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JULY 2002 - REPORT TO CONGRESS OF THE U.S. - CHINA SECURITY REVIEW COMMISSION - THE NATIONAL SECURITY IMPLICATIONS OF THE ECONOMIC RELATIONSHIP BETWEEN THE UNITED STATES AND CHINA

Chapter 10 - Technology Transfers and Military Acquisition Policy

Key Findings

Introduction

A substantial part of China’s military modernization program involves merging modern civilian industrial skills and assets with its older military/defense assets. China’s defense industry is undergoing strategic reform aimed at building an integrated production system viable for both military and civilian purposes. In 1997, the Chinese Communist Party (CCP) defined the country’s economic strategy.1 It called for close coordination between the military and civilian sectors, and put the civilian sector at the service of the military.

Foreign investment, particularly in R&D areas, interaction with U.S. industry, reverse migration of Chinese scientists and engineers back to China, and government-sponsored S&T initiatives continue to accelerate China’s across-the-board development and use of new technology. China has made extensive efforts through both legal and illegal means to acquire advanced U.S. and western military and dual-use technologies. China uses both indigenous R&D activities and foreign joint ventures to meet its technology needs. Because of concerns with U.S. export controls, China has made significant efforts to locate and source sensitive technology from suppliers in Europe, Israel, and Japan, particularly when they meet U.S. standards. China has implemented programs to acquire dual-use and military technologies through espionage.

PLA Modernization Efforts

Priorities

China’s leaders view the United States as the primary obstacle to its interests in East Asia, especially Taiwan. The Chinese realize that they cannot win a traditional war against the U.S. in this area and are seeking unorthodox ways to defeat the U.S. in any such conflict, all the while building up their military power to eventually match or exceed U.S. military capabilities in East Asia. The PLA’s development program emphasizes technological advances in its air and naval power and a reorganization of its force structure to be able to operate ships and aircraft several hundred miles from its coastlines. China’s major force modernization efforts are focused in the following areas:

  • Assuring the viability of its nuclear forces
  • Improving the range, mobility, and capabilities of its strategic missile force
  • Acquiring a next-generation fighter aircraft with aerial refueling capability
  • Acquiring the capability to sink an American aircraft carrier
  • Acquiring the power projection capabilities necessary to absorb Taiwan
  • Developing the asymmetrical warfare weapons to counterbalance U.S. technological superiority

Chinese Military Strategy and Policies

China has the financial and political resources to build a large, focused force. Beginning in 1985, the PLA began to transform itself from a large army designed to fight a major land-based "people’s war" to one based on a technologically advanced force capable of fighting in various environments. The PLA has shifted from threat-based planning to contingency-based planning (e.g. military action against Taiwan). China’s new doctrine commonly referred to as "local war under high-tech conditions," focuses on preparing to fight small-scale, regional conflicts along the nation’s periphery.

China’s aim is to project power and operate ships and aircraft several hundred miles from its coastlines in order to protect its maritime, economic, and geopolitical interests. To meet these goals it is introducing a combined arms capability integrating smaller, highly trained, technologically advanced, military forces into the PLA’s overall force structure. Chinese strategists argue that regional conflicts into which China can be drawn require the deployment of smaller, more flexible, so-called rapid reaction, joint-force combat units supported with airborne and amphibious landing capabilities.2 Over the long run, this program will significantly increase China’s military capabilities and make it a formidable regional actor.3 At least for the next ten years, the PLA will have to rely on its very large inventory of old Soviet-era equipment and a much smaller inventory of advanced systems. China’s military production capabilities cannot now support the demands of the new doctrine, which are dependent on information-based systems. Even though much of the appropriate technological infrastructure is already in place, it will take many years to create self-sustaining institutions and infrastructures.

Nuclear Weapons/Ballistic Missiles

China’s nuclear forces today consist of a triad of land-based missiles, bombers and submarine-launched ballistic missiles, and some 350-450 warheads. Its second-generation nuclear force, to be deployed over the next five to fifteen years, will be far more mobile, accurate and reliable. The Second Artillery, China’s strategic missile force, continues to modernize. Over the last several years it has begun to develop four new types of missiles and to modernize its current intercontinental ballistic missile (ICBM) force in order to serve as a strategic deterrent against the United States. China can be expected to field new mobile ICBMs, more accurate medium- and short-range ballistic missiles, a new land-attack cruise missile, and a submarine-launched anti-ship cruise missile.

Land-based missiles remain the strongest element of the present nuclear arsenal. China has about twenty DF-5 ICBMs with a striking range of 13,000 km (8,100 miles), which gives China the ability to attack the United States mainland. This number could increase to sixty by 2010. China operates a single nuclear submarine, the Xia armed with twelve JL-1 submarine launched ballistic missiles with a range of 1,700km (1000 miles). As for intermediate range and long-range missiles, in addition to the DF-5s, China has at least ten DF-4s land-based missiles with a striking range of 4700km (2920 miles); thirty-eight DF-3s and DF3A missiles with striking ranges of 2,650km (1646 miles) and 2,800km (1740 miles); and thirty DF21 and DF21A missiles with striking ranges of 1700-1800 km (1050-1120 miles) respectively.4

The new mobile, solid propellant strategic missiles in development are the JL-2 submarine-launched ballistic missiles (SLBM) and the road-mobile CSS-X-10 ICBM/DF-31. The DF-31 was tested for the first time in August 1999 and full deployment is expected soon. China’s strategic nuclear force includes 20 ICBMs, 80 Intermediate-range ballistic missiles (IRBMs), 120 nuclear-capable bombers, and 12 SLBMs. The Intelligence Community projects that by 2015, China’s nuclear long-range force will quadruple in size and that most of its strategic missile force will be mobile.

Conventional Force Modernization

The PLA has begun to integrate modern, state-of-the-art equipment, doctrine, and training into its armed forces. China wants a next-generation fighter aircraft, strategic airlift, force projection, aerial refueling, and sophisticated ground-attack capabilities, along with a credible Taiwan invasion force and the ability to sink an American aircraft carrier.5 The PLA places a high priority on the procurement and co-production of air and naval electronic warfare systems, improved missile and aircraft guidance systems, improved surface ships (especially in air defense and fire control), a more advanced communications and early warning/battle management system (AWACS), and precision-guided munitions. China has already used navigation data from the U.S. Global Positioning System (GPS) constellation to increase the accuracy of its 360-mile-range DF-15 missiles, which were used near Taiwan during exercises in 1995 and 1996. For now, China has little choice but to continue to rely on imported foreign systems as a shortcut to close the gap between its strategic requirements and operational capabilities.

The Chinese know they must integrate new high-technology weapon systems on the training field, including the use of modern communications, intelligence, and logistics systems. For limited numbers of divisions, and using limited assets, the PLA has demonstrated it can incorporate new technologies and employ them on the battlefield.6

Ground Forces

Only a small portion of the army is currently capable of fighting effectively outside of Chinese territory. While the PLA will retain many existing weapons in an attempt to develop new tactics and techniques to defeat a high-technology enemy, only limited amounts of foreign weapons and equipment will be introduced. The new force will require more time and money to train in order to perfect the PLA’s new war-fighting doctrine.7

China has approximately 1.7 million personnel in the ground forces, by far the largest fighting organization on the world. There are 21 integrated Group Armies, roughly analogous to a U.S. corps, each with two to three infantry divisions, sometimes an armored division, as well as artillery, combat support, and combat service support units. In total, China has over 100 combat divisions in its active forces. Of these, at least three have a national-level rapid reaction role and nine others have regional rapid reaction roles. These divisions can mobilize and deploy within 24-48 hours. The PLA’s ground forces can be augmented by the paramilitary People’s Armed Police (PAP), containing another 1 million personnel organized into divisions and regiments. PAP divisions and regiments often have their own integral armor and artillery. China has also improved its reserve forces so that the active PLA can draw on another 500,000-600,000 reserve personnel distributed around the country. They are organized into about 50 infantry, artillery or air defense divisions and numerous independent regiments.

These ground forces have over 7,000 main combat tanks, about 5,500 of which are of 1950’s vintage. These tanks have been improved by adding laser rangefinders and new guns. The PLA has some 12,000 pieces of towed artillery, 1,200 self-propelled artillery pieces, and 2,500 multiple rocket launchers.

China’s formidable ground forces can mobilize quickly with good operations security. However, they are limited by a predominance of equipment that is of 1950s and 1960s vintage. China can project force decisively and quickly inside its borders and about 500 miles beyond, but the PLA lacks the capability to project decisive ground force power across the ocean or at great distances. China’s amphibious lift capability is limited to perhaps two divisions at best, and its capability to insert airborne forces is limited to one, of its three airborne divisions at a time.

Air Defense Systems

China is building the framework for a Chinese theater missile defense system. China has bought or is building, with Russian help, advanced surface-to-air missile systems, deployed around key government and industrial complexes.8 There are reports indicating China has recently contracted for the purchase of additional advanced S300 PMU2 air defense systems.9 It is developing a domestic variant of the SA-7, the Russian version of the Stinger anti-aircraft missile. Additionally, it was reported last year that the Ukrainian design bureau Kvant had supplied equipment to China to upgrade its air defense systems. According to the bureau's director, Kvant supplied China with equipment, manuals and technology. Kvant has developed a unique system called Kashtan-3, capable of leading laser-guided bombs and missiles away from their targets.10 Also in accordance with the agreement between Ukraine and China, the Karhkiv Military University has started training Chinese specialists in air defense. Using both domestically produced systems and components and imported Russian technology China is making many kinds of surface-to-air missiles (SAM) systems and will soon have a complete air defense capability.

Air Forces

The People’s Liberation Army Air Force (PLAAF) has 150 medium bombers, many of which are capable of carrying nuclear weapons and cruise missiles. It has about 1,000 fighter aircraft, and 1,900 ground-attack aircraft. The majority of these aircraft of all types are of 1950s or 1960s vintage, although in many cases they have been upgraded with modern fire control systems and radar, often obtained from Western countries. Russia has assisted the PLAAF by selling or licensing for co-production the SU-27 and SU-3MKK. In addition, in order to solve China’s limitations on force projection, the PLAAF has recently developed, with the assistance of British companies, six air-to-air refueling tankers. This capability permits China’s naval air forces to project power into the South China and East China Seas to reinforce maritime claims in the Spratly Archipelago. Naval air forces include an additional 500 shore-based combat aircraft.

The PLAAF has been able to arm its aircraft with modern air-to-air missiles, many of which are as capable as some of the best American or Western armaments. Within the next ten years, the PLAAF should have an effective offensive strike force. During this decade the PLAAF will acquire and deploy increased numbers of third- and fourth-generation aircraft and will be able to integrate more sophisticated Command, Control, Communications, and Intelligence systems (C3I) and early warning support, allowing it to project air power much more effectively.11

Acquisition of the multi-role SU-27 constitutes a quantum leap for the PLAAF. The SU-27 is comparable to the U.S. F-15. If the PLAAF does receive its total of about 300 SU-27s (72 purchased plus 200 domestically produced) that would represent a significant power projection capability. The PLAAF may also have received a shipment of Russian AA-12 air-to-air missiles (nicknamed: Amramskis). An SU-27 armed with AA-12s will obtain an advantage over Taiwan’s Mirage 2000-5 armed with MICA missiles.

The integration of the SU-27s into the PLAAF operational forces has proven difficult, however, particularly with respect to training and maintenance costs. The PLAAF apparently has not achieved a consistent capability with the SU-27s to employ air-to-air missiles in all weather conditions and beyond visual range. The General Manager of Russia’s Aeronautical Equipment Corporation for instance is reported to have said, "…half of the Mainland’s fighter planes, the SU-27s, are unable to conduct normal take-off and flight due to damage to electronic equipment on board. Russia has decided to help China replace and repair the equipment".12

China has also acquired the SU-30MKK ground-attack plane. The SU-30MKK is the first fourth-generation Russian aircraft to be produced in a large series. It is being built according to a PRC order, and is a technologically sophisticated, long-range and well-armed aircraft. The extended range of the SU-30MKK would allow the PLAAF to circumnavigate Taiwan and strike lesser-defended facilities on the eastern side of the island. The SU-30MKKs can carry the Kh-31 supersonic anti-ship missile or other supersonic cruise missiles and pose a greater threat to U.S. and ROC vessels.13 All 38 SU-30MKKs ordered in 1999 were reportedly delivered between December 2000 and late 2001.14 There are recent reports to indicate that China signed a second contract last year for an additional supply of 40 SU-30MKKs for delivery within the next 4 years.15 Additionally, the radar on the SU-30MKK is capable of "data-linking" with the SU-27s giving the "complex of aircraft" a cooperative target engagement capability.

Maritime Issues

In the last 15 years, the Chinese Navy has put great emphasis on operational and combined-arms tactical training. The integration of the Sovremenny-class destroyers into its operational force will provide the PLA Navy (PLAN) one of the world’s most advanced military systems with a balanced armament of anti-ship and anti-aircraft missiles, long-range weapons, and anti-submarine capabilities. There are additional reports that indicate China has recently purchased two additional Sovremenny-class destroyers.16 China’s sea-based mobile forces have enhanced their air-defense, anti-submarine, and anti-ship fighting capabilities. The PLAN has also begun to work on advanced anti-submarine and over-the-horizon anti-ship fighting capabilities.

China views the United States as the primary maritime obstacle to its interests in East Asia, especially Taiwan. Enforcing its South China Sea territorial claims–including the Spratly Islands--requires the PRC to possess a navy that can sustain itself away from shore, with air defenses, and air cover.

The four Russian-built Kilo submarines are among the quietest diesel submarines in the world, and come equipped with both wake-homing and wire-guided acoustic homing torpedoes. Because of its diesel-electric propulsion system its quiet operations are well suited for narrow water lanes and shallow sea areas. The Kilo is equipped with radars and sonar to search for targets. The wake-homing torpedo is designed to ignore acoustic ship defense and evasive maneuvers and has been described by the U.S. Office of Naval Intelligence as particularly effective. It has been reported that China also negotiated with Russia to transfer the technology to permit Chinese construction of Kilos.17 It has recently been reported that China has purchased an additional eight Kilos from Russia. These newer submarines will be ready for delivery by 2007. Of concern with this latest contract is the reported sale of the KLUB-S anti-ship missile. The KLUB-S (SS-N-27) has a range of 300kms (186 miles), which is close to the defense radius of an aircraft carrier battle group. It is interesting to note that Russia only operates the Kilo production facilities for the Chinese order.18

In addition, the first of a new class of nuclear-powered attack submarines, known as Project 093, is under construction. A new class of ballistic-missile-armed nuclear-powered submarine Project 094 is at the design stage and production is expected to begin between 2003-2005. Russia is aiding China in covering the hulls of the new submarines with a layer of anechoic tiles to reduce noise.

Asymmetric Warfare

In the short to mid-term, PLA strategic writings focus on so-called "assassin’s mace weapons" and asymmetric capabilities and strategies to compensate for its overall weaknesses and deficiencies.19 The PLA fully recognizes the paradigm shift from conventionally planned warfare to warfare under 21st-century conditions. Instead of improvement of its entire armed forces across-the-board, the PLA is targeting those programs and assets that will give it the most effective weapon to attack critical U.S. military vulnerabilities.

Crippling Weapons

Because the Chinese recognize they lag the United States in technology warfare, they are developing weapons and means to quickly narrow the difference. These stratagems known as "assassin’s mace weapons," are either a concept or device designed to attack an American vulnerability in an attempt to destroy its strengths. An authoritative article in the Liberation Army Daily on February 13, 2001, reported that President Jiang Zemin had called for accelerated development of such weapons in August 1999.20 They focus on such weaknesses as the U.S. reliance on computer networks and dependency on satellites for our strategic military and economic communication network. Chinese military strategists envisage attacks on all American vulnerabilities, including civilian communications systems or on the vital nervous systems of our economic institutions such as the New York Stock Exchange’s computer system. Since mid-1999, the PLA has openly recruited, in civilian newspapers, an "army of hackers."21 The PLA is also attempting to develop an ability to target forward-based command, control, communications, computers, and intelligence (C4I) nodes, airbases, aircraft carriers and sea- and space-based command and control platforms.22

Chinese analysts have written extensively on the concept that in a future war those combatants with information superiority will gain the initiative by integrating human and mechanical functions in three-dimensional space.

Information Warfare (IW)/ Electronic Warfare (EW)

Chinese strategists believe the Gulf War and the war in Serbia and Kosovo showed that reliance on heavy armor and mechanization is diminishing, while information and digitization are becoming the principal method of war and combat. Several senior Chinese military analysts such as Major General Wang Pufeng, former director of the strategy department of China’s Academy of Military Science, believe that "in the near future, information warfare will control the form and future of war. Even as governments mobilize troops, the numbers and roles of traditional warriors will be sharply less than those of technical experts. An IW victory will likely be determined by which side can mobilize the most computer experts."23

Xie Guang, Vice Minister of Commission of Science, Technology, and Industry for National Defense (COSTIND) has written that as information technology develops and as dependency on rapid and secure electronic transmission of information grows, information activities will infiltrate every dimension of both peacetime and wartime space.24 The PLA’s offensive IW program is in the early stages of research and the Defense Department believes China is studying offensive employment of IW against foreign economic, logistics, and C4I systems,25 specifically to establish a competence to attack computer systems. China is developing cyber warfare capabilities that could put at risk the computer networks that the U.S. military increasingly relies on for its operations. "We see this in terms of capabilities we know they have, we see this written in their doctrine, we see this espoused by their leadership."26

Space

Satellite space telecommunications, reconnaissance, and navigation systems all make it possible to provide the warfighter with real-time, continuous, accurate information and to guide modern cruise and ballistic missiles to distant targets. China has an active domestic program and is seeking Russian and perhaps European help in this area. And it continues to acquire the space and airborne reconnaissance systems necessary to provide the PLA with the precise targeting information required for the next-generation of intermediate range ballistic missiles and both land- attack cruise missiles and contemporary anti-ship cruise missiles.

China is constructing a new satellite positioning system to provide it a capability independent of the U.S. GPS system and the Russian version GLONASS. GPS is absolutely critical to U.S. military operations because it allows for significant capabilities over previous systems such as those used in Desert Storm to target missiles and bombs remotely. Chinese military analysts have written extensively on the ever-increasing role GPS has in long-range precision attacks, precision bombing, and accurate deployment of troops. Two years ago China launched two indigenous navigational satellites, the geostationary Beidou national satellites, which will provide it all-weather, round-the-clock navigational information. However, more satellites would be needed to form a system and provide better and higher precision service globally.27

In the next several years China is expected to field several high-technology space platforms, including higher resolution imagery satellites, electronic signals intelligence satellites, and military communications satellites.28 The World Journal reported a story that appeared in the Hong Kong paper Taiyang Bao concerning Chinese military satellites. "A source in Beijing revealed [to Taiyang Bao] that before U.S. Secretary of State Powell’s 28 July 2001, visit, China successfully launched two military satellites on the same day, from the same site. According to a reliable source, the two satellites have different functions. One of the satellites, code name "Xianfeng-7" (Vanguard-7), is China’s seventh military satellite. Its missions are to target U.S and Japan military activities and deployments near the Chinese Mainland and deployments in the Taiwan Strait. The satellite can coordinate with early warning aircraft, navy radar, and the land-based defense network; it can also conduct reconnaissance and take pictures of enemy military activities. The other satellite’s code name is "Shiji-1 (Century-1). It represents China’s current hi-tech, state-of-the-art military space technology, and it can evade an enemy’s military satellite’s detection and interference."29

Foreign Military Sales to China

A more detailed discussion of the transfers identified below is contained in the Commission’s classified Report.

Russian Assistance

China is modernizing its military forces with specific military assets in mind and in the past ten years it has had a major acquisition program with Russia worth roughly $1 billion (or more) per year. Russia is China’s primary weapons supplier. Chinese purchases have increased in recent years and China is systematically acquiring the aviation and blue-water systems necessary to control critical sea-lanes of communication, and the command and control infrastructure to project a regional force. Russian weapons have filled the void resulting from the termination of Western arms transfer programs to Beijing after the Tiananmen Square massacres of 1989.

Moreover, Chinese leaders want to obtain Russian know-how, so that they can reverse engineer the weapons or obtain licenses, as in the SU-27, and remarket its own version of the system at a cheaper price. Military industrial cooperation between China and Russia is extensive. Technicians and scientists from several states of the former Soviet Union have spent time in China over the past decade and there are periodic visits and information exchanges among specialists. Nearly 90 percent of all China’s arms imports since 1990 have come from Russia.30

Israeli Assistance

Israel ranks secondly only to Russia as a weapons systems provider to China and as a conduit for sophisticated military technology followed by France and Germany. Recent upgrades in target acquisition and fire control, probably provided by Israeli weapons specialists, have enhanced the capabilities of the older guided missile destroyers and frigates in the PLA Navy’s inventory. Hong Kong’s AFP reported in November of 1999 that "as the world’s fifth biggest weapons exporter, Israel has supplied China with radar systems, optical and telecommunications equipment, drones and flight simulators".31 Israel has established itself as an important exporter of high-technology niche weapons containing more sophisticated technology than what is provided by Russia.

Western European Assistance

Although foreign investment in China’s military-industrial complex is not allowed, China has benefited from numerous sensitive transfers. Western and Chinese firms have accomplished this through cooperative production, licensing and joint ventures:32

  • Harbin Helicopters has licensed the French "Dauphine" helicopter production from Aerospatiale.

  • The UK has sold and has possibly delivered 80 to 90 Rolls-Royce Spey engines for China’s indigenous JH-7 fighter. The JH-7, will be armed with advanced radar, advanced low-light sensors, and will carry advanced supersonic missiles. Its obsolescence is becoming less important as it will contain advanced electronics, sensors and missiles that are difficult to defend against.

  • Air-to-air refueling provided by the UK.

  • The newest class of Chinese guided missile frigate has a German diesel engine.

  • The new Song-class submarine has a French-design sonar array on the bow; China has received
    • considerable assistance particularly from France’s Eurocopter to help develop specific capabilitieswithin the helicopter industry as well as the aircraft industry.

  • At the Paris Air show, the Chinese and Russians announced the sale of over 100 very modern
    • ground-attack radars to be put on the Chinese built J-8.

Reportedly, in 1999 two of Europe’s biggest military electronics firms — Marconi Electronics Systems of Britain and Thomson CSF of France — jointly approached China to offer to re-equip the Varyag aircraft carrier. Thomson-CSF provided the major systems for the upgrading of China’s Luda-class guided-missile destroyer. Marconi is trying to sell Beijing airborne early-warning systems, and is competing with Thomson CSF to supply radar and avionics for Beijing’s’ first fly-by-wire fighter aircraft.33

Defense Science and Technology Initiatives

China’s objective in developing its national defense S&T industry is to satisfy basic operational needs and guarantee the production and supply of military equipment during times of crisis or military hostilities.34 Its S&T focus includes acquiring the ability to manufacture technologies such as super-scale integrated circuits, computer software, information security systems, and biochips as well as the establishment of key technical standards. Improvements in such commercial sectors as computers, microelectronics, telecommunications, flexible manufacturing, and satellites are all directly applicable to improvements sought by the PLA for Command, Control, Communications, Computers, Intelligence, Surveillance, and Reconnaissance (C4ISR), advanced guidance systems for modern land-attack cruise missiles (LACMs), advanced avionics and aviation as well as evolutionary improvements in nuclear weapons and modern intercontinental ballistic missile production.35

Minister of Science and Technology Xu Guanhua indicated that during 2002 China plans to launch research into 12 key technologies with information technology at the top of that list. China plans to be a world leader over the next five to ten years in the design and manufacture of super scale integrated circuits.36 Another initiative, "Project 1-26", was initiated in January 2000 and involves the development, primarily by the military, of six major technology projects including dual-use space and information technology, and exotic weapons such as miniaturized nano-technology weapons.37 The underlying informational technologies, artificial intelligence, and electrical engineering make the Revolution in Military Affairs (RMA) an effective war-fighting strategy in which China plans to invest heavily. Computer sciences and telecommunications are RMA-related technologies in which China is demonstrating significant technical progress.

China’s military and defense managers study closely how Western defense corporations have worked cooperatively on joint production and development projects. This is recognized as another characteristic of the globalization trend in the world defense industry. The Chinese military industrial conglomerates view this as an opportunity for the integration of the defense industry into a world supply and development chain. One China Academy of Social Sciences researcher said in 1998, ‘If China's defense industries are not prepared to grhtm the opportunity offered through China's entry into the WTO to export massive quantities of new military products to the world market, it will be difficult to sustain any further research and development. Otherwise, ultimately they will have to continue turning to civil-use goods.’38

U.S. Export Control System

The United States has two separate export control systems. One controls the export of munitions list items and is run by the Department of State. The statutory authority for it is the Arms Export Control Act (PL 90-629). As a result of the Tiananmen Square massacre Congress has prohibited the export of munitions list items to China (section 902 of Public Law 101-246).

The second system controls the export of so called dual-use items and is run by the Department of Commerce. Its statutory authority is the Export Administration Act of 1979 (PL 96-72). This act restricted the export of dual-use items that would be detrimental to the national security interests of the United States.

There is some cooperation among advanced industrial nations in an organization called the "Wassenaar Arrangement on Export Controls for Conventional Arms and Dual-Use Goods and Technologies." The Wassenaar Arrangement is an informal agreement and is based on coordination of national controls. It was established to contribute to regional and international security by promoting transparency and greater responsibility in transfers of conventional arms and dual-use goods and technologies. The Wassenaar Arrangement, however, does not apply to exports to China.

The Arrangement is essentially an information exchange and discussion system and does not control international arms sales. Under it member countries provide semi-annual reports to the Secretariat of export licenses they have approved or denied. Reporting for arms transfers is more limited than for dual-use technology. Members report twice a year the aggregate information on transfers now reported annually to the UN Register of Conventional Arms, plus the model and type of each item (except for missiles and missile launchers, which are reported generically).

In the United States these decisions have resulted in decontrol of numerous technologies mainly in the electronics, computer, and telecommunications sectors, primarily for use in the civilian sector. Nevertheless, U.S. export controls to China remain in place for potential dual-use items, and licenses are reviewed on a case-by-case basis. Recently, the number of dual-use export license applications has declined, and the percentage of denials has increased.

China’s military leaders target the acquisition of advanced dual-use and production technologies for indigenous development and manufacture, but they have not been successful in assimilating and exploiting advanced technologies they have acquired. China has begun to emerge from its sole focus on reverse engineering of the military equipment it acquires from Russia or the West and has begun a technology program to produce domestically designed and enhanced weapons systems and technologies. It remains to be seen if they are successful.

China has gone to extensive legal and illegal lengths to target and acquire advanced U.S. and Western defense and dual-use technologies. To counter problems with the U.S. export control system, Chinese manufacturers and designers have made significant efforts to find sensitive technology suppliers in Europe and Japan, particularly in those technologies equivalent to U.S. standards. China’s military-industrial sector still lags significantly behind that of the West, giving the PLA little choice but to continue to rely on the imports to close the gap between strategic requirements and operational capabilities. Consequently, pressure for more contacts between the military and civilian sectors is expected.

China has implemented programs directed at leveraging useful dual-use and military technologies through indigenous R&D as well as foreign joint ventures in specified industrial sectors. The PLA has begun to narrow the technology gap between PLA forces and Taiwan, and between itself and other U.S.-allied operational forces. China is using its access to U.S. advanced commercial technology to develop advanced systems with a goal of reaching a military capability equaling or exceeding those of the United States. But they are far from achieving that goal.

China’s electronics sector has emerged rapidly and achieved some technological successes. China’s capacity and increasing sophistication in the electronics sector could, if current trends continue, easily make China a leading producer (by volume) of electronics in the next decade or two. However, China’s electronics industry remains highly dependent on foreign inputs for design, marketing and R&D.39

The sectors discussed here were chosen to show Chinese dependency on Western technology in those technologies critical to power projection. Telecommunications is critical for advanced battlefield management, command and control; space navigation is becoming more critical every day for ballistic and cruise missile targeting data. Semiconductors and integrated circuits are the foundation technologies for all modern weapons and associated military systems. And computers are critical components in the design, development, manufacturing and integration phases of weapons development programs.

There were 893 licenses issued for American exports to China in 2001 with a majority of those licenses issued for exports related to telecommunications, high performance computers, and semiconductors and integrated circuits discussed below.

Telecommunications

China opened its domestic market to foreign providers in the early 1990s, a decision that has been fundamental to China’s successful telecommunications development.

China’s leaders have emphasized the development of a survivable high-capacity fiber optic system with common channel signaling software. It has focused on the development of domestic satellite communication systems with critical systems integration and data fusion capabilities. With these technologies China is establishing a high-speed, large-capacity, safe and reliable countrywide, globally connected telecommunications network.

Even though telecommunications technology is intrinsically dual-use with both military and commercial applications, China cannot simply acquire systems and supporting equipment and redirect those systems to military use. Systems integration is critical to flawless functioning.

Both civil and military communications networks support China’s national command and control infrastructure. The PLA is building a battle-management system for strategic and tactical planning and operations oversight. China has developed an automated tactical air defense C4I system providing field systems with prompt and accurate information to better exploit combat efficiency. However, its current command and control system is not capable of directing operational forces in a complex war-fighting environment. Recognizing the threat from modern sensor-to-shooter warfare capabilities, the PLA is working closely with the Ministry of Post and Telecommunications, the electronics sector, and the space industry to establish a domestically controlled, integrated high-capacity national information infrastructure.40

High Performance Computers

The sale of high performance computers has long been a sensitive national security issue. The United States uses high performance computers to design next-generation defense systems, reduce costs, and improve performance. The National Security Agency uses high performance computers to keep track of our adversaries and leading defense contractors use them to develop stealth technology and simulate testing of precision-guided munitions and advanced weapons platforms. These computers make it easier to crack encrypted commercial and military codes.

High performance computers can save China billions of dollars in R&D time and expenditure and significantly advance their efforts to rapidly design modern nuclear weapons and other sophisticated military systems. Furthermore, with supercomputers China can model and simulate tests of nuclear weapons and advanced delivery systems and do so covertly without the U.S. recognizing what China is undertaking. China is seeking to enhance its nuclear weapons and their delivery systems. High performance computers enable their engineers to more rapidly design state-of-the art weapons, add stealth capability to missiles and aircraft, and improve anti-submarine warfare technology. More important still is the ability to simulate tests of nuclear weapons, conventional explosives, and chemical and biological weapons, and the ability to design and build smaller nuclear weapons without actually exploding them, and produce and test missile systems without actually launching them.

Direct sales to the Chinese military are strictly prohibited, but U.S. firms can and do sell to Chinese government agencies. Thus, if the computers are sent to a Chinese University or a government-owned toy factory, the machines can easily be diverted to military R&D. Two recent examples include the Chinese Academy of Engineering Physics using U.S. high performance computers illegally to simulate warhead detonations."41 And "mainland China had successfully completed laboratory simulations of a launch of its latest ICBM which can reach targets in most parts of the United States."42

Department of Commerce statistics for the year 2000 show that 23 license applications for controlled computers were approved to China for a total of $10,939,033. For the year 2001, two applications were approved for a total of $3,942,456. These statistics suggest that most of the trade in high performance computing is no longer licensed and monitored.

Semiconductors/Integrated Circuits

According to Wu Jichuan, China’s Minister of Information Industry, electronics was declared a "pillar industry" in China’s Ninth Five-Year Plan (1996-2000) and several billions of dollars were appropriated for the development of its domestic microelectronics industry. According to its new Five-Year Plan, China will accelerate development in the fields of super large-scale integrated circuits (SLIC), high-powered computers, large-scale system software, and high-speed networking systems.

The China market for semiconductor equipment was about $1.2 billion in 1999 and the Semiconductor Industry Association estimates that it will grow to $7 billion by 2003. China is now the most dynamic and fastest-growing market for such materials since, at present it produces only about 10 percent of what it needs. Thus, while much of the technology industry has faced steep downturns in the last year, China launched many new projects.43 Chinese manufacturers are beginning to narrow the gap between U.S. and Chinese semiconductor manufacturing technology, the direct result of transfers of European, Japanese, and U.S. integrated circuit production technology to manufacturers in China. China is expected to become the world’s third largest user of microelectronics by 2005. Though the Mainland’s chip market, at $11.4 billion, is the largest in Asia, current chip production meets only about 20 percent of demand. Consequently there is a boom in the development of semiconductor manufacturing projects:

Among China’s highest priorities is the development of an indigenous microelectronics industry. According to DOD, "A cutting-edge domestic microelectronics sector will support both military and commercial modernization in China. China’s increasing emphasis on development of very large-scale integrated circuits will have direct application in future military systems, for example, advanced phased-array radars."44

As in other high-tech sectors, China has experienced problems converting its domestic designs into components for reliable weapons systems. As a result it continues to target sensitive and controlled technology abroad. On May 3, 2001, U.S. Customs and the Department of Commerce Export Control Enforcement officers raided the Orlando, Florida, office of the firm Means Come. The firm was investigated for the illegal export of radiation-hardened integrated circuits to China without appropriate export licenses. These chips are particularly critical for missile and satellite development programs.

National Security Implications

China is engaged in a comprehensive military modernization effort. It has determined which technologies it requires to accomplish its strategies and missions, and has implemented a program to acquire the capabilities and technologies needed to achieve its goals. China’s objective is to be self-sufficient in the production of weapons it deems vital to its national interests. A China self-sufficient in the production of state-of-the art power projection systems such as the SU-27 and SU-30MKK, and the continued acquisition of Kilo-class submarines will seriously affect operational decisions of the U.S. and its allies in the region. In time, China hopes to be able to effectively exploit several elements of asymmetric warfare and assassin’s mace weapons systems, to counter U.S. technological superiority. The impact on U.S. operations will be dependent on the ability of the United States to understand China’s programs and the current success of U.S. research and development programs for countering such programs.

Moreover, China is actively acquiring sensitive technologies to improve its commercial industrial base and to significantly enhance its military capabilities to better challenge U.S. influence in Asia. While not a current or imminent threat, China will at some point soon have the capability of seriously degrading U.S. capabilities and its operations in the South China Sea. If China can more successfully integrate a modern industrial base with interoperable forces and advanced weapons systems and capabilities, U.S. operational force strategies will have to be scrupulously reexamined.

Recommendations:

  • The Commission recommends that the Congress require an annual joint DoD/FBI classified
    • assessment of Chinese targeting of sensitive U.S. weapons-related technologies and what actions were taken, or need to be taken, to prevent or deny that acquisition. The report should also provide the Congress with information detailing trends of China’s acquisition targeting attempts.

  • The Commission recommends that the Congress require that both pre-license and end-user checks
    • be conducted on sensitive exports to China.

  • The Commission finds the S&T report submitted to the Congress and this Commission this year a
    • useful tool for monitoring U.S.-PRC government-to-government S&T programs. The Commission recommends the Congress request that such a report be conducted biannually beginning in 2004. The Commission also recommends that the Executive Branch establish an effective coordinating group that should set standards for S&T transfers, monitor the programs and coordinate with the intelligence community.

 

ENDNOTES:

1. Translation of the 16 Character Policy: Jun-min jiehe–Combine the military and the civilian; Ping-zhan jiehe–Combine peace and war; Jun-pin youxian–Give priority to military products; Yi min yang jun–Let the civil production support military production.
2. ‘Text of PRC White Paper on National Defense in 2000’, Xinhua Domestic Service 0205 GMT, 16 October 2000; General Fu Guanyou, "Deepen the Study of the Characteristics and Laws of High-Technology Local War and Raise the Standard of Guidance for Winning High-Technology Local War of the Future", Zhongguo Junshi Kexue, 20 February 1999, 6-14; translated in FBIS.
3. It is interesting to note that in the six years between the Gulf War and the spring of 1996, the PLA was able to acquire, train, and plan a joint-land-sea-air military maneuver. According to the Xinhua Domestic Service, "the maneuver was a complete success, which demonstrated that the PLA has enhanced its combat capability and that the PLA has the resolution and ability to safeguard the motherland, the sovereignty and territorial integrity of the state."
4. National Intelligence Estimate, "Foreign Missile Developments and the Ballistic Missile Threat Through 2015", National Intelligence Council, December 2001, 8.
5. John Culver and Michael Pillsbury. "Defense Policy and Posture II." Session 5: Strategic Trends in China, Institute for National Strategic Studies, Institute for National Strategic Studies, Culver Section, http://www.ndu.edu/inss/books/china/chinasess5.html (21 February 2001); Battilega, John A., et al. "Transformations in Global Defense Markets and Industries: Implications for the Future of Warfare." Director of Central Intelligence, Strategic Estimates Program, http://www.cia.gov/nic/pubs/research (24 June 2002).
6. Rear Admiral Eric A. McVadon, U.S. Navy (Retired), "Systems Integration in China’s People’s Liberation Army", Chapter 11. Dr. Paul Godwin and John J. Schulz, "Arming the Dragon for the 21st Century: China’s Defense Modernization Program", Arms Control Today, December 1999. Wang Chien-min, "Training on New Tactics To Counter US Aircraft Carriers": Hong Kong Yazhou Zhoukan, (In Hong Kong) June 11, 2001, no. 24, 32-35; translated in FBIS.
7. U.S.-China Security Review Commission, Hearing on PLA in the Economy, Oral Testimony of Dr. Dennis Blasko, 7 December 2001, 215.
8. Richard D. Fisher, "Foreign Arms and Acquisition and PLA Modernization", China’s Military Faces the Future", ed., James R. Lilley and David Shambaugh, 1999, 85; Igor Korotchenko, "Marshal Sergeyev’s Diplomacy: RF Defense Minister’s Visit to Vietnam and China Will Enable Moscow To Strengthen Positions in Asia", Nezavisimoye Voyennoye Obozreniye, 30 October – 5 November 1998; translated in FBIS.
9. John Pomfret, "China to Buy 8 More Russian Submarines", Washington Post, June 25, 2002, sec. A, p. A15; Moscow ITAR-TASS, "China Major Buyer of Russian Arms", Radio, 29 May 2002; translated in FBIS.
10. "Ukrainian design bureau offers new air defense technology to Russia", Kiev 2000, GMT 0000, 7 December 2001; translated in FBIS. Note: The SU-27 is also in Ukraine’s inventory.
11. Dr. You Ji, "The Chinese Air Force in the New Century", Conference – Control of the Air: The Future of Air Dominance and Offensive Strike, Canberra, 15 November 1999; Tien Feng, "Chinese Air Force Strengthens Its Long Range Combat Capability – The Air Force Needs to Perform a ‘Leading Independent Mission in Warfare", Kuang Chiao Ching, 16 July 2000, no. 334, 40-43; translated in FBIS. Kenneth Allen, Glenn Krumel, and Jonathan D. Pollack, "China’s Air Force Enters the 21st Century", Project Air Force, Rand, 1995.
12. Lin Wei-chu, "Half of Mainland Principal Fighter Planes, SU-27s, Unable to Fly Due to Damaged Electronic Equipment on Board, Says Russian Expert in Zhuhai On 7 November", Hong Kong Ming Pao, 8 November 2000: translated in FBIS.
13. U.S.-China Security Review Commission, Hearing on Strategic Perceptions, Oral Testimony of Dr. Richard Fisher, 3 August 2001, 184.
14. http://www.concentric.net/~Jetfight/gallery1; see also Konstantin Makienko, "Preliminary Estimates of Russia’s Arms Export in 2001", Eksport Vooruzheniy, November-December 2001; Interfax, December 25, 2000; translated in FBIS.
15. Pom "Russian Submarines," ITAR-TASS "Russian Arms," Mikhail Kozyrev and Aleksey Nikolskiy, "Kasyanov Has Taken Up Military-Technical Cooperation", Vedmosti, 19 March 2002; translated in FBIS.
16. Ibid.
17. Michael J. Barron, "China’s Strategic Modernization: The Russian Connection," Parameters, Winter 2001, 72-86.
18. Fisher, Oral Testimony, 182. "Report on Function, Armament of Russian-made ‘Kilo’-Class Submarine," Hong Kong Sing Tao Jih Pao, 10 June 2002; Moscow ITAR-TASS, "Russia: Defense Ministry outlines goals of minister’s visit to China, 30 May 2002": translated in FBIS. Holmes S. Liao, "China’s Military Technology Modernization", Taiwan Research Institute, March 2000.
19. Fisher, Oral Testimony, 182.
20. U.S.-China Security Review Commission, Hearing on Strategic Perceptions, Oral Testimony of Michael Pillsbury, 3 August 2001, 26, 62; U.S.-China Security Review Commission, , Hearing on PLA in the Economy, Oral Testimony of Colonel John Corbett, 7 December 2001, 211. Dr. Michael Pillsbury, Commission Research Report, "China’s Military Strategy Toward the U.S.: A View form Open Sources" 2 November 2001; Fisher, Oral Testimony, 174; U.S.-China Security Review Commission, Hearing on PLA in the Economy, Oral Testimony of Professor Bernard Cole, 7 December 2001, 257; Bill Gertz, "China Tests Supersonic Anti-Ship Cruise Missiles", Washington Times, 25 September 2001.
21. Al Santoli, "China’s New War Fighting Skills: Emerging Threats to the U.S., India, Taiwan, and the Asia/Pacific Region," American Foreign Policy Council, 20 September 2000; Glenn Schloss, "Mainland Cyber-Soldiers in Taiwan Strait", South China Morning Post, 29 March 2001: translated in FBIS.
22. LTC Timothy L. Thomas, US Army, Retired, "Like Adding Wings to the Tiger: Chinese Information War
Theory and Practice," Foreign Military Studies Office, <http://call.army.mil/call/fmso/fmsopubs/issues/chinaiw.
htm> (24 June 2002).
23. Major General Wang Pufeng, "Meeting the Challenge of Information Warfare", Zhongguo Junshi Kexue [China Military Science], 20 February 1995, no. 1, 8-18; Interview with Major General Wang Pufeng, " Major General Wang Pufeng Discusses Definition, Significance of Information Warfare", Hong Kong Hsien-Tai Chun-Shih, 11 April 2000, 19-21: translated in FBIS.
24. Xie Guang, Vice Minister of COSTIND, and Senior Advisor to the China Association of International Strategy, "Wars Under High-Tech", Renmin Ribao, 27 December 1999; translated in FBIS.
25. U.S. Department of Defense, Annual Report to Congress on the Security Situation in the Taiwan Strait, Washington, D.C, 26 February 1999. U.S. Department of Defense, Annual Report to Congress on The Military Power of the People’s Republic of China, Washington, D.C., June 2001.
26. Agence France Presse, "PRC Cyberwarfare Capabilities," NAPSNet Daily Report, 29 March 2001, http://www.nautilus.org/napsnet/dr/0103/MAR29.html, (14 June 2002); William Knowles, "US concerned about China’s cyberwarfare threat," Internet Security News, 2 April 2001, <http://www.landfield.com/isn/mail-archive/2001/Apr/0011.html> (14 June 2002).
27. Zheng Shuwan, "China To Continue Launching Navigation Positioning Satellites", Wen Wei Po (Internet Version), 5 November 2000; translated in FBIS.
28. Information Office of the State Council, "White Paper on China’s Space Activities", People’s Daily, 22 November 2000, <http://english.peopledaily.com.cn/features/spacepaper/spacepaper.html> (24 June 2002).
29. World Journal, "China Launched Two Military Satellites," 30 July 2001,
http://english.pravda.ru/world/2002/05/15/28799.html
30. "China Major Buyer of Russian Arms", Russia Weekly, Center for Defense Information, 29 May 2002, <http://www.cdi.org/russia/208-9.cfm>, (24 June 2002).
31. Hong Kong AFP, November 30, 1999; translated in FBIS.
32. Fisher, Oral Testimony, 184; Cole, Oral Testimony, 261; U.S.-China Security Review Commission, Hearing on PLA in the Economy, Oral Testimony of Dr. Luke Colton, 7 December 2001, 262.
33. Al Santoli, Editor, "CIA: China Has "Total " Penetration of U.S. Nuclear Labs; Chinese Publications Describe Indsutrial Espionage Against West", China Reform Monitor, American Foreign Policy Council, no. 186, 7 April 1999.
34. President Jiang Zemin, "Act Fully on the Requirements of the ‘Three Represents’ and Work Hard to Promote Scientific-Technological Innovations", Xinhua Domestic Service, speech, 28 May 2002; translated in FBIS.
35. Note: China has technological representatives in more than 60 countries to facilitate and channel support for international cooperation for the development of science and technology in different Chinese regions and industrial sectors.
36. Chinese S&T Minister on Plans to Launch Research into 12 Key Technologies," Xinhua, Radio, 9 January 2002. "These technologies include: large-scale integrated circuits, computer software, information security systems, e-administration and e-finance, functional gene-chips and bio-chips, electric automobiles, magnetic levitation trains, new medicines and modernization of production of traditional Chinese medicines, intensive processing of farm produce, dairy product manufacturing, food security, water-conservation farming, and water pollution control." Translated in FBIS.
37. Al Santoli, "China’s New War Fighting Skills: Emerging Threats to the U.S., India, Taiwan and the Asia/Pacific Region", American Foreign Policy Council, Investigative Report, 20 September 2000, <http://www.afpc.org/issues/thailand.htm> (2/21/2002)
38. Ye, Weiping; "WTO and China’s Defense Industry", trans. http://www.uscc.gov, Zhanlue yu Guanli (Strategy and Management), no. 3, (2000).
39. "NEC to Boost PC Production in China", 28 February 2002, <http://www.2456.com/eng/main.htm> (24 June 2002).
40. LTC Timothy L. Thomas, US Army, Retired, "China’s Electronic Strategies", Military Review, May-June 2001, 47-54.
41. Bill Gertz, "China Using High performance computers From US Illegally", The Washington Times, 27 June 2000, <www.rense.com/general2/super> (24 June 2002).
42. Central News Agency, "Beijing Simulates Long-Range Missile Launch: Report", 15 October 1999, <www.taiwansecurity.org/CAN/CAN-991015-Long-Range-Missile> (24 June 2002).
43. Written Testimony of Semiconductor and Equipment Materials International, dated February 21, 2002.
44. U.S.-China Security Review Commission, Hearing on U.S. Export control Policy Toward China, Prepared Written Testimony of Lisa Bronson, Deputy Under Secretary for Technology Security Policy and Counterproliferation, 17 January 2002, 2.