estimate China’s military capabilities. As mentioned
above, official Beijing declares that China’s defence expenditures mainly comprise expenses
for personnel, training and maintenance, and equipment. Personnel expenses mainly coversalaries, insurance, food, clothing, and welfare benefits for officers, non-commissioned
officers and enlisted men as well as for civilian employees. 40 Training and maintenanceexpenses cover troop training, institutional education, construction and maintenance ofinstallations and facilities, and other expenses on routine consumables. The equipment
expenses mainly cover research on, experimentation with, and procurement, maintenance,transportation and storage of weaponry and equipment. The defence expenditures cover not
only the active forces, but also the militia and reserve forces. Also covered by the defence
expenditure are costs to support part of the retired officers, education of servicemen's children
and the national economic development, as well as other social expenses. 41 However, China
does not provide specific details on the number and type of PLA armaments and maintenanceschedules, nor the alignment of units, troop movements, training records or defence
spending.42
Beijing realizes that Chinese army must import advanced weapons and militarytechnology from other countries through “military diplomacy,” which envisages militaryexchange, cooperation with the neighbouring countries and regions, and China’s involvementin global security to build a stable and favourable international security environment. To
achieve it China feels strongly that it must actively proceed on a “revolution in military affairs(RMA) with Chinese characteristics.” In order to achieve the RMA, it is faced with the task of
the “informationization” of the PLA. However, the “mechanization” of the PLA to strengthen
the mobility and protection of PLA units is still less than complete. Having witnessed the first
Gulf War and the Kosovo War, where precision guided weapons were extensively employed,
China realized that major conflicts in the 21st century will be “information warfare,” and that
their outcome will be determined by C4ISR (command, control, communications, computers,
intelligence, surveillance, and reconnaissance) capabilities as well as by advanced space
39

Ibid.
China’s National Defense in 2006, Information Office of the State Council of the People’s Republic of China
December 2006, Beijing, Chapter 9. Defence Expenditure.
41
Ibid.
42
National Institute of Defense Studies of Japan, East Asian Strategic Review 2007, Tokyo, March 2007, p. 126.
40

8

technologies. 43 With this in mind, the PLA set the “dual-historical task” of simultaneous
mechanization and informationization. Afghanistan and Iraq wars impressed the leadership of
the People’s Liberal Army (PLA) with the level of informatization. It was reflected in the
Chinese defence white paper, China’s National Defense in 2006 whereby it declared “thestrategic goal of building informationized armed forces and being capable of winning
informationized wars by the mid-21st century.”44
Therefore, the PLA pursues its goal by means of science and technology. It works toaccelerate change in the generating mode of war fighting capabilities by drawing on scientificand technological advances. The PLA seeks to raise its capabilities of independent innovation
in weaponry and equipment, as well as defence-related science and technology, and strives tomake major breakthroughs in some basic, pioneering and technological fields of strategic
importance. It is stepping up its efforts to build a joint operational command system, training
system and support system for fighting informationized wars and enhance the building ofsystems integration of services and arms. 45
Taking above into consideration lifting the EU arms embargo would potentially allow
China access to military and dual-use technologies that would help it improve current weapon
systems. Moreover, due to the facts that certain arms and technologies have been transferredby European countries despite the embargo, China could have started working on its futureadvanced weapon system. Ending the embargo could also remove implicit limits on Chinese
military interaction with European militaries, giving China’s armed forces broad access tocritical military “software” such as management practices, operational doctrine and training,
and logistics expertise. Moreover, if the embargo is lifted, China’s strategy would likely
center on establishing joint ventures with EU companies to acquire expertise andtechnology. 46 In the medium to long term, however, China is likely interested in acquiring
advanced space technology, radar systems, early-warning aircraft, submarine technology, andadvanced electronic components for precision-guided weapons systems.
In the 1990s – early 200s China has been modernizing the conventional weapons
arsenal. In 2006-2007 China has decreased the import of military weapons by 62%. 47 China
imported helicopters, radars, airplane engines and missiles as well as Kilo-type submarines(Figure 2).
Figure 2. Russian Arms Sales to China, 2001-2005

Equipment
Su-30MKK aircraft
Kilo-class submarines
SOVREMENNYY II-class destroyers
S-300PMU-1 surface-to-air missile system
Su-30MK2 aircraft
S-300PMU-2 surface-to-air missile system
AL-31F aircraft engines for the F-10 fighter

Year
2001
2002
2002
2002
2003
2004
2004

Quantity38
up to 82
4 battalions
24
8 battalions
100

43

National Institute for Defense Studies, Ministry of Defense of Japan, 27 September 2007.
China’s National Defense in 2006, Information Office of the State Council of the People’s Republic of China
December 2006, Beijing, Chapter 2.National Defence Policy.
45
Ibid.
46
Annual Reports to Congress: Military Power of the People’s Republic of China 2006, Office of the Secretaryof Defense, pp. 22-23.
47
Andrey Terekhov, Viktor Myasnikov, “China transfers to self-sufficiency in Russian weapons [Kitay
perehodit na samoobespecheniye Rossiyskimi vooruzheniyami],” Nezavisimoye Voyennoye Obozreniye, 4 April
2008.
http://nvo.ng.ru/notes/2008-04-04/8_china.html
449

SimultaIL-76 transport aircraft2004
10
neously,
China
RD-93aircraft engines for the JF-17 fighters
2005
100
assembled
IL-76 transport aircraft
2005
40
airplanesupon
IL-78 tanker aircraft
2005
8
Russianlicense.
Source: Office of the Secretary of Defense, Annual Report to Congress: Military PowerAll in all, Chinaof the People’s Republic of China 2006, p. 21. Note: Quantity indicates numbers of units
in the purchase agreement. Actual deliveries may be spread across several years.
would
need
Russian military equipment less and less, which is its intentions. Meanwhile “… the defence
industry of China is developing due to import of license and equipment form Russia, whichallows China to increase its own production,” acknowledges SIPRI researcher Paul Holtom. 48
At the same time Moscow fears that its military products would be copied by China. For
instance, Russia exported Su-27k and now China has very similar airplane J11B. In the airforce China possesses more than 150 SU-27, SU-30 and possibly SU-33. In naval force Chinabought Kilo-class submarines and Sovremenny II class destroyers. Thus, firstly because of
copyrights Russia is not in a hurry to export more weapons to China. Secondly, China has
almost re-modernized its army and therefore it does not need more units of weapons from
Russia. Therefore, it can be expected that Russia’s export to China would decrease in the
coming years. In addition, to counterbalance China, Russia also sells its weapons to India,
which makes China very unsatisfied with this fact.
The most noticeable development in the overall balance of air warfare capabilities inNortheast Asia is China’s increased deployment of Su-27 and Su-30 fourth-generation
fighters. In sheer terms of number of fourth-generation fighters owned, China already rivals
Japan and may take the lead in the near future.49 If that happens, the balance in air power
would greatly shift in China’s favor, with Japan losing the qualitative superiority it has so far
enjoyed. As such, the regional strategic balance is changing, and thus is a critical concern forboth Japan and the United States.50
In addition, Japan and the United States are the only countries that operate full-scale
airborne warning and control system (AWACS) capabilities in East Asia, and the qualitative
strategic superiority enjoyed by both nations largely derives from those capabilities. However,some security experts hold that it is only a matter of time before China puts full-fledged
AWACS capabilities into operation. 51
Finally, from global perspective lifting the EU arms embargo could accelerate
weapons proliferation to countries that the EU wants to remain isolated. Beijing’s track recordin transfers of conventional arms and military technologies suggests EU or other third party
sales to China could lead to improvements in the systems that Chinese companies market
abroad, including to countries of concern (in the Middle East, Africa). Hence, for the US andJapan the main concern about China is a discrepancy between what it declares and what isreally pursues. The problem of transparency complicates the situation around PLA’s
capabilities as well as around the lifting.
From market viewpoint, lifting the EU embargo would also lead to greater foreigncompetition to sell arms to the PLA, giving Beijing leverage over Russia. In order to secure
its share on the Chinese defence market, hypothetically the US would start selling weapons to
China too. Then China would be very selective in weapons it would buy inasmuch as it has
almost finished to re-modernize its army and according to the strategy development it isplanning to export arms itself (it may have potential customers in Africa and Central Asia).

48

Ibid.
National Institute of Defense Studies of Japan, East Asian Strategic Review 2008, Tokyo, March 2007, p. 214.
50
Ibid.
51
Ibid, p. 213.
49

10

As demonstrated, even despite the embargo intact, the security balance in East Asia isalready changing in favour of China especially in communication technologies, possibly air
warfare technologies. China’s primary goal is advanced technologies, including space ones.
Therefore, now we will examine what China does in research and development area.
3.3. China’s R&D expenditures, Research centres
During Cultural Revolution scientists and scholars, and science and technology were
oppressed. In 1978 at the 4th National Conference on Science and Technology Deng Xiaoping
made clear that along with industry, agriculture and army, science and technology is the
fourth point of modernization. 52 Since then the expenditures on R&D have been gradually
increasing (Figure 3). Though not considerable in terms of GDP ratio (increase from 0.6% in
1995 to 0.8% 2006), China increased expenditures on R&D.
In 1978 the slogan “Science and Technology is the leading productivity power”
emerged. 53 Next, after announcement of three reformations (state enterprises, financial,administrative) and in order to employ population, the emphasis was made on thedevelopment of private business in high-tech sector. Later, in addition to traditional high-tech,
there were set high-tech companies in information technology, biotechnology andpharmaceutics.
In 2006 the State Council of China adopted the Guidelines on National Medium- andLong-Term Program for Science and Technology Development (2006-2020), whereby itstates that “by 2020, the progress of science and technology will contribute at least 60 percent
to the country’s development. Meanwhile, the country’s reliance on foreign technology will
decline to 30 percent and below.”54 Thus, instead of dependence on imported technologies,
China is going to rely upon its resources. According to the guidelines, China will pushenterprises to spend more on research and development while state financial investment will
be used to mainly develop basic research.
The Guidelines defined eleven sectors where the technological development is given
priority. These key industries are energy, waters resources, mining resources, the environment,
agriculture, manufacturing, communications and transport, information industry and modern
service industries, population and health, urbanization and urban development, public security,and national defence. With regards to the last sector, national defence, it is envisaged that
“China will reform the current scientific and technological management system and combine
and coordinate the military and civilian research organizations.” 55 In this view China
encourages military organizations to shoulder up the tasks of scientific research for civilianuse. At the same time, civilian research institutes and enterprises are also allowed to take partin national defence research projects. 56
Figure 3. China's Expenditure on
Science and Research in 1978-2004 (mln yuan)

52

National Institute of Science and Technology Policy (NISTEP), MEXT, Syuyona Kuni ni Okeru Shisaku Doko
Chyosa Oyobi Tassei Koka ni Kakaru Kokusai Hikaku Bunseki [Comparative Analysis on S&T Policies andTheir Achievements between Major Countries], NISTEP Report No. 81, May 2004, p. 284.
53
Ibid, pp. 284-319.
54
China Issues Science and Development Guidelines, 9 February 2006, Chinese Government’s Official Web
Portal: http://www.gov.cn/english/2006-02/09/content_183426.htm
55
China Issues Guidelines on Science and Technology Development Programme, 9 February 2006, Chinese
Government’s Official Web Portal: http://www.gov.cn/english/2006-02/09/content_184426.htm
56
Ibid.
11

China possesses
considerable economic
and human resources toimplement its strategy. It
1800
welcomesthe1600
establishmentof1400
research centres and
1200
even
provides1000
favourable tax regime
800
for them. It is also
600
concerned with brain
400
drain
and
prefers
200
scientists
and0researchers not to leave
the country thus creating
appropriate conditions
Source: China Statistical yearbook 2007 http://www.stats.gov.cn/tjsj/ndsj/2007/indexeh.htm
forresearch57
domestically.
Actually, China has no shortage of well-trained scientists, engineers,mathematicians or other technical experts. A considerable majority of Chinese scholars
educated abroad over the last two decades are working on key research projects in China thus
applying both knowledge and high-tech technologies to conduct research independently or incooperation with foreign colleagues. Nowadays China’s research and development is
especially active in atomic nuclear power energy, space industry, high energy physics,
biology, computer science, electric communications, where China attained or is approachingadvanced level. Such tremendous development cannot not worry its counterparts both fromviewpoints of competition and adaptation new conditions dictated by Chinese growth.
To conclude, China’s primary goal in military area is to have advanced spacetechnologies. China and the EU have agreed to open their research programmes toaccommodate the increasing number of joint research projects. More and more Chinese havebeen invited to participate in the EU-funded 7th Framework Programme for research,
Technology Development and Demonstration Activities (RTD) for the period 2007-2013 andChina is attracting Europeans into projects under its research programmes.
Constant increase of expenditures on research and development, establishment ofresearch centres, granting favourable tax regime to these centres and joint projects withforeign institutions and states on R&D provide a sound basis for China’s aspiration to become
the exporter of technologies in the future. Moreover, since Beijing is uniting civil and defence
research, it would not be hard for China to produce and export its own advanced weapons.
Obviously, emergence of China as arms exporter would restructure the world weapons market.
In order to achieve the goals as fast as possible, China is active in importing high technologies
and in the next section we are going to study European technology transfer to China.
19
78
19
85
19
91
19
93
19
95
19
97
19
99
20
01
20
03
20
05

China's Government Expenditures for Scienceand Research in 1978-2006 (100 mln yuan)

3.4. European Technology Transfer to China
It is obvious that in an increasingly globalised economy China is likely to depend on its
capacity to maintain and develop its comparative advantages in high-technology goods. The
Chinese government has emphasised the need for FDI to be coupled with the transfer of more
57

Interview, Research Centre for Advanced Science and Technology (RCAST), University of Tokyo, 27 April
2006.
12

20
05
20
10
(e
)
20
20
(e
)

20
04

20
03

20
02

20
01

20
00

19
99

19
98

19
97

19
96

19
95

advanced technologies to China. 58 In an effort to develop high-tech industries, Chinese
foreign import technology policies have become increasingly selective and restrictive in thetype of imports and investments that are allowed or officially encouraged. In particular, there
have been increased emphases on industry-specific investment and high-technology imports.
Owing to it China has become the world’s first exporter of information technology products,
though, as discussed previously, the large proportion of these exports come from foreigncompanies established in China thatimport research-intensive, high value- Figure 4. R&D Expenditures in GDP
in China, Japan, EU, USA
added components.
R&D % of GDP
Innovative technologies are%tools to implement successful
4
3,5
strategies to stay competitive on the3world market. In 2006 the European
2,5parliament acknowledged, “[whereas]
2
China has tripled its expenditure on
1,5
research and development in the past
1
0,5
five years… Europe must rise to this0challenge in order to continue to59
benefit from world trade in future.”
USA Japan EU-25 China(Figure 4) As demonstrated herein,
research and development is not only Source: MEXT, Indicators of Science and Technology 2005.
trade and competitiveness in the world but also security, i.e. sophisticated weapons, social
expenditures and the competitiveness in the many areas, not exclusively trade.
All in all, access to China’s attractive market is often used as leverage to get foreign
partners in larger joint ventures to provide their technology on terms that most Westerncompanies would not be ready to accept anywhere else. 60 By purchasing high-tech goods off
the shelf, China does not have to pass through the development process itself. However, thegovernment is also chasing more actively for technological development and knowledge. 61
Thus, in its EU Policy Paper, Beijing appeals to Europe to ease restrictions on high-tech
exports, and vows to tap the enormous potential of technological cooperation. 62 The Chineseside would like to see EU participation in IT promotion. Space technology, high energy
physics, polar exploration and development, life science, biotechnology, bio-diversity,
resources, environment and human health are other major areas of interest. China succeededin plugging into European expertise in several of these fields. In terms of technology transfer,
EU countries already are China’s biggest supplier of technologies and equipment. 63 By theend of September 2004, China had introduced 18 363 technologies from the EU with acontract value of $79.4 billion.64 Below I will briefly demonstrate how actively China andEurope cooperate in science and technology area.

58

For details see: Olena Mykal, “China within Global Technology Transfer Policy of Japan: Implications for
Europe,” Asia-Pacific journal of EU Studies, Vol. 4. No. 2, pp. 137-66.
59
European Parliament resolution on prospects for trade relations between the EU and China (2005/2015(INI),
Official Journal of the European Union, 28.9.2006, C 233 pp. 103-111, item M.
60
Nicola Casarini, “The Evolution of the EU-China Relationship: from Constructive Engagement to StrategicPartnership,” Occasional Paper (Paris: European Union Institute for Security Studies), No. 64, 2006, p. 30.
61
Jonathan Holslag, “The European Union and China: The Great Disillusion,” European Foreign Affairs Review,No. 11, 2006, p. 573.
62
State Council, China’s EU Policy Paper (State Council, Beijing, 2005), section II.1.
63
Jonathan Holslag, “The European Union and China: The Great Disillusion,” European Foreign Affairs Review,No. 11, 2006, p. 562.
64
Huang Qing, “China-EU Relations: More Vigorous. More Mature,” People’s Daily, 16 December 2005.
13

To start with, in September 2003 China joined the European satellite navigation
project Galileo contributing 230 million Euro. As a natural cause it leads to technology
sharing between Europe and China, which allows China to develop the satellite guided
navigation technology by Chinese domestic industry. Moreover, China’s goal is to reachmilitary superiority in space, which is a key element to achieving operational objectives of the
PLA. Although most of China’s space programmes have mainly commercial and scientificpurposes, improved space technology has the potential to significantly improve Chinese
military capabilities. 65 The European side rejects American worries that China could gain amilitary advantage from Galileo. The European Commission argues that the Public Regulated
Service (PRS) would be withheld from China and any other non-EU participants in the system.
The PRS is a encrypted signal, meant to guarantee continuous signal access in the event of
threats or crisis. Unlike other Galileo signals, the PRS will be accessible even when the otherservices are not available, making it suitable for security- and military-related uses. 66 Yet, as
Nicola Casarini acknowledges, “there is still a fair amount of unpredictability as to what
China will be able to use – or not to use – in the end. However, in any case research work on
Galileo will assist China in fostering the development of its own, independent satellite
navigation system. In fact, as already happened in the past, China will almost certainly be able
to sue foreign technology to upgrade its indigenous space capabilities.” 67
Secondly, France, Germany and the United Kingdom lobbied hard to convince Beijing
to purchase Airbus aircraft instead of its American rival Boeing to secure the share of therising China’a defence budget.68 The Airbus - whose corporate parent is European Aeronautic
Defence and Space - partnership with China dates to 2005, when the company opened adesign center in Beijing. In June 2006, Airbus agreed to set up an A320 assembly line in
Tianjin. That line, which is still under construction, is expected to make about four planes amonth by 2011. In November 2007 Airbus received orders from Chinese airlines for 160
passenger planes worth about $14.8 billion. In return, Airbus promised “to award to Chinesecompanies at least 5 percent of the supply contracts for its next-generation widebody jet, theA350-XWB.” 69 Outside of euro-zone such jet was offered only to Russia. 70 Airbus said it
would involve its Chinese partners in the development of the 300-seat A350 plane in Harbin,
where the site is expected to be ready in 2009. Airbus said that its initial guarantee of 5
percent of the work “may be enlarged based on the future business plan.” In addition, Airbus
signed a memorandum of understanding with the National Development Reform Commissionthat granted risk-sharing supply contracts to Chinese manufacturers for many of the A350’s
moving parts, including wing flaps and tail rudders. Hence, Airbus has increasingly offered

65

William S. Murray III and Robert Antonellis, “China’s Space Program: The Dragon Eyes the Moon (and Us),”
Orbis, Autumn 2003, pp. 645-52, cited in Nicola Casarini, “The Evolution of the EU-China Relationship: from
Constructive Engagement to Strategic Partnership,” Occasional Paper (Paris: European Union Institute for
Security Studies), No. 64, 2006, p. 29.
66
Gustav Lindstrom, Giovanni Gasparini, “The Galileo Satellite System and its Security Implications,”
Occasional Paper (Paris: European Union Institute for Security Studies), 2003, No. 44, p. 19.
67
Nicola Casarini, “The Evolution of the EU-China Relationship: from Constructive Engagement to StrategicPartnership,” Occasional Paper (Paris: European Union Institute for Security Studies), No. 64, 2006, p. 29.
68
Jonathan Holslag, “The European Union and China: The Great Disillusion,” European Foreign Affairs Review,No. 11, 2006, p. 570.
69
Nicola Clark, David Laguea, “Airbus Part of $30 Billion in Contracts with China,” The New York Times(electronic edition), 27 November, 2007.
70
European Aeronautic Defense and Space (EADS), corporate parent of Airbus, in March 2007 agreed to give 5
percent of the work on the A350 to Russian companies as part of a $4.4 billion deal that committed the Russiancarrier Aeroflot to buying 22 planes. See: Nicola Clark, David Laguea, “Airbus Part of $30 Billion in Contracts
with China,” The New York Times (electronic edition), 27 November, 2007.
14

China projects that over time will make Chinese producers critical suppliers of components
and sub-assemblies for some of the most important Airbus products.71
Thirdly, French nuclear company Areva won an $11.9 billion agreement to build
nuclear reactors as well as to supply technology and uranium to China that tries to reduce its
dependence on coal. Areva is expected to build two third-generation reactors at Taishan in thesouthern Chinese province of Guangdong under a contract with China Guangdong Nuclear
Power. In response the Chinese company agreed to buy 35% of the production of Areva’suranium-mining subsidiary, UraMin, which plans to obtain the nuclear fuel from its threemines in Africa. In addition, Europe and China could become long-term partners in nuclear
fuel processing after Areva signed a separate deal with the China National Nuclear
Corporation to study whether to build a reprocessing plant for spent fuel.
Finally, the telecommunications equipment maker Alcatel-Lucent, the engineeringgroup Alstom and the utility groups Suez and Électricité de France also have large contracts
in China. Alcatel-Lucent, the world’s biggest maker of telecommunications gear, received
orders worth 750 million euros to expand the networks of China’s two largest cellphone
carriers. The French utility Suez signed agreements with two cities, Chongqing and Tianjin,
for water and waste management services, while engineering group Alstom received acontract worth 43 million euros to supply electronic equipment for the subway system of
Shanghai. Eurocopter, a division of EADS, was expected to sign a contract with China’s
military for 10 helicopters worth 80 million euros.
Abovementioned cases confirm the value of China as a market for European
technology despite tensions over human rights, trade and the environment. To generalize, theaccumulation of the transferred technologies and their application in domestic researches(without investing so heavily in research previously done by Europeans, Americans orJapanese) supposes that little by little China becomes or already became the leader in R&D.
As Nicola Casarini notes, “Europe has become over the years a source for advanced
technology that would otherwise be more difficult (if not impossible) to obtain from the US or
Japan.”72 Access to advanced technology not only ensures competitiveness over medium tolonger term, but it is also a prerequisite for the modernization of Chinese industry and by
default army. Therefore, given the pattern of technology transfer between Europe and China,
the practical impact of the embargo is highly questionable. Moreover, though Europeans wantto establish a system where China depends on Europe, there is an opposite side of the “coin”:
Europe becomes increasingly dependent on China.

4. CONCLUSION - IMPLICATIONS FOR EAST ASIAN INTEGRATION PROCESSThe EU attempts to lift arms embargo on China have a direct influence on the futureof East Asian integration and limited impact on security balance in the region inasmuch as it
is already changing in favour of China. Firstly, in spite of the embargo some EU member
states sell weapons to China. Secondly, unlike the US and Japan, Europe does not consider
increase of China’s military expenditures as an alarming sign of its militarization. Therefore,
it is quite skeptical about China’s actual military expenditures arguing that still they are far
71

Claud Fouquet, “La France engrange 9 milliards d’euros de contracts avec la Chine,” Les Echos, 6 December
2005 (Tue), p. 6, cited in Nicola Casarini, “The Evolution of the EU-China Relationship: from Constructive
Engagement to Strategic Partnership,” Occasional Paper (Paris: European Union Institute for Security Studies),
No. 64, 2006, p. 30.
72
Nicola Casarini, “The Evolution of the EU-China Relationship: from Constructive Engagement to StrategicPartnership,” Occasional Paper (Paris: European Union Institute for Security Studies), No. 64, 2006, p. 29.

15

from almost $500 billion Pentagon budget. Thirdly, in the US (and possibly European)estimations China’s modernized nuclear force, advanced missiles, communication, space andcyberspace technologies are changing the security balance in East Asia. Fourthly, China andthe EU are actively involved in joint research projects, where Galileo is most illustrative case.
Constant increase of expenditures on research and development, establishment of research
centres, granting favourable tax regime to these centres provide a sound basis for China’s
aspiration to become a producer and exporter of both civilian and military technologies in the
future. Finally, though being aware that R&D are closely connected with dual-use
technologies and advanced weapons, Europe actively transfers production together withtechnologies to China as in the case with Airbus.
Therefore, given the scope of cooperation between Europe and China, the practical
impact of the embargo is doubtful. It should be also stressed that while US (and Japan)
upholds monoltipolarity, the EU attempts to counterbalance it by inter alia attracting China
into a construction of multilateral world order. However, emergence of China as a global
player with not clear intentions possesses risks due to non-transparent military expenditures,changing military balance in East Asia, hasty and selective technology import.
As demonstrated, the arms embargo is not so much an effective tool to contain China
and motivate it to improve domestic situation with human rights due to extensive relations
between Europe and China and other ways European technologies to be introduced in China’s
defence area. The EU arms embargo is a litmus paper that gives an idea how the US, Japan on
one side and Europe on the other views China’s military capabilities: it indicates unlikelinessof common vision between China and Japan on regional integration. Therefore, unlessproperly nurtured, nowadays Sino-Japanese relations would continue to be locked in thepattern of interdependence in economy and rivalry in politics.

16