OPENING STATEMENT

Let me begin by thanking the Members of the U.S.-China Security Review Commission (USCC) for inviting me to share some of my observations related to the weapon system acquisition process of the People=s Liberation Army Air Force (PLAAF). Given the time constraints, I will limit myself to discussing four broad, interrelated issues central to PLAAF system procurement, each of which poses its own unique challenges. The following insights presented are of a general nature and not program-specific.

KEY DRIVERS IN WEAPON SYSTEM PROCUREMENT

The Chinese air force acquisition process is complex, lengthy, and influenced by a number of organizations with interests beyond those of its own. Four key determinants are significant to the process:

• Specific mission requirements;
• Long term aeronautical industry strategy;
• Limited availability of program funding; and
• Relations with foreign governments & system providers.


Defining Mission Requirements

Platform acquisition is first and foremost a function of the operational requirements resulting from the PLAAF mission. Currently, the air force continues to view as its principal mission the defense of PRC territory and air space, while gradually emphasizing offensive operations into the future. While its secondary missions are keyed to providing air support to PLA ground and naval forces, the air force admits it cannot meet these missions. More specifically, since its inception in 1949 the PLAAF has struggled with the definition of its mission and the development of appropriate mission statements. This, in turn, has prevented their effective translation into Request for Proposals (RFPs) and formal Statements of Work (SOWs) needed by Aviation Industries of China (AVIC I & II) to define hardware performance requirements. Fundamentally, this is an institutional problem, with the net result being the induction of a new system with capabilities well short of the specified technical objectives.

While there is a complicated formal process underpinning system procurement centered around the Equipment Department [ED] (kongjun zhuangbeibu/kongzhuang) of Headquarters Air Force/PLAAF, perhaps the most influential factor guiding acquisition is whether or not the specific system may be designated a Afocal point program@ (zhong dian zhi yi). Such a classification suggests its perceived importance within the highest policymaking circles of the General Staff Department (GSD), the Central Military Commission (CMC), and the State Council. High level political support, in turn, generally translates into favorable funding which can significantly determine the scope and pace of the program itself. By contrast, lower priority programs may continue at a gradual pace with funding secured by entities other than the central government. Moreover, a direct correlation exists between the critical absence of so-called Aprogram champions@ within the PLAAF - i.e., high ranking officers with the necessary experience, foresight, and clout to aggressively promote and defend Atheir aircraft program@ vis-a-vis other competing defense interests - and the ability of that program to attract the required funding either for its development or procurement.

Long Term Aeronautical Development Strategy

Symbiotically tied to the hardware specifications produced by the PLAAF is the central government=s long term aeronautical development strategy. In spite of the apparent increasing reliance on Russian weapons systems to meet selective air force modernization objectives, China=s ultimate htmirations are to eventually develop a fully self-sufficient aircraft industry as a matter of national strategy and prestige. To that end, AVIC I & II seek to meet the technical requirements articulated in ED project documents. However, the lack of superior managerial expertise; effective program controls coupled to a tight accounting system; the absence of many appropriate technologies and mastery of the systems integration discipline; and test equipment & methodologies - all fused into an enterprise system incompatible with technological innovation and its effective dissemination; lack of recognition for individual accomplishments; insufficient protection of and disagreements over ownership of intellectual property rights (IPR); and serious industry employment concerns - conspire to effectively subvert the performance benchmarks set by the PLAAF. This is a situation which is generally understood by many at the beginning of any new program.

The air force, whose top priority it is to acquire a platform which will meet its operational requirements, all too often recognizes industry is simply incapable of meeting the stipulated project requirements. As a result, a significant and widening dichotomy exists between PLAAF specifications and the ability of industry to design, develop, test, and manufacture in militarily useful quantities effective weapon systems at a cost acceptable to government. It is not possible for the air force to make its own procurement decisions independent of AVIC I & II. Not surprisingly, their relationship is, at times, characterized by a considerable degree of friction and diametrically opposed interests.

Limited Availability of Program Funding

By the same token, some foreign acquisitions represent the only short term solution to accommodate an air force requirement. However, the need to import an appropriate system is undesirable, both from the perspectives of the central government and industry alike. Because the State Council must exercise strict fiscal responsibility in allocating limited hard currency reserves to finance the purchase of a major foreign platform, it is prudent to assume the procedures proscribing such acquisitions contrast sharply with those of locally sourced solutions.

While entering into a cooperative relationship with some international manufacturers is desirable for reasons which have as much to do with national prestige and symbolism as with actual system performance and capability, a deeply ingrained sense of ambivalence and mistrust towards foreigners is often noticeable among Chinese teams conducting the commercial negotiations. As a result, a considerable effort is made to ensure the appropriate allocation of the State Council=s limited resources, and in securing the representation of skilled interlocutors and highly qualified technologists on the pertinent team to carefully evaluate all htmects related to the potential acquisition.

While importing critical defense equipment from abroad may be favored by PLAAF planners, trying to sell the government and AVIC I & II on such an idea is considerably more difficult. With a non-domestic acquisition the probability of any local industry participation in the program precipitously drops to a very low level - if any - which can only strengthen industry=s resistance to support the use of scarce hard currency for the purposes of financing its cost. In particular, given the reorganization of China=s defense industrial complex in 1998-1999 and earlier enacted policies that state-owned enterprises (SOEs) must rely less on central government funding to secure their continued viability into the future, it is not difficult to ascertain why many SOE general managers are unenthusiastic when the air force opts for a foreign platform, rather than a locally developed one.

Relations With Foreign Governments & System Providers

In cases where a consensus has been reached to exploit a foreign channel, the PLAAF probably identifies key international suppliers and produces a comprehensive assessment of their capabilities to either develop the weapon system and/or their products which are likely to meet the desired specifications. While cost estimates form an integral part of the decision making process, final selection criteria probably also gives due consideration to the political relationship the PRC enjoys with the government of the targeted supplier(s). Although a cooperative relationship with a Western system provider may result in significant benefits, PLAAF planners and the State Council are equally cognizant that it is in their interests to look to non-Western suppliers to meet certain weapon requirements. At the same time, it would be a mistake to interpret air force sourcing from an oligarchy of suppliers representing a single country as constituting end-user satisfaction. Instead, such cases reflect high level pragmatic decision making by group consensus necessary to secure imperative hardware requirements within a reasonable time frame.

There is a curious contradiction inherent in such decisions. On the one hand, great importance and prestige is attached to a high performance machine or quality product offered by a reputable manufacturer. On the other, there exists an underlying but elusive antipathy towards a foreign system. This subtle perception can be traced to China=s difficulty in accepting its comparatively low state of technological development vis-a-vis that of the West and its relative power and position within the international system, coupled with a highly developed and astute sense of manifest destiny to correct what it regards as historical anomalies at a critical juncture in the country=s place & time. A more practical set of concerns is that a commercial relationship with an international manufacturer can provide significant opportunities for a foreign government to disrupt or deny the supply of associated product support, and/or to acquire information sensitive to the PRC=s national security. Thus, while the PLAAF may seriously consider a cooperative relationship with a new systems provider, a culture of institutional secrecy and conservatism probably gives priority to established, proven, and predictable supplier relationships.

A FINAL THOUGHT

In conclusion, I would like to address one final point. PLA writings often uphold the U.S. military as the model from which China must learn, if it is to complete selective military modernization. Specifically, in some cases the PLAAF seems to be influenced by institutional and/or analytical misperceptions to support its transformation into a capable fighting force by procuring similar weapon systems USAF either has; may have; or is scheduled to introduce into the future. This is endemic of a much larger problem, compounded by the country=s great physical distance to the United States and its as yet unproven ability to consistently innovate at a standard commensurate with its current level of development and capabilities.

Moreover, its near-complete prohibition from participation in international defense industry forums and joint military training exercises effectively precludes the Chinese air force from benefitting from the intangible but invaluable types of analytical exchanges; synergistic interactions; and intimate operational experiences at all levels which USAF and other leading air forces exploit to their advantage. Put another way, the opportunity cost for the PLAAF to accelerate development of its own unique corporate memory is inversely proportional to the square of the rate at which USAF is rapidly advancing along the learning curve. As a result, the PLA=s apparent heavy orientation towards the U.S. military experience suggests the conclusions it has drawn are - at times - incorrect and not necessarily applicable to selective modernization of its air force into the future.