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Hearing One Hundred Ninth Congress CHINA’S MILITARY MODERNIZATION AND U.S. EXPORT CONTROLS HEARING BEFORE THE U.S.-CHINA ECONOMIC AND SECURITY REVIEW COMMISSION ONE HUNDRED NINTH CONGRESS SECOND SESSION _________ March 16-17, 2006 _________ Printed for use of the United States-China Economic and Security Review Commission Available via the World Wide Web: www.uscc.gov UNITED STATES-CHINA ECONOMIC AND SECURITY REVIEW COMMISSION WASHINGTON : May 2006 U.S.-CHINA ECONOMIC AND SECURITY REVIEW COMMISSION LARRY M. WORTZEL, Chairman CAROLYN BARTHOLOMEW, Vice Chairman Commissioners: GEORGE BECKER KERRI HOUSTON DANIEL BLUMENTHAL Hon. PATRICK A. MULLOY PETER T.R. BROOKES Hon. WILLIAM A. REINSCH Hon. C. RICHARD D’AMATO Hon. FRED D. THOMPSON THOMAS DONNELLY MICHAEL R. WESSEL T. SCOTT BUNTON, Executive Director KATHLEEN J. MICHELS, Associate Director The Commission was created on October 30, 2000 by the Floyd D. Spence National Defense Authorization Act for 2001 § 1238, Public Law No. 106-398, 114 STAT. 1654A-334 (2000) (codified at 22 U.S.C.§ 7002 (2001), as amended by the Treasury and General Government Appropriations Act for 2002 § 645 (regarding employment status of staff) & § 648 (regarding changing annual report due date from March to June), Public Law No. 107-67, 115 STAT. 514 (Nov. 12, 2001); as amended by Division P of the "Consolidated Appropriations Resolution, 2003," Pub L. No. 108-7 (Feb. 20, 2003) (regarding Commission name change, terms of Commissioners, and responsibilities of Commission); as amended by Public Law No. 109-108 (H.R. 2862) (Nov. 22, 2005) (regarding responsibilities of Commission and applicability of FACA). The Commission’s full charter http://www.uscc.gov/about/charter.php and Statutory Mandate http://www.uscc.gov/about/overview.php available via the World Wide Web II U.S.-CHINA ECONOMIC AND SECURITY REVIEW COMMISSION May 22, 2006 The Honorable TED STEVENS President Pro Tempore of the U.S. Senate, Washington, D.C. 20510 The Honorable J. DENNIS HASTERT Speaker of the House of Representatives, Washington, D.C. 20515 DEAR SENATOR STEVENS AND SPEAKER HASTERT: We are pleased to transmit the record of our March 16-17, 2006 hearing on “China’s Military Modernization and U.S. Export Controls.” The Floyd D. Spence National Defense Authorization Act (amended by Pub. L. No. 109-108, sect. 635(a)) provides the basis for our hearing, as it requires the Commission to study China’s military modernization. During the hearing, the Commission heard from Senator Lindsey Graham and Congressmen Earl Blumenauer, Jim Kolbe, Donald Manzullo, and Thaddeus McCotter and received a written statement from Senator Michael Enzi. Administration officials and experts from outside government also appeared.1 The hearing was timely. The Pentagon’s February 6, 2006 Quadrennial Defense Review cited China as the emerging power with the greatest potential to compete militarily with the United States and offset traditional U.S. military advantages. China’s Military Modernization China’s growing military capacity casts a shadow on its self-described “peaceful rise.” From 1994 to 2004 China’s publicly acknowledged defense budget grew at an average annual rate of 15.8 percent. This March, Beijing announced that its 2006 defense budget will rise 14.7 percent from the previous year. Beijing puts its 2006 military spending at $35 billion, but the Pentagon believes it could be $70-105 billion. Assistant Secretary of Defense Peter Rodman explained that China’s military-related acquisitions suggest that Beijing is building capacities to go beyond a Taiwan scenario and “are intended to address other potential regional contingencies, such as a conflict over resources or territory.” According to Assistant Secretary Rodman, China is at the very beginning stages of acquiring power projection capability. Unfortunately, as China’s military capacity grows, transparency surrounding its military motives diminishes. Airpower According to Cortez Cooper, China’s air force is a “defensive force…with offensive aspirations.” Beijing wants a force capable of muscling opponents further away from its 1 An electronic copy of the full hearing record is posted to the Commission’s Web Site www.uscc.gov. http://www.uscc.gov/hearings/2006hearings/transcripts/march16_17/March_16-17_FINAL.pdf). iii shore and the vicinity of Taiwan. To achieve this, Mr. Cooper explained, China is acquiring or developing its aerial refueling abilities, airborne targeting capabilities, helicopters, and over-the-horizon radars. Additionally, according to Richard Fisher, China is developing a fifth-generation twin-engine fighter with stealth design. Mr. Cooper indicated that if China’s reported interest in Russian Backfire bombers were realized, these bombers would have the range to target U.S. forces on Guam. Naval Forces Mr. Cooper, Dr. Bernard Cole, and Assistant Secretary Rodman opined that China has a short-term goal of building a navy to frustrate an adversary such as the U.S. Navy seeking to operate in areas vital to its interests such as the Taiwan Strait. Modernizing its destroyer, frigate, and submarine fleets is key to achieving this capability. China is producing Song-class submarines, and the Pentagon states that China’s development of two new types of nuclear submarines is nearly complete. China will take delivery of more advanced Russian submarines and Mr. Cooper expects China to have more than 15 modern frigates by 2007, equipped with upgraded air defense systems. Looking into the future, China could seek to extend its naval reach westward to protect its energy-related interests in the Middle East or Africa. This would require a reliable blue- water fleet, possibly including aircraft carriers. Missiles China has over 700 short-range ballistic missiles (SRBMs) stationed opposite Taiwan; the numbers have been increasing by roughly 100 missiles a year. According to Mark Stokes, these SRBMs are used to deter or coerce neighbors such as Taiwan. They could also reach U.S. bases in the region and interrupt U.S. naval operations. China continues to upgrade its intercontinental ballistic missiles. According to Assistant Secretary Rodman, “these longer-range [missile] systems will reach many areas of the world beyond the Pacific, including virtually the entire continental United States.” Information Warfare and Space China is also improving its high-technology military capabilities. The People’s Liberation Army (PLA) is focusing on cyber-warfare. Assistant Secretary Rodman explained how the PLA’s strategy in this area has evolved from defending its networks to attacking the networks of its adversaries. China’s manned space mission last October confirms its strides in developing space power. According to Assistant Secretary Rodman, “evidence suggests [China] is developing the capacity to deny [space] access to others with at least one ground-based laser anti-satellite research and development program underway.” Foreign Acquisitions and Domestic Capabilities China has relied heavily on foreign countries for its military capabilities. According to a European study, China was the world’s largest weapons importer from 1999-2004. Dr. Cole noted that China obtains the majority of its military supplies from Russia, particularly naval and air weaponry. iv Beijing has also sought defense-related technologies and systems from EU countries, Israel, and the United States. Assistant Secretary Rodman and Acting Principal Deputy Assistant Secretary of State Francis Record stressed the importance of the EU retaining its arms embargo against China. But Deputy Assistant Secretary Record noted that despite the embargo, “EU nations have approved significant non-lethal military exports to China.” These include: • Military helicopters; • Fire control radars; • Aircraft engines; • Submarine technology; and • Airborne early warning systems Both Deputy Assistant Secretary Record and Dr. Takis Tridimas noted that in 2004, EU members issued over 200 military-related export licenses for sales to China, worth over $400 million. The past record of Israel’s sales of advanced military technology to China is also of great concern. According to Acting Deputy Under Secretary of Defense Beth McCormick, Israel has begun to “improve governmental oversight of military and dual-use exports to China ...” Assistant Secretary of Defense Rodman generally agreed with McCormick’s statement. Beijing is working to improve the efficiency, profitability, and overall effectiveness of some of its state-owned defense companies. For example, Dr. Adam Segal explained that Chinese “policy makers are working to ensure that the civilian economy makes a more direct contribution to defense modernization…[and] creating new institutions to promote cooperation between the defense S&T establishment and its civil counterparts.” However, the state-owned defense companies as a group remain inefficient and lethargic, lacking managers who take responsibility or innovate. U.S. Export Controls China’s military covets American equipment and technology. To protect our security, U.S. export controls must be effective, but must not unduly burden American exporters. The Export Administration Act of 1979 (EAA) expired and efforts to reauthorize it have been unsuccessful. During the hiatus, the Executive Branch maintains export controls based on authority in the International Emergency Economic Powers Act, but the United States requires new legislation to protect national security and take into account advances in technology since 1979. Currently, the Department of Commerce is working with the Departments
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