United States General Accounting Office

GAO Report to Congressional Committees

June 1995 NATIONAL SECURITY

Impact of China’s

Military Modernization

in the Pacific Region

GAO/NSIAD-95-84

GAO United States

General Accounting Office

Washington, D.C. 20548

National Security and

International Affairs Division

B-260323 

June 6, 1995

The Honorable Benjamin A. Gilman

Chairman

The Honorable Lee H. Hamilton

Ranking Minority Member

Committee on International Relations

House of Representatives

We are providing information on the nature of China’s military modernization and how it

compares to military modernization efforts of other Asian nations.

As agreed with your staff, we plan no further distribution of this report until 5 days after its

issue date. At that time we will send copies of this report to other interested congressional

committees and the Secretaries of State and Defense. Copies will also be made available to

others on request.

This report was prepared under the direction of Joseph E. Kelley, Director-in-Charge,

International Affairs Issues, who may be reached on (202) 512-4128 if you or your staff have any

questions. Other major contributors to this report are listed in appendix III.

Henry L. Hinton, Jr.

Assistant Comptroller General
Executive Summary

Purpose With the end of the Cold War, the Asia-Pacific region faces an uncertain

security environment. China, once viewed as a counterweight to Soviet

aggression, is now viewed as a country that aspires to fill the role of the

leading regional power. China is pursuing long-range military

modernization that emphasizes the upgrading of its air and naval power

and a realignment of its force structure. These actions and China’s lack of

openness on military matters have raised questions about its intentions.

GAO undertook a study of China’s military modernization due to numerous,

and often conflicting, reports of a military buildup in China. GAO’s

objectives during this study were to (1) assess the nature and purpose of

China’s military modernization, and (2) compare China’s military

modernization efforts with those of other Asian nations. GAO’s work is

intended to assist the Congress in decisions it faces concerning China and

the region.

Background China’s military, known collectively as the People’s Liberation Army (PLA),

is the world’s largest military force. Its weaponry, however, consists

mostly of outdated equipment, and its troops are not well trained in the

tactics of modern warfare. Since 1975, China’s four major national goals

have emphasized agricultural development, industrial growth, enhanced

research and development, and military modernization. Military

modernization, however, appeared to be the lowest priority as it was not

until 1989 that China began to devote more resources to this goal.

Results in Brief China has begun to modernize its military by acquiring some new weapon

systems, restructuring its forces, and improving its training. Since 1989,

the official Chinese defense budget increased annually at a double digit

pace, but our analysis revealed that when adjusted for inflation there has

been almost no real growth in the official defense budget. Major categories

of defense spending, such as weapons acquisitions and research and

development, however, are not part of the official budget. To date, few

new weapon systems have been acquired, and other improvements, such

as better training, have benefited only a few units. China’s military

modernization is being driven by several factors, including a desire to be

the leading regional power in Asia, lessons learned about modern warfare

from the Gulf War, the need to protect its economic/territorial interests,

and a need to maintain internal stability.

Page 2 GAO/NSIAD-95-84 National Security
Executive Summary

U.S. and Asian officials and scholars GAO interviewed commented that as

China’s military capability increases so does regional anxiety about its

intentions. Although many Asians believe that China now presents a

limited threat to them, they are concerned that in the future China will

have greater military capability with which to challenge them in contested

areas. Tempering the potential for aggression is China’s economic

development, which relies heavily on foreign investment and trade.

Further, many of China’s neighbors are also modernizing their militaries,

some more extensively and rapidly than China.

U.S. policymakers recognize that to deter aggression and combat the

proliferation of weapons of mass destruction, integration, not isolation, of

the region’s powers is important. The United States and Asian nations are

reinforcing bilateral arrangements and pursuing multilateral dialogue, and

U.S. policymakers are trying to renew relations with the PLA to better

understand China’s intentions. Although many experts do not consider

China a security threat, China could eventually emerge as a more

formidable power.

Principal Findings

China Is Slowly Changing

Its Military Force Structure

China has reduced its forces, acquired modest amounts of new military

equipment, increased its defense budget, and changed its military doctrine

in an effort to modernize its military. In addition, China maintains a

nuclear arsenal and is the only country currently conducting nuclear tests.

However, after it completes a series of nuclear tests by 1996, China

reportedly desires to see a comprehensive test ban treaty implemented.

The closed nature of the PLA is an obstacle to clearly understanding

China’s long-range military objectives, but actions to date indicate China

has begun to slowly, methodically modernize its military structure.

Although China’s official defense budget increased about 159 percent

between 1986 and 1994, when adjusted for inflation, it actually increased

by only 4 percent. According to Chinese officials and many China

specialists, enhancements to the military’s salaries and standard of living

have been the cause for most of the increases in the official budget.

However, China’s official defense budget does not include its total defense

expenditures. For example, the official budget does not include profits

from defense sales and PLA commercial activities, nor does it include costs

Page 3 GAO/NSIAD-95-84 National Security
Executive Summary

of major weapon acquisitions funded from other budget accounts.

Because of uncertainty about the amounts of other defense revenues,

including profits the PLA actually earns from its commercial enterprises

(such as hotels, casinos, and mines) and how these profits are used, it is

impossible to determine total defense spending. Estimates of China’s

actual defense spending vary widely, but most estimates are about two to

three times the official budget.

China reduced its military personnel by about one-fourth from 1985 to

1990 and plans additional reductions. The Chinese are buying, or are

reportedly interested in buying, modern long-range bombers and fighters,

in-flight refueling capability, an airborne early warning system, antiaircraft

missile defense systems, submarines, and other advanced equipment from

Russia and other suppliers of military equipment or military-related

technology. China is also building several naval vessels and has its own

fighter aircraft development program. The more modern equipment is

being procured in relatively small numbers. For example, China has

bought 26 Su-27 fighter aircraft from Russia and has built 1 Luhu class

destroyer. Major acquisitions are often financed through the proceeds

from weapons exports. From 1985 to 1991, China sold about $12 billion in

defense equipment, according to the U.S. Arms Control and Disarmament

Agency. Defense exports have fallen since the end of the Iran-Iraq War,

during which China sold weapons to both countries.

Justification for and

Influences on Military

Modernization

Several factors appear to be driving China’s military modernization. The

Gulf War demonstrated that Chinese equipment and military doctrine were

obsolete for the conditions of modern warfare. Other factors include a

desire to attain military power commensurate with China’s growing

economic power, the protection of sovereign territories and economic

zones, and the ability to deploy forces quickly within China to maintain

internal stability.

China has territorial disputes with many countries in the region. The most

prominent examples are China’s claim to the South China Sea and its

resolve to use force if Taiwan declares independence from the mainland.

Many government officials and academics believe that Chinese military

action is unlikely because it would precipitate negative foreign reaction.

China’s economic development, its first priority, depends heavily on

foreign trade, investment, and assistance. As a result, China has attempted

to diplomatically minimize potential problems that could result from

competing geographical claims.

Page 4 GAO/NSIAD-95-84 National Security
Executive Summary

Other Asian Nations Are

Modernizing Their Defense

Forces

Economic prosperity is allowing other Asian nations to modernize their

militaries too. With few exceptions, most Asian nations’ current military

capabilities are, like China’s, also limited and based on older technologies.

Until recently, many Southeast Asian nations faced serious internal

security threats, and their military forces were focused on

counterinsurgency warfare. As internal security threats subsided, many

Asian nations changed their focus to external defense, including

protecting their trade routes. Economic growth has allowed them to

devote more resources to defense and take advantage of the current

buyers’ market in defense equipment.

Enhancing Regional

Stability Through

Engagement With China

China’s role in regional and international security matters is increasingly

important and critical to the furtherance of arms control and other

security matters. As a permanent member of the United Nations Security

Council, a nuclear state, a rising economic power, and a major

Asian-Pacific nation, China increasingly impacts on U.S. security

objectives. Accordingly, in late 1993, the United States initiated a policy of

resuming dialogue with the PLA that had been suspended since the

June 1989 Tiananmen Square massacre of pro-democracy demonstrators.

Current U.S. objectives include (1) influencing China’s security community

on a range of issues of mutual concern, including proliferation and

regional stability, (2) increasing mutual understanding and trust between

the militaries, (3) promoting transparency within the PLA and gaining

operational insights into the PLA that may assist in clarifying intentions,

and (4) encouraging Chinese participation in multilateral security

arrangements that promote global and regional stability. U.S. security

engagement policy is being carried out through high-level dialogue,

functional exchanges, and routine military activities. Although these

meetings have been positive, establishing effective military dialogue in the

wake of Tiananmen Square will take some time.

Asian leaders hold the view that the United States must remain politically,

economically, and militarily engaged in the Asia-Pacific region to ensure

stability. The most visible sign of U.S. commitment is the presence of U.S.

forces in the region. Many Asians believe, however, that the American

public will ultimately call for further reductions in the U.S. overseas

military presence. Concerned that a U.S. withdrawal could lead to regional

instability, many Asians are establishing or reinforcing bilateral ties with

the United States and engaging in multilateral dialogue. On the future

multilateral agenda are discussions of transparency in defense planning

and diplomatic resolution of territorial disputes.

Page 5 GAO/NSIAD-95-84 National Security
Executive Summary

Recommendations This report contains no recommendations.

Agency Comments In commenting on a draft of this report, the Departments of Defense and

State concurred with its overall content and conclusions.

Page 6 GAO/NSIAD-95-84 National Security
Page 7 GAO/NSIAD-95-84 National Security
Contents

Executive Summary 2

Chapter 1 

Introduction

10

Relations Among the Asian Nations 10

U.S. Military Relations With China 13

Objectives, Scope, and Methodology 14

Chapter 2 

Overview of China’s

Force Modernization

16

China Spends More on Defense Than Official Budget Shows 16

PLA Is Modernizing Forces Slowly, With Limited Effect 19

China Maintains Numerous Weapons of Mass Destruction 24

Reasons for China’s Force Modernization 25

Conclusions 27

Chapter 3 

Regional Defense

Spending,

Modernization, and

Dialogue

28

Asian Nations’ Defense Spending Has Increased 29

Asian Nations Are Modernizing Military Forces to Respond to

Potential Regional Conflict

31

Multiple Factors Influence Asian Nations’ Defense Spending and

Modernization

36

Asian Nations’ Concerns About China 41

Asian Nations’ Support Dialogue on Security Issues 43

The United States Is Taking Steps to Engage China 44

Conclusions 45

Agency Comments 46

Appendixes Appendix I: Comments From the Department of Defense 48

Appendix II: Comments From the Department of State 49

Appendix III: Major Contributors to This Report 50

Figures Figure 1.1: Sovereignty and Territorial Disputes in Asia 11

Figure 2.1: The PLA Defense Budget in Current and Constant

1986 Renminbi

17

Figure 2.2: PLA Air Force Fighter Aircraft 22

Figure 3.1: 1993 Official Defense Budgets of Selected Asian

Nations Compared to China

30

Figure 3.2: Percent Changes in the Official Defense Budgets of

Selected Nations Compared to China Adjusted for Inflation, 1987

versus 1993

31

Figure 3.3: 1994 Military Holdings in Select Asian Nations 34

Page 8 GAO/NSIAD-95-84 National Security
Contents

Abbreviations

ASEAN Association of Southeast Asian Nations

GNP Gross National Product

PLA People’s Liberation Army

PRC People’s Republic of China

TASC The Analytical Sciences Corporation

Page 9 GAO/NSIAD-95-84 National Security
Chapter 1 

Introduction

The People’s Republic of China (PRC) has expanded its role in regional and

global affairs, requiring U.S. policymakers to focus greater attention on

U.S.-China relations and China’s impact on U.S. security and trade

interests in Asia. China is not only a growing military power, possessing

nuclear and some advanced conventional weapons’ technologies, it also

has the world’s third largest economy, according to the International

Monetary Fund. It holds a permanent seat on the United Nations Security

Council and it has the world’s largest military.

In 1975, China adopted the policy of the “four modernizations” as the way

to ensure long-range comprehensive security. China’s plan was to

modernize its agriculture, industry, science and technology, and defense.

Until 1989, when China began devoting more resources to its military,

economic development through the modernization of agriculture, industry,

and science and technology clearly preceded defense modernization.

Relations Among the

Asian Nations

China and several other Asian nations appear to be embarked on force

modernization programs that when combined with long-standing

territorial disputes, raise concerns among policymakers over the stability

of the region. Almost every nation in the Asia-Pacific region has territorial

disputes with one or more of its neighbors. This is particularly true for

China, which has disputes with Russia, Japan, India, Malaysia, and

Vietnam as well as an internal dispute with Taiwan. One of the major hot

spots is the potentially oil-rich South China Sea, particularly the Spratly

Islands. China, Taiwan, Vietnam, Malaysia, and the Philippines all occupy

islands, and both China and Vietnam have signed oil exploration contracts

with U.S. firms. Figure 1.1 shows the location of and lists the various

territorial disputes within the region.

Page 10 GAO/NSIAD-95-84 National Security
Chapter 1 

Introduction

Figure 1.1: Sovereignty and Territorial Disputes in Asia

Page 11 GAO/NSIAD-95-84 National Security
Chapter 1 

Introduction

Many Asian nations harbor long-standing feelings of mistrust toward each

other, and they are arming themselves with the types of systems necessary

to defend their interests militarily. China and most Asian countries are

establishing rapid reaction forces, improving their naval assets, and

modernizing their aircraft. As the military capabilities of countries in the

region increase, so does the possibility of conflict because countries may

feel they have the capability to press their claims.

Page 12 GAO/NSIAD-95-84 National Security
Chapter 1 

Introduction

U.S. Military Relations

With China

Historically, the U.S.-China military relationship has been limited in scope.

The United States established diplomatic relations with China in 1979, and

in 1980, the Secretary of Defense visited China. In September 1983, the

Secretary of Defense set in motion the U.S. “three pillars” approach in

pursuit of a military relationship with China—high-level visits,

functional-level exchanges, and military technology cooperation.

From 1983 to 1989, many high-level defense visits took place between the

U.S. military and the People’s Liberation Army (PLA). Working-level

contacts occurred in numerous fields, including military education and

training, logistics, quality assurance, systems analysis, and military

medicine. In June 1984, China became eligible for Foreign Military Sales,

which marked the beginning of cooperation in the area of military

technology. By 1987, four sales agreements were signed: the $22-million

large-caliber artillery plant modernization program, the $8-million MK-46

Mod 2 torpedo sale, the $62-million AN/TPQ-37 artillery-locating radar

sale, and the $500-million F-8 interceptor avionics modernization program.

There were also a limited number of commercial sales of defense

equipment.

On June 5, 1989, immediately after the massacre of pro-democracy

demonstrators at Tiananmen Square in Beijing, the President imposed

sanctions on China to protest its actions. The U.S. sanctions targeted the

Chinese military by suspending visits between U.S. and Chinese military

leaders and suspending all government-to-government sales and

commercial exports of weapons. The prohibition on military equipment

can be waived by the President if it is important to the national interest or

if he determines that China has made specified progress on human rights.

Compared to U.S. military relations with many other nations, U.S.-China

military relations were limited prior to Tiananmen, but from June 1989

until 1993, they were virtually nonexistent. Contacts were limited to visits

by U.S. students from the National Defense University in 1991 and 1992.

U.S. actions ending military relations raised suspicion and anger within the

PLA, which above all else saw the U.S.-China relationship in terms of

prestige and respect. According to some officials and scholars, PLA officials

believed that they were being punished for an incident in which many did

not want to participate. Some of the more pro-Western officers were

purged from the PLA ranks, while others lost influence. U.S. officials told us

that the U.S.-China working level contacts prior to 1989 may have been

instrumental in professionalizing the military and gaining China’s support

on a number of issues. According to these officials, during the time that

Page 13 GAO/NSIAD-95-84 National Security
Chapter 1 

Introduction

China and the United States had military contact, China muted its protests

over arms sales to Taiwan, restrained from selling Silkworm missiles to

Iran during the Gulf tanker operations, and cooperated with the United

States on Afghanistan.

For 4 years after Tiananmen, little attempt was made to reestablish

military ties. In the past year, however, the United States and China have

reestablished a military dialogue.

Objectives, Scope,

and Methodology

Our objectives during this study were to (1) assess the nature and purpose

of China’s military modernization and (2) compare China’s modernization

to other Asian nations’ military modernization programs.

We interviewed officials and reviewed documents at the Departments of

Defense and State in Washington, D.C., and U.S. embassies and consulates

in the PRC, Hong Kong, Japan, Australia, South Korea, Indonesia, Malaysia,

Singapore, Thailand, and India. We also interviewed representatives of the

American Institute of Taiwan. Additionally, we spoke with members of the

intelligence community, reviewed the U.S. Arms Control and Disarmament

Agency’s World Military Expenditures and Arms Transfers 1991-92, and

used data from the International Monetary Fund for economic statistics.

To gain perspective on Asian views of China’s military modernization, we

met with foreign government officials, scholars, and journalists during our

fieldwork abroad. To gain China’s perspective we spoke to Chinese

academics at Fudan University in Shanghai, the Chinese Institute for

Peace and Development Studies in Shanghai, the Shanghai Institute for

International Studies, the China Institute of International Studies in

Beijing, and the China Institute of Contemporary International Relations in

Beijing. We also spoke to several China specialists in the United States and

reviewed papers presented at the American Enterprise Institute’s

conferences on the People’s Liberation Army and the National Defense

University’s Pacific Symposium.

The Analytical Sciences Corporation (TASC) provided us with information

on the military holdings of China and the other Asian nations from its

unclassified data bank, which incorporates unclassified U.S. government

information as well as information from publications such as Jane’s

International Defense Review and the International Institute for Strategic

Studies’ The Military Balance.

Page 14 GAO/NSIAD-95-84 National Security
Chapter 1 

Introduction

Data on China’s defense budget and force modernization was obtained

mostly from non-Chinese sources due to China’s general lack of openness

on military matters, the dearth of official government documents, and the

PLA’s decision not to meet with us in China.

We performed our work from January 1994 to January 1995 in accordance

with generally accepted government auditing standards.

Page 15 GAO/NSIAD-95-84 National Security
Chapter 2 

Overview of China’s Force Modernization

In an effort to modernize its military forces, China has acquired modest

amounts of modern weaponry, reduced the overall size of its forces, and

changed its military doctrine. Current and historical spending trends,

combined with known equipment acquisitions, suggest that China is

engaging in a very slow upgrading of very old equipment, which to date

has benefited only a small number of units. Several factors appear to drive

China’s force modernization efforts, including a desire to be the

preeminent regional power, lessons learned from observing modern wars,

and the need to protect what it sees as its sovereign territory. China’s lack

of openness about its defense planning and spending and skepticism

regarding China’s ability to acquire and absorb technologies needed for

wholesale force modernization make it difficult to project its future

military capabilities. Nonetheless, its strategic nuclear capabilities make it

a global power.

China Spends More on

Defense Than Official

Budget Shows

Much has been written about China’s defense budget, including reports of

double-digit increases in its official defense budget and the existence of a

much larger unofficial supplementary defense budget. Our analysis of the

official budget revealed that despite reported increases, when adjusted for

inflation, the official budget has actually remained relatively constant. And

although we were unable to quantify the unofficial budget, we identified a

number of revenue sources that comprise it. Nevertheless, determining

China’s total defense expenditure is not possible.

Official Defense Budget The official budget of the PLA consists primarily of salaries and personnel

expenses and some operating and maintenance expenses, such as fuel for

training. Other appropriations, including funds for defense procurement

and research and development, are located in other budget accounts. As

seen in figure 2.1, the official defense budget increased about 159 percent

from 1986 through 1994, but when adjusted for inflation, the budget

actually increased by only 4 percent.1

1

Attempts to convert renminbi into U.S. dollars or other currency for comparative purposes distorts

and, in this case, understates spending for two reasons. First, the exchange rate is controlled and

therefore artificial, and second, prices for some items in China are well below world prices. For

example, the official 1993 defense budget of 42.5 billion renminbi is $7.45 billion using the 1993 official

exchange rate. However, because the renminbi was devalued, the official 1994 budget of 52 billion

renminbi equals $6.10 billion at the current exchange rate. This would leave the erroneous appearance

of a decline in defense spending.

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Chapter 2 

Overview of China’s Force Modernization

Figure 2.1: The PLA Defense Budget in

Current and Constant 1986 Renminbi

(Chinese Currency)

Renminbi in billions

0

5.0

10.0

15.0

20.0

25.0

30.0

35.0

40.0

45.0

50.0

55.0

60.0

1986 1987 1988 1989 1990 1991 1992 1993 1994

Years

Current renminbi

Constant 1986 renminbi

Source: Budget figures from “Off the Books” Analyzing and Understanding Chinese Defense

Spending, Richard Bitzinger and Chong-Pin Lin, the inflation rate for 1986 to 1993 from the

International Monetary Fund, and the 1994 inflation rate was estimated at 20 percent.

Beginning in 1989 and continuing until 1994, China’s official defense

budget increased annually at a double-digit pace. By 1992, this rapid

increase in the official defense budget, coupled with lower inflation

between 1990 and 1992, allowed the official defense budget to just exceed

its 1986 level in real terms. The large defense budget increases in 1993 and

1994, however, have been more than offset by inflation, which officially

was 17 percent in 1993 and estimated to be at least 20 percent in 1994. In

addition, the percentage of China’s total national resources consumed by

defense spending, based on the official budget, fell during the decade from

about 2.1 percent of the gross national product (GNP) in 1986 to about

1.4 percent in 1993.

According to Chinese officials and many specialists on China, most of the

increases in the official budget have been spent to enhance the salaries

and standard of living of the military. They said that before the increases in

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Chapter 2 

Overview of China’s Force Modernization

the official budget, the PLA’s morale had fallen low. Several China scholars

believe that official funding for the PLA would have to increase

tremendously if units are to discontinue their commercial activities (as

discussed below, revenues from these activities make up part of China’s

unofficial budget) that provide them with additional income.

Unofficial Defense Budget Although China’s actual defense expenditures are extremely difficult to

measure, many analysts agree that China’s total defense spending is about

two to three times its official budget. They cited the following additional

sources of defense support and revenues:

• Some defense spending is hidden in other parts of the state budget. For

example, most military research and development costs are not included

in the defense budget but are in the budgets of civilian ministries.

• The procurement of weapons, in particular arms imports, is funded by

special appropriations not included in the official budget.

• Defense revenues also come from the PLA’s commercial activities. It is

estimated that the PLA has over 10,000 businesses run by PLA units,

members, and their families. PLA units even bid on major government

infrastructure projects, such as the construction of highways, for which

they are paid.

• PLA units grow crops and raise livestock for food and as a result require

less funding.

• China uses profits from arms exports to subsidize the PLA’s purchase of

foreign weapon systems.2

Because of uncertainty about the amounts of other defense revenues,

including the amount of profits the PLA actually earns from its commercial

enterprises (such as hotels, casinos, and mines) and how these profits are

used, it is impossible to determine whether total defense spending,

adjusted for inflation, has increased, decreased, or remained the same.

Several experts believe that the PLA itself does not know how much money

in total it generates and spends. However, many analysts believe that

China’s total defense spending is about two or three times its official

budget.3

 Since total defense spending is so difficult to compile or

2

China’s revenues from arms sales fell from a peak of about $2 billion annually in the late 1980s to less

than $1 billion in 1991. China is unlikely to rebound in the current market, which favors suppliers of

advanced weapons, according to the U.S. Arms Control and Disarmament Agency.

3

Estimates range from less than 2 to 12 times China’s official budget, but most are between 2 and 

3 times the budget.

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Overview of China’s Force Modernization

ascertain, we believe it may be more useful to look at current and

proposed changes in equipment, training, and doctrine to draw

conclusions about the extent of China’s military modernization.

PLA Is Modernizing

Forces Slowly, With

Limited Effect

Since 1985, the PLA has slowly been modernizing and changing its military

equipment, doctrine, and force structure. Nonetheless, these efforts have

been characterized as piecemeal, with limited effectiveness. The PLA has

put a priority on upgrading the major weapon systems of its Air Force and

Navy but has also made numerous changes in its ground forces. Since

1985, the PLA has reduced its force structure from about 4 million to

3 million personnel (2.3 million in the Army, 470,000 in the Air Force, and

260,000 in the Naval Forces). At the same time it has replaced its outdated

“People’s War” doctrine, a defensive doctrine relying on the PLA’s

numerical superiority and ability to trade ground to defeat a

technologically superior enemy, with one more suited to fighting limited

regional wars under modern conditions. PLA force modernization has

emphasized

• increasing unit mobility and training in combined arms operations;

• improving logistics, combat support, and communications, command, and

control systems;

• introducing a limited number of imported modern weapon systems, such

as the Russian-built Su-27 multirole fighter aircraft and SA-10 air defense

systems; and

• developing a number of indigenously produced systems, including several

new classes of naval vessels and a new multirole fighter aircraft.

By various accounts, China is pursuing the purchase of dozens of weapon

systems and technologies from Russia, Israel, and other arms suppliers.

However, many of these reports have proven unfounded or are a case of

Chinese window-shopping. For example, rumors of China’s impending

purchase of a nearly constructed, former Soviet aircraft carrier caused

concern throughout the Asia-Pacific. China does seem interested in

purchasing some items but continues to pursue a policy of self-sufficiency;

that is, it prefers to purchase technology rather than end items. At the PLA’s

current pace of modernization, the replacement of its 1950’s- and

1960’s-vintage equipment with more modern equipment will take years.

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Overview of China’s Force Modernization

Naval Forces The PLA Navy’s force modernization has emphasized the addition of new,

indigenously built destroyers, frigates, supply ships, landing ships, and

other smaller vessels. It has purchased Russian-built Kilo-class submarines

and reportedly wants to purchase associated technology to replace its

aging, obsolete diesel-electric submarine force.4

 To increase the

survivability of its surface combatants, the Navy seeks to acquire modern

antisubmarine and antiaircraft systems. It has had little success in

developing these systems and now seeks technical assistance from Russia

and, reportedly, Israel. In the interim, China has purchased a few modern

systems from Western sources, such as the French-built Crotale air

defense system and the Whitehead A244S antisubmarine torpedo.

Additionally, according to published reports, the electronic warfare

capabilities of the new vessels are a dramatic improvement over the old

vessels. The new Luhu-class destroyers and the new Jiangwei-class

frigates represent a substantial improvement over the Navy’s current fleet

of destroyers and frigates. These new, larger, and more specialized vessels,

combined with the new Dayun-class supply ships, will give the PLA Navy a

much greater “blue water” capability and form the basis of a more modern

and expanded fleet.

The PLA Navy has shown interest in acquiring an aircraft carrier, according

to numerous sources. However, it will need to overcome several large

obstacles before it can field an operational aircraft carrier and associated

supporting ships. First, the PLA Navy does not have any carrier-capable

aircraft. Second, although substantially improved in these areas, it still

needs more and better antisubmarine and antiaircraft capabilities to

protect a carrier and its supporting vessels. Finally, to have adequate

power projection capabilities from the use of a carrier, it is preferable to

have more than one carrier so that a carrier is assuming the mission at sea

at all times. Thus, many experts have concluded that an operational

aircraft carrier does not appear to be in China’s near future, even though

China is funding research and development and training officers in aircraft

carrier operations.

Air Forces The PLA Air Force’s modernization consists of purchasing Russian-built

aircraft, engines, and surface-to-air missile systems; developing or

acquiring an air-to-air refueling system; indigenously developing an

4

China has reportedly produced a new diesel-electric submarine and has agreed to purchase four

Kilo-class submarines from Russia, one of which has been delivered.

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Overview of China’s Force Modernization

advanced fighter aircraft, believed to be comparable to the U.S.-built F-16;

and pursuing the purchase of an airborne early warning system.

China purchased 26 Russian-built Su-27 multirole fighter aircraft and may

purchase more. Although the number of aircraft is small, the

Su-27s—comparable to U.S.-built F-15s—represent a large technological

leap forward for the PLA Air Force and demonstrate its determination to

gain experience operating advanced multirole fighter aircraft. China has

reportedly purchased or will purchase additional Su-27s and is trying to

obtain the technology to produce them indigenously. Additionally, China

reportedly wants to co-produce the a new-generation MiG-31. However,

Russia, although strapped for foreign exchange, has been reluctant to

provide such advanced technology to the Chinese. China purchased 100

RD-33 engines, which power the MiG-29, to upgrade its indigenously

produced F-7 fighter. The F-7s equipped with RD-33s may be exported.

Figure 2.2 shows that China’s inventory of fighter aircraft is enormous, but

most represent 1950’s technology.

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Figure 2.2: PLA Air Force Fighter

Aircraft 5,000
 Number of aircraft

4,900


4,800


4,700


4,600


4,500


4,400


4,300


4,200


4,100


4,000


3,900


3,800


3,700


3,600


3,500


3,400


3,000


2,000


1,000


0

1995

Year

1980 1985 1990

SU-27 (1980's technology comparable to F-15)


J-8/9 (1970's technology comparable to upgraded F-4)


J-7 (1960's technology comparable to F-4)


J-2/4/5/6 (1950's technology comparable to F-86)

3400 3400

3650

200

500 500

100 4600

80

175

30

50

24

Source: TASC (The Analytical Sciences Corporation).

Page 22 GAO/NSIAD-95-84 National Security
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The 10 IL-76 medium- to long-range transportation aircraft purchased from

Russia will improve the PLA’s formerly limited lift capability. However,

some reports speculate that these aircraft will be used as air-refueling or

electronic warfare platforms. China reportedly bought air-refueling

equipment and technology from either Iran or Israel and is expected to

achieve an operational capability in the next few years. It also is

reportedly trying to purchase a complete, fully operational airborne early

warning system from either Russia or Israel.

Finally, 4 batteries of SA-10 surface-to-air missile defense systems, with

100 missiles, are expected to improve China’s antiquated air defense

system. The SA-10—comparable to the U.S.-built Patriot system—is

designed to shoot down aircraft and has a limited ability to intercept

ballistic or cruise missiles. It is believed that the purchase of these

systems, which have been deployed around Beijing, was likely a direct

result of China’s witnessing the bombardment of Baghdad during the

Persian Gulf War.

Ground Forces The PLA ground force of about 2.3 million personnel is too large to be

modernized at once; consequently, the PLA is focusing on achieving a high

level of readiness in specific rapid reaction, or “fist,” units. These units are

the first to receive modern equipment and additional funds for training.

Fist units include the 15th Airmobile Army and the PLA’s recently

established Marine Corps units. They are tasked with responding to any

crises on China’s periphery and developing, through training, the PLA’s

doctrine on combined arms operations, such as amphibious assaults.

China reportedly purchased a limited number of T-72 tanks from Russia

and is negotiating with Russia to obtain other advanced technologies and

coproduction rights for advanced munitions and weapons.

PLA ground forces have received the lowest priority in the modernization

effort. Even so, China’s vast number of ground forces compared with its

neighbors’ forces makes it a significant regional power. If only the

modernized fist units are considered, China still enjoys a substantial size

advantage over most of its neighbors. With an emphasis on combined arms

training exercises, China’s fist units will enhance China’s power projection

capabilities.

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China Maintains

Numerous Weapons

of Mass Destruction

China has substantial strategic nuclear capabilities, which it

acknowledges, and, according to congressional testimony by U.S. officials,

probably has chemical and biological capabilities, which it does not

acknowledge. China maintains research, development, and production

capabilities for nuclear weapons and probably does so for chemical and

biological weapons as well. China’s nuclear weapons and space (ballistic

missile) programs have been described by several China scholars as

“pockets of excellence.” Although China’s ballistic missiles lack the

sophistication and accuracy of U.S. or Russian missiles, they provide

China with a credible retaliatory capability.

Nuclear Weapons China, a nuclear power with air-, land-, and sea-based warheads, has

maintained the same official nuclear policy since it first detonated a

nuclear device in 1964. Under this policy, China pledges not to use nuclear

weapons first and not to use them against nonnuclear nations and

nuclear-free zones. Under its nuclear strategy, China seeks to deter other

nuclear powers by maintaining strategic nuclear forces of adequate size

and range to reach a few cities in any potential adversary’s homeland.

Thus, in a crisis, an adversary cannot use or threaten to use nuclear

weapons against China without facing the possibility of nuclear retaliation.

According to Arms Control Today, the air-based leg of China’s nuclear

triad consists of approximately 120 long-range (3,100 kilometers) B-6

bombers, 30 medium-range (1,200 kilometers) B-5 bombers, and 30

short-range (400 kilometers) A-5 attack aircraft that are nuclear capable.

These aircraft are based on 1950’s and 1960’s technology and would have

limited operational capability against modern air defense systems. China is

working to develop a new supersonic bomber, the B-7, which first flew in

1988 but has yet to be operationally deployed.

The land-based leg of China’s nuclear triad consists of several different

types of intermediate- and long-range land-based ballistic missiles, most of

which are liquid-fueled. These missiles can carry warheads with yields up

to 3 megatons from about 1,800 kilometers to over 13,000 kilometers.

However, China possesses only a handful of missiles with sufficient range

to strike targets anywhere in the United States, according to Arms Control

Today.

China’s sea-based leg of its nuclear triad consists of one Xia-class ballistic

missile submarine. It can carry up to 12 ballistic missiles.

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China is developing new, solid-fuel land- and sea-based ballistic missiles

with improved accuracy, according to numerous reports. Additionally,

China appears to have developed technology for a multiple independently

targetable reentry vehicle that would allow it to strike several targets with

one missile. Whether China maintains tactical land-based nuclear weapons

such as artillery shells or warheads for its short-range M-9 and M-11

ballistic missiles is uncertain, although reportedly both missiles can carry

nuclear weapons. China’s policy on the use of tactical nuclear weapons is

unclear.

China appears determined to upgrade its strategic nuclear capabilities,

despite the end of the Cold War. It has been the only country to continue

nuclear testing during the past 2 years, while an unofficial worldwide

moratorium has been in place. China justifies this testing by pointing out

that it has conducted far fewer nuclear tests than either the United States

or Russia (including those conducted by the former Soviet Union).

However, after it completes a series of nuclear tests by 1996, China

reportedly desires to see a comprehensive test ban treaty implemented.

Chemical and Biological

Weapons

China has signed the Convention on Prohibition of the Development,

Production, Stockpiling and the Use of Chemical Weapons, and has

acceded to the Convention on the Prohibition of Biological Weapons.

Nevertheless, China is suspected of having offensive chemical weapons

and a biological weapons program. U.S. officials have testified before the

Congress that China probably possesses both chemical and biological

capabilities. Little is known about its suspected stockpile of weapons.

Reasons for China’s

Force Modernization

China has several reasons for modernizing its forces. The secrecy of this

defense planning, however, hinders analysis of China’s intentions. Foreign

and U.S. government officials and China specialists most often cite five

reasons for China’s military modernization. First and foremost, the vast

majority of weapons and equipment in the PLA’s current inventory reflect

1950’s and 1960’s technology, and modernization efforts are therefore

expected, especially since China’s economic growth provides greater

means with which to modernize. Other reasons cited are

• a desire to have military power commensurate to its growing economic

power, allowing it to be a greater regional and global power;

• the ability to defend what it defines as its sovereign territory, which

includes territories disputed with almost all its neighbors;

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Overview of China’s Force Modernization

• lessons learned about modern warfare and high-technology weapon

systems from the Persian Gulf War and other recent conflicts; and

• the PLA’s role in maintaining internal stability and providing legitimacy to

the communist regime.

Many Factors Influence the

Pace of China’s Force

Modernization

According to the officials we interviewed and reports we reviewed, several

factors will influence how quickly China is able to continue to modernize

its military. The most important factor is the pace of economic

development, which determines the funding available to the government

for defense and other spending. Other demands will compete for funding,

however. Economic growth resulting in greater prosperity may result in

demands for improved living conditions, which will place greater demands

on the government to provide social services, education, and

environmental safeguards.

China’s indigenous research and development efforts, as well as its ability

to absorb new technologies, will determine how quickly China can

effectively field more modern weapon systems. China has had both

successes and failures in its military research and development efforts.

China has been successful in using indigenously developed technologies in

conjunction with foreign technologies in its space and nuclear programs;

however, despite technological assistance from both Russia and Israel,

China has had trouble developing an indigenous fighter aircraft.

Additionally, China’s ability to absorb new technology has been

questioned and may be a roadblock to the PLA’s modernization. The PLA

may have to significantly enhance the quality, education level, and training

of its personnel to field increasingly sophisticated weapon systems.

The internal political environment will also affect how quickly the PLA’s

modernization program will proceed. Greater instability could increase the

dependence of the Chinese Communist Party on the PLA to maintain order,

which could in turn mean that China would devote a greater share of

resources to the PLA. Furthermore, the PLA will play a role in determining

the successor to Deng Xiaoping, and those vying to become the new

leaders may increase funding for the PLA to elicit its support.

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Conclusions To date, China’s force modernization efforts have been characterized as

“piecemeal.” High inflation has resulted in little real increases in the

official defense budget, and the defense budget has decreased as a

percentage of China’s GNP. China’s unofficial defense spending is very

difficult to gauge because expenditures and revenues are hidden in other

budgets. Acquisition of major weapon systems, for example, falls under

unofficial spending. Although few new weapon systems have been

procured, these systems, primarily for the Air Force and the Navy, provide

capabilities for more sustained, longer-range military operations. This

small amount of modern weapons combined with better training, the

formation of rapid reaction units, and better command, control, and

communication, and logistics has benefited only a few military units.

Additionally, China continues to conduct nuclear tests as part of its effort

to modernize its nuclear forces. There are doubts about China’s ability to

absorb, operate, and maintain the new technologies and weapons needed

to modernize its armed forces. Further, the mere possession of modern

weapons, platforms, and sensors (radars, night vision devices, etc.) does

not necessarily create combat effectiveness. These new, but limited,

capabilities could be used to stop internal strife or to conduct limited

operations in areas such as the South China Sea. However, it is not clear

that either of these possibilities, alone, is driving China’s current

modernization effort.

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and Dialogue

For more than a decade, most Asian nations have increased their defense

spending and embarked on significant force modernization programs. This

trend has continued in recent years, despite a generally less-threatening

post-Cold War regional security environment. Annual defense spending in

the region rose substantially between 1987 and 1993. At the same time,

however, defense spending as a percentage of GNP fell or remained

constant for most of these nations as a result of their remarkable

economic growth. Most force modernization programs in the region have

emphasized the acquisition of (1) communication, intelligence, and

electronic warfare systems; (2) multirole fighter aircraft, maritime patrol

aircraft, and modern naval surface combatants, all armed with antiship

missiles; (3) modern diesel-electric submarines; and (4) rapid deployment

forces. The net result of these modernization programs has been a

substantial enhancement of some Asian nations’ formerly quite limited

power projection capabilities.

Multiple factors interact to influence Asian nations’ increased defense

spending and force modernization, according to Asian officials we met

with. These factors include (1) concerns about the diminishing U.S.

military presence in the region, which has created uncertainty about the

emerging regional security structure; (2) unresolved international

sovereignty and territorial disputes; (3) increased emphasis on future

security issues, specifically the protection of maritime resources; (4) the

acquisition of advanced military technologies for industrial development;

(5) the increased availability and low prices of advanced weapons on the

international arms market; and (6) sustained economic prosperity, which

provides increased budgetary resources for modernization. Although many

Asian nations are uneasy about China’s increasing military power and its

strategic intentions, most regional force modernization programs predate

China’s recent increases in defense spending. Moreover, many Asian

nations view China’s increasing military power as threatening only in the

context of a diminishing U.S. military presence.1

 For now, concerns about

China’s increasing military power appear secondary to other, more

immediate regional concerns about China—for example, the potential that

millions of Chinese refugees will flood across their borders if China’s

economic reforms fail. Multilateral dialogue and the reopening of military

talks between China and the United States may enhance regional stability.

1

In 1990, 135,000 military personnel were stationed in the region compared to 109,440 in the region in

1993.

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Asian Nations’

Defense Spending Has

Increased

Regional defense spending rose substantially between 1987 and 1993.

However, as figures 3.1 and 3.2 show, the current levels and recent rates of

increase in official defense spending vary widely within the region. At

$39.7 billion, Japan’s 1993 defense budget was over three times as large as

Korea’s, the second largest regional defense budget at $12.1 billion. At

$7.5 billion, China’s official defense budget was fourth largest, just behind

Taiwan’s $10.5 billion budget. Although Thailand, Singapore, Malaysia,

Indonesia, and Pakistan had the lowest defense budgets in 1993, their

budgets increased in real terms by 34.5, 53.6, 89.6, 10.6, and 27.1 percent,

respectively, compared to 1987. Comparing the same periods, Taiwan,

South Korea, and Japan also showed substantial increases in their defense

budgets of 24.1, 35.9, and 16.8 percent, respectively. Meanwhile, the

defense budgets of India and the United States fell by about 10 and

28 percent, respectively (the 1993 U.S. defense budget was $259 billion). In

conjunction with declining defense spending in the United States, Europe,

and the former Soviet Union since 1989, these increases in Asian defense

spending have doubled the region’s share of world military expenditures

over the decade.

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Figure 3.1: 1993 Official Defense Budgets of Selected Asian Nations Compared to China

Billions of U.S. Dollars

0

5

10

15

20

25

30

35

40

Japan

South Korea

Taiwan

China

Australia

India

Pakistan

Thailand

Singapore

Malaysia

Indonesia

39.7

12.1

10.5

7.5 7.0 6.3

3.5 3.2 2.7 2.0 2.0

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Figure 3.2: Percent Changes in the Official Defense Budgets of Selected Nations Compared to China Adjusted for Inflation,

1987 Versus 1993

Percent increase

-30

-20

-10

0

10

20

30

40

50

60

70

80

90

100

Malaysia

Singapore

South Korea

Thailand

Pakistan

Taiwan

Japan

Indonesia

China

Australia

India

United States

89.6

53.6

35.9 34.5

27.1 24.1

16.8

10.6 6.4

1.9

-10.6

-28.2

Defense spending as a percentage of GNP fell for most Asian nations during

the decade, even as total defense spending rose substantially. In Asia,

defense spending as a percentage of GNP fell from an average of about 

8.4 percent to about 6.2 percent. As a matter of policy, Japan’s defense

spending remained around 1 percent of GNP over this period, but rose from

$21.9 billion to $32.6 billion because of Japan’s rapid economic growth.

The same is true for Singapore, where government policy fixes defense

spending at about 5 percent of the GNP.

Asian Nations Are

Modernizing Military

Forces to Respond to

Potential Regional

Conflict

Force modernization is underway in many countries in the region, along

with economic and political progress. Asian nations have concluded that

the current (uncertain) world situation requires greater preparation for

limited local wars and unanticipated low intensity conflicts, and that these

contemporary wars and conflicts require quick-reaction forces structured

around high technology arms and equipment. The conduct and outcome of

the last Arab-Israeli, Falkland Islands, and Persian Gulf wars significantly

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influenced Asian nations’ military thinking in this regard. As a

consequence of this influence, regional conventional force modernization

has emphasized, with few exceptions, the acquisition of the following

items:

• national command, control, and communication systems, including the

construction of national command centers and headquarters,2

 and the

development of national defense planning staffs, independent operations

concepts and doctrines, and national communication systems and

facilities;

• national technical intelligence systems, including electronic and signal

intelligence capabilities to provide real-time intelligence for enhanced

maritime surveillance and for deploying appropriate electronic warfare

capabilities against hostile forces;

• electronic warfare capabilities, particularly for modern naval surface

combatants, with Japan leading the trend;

• multirole fighter aircraft, such as U.S.-built F-16 Falcons and F/A-18

Hornets, French-built Mirages, and Russian-built MiG-29 Fulcrums;

• maritime reconnaissance/surveillance aircraft, such as U.S.-built P-3

Orions, E-2C Hawkeyes, and C-130Hs; German-built F-50 and F-27

Maritime Enforcers; and French-built Dornier-228s;

• modern naval surface combatants, including a light aircraft carrier for

Thailand, Aegis-equipped destroyers for Japan, over 100 new frigates, and

over 100 new corvettes and patrol vessels;

• antiship missiles, such as U.S.-built Harpoons or Penguins, French-built

Exocets, Chinese-built C-801s, and Taiwan-built Hsiung Feng IIs, deployed

on aircraft and surface combatants;

• diesel-electric submarines, including Australia’s Collins-class and

German-type 209s; and

• rapid deployment forces (fully mobile, especially adapted for movements

by air, equipped with the necessary firepower and the latest technology)

and the cargo/transport aircraft to move them.

The net result of this force modernization has been a considerable

enhancement of Asian nations’ potential power projection capabilities,

which formerly were quite limited. As in the case of China, the mere

possession of modern systems does not necessarily mean they can be used

effectively. For the most part, this force modernization appears to be

consistent with regional countries’ defense needs and emphasis on

self-reliance. Figure 3.3 shows the size of several Asian nations’ militaries,

2

For example, the Japan Self-Defense Force is building a new headquarters in Tokyo, South Korea is

building a new military headquarters in the center of the country at Taejon City, and Singapore has

built a new Ministry of Defense headquarters.

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inventories of some types of weapons, and an indication of how many of

those systems are considered advanced.

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Figure 3.3: 1994 Military Holdings in

Select Asian Nations

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aAdvanced systems are at least mid-1960’s design with advanced technologies, such as laser

range finders for tanks.

Source: TASC (The Analytical Sciences Corporation).

Multiple Factors

Influence Asian

Nations’ Defense

Spending and

Modernization

Multiple factors shape Asian nations’ defense spending and force

modernization efforts. Underpinning the regional force modernization is

the sustained high rates of economic growth in many Asian countries,

which substantially increased budgetary resources. Other factors include

perceptions of diminished U.S. military commitment to the region, which

has created uncertainty about the emerging regional security structure;

unresolved international sovereignty and territorial disputes involving

most regional states; increased emphasis on external security issues,

specifically protection of exclusive economic zones and their maritime

resources; the acquisition of advanced military technologies to speed

civilian and military industrial development; the increased availability and

low prices of advanced weapons in the international arms market; and

improving national or military prestige. Due to Asia’s diversity of cultures,

different levels of political and economic development, and lack of a

common perception of military threat, some factors are more salient than

others in each country.

Perception of Diminished

U.S. Military Presence

Asian nations’ perception of a slow, but continuous, decrease of U.S.

military commitment creates uncertainty within the region about the

nature of the emerging, post-Cold War security structure. Asian nations are

concerned that the current, generally favorable regional security

environment will prove transitory. Major security crises could spring from

North Korea’s nuclear aspirations, social unrest in China, hostilities in the

South China Sea, renewed civil war in Cambodia, or other intraregional

tensions.

The perception of a reduced U.S. military commitment has created a

heightened awareness among Asian nations of the need for self-reliance or

national resiliency in security matters. For most regional countries,

increasing self-reliance involves a primary emphasis on defense of

maritime approaches and a redirection of defense planning away from

internal counterinsurgency warfare. Self-reliance for many of these

nations translates into independent surveillance, warning, and intelligence

capabilities to monitor regional developments, especially in the maritime

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approaches. These requirements for self-reliance are reflected in Asian

nations’ current force modernization programs.

The Asians’ perception of a reduced U.S. commitment to the region

originated with President Nixon’s 1969 Guam Doctrine, which states that

the United States will look to Asian nations to be primarily responsible for

their own defenses. These perceptions were reinforced by a number of

events, including

• the subsequent U.S. pullout from Vietnam and Indochina;

• President Carter’s decision (later reversed) to withdraw U.S. ground

forces from South Korea;

• U.S. requests for Japan and South Korea to assume a greater role in their

own defense;

• the 1992 U.S. East Asian Strategic Initiative, which called for a phased

reduction in U.S. forces in the Pacific;3

• the closure of U.S. bases in the Philippines4;

• post-Cold War cuts in U.S. defense spending and military capabilities

worldwide; and

• U.S. reluctance to commit forces to peacekeeping operations in Cambodia.

Despite U.S. pledges to maintain a military presence in Asia, these events

have created the general regional perception of a declining U.S. military

commitment to the region. Many Asians harbor doubts about the

willingness of the U.S. government—faced with decreasing congressional

and public support for foreign interventions—to commit forces to the

region in circumstances of future tension or conflict. Asian nations are

convinced that U.S. military presence will continue to diminish, creating a

power vacuum that China and Japan, or perhaps India or Russia, will

attempt to fill.

In the view of many Asian officials and scholars we interviewed, the U.S.

military presence in Asia has

• greatly reduced regional uncertainty and prevented any dramatic

escalation of regional security tensions;

3

Recognizing that the 1992 report was viewed as a plan of reduction, the 1995 report stated a clear

commitment to maintain 100,000 military personnel in Asia for the foreseeable future.

4

Until 1992, under the Military Bases Agreement of 1947, as amended, the United States maintained and

operated major facilities at Clark Air Base, the Subic Bay naval complex, and several small subsidiary

installations. About 15,000 military personnel were stationed in the Philippines (not including the

Seventh Fleet personnel temporarily ashore).

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• provided a guarantee of ultimate security against major threats to the

region; and

• fostered a relatively benign security environment with high levels of local

confidence, which has facilitated the region’s rapid economic and social

development.

The end of the Cold War has not substantially changed the perceived role

or value of the U.S. military presence in the region. Asian nations conclude

that efforts to solve security problems in Asia continue to depend heavily

on U.S. political will and military capabilities.

Officials and others we interviewed throughout Asia are concerned by the

prospect of either China or Japan emerging as an independent maritime

power to replace the United States. Their concerns about Japan are based

on its history of militarism and what many perceived as a cultural

tendency toward aggression. Asian nations view the U.S. military presence

and the U.S.-Japan security alliance as a check on Japanese militarism and

will accept a major regional role for Japan only within the framework of

that alliance. Asian nations are concerned that Japan’s defense of its sea

lanes out to 1,000 nautical miles from Tokyo might initiate a process

leading to the development of an independent Japanese defense capability.

In general, Asian nations fear that Japan might add military muscle to its

economic domination of the region, and they will not accept a condition

where Japan’s regional military role becomes commensurate with its

economic role.

Asians’ concerns about China are based on its military modernization, its

issuing of the Territorial Waters Law in 1992 declaring its sovereignty over

the South China Sea and other disputed areas, and its continued

unwillingness to renounce the use of force against Taiwan. According to

some Asian officials and studies, China remains a self-contained,

inward-looking nation, often more reluctant than other nations to accept

constraints on its own actions in the interest of wider regional community.

It retains a rigid and highly centralized political system that is less subject

than most others in the region to the popular pressures that can modify a

government’s international conduct. Uncertainties about China’s future

international posture are amplified by uncertainties about its future

internal affairs, particularly the outcome of its impending leadership

transition. However, according to other Asian officials and studies, China’s

strong emphasis on economic development and international trade,

positive attitude toward foreign investment, and the free flow of capital

and people in and out of China provide substantial evidence that it will

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develop as a peaceful and constructive member of the region. According

to these more optimistic sources, China’s evident determination to become

a fully integrated member of the region’s dynamic economy requires it to

become equally cooperative on security matters. Also, they believe that

China’s economic interest in trade and investment will act as a strong

incentive to cooperate with other nations to keep the peace and maintain

stability.

Unresolved Sovereignty

and Territorial Disputes

According to numerous sources, while the end of the Cold War reduced

the likelihood of global war, this development probably increased the

likelihood of local wars and conflicts because it removed the tempering

mechanism that often served to keep regional tensions under control.

Asian nations face numerous sources of tension involving competing

sovereignty claims, unresolved territorial disputes, and challenges to

government legitimacy. The contentious sovereignty and territorial

disputes in the South China Sea have lately received much attention, but

numerous other disputes exist in other parts of Asia, as discussed in

chapter 1. The perception of a diminishing U.S. military commitment also

increases the likelihood that regional tensions could erupt into open

conflict.

Increased Emphasis on

External Security Issues

As a result of increased economic prosperity and effective

counterinsurgency programs, many Southeast Asian nations face

diminished internal threats to their security and legitimacy. At the same

time, these nations find their continuing and future economic prosperity

increasingly tied to the safety of navigation and the maritime resources

contained in their exclusive economic zones,5

 which are often much larger

than their land areas. Diminished internal threats have allowed many

Southeast Asian nations to restructure their military forces to focus on

monitoring and policing their exclusive economic zones against piracy,

poaching, smuggling, environmental damage, and other threats. Thus, a

focus on modern maritime and air forces to support new economic and

security interests in the surrounding seas has replaced an earlier emphasis

on ground forces oriented to internal security.

As maritime resources, territories, and sea lanes have become more

important, Asian nations have sought to protect them from potential

5

These economic and security interests took on additional importance with the implementation of the

1982 United Nations Law of the Sea Convention, which for the first time defined the concept of an

archipelagic state (such as Indonesia and Malaysia) and allowed many regional states to claim

200-nautical-mile exclusive economic zones in the regional seas.

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harassment from air or sea. As a result, they have sought to acquire

maritime patrol and response capabilities needed to intercept intrusions

into areas of interests, to help protect offshore territories and resources,

to keep hostile forces away from their territories, and to prevent resupply.

For example, in December 1993, the Philippine Navy announced that it

would deploy more forces to the country’s major fishing grounds to deter

poaching, piracy, and illegal fishing.

In addition to acquiring new forces, some regional states are exploring

ways to cooperate to protect their joint interests in the region. Such efforts

include proposals for joint Indonesia-Malaysia-Singapore patrols in the

Straits of Malacca to deter piracy and environmental damage. Another

effort is Australia’s proposal for military cooperation arrangements for

sea-lane security in Southeast Asian waters.

Acquisition of Advanced

Military Technologies for

Industrial Development

According to some U.S. and Asian officials and academics, some Asian

nations desire to acquire advanced military technologies to facilitate the

development of indigenous military and civilian production capabilities. As

we reported in 1994, military and civilian manufacturing activities in some

Asian nations are closely connected.6

 A 1988 study of Sino-Japanese-U.S.

military technology relations noted that Japanese officials often elected to

produce sophisticated U.S. weapon systems in Japan instead of buying

them from U.S. sources even though the unit-cost of such items produced

in Japan was driven higher because Japan gained more than it lost over

time by procuring greater access to U.S. military technology and by

significantly reducing its research and development (or “learning curve”)

expenditures in the process.7

Many of the recent acquisitions of advanced weapon systems in Asia have

a clear technology transfer component, for example, Malaysia’s widely

publicized purchases of F/A-18s and MiG-29s. For both sales, Malaysian

officials negotiated technology transfer agreements, including the

development of a MiG-29 maintenance facility in Malaysia. Indonesia’s

widely publicized purchase of 39 ships from the former East German Navy

was driven by the Minister of Research and Technology’s plans to

establish a modern ship repair facility at Surabaya, not by military

requirements. In fact, many high-level Indonesian military officers opposed

6

Asian Aeronautics: Technology Acquisition Drives Industry Development (GAO/NSIAD-94-140, May 4,

1994).

7

Tow, William T., Sino-Japanese-US Military Technology Relations, Institute of Strategic and

International Studies (ISIS) Malaysia.

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the purchase because, in their opinion, the country would have received

better value for the money by purchasing new modern naval surface

combatants from a Western European source.

Increased Availability and

Low Prices of Advanced

Weapon Systems

The glut of weapons on the current world arms market facilitates regional

force modernization. With the end of the Cold War, the defense industries

of Russia, the United States, Europe, and other nations are competing to

supply military items to buyers throughout Asia, specifically air, naval, and

communications technologies. Russia, with its economy in difficulty and in

need of foreign exchange and imports, has been especially willing to lower

prices and accept barter trade for modern weapon systems. Even regional

arms manufacturers are competing for arms export business. For example,

leading Australian defense electronics contractors have formed a joint

working group to promote exports of command, control, communications,

and intelligence equipment to Southeast Asia. China is also competing in

the regional arms market, having sold ships to Thailand and aircraft to

Pakistan. In short, the increased availability and low cost of advanced

weapon systems will result in the acquisition of a greater number of such

systems in the region than would otherwise be the case.

Improving National or

Military Prestige

In some Southeast Asian nations—notably Indonesia and Thailand—the

armed forces play a significant political role. In such an environment, the

purchase of advanced military equipment is seen as enhancing national

prestige. For example, prestige is reportedly a major factor in the Royal

Thai Navy’s proposed purchase of diesel-electric submarines and an

aircraft carrier. Likewise, prestige is believed to be a major factor in

Indonesia’s purchase of F-16 aircraft.

Asian Nations’

Concerns About

China

For many Asian nations, the potential threat of Chinese military action

(spawned by increasing military power) is of small immediate concern.

More important issues seem to be the potential for large numbers of

Chinese refugees, economic competition from China, and political

intervention by overseas Chinese communities.

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Millions of Chinese

Refugees May Flee to

Neighboring Countries

A concern for many Asian nations is the possibility that China’s economic

reforms will fail or that the stress of its impending leadership transition

will lead to internal fighting that could result in a flood of millions of

Chinese refugees to neighboring countries. Such migration would raise

urgent and perhaps acute economic and social problems for many of

China’s neighbors. In support of their concerns, some Asian officials point

to signs of instability caused by China’s rapid and uneven economic

growth. Several Asian officials and a study of the current situation in

China noted a growing surplus of unemployed workers, including a large

number of economic- and opportunity-seeking migrants from China’s

depressed rural or inland areas.

In general, many Asian officials are sensitive about the problem of

large-scale unplanned population movements in the region. Recent

experience gives them the sense of a continuing problem with large

numbers of displaced people, many of whom cannot or will not be

repatriated to their homelands. For example, after the fall of Vietnam,

Laos, and Cambodia to communist forces, waves of Indochinese refugees

crossed the border into Thailand or took to boats in the South China Sea

and the Gulf of Thailand, creating social and economic problems for many

Southeast Asian nations.

Economic Competition

From China

Another concern of several Southeast Asian nations is the possibility that

China’s rapid economic development will undermine their prosperity by

diverting critical foreign investment and firms seeking low-cost,

semiskilled labor. Officials from several Southeast Asian nations noted

that their nations’ economies are still very dependent on foreign

investment for their continued growth and prosperity, specifically

investment by Japanese and Western firms seeking low-cost, semiskilled

workers. Officials from these countries argue that any significant diversion

of foreign investment to China would significantly reduce their potential

economic growth. Indeed, various sources show that the overseas Chinese

community accounts for a considerable portion of the foreign investment

pouring into China in recent years. In addition, one report expressed

concerns that Southeast Asia’s lucrative, but increasingly competitive,

markets have been flooded with Chinese-made consumer goods, many

produced in China’s state-subsidized defense sector factories.

Overseas Ethnic Chinese

Communities

An additional concern of some Southeast Asian officials and others we

interviewed was the possibility that China might intervene in their

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domestic affairs through the cultural and nationalistic movements of

overseas Chinese communities. This concern is based in part on these

communities’ support for PRC-supported communist insurgencies, although

there has been no recent evidence of this kind of activity. Burma,

Cambodia, Indonesia, Malaysia, the Philippines, Thailand, and Vietnam

have large ethnic Chinese minorities, both immigrant and native born.8

 In

most cases, these ethnic Chinese communities maintain a cultural

separateness and language. In part as a result of these factors and racial

tensions, ethnic Chinese communities have often been the focus of

deep-rooted suspicions of the majority in many Asian nations, which were

intensified during the Cold War when ethnic Chinese communities were

the focus of Chinese-sponsored communist insurgencies.

While these insurgencies have been defeated, many Southeast Asian

officials remain suspicious of overseas Chinese and concerned that China

could intervene in their domestic affairs through these communities.

China’s diplomatic interventions, while legitimate under international

practice according to State Department officials, have increased the

worries of some of its neighbors. For example, China demanded that the

Indonesian government take appropriate steps to protect the ethnic

Chinese community after recent worker riots in Sumatra that were largely

directed at ethnic Chinese factory owners.

Asian Nations’

Support Dialogue on

Security Issues

Although the view among many Asians is that China does not appear to

have hostile intentions toward its neighbors, there is concern that China’s

behavior could change as its military capabilities change. To help diffuse

tensions that could escalate or be exacerbated by the modernization of

regional forces, Asian nations are moving toward more multilateral

dialogue.

Regional security dialogue commenced with the Manila meeting of the

Association of Southeast Asian Nations (ASEAN) Ministerial in July 1992

and since then has gained wide acceptance beyond the subregion to

include China and the United States. Historically, Asian nations have relied

on bilateral, rather than multilateral approaches to protect their security

interests. The community is diverse with no common enemy, and nations

harbor long-term apprehensions about each other. The dialogue is

essentially preventive diplomacy designed to bring together potential

adversaries to ease tensions and eliminate misconceptions. Thus, some

8

Singapore, which has a substantial Chinese majority, is the only Southeast Asian nation that does not

fit this demographic pattern.

Page 43 GAO/NSIAD-95-84 National Security
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and Dialogue

Asian experts envision that future discussion may focus on territorial

claims and military budgets. China, which was invited to participate in the

1994 ASEAN Regional Forum held in Bangkok, made it clear that while it

supports a regional security mechanism, it would not participate in a

forum that would be used to “gang up” on it.

The United States Is

Taking Steps to

Engage China

In addition to the multilateral discussions, the U.S. government took steps

in 1993 to reengage China in bilateral military dialogue as part of its

Asia-Pacific strategy. The U.S. strategy for a “new Pacific community”

recognized the growing importance of Asia in U.S. security and prosperity

by linking security requirements with economic realities and U.S. concerns

for democracy and human rights. The strategy called for, among other

things, stronger efforts to combat the proliferation of weapons of mass

destruction on the Korean Peninsula and in South Asia, and the

development of new arrangements to meet multiple threats and

opportunities. U.S. officials recognized that reopening military dialogue

with China was key to enlisting China’s cooperation on security issues

pertaining to North Korea, arms control, and the disputed Spratly Islands.

The best way for the United States to influence Chinese behavior on

several issues may be through the PLA, according to U.S. government

officials and others we interviewed. They pointed out that the PLA is a

major player within several areas of great concern—regional stability,

nuclear proliferation, and arms control and the PLA clearly has influence in

controlling Chinese military exports. Some defense analysts believe that

some defense exports may even occur without foreign ministry approval.

They indicated that the PLA must be convinced its interests are served by

providing greater insight into its defense budget and policies.

According to U.S. officials, severing military dialogue with China has been

costly to both sides. China lost prestige and access to U.S. training and

technology. But the United States lost the opportunity to influence and

gain the assistance of the PLA on a number of issues of concern to the

United States, such as the proliferation of nuclear weapons.

From November 1993 through October 1994, several high-level defense

meetings between the United States and China took place. Dialogue began

when the Assistant Secretary of Defense for International Security Affairs

proposed several specific initiatives to lay the foundation of a new

program of military contacts with the PLA, including academic exchanges,

high-level visits, attendance at conferences, and peacekeeping-related

Page 44 GAO/NSIAD-95-84 National Security
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activities. In March 1994, senior PLA leaders in Beijing met with the Under

Secretary of Defense for Policy to discuss greater military cooperation,

including port calls and joint training exercises for U.N.-sponsored

humanitarian rescue missions. But talk of whether or not to renew China’s

Most Favored Nation status, in light of limited progress in human rights,

remained in the forefront, delaying further military contact.

Historically, the U.S. military relationship with China has never been

allowed to proceed ahead of the political one. No further action was taken

until mid-1994, shortly after the de-linking of human rights from the

decision to approve Most Favored Nation trading status. Meetings in

August and October between the Secretary of Defense and senior PLA

leaders continued to emphasize common security concerns (for example,

a nuclear-free Korean Peninsula), and both sides agreed to continue to

hold meetings on a number of military issues, including defense strategies.

Contact at a lower level with the younger PLA officers through exchanges

and educational programs are beginning to take place. It will take time to

build a mutually trusting relationship, but dialogue between the two sides

indicates steady progress is being made. One U.S. official commented that

the benefits of military dialogue are already emerging. He cited as an

example the PLA’s restraint in criticizing the United States on recent

changes in U.S.-Taiwan policy.9

Conclusions Most regional defense spending and force modernization is not focused on

or in direct response to China’s current force modernization. In most

cases, regional spending and modernization predates or occurs

simultaneously with China’s recent efforts. Moreover, the defense

modernization of some of China’s neighboring countries is proceeding

more rapidly than China’s defense modernization. Although regional states

remain wary of China’s military modernization, their most immediate

concerns regarding China center on the possibility for millions of Chinese

refugees fleeing economic or political chaos in China, potential economic

competition from China that would slow their own economic growth, and

the possibility that China might use their ethnic Chinese communities to

intervene in their domestic affairs.

Although many experts do not currently consider China a security threat,

in the next decade or two, China could emerge as a more formidable

power. According to U.S. and Asian officials, U.S. military-to-military

9

For example, Taiwan’s office in the United States will be renamed from Coordination Council for

North American Affairs to the Taipei Economic and Cultural Representative Office, and higher-level

U.S. government visits to Taiwan will be allowed.

Page 45 GAO/NSIAD-95-84 National Security
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and Dialogue

dialogue with the PLA could provide important opportunities to influence

China’s policies on issues where the PLA plays a key role and usual

diplomatic channels may be ineffective.

Agency Comments In commenting on a draft of this report, the Departments of Defense and

State concurred with its overall content and conclusions. Their respective

comments are presented in their entirety in appendixes I and II.

Page 46 GAO/NSIAD-95-84 National Security
Page 47 GAO/NSIAD-95-84 National Security
Appendix I 

Comments From the Department of Defense

Page 48 GAO/NSIAD-95-84 National Security
Appendix II 

Comments From the Department of State

Page 49 GAO/NSIAD-95-84 National Security
Appendix III 

Major Contributors to This Report

National Security and

International Affairs

Division, Washington,

D.C.

Joseph E. Kelley, Director-in-Charge

F. James Shafer, Assistant Director

Diana Glod, Evaluator-in-Charge

Hynek Kalkus, Evaluator

Far East Office Michael D. Rohrback, Senior Evaluator

Michael C. Zola, Senior Evaluator

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