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DOD Background Briefing on Military and Security Developments Involving the People’s Republic of China

Presenter: Senior Defense Official
August 16, 2010

                MODERATOR:  All right.  Just as a reminder, I saw many of you many this morning, and indicated that, you know, the China Military Power Report went over to the Hill today.  It is a -- it is a report that is carefully edited and put together.  It’s one of the reports the Department believes really does stand on its own when we are completed with it.  But we also understand that there may be things in there that you have a question about.  We’re here today to try and answer any questions or make clear anything that you didn’t understand.

                We’re not here to debate the report or opposing views or anything of that nature, but rather provide clarity to something that you might not be able to glean from these report directly.

                We are on background today, so on your right, my left, here we have Senior Defense Official 1 and Senior Defense Official 2.  You can see their bona fides here.  You can see that they’re eminently qualified to be talking on this subject.  They have been over on the Hill delivering the report and talking to staff today.  And they’re going to give you just a brief overview and then take any questions that you might have on the report.  So any questions before we get started?

                All right.  Well, thanks for joining.  And let me turn it over to Senior Defense Official 1.

                SR. DEFENSE OFFICIAL:  Okay, thank you.  I thought I would start out offering probably about 10 minutes of just some opening comments and provide you an overview of the report, what’s in it this year, and how we’re thinking about security and military issues in the context of China.  And then we can turn things open for whatever questions you have and discussion and wherever it is that you all want to take things.

                As you know and as was just sort of commented on, the annual report on military and security developments involving the People’s Republic of China is a report that we view as being very factual in nature.  It’s not intended to get into a deep and serious discussion of policy issues per se, although, obviously, there are lots of implications for the report that we believe policymakers need to consider. But the tone of the report and our efforts in writing the report is to be very, very straightforward, factual, descriptive and analytical, and, as we said, to let the facts speak for themselves. 

                As stipulated by law, the report is produced by the Department of Defense and transmitted to Congress by the secretary of Defense.  We coordinated with other agencies and departments across the U.S. government, and in that respect, it is an authoritative assessment of the U.S. government on military and security developments involving China.

                As many of you know, this report was originally due on March 1st.  We ran into some delays this year as we worked the process to produce the best report possible.  That is an inevitable and apparently unalterable part of the wonders of coordination both within the Department of Defense and across the -- across the U.S. -- the U.S. government, but we believe that the result of this process is a very high quality report that provides, as I said, a very, very good factual analysis and very, very good insight and description of military developments involving the People’s Republic of China. 

                I know many of you are familiar with the -- with the report from past years.  I will flag a couple of new sections that we have in this year’s report -- and, again, we can talk about -- talk about these sections and the content in more detail if you’re interested when we get to the question-and-answer and discussion part of -- part of our program today.

                First, we have a section that speaks to China’s new historic missions and a discussion of China’s military -- the Chinese military’s new historic missions.

                Secondly, there is a discussion of the PLA’s development of new platforms and capabilities to extend its operational reach to address concerns other than Taiwan.

                Thirdly, there is a discussion of China’s approach to the South China Sea in the context of PLA strategy and force planning.

                And, lastly, there is a review of the U.S.-China military-to-military relations in 2009 and a discussion of U.S. strategy for military relations moving forward, as well as a discussion of our sense of what China hopes to gain out of those -- out of those engagements.

                There are some other new sections in the report as well.  Those, I think, are the primary new areas that we’ve added for consideration for this year.  Let me now offer some general remarks on U.S. policy and the trends as we see them in military and security developments regarding China’s military modernization that are captured in this report.  And then I’ll wrap up by offering some additional comments on where we are in the military-to-military relationship today.

                The United States has committed itself, as I know many of you have heard on numerous occasions before, to the pursuit of a positive, cooperative and comprehensive relationship with China capable of addressing common global challenges and advancing our shared interests.  As we’ve observed China, we’ve observed a China that over the past several decades has made substantial progress in raising national incomes and achieving higher living standards for the Chinese people.

                We recognize this achievement, and we welcome a strong, prosperous and successful China that plays a greater and more responsible role in world affairs.  At the same time, we’ve also noted that China has also embarked on a comprehensive effort to transform its military into a modern force capable of conducting a growing range of military operations.

                China has been increasingly effective at translating its increasing economic strength into military capabilities.  Earlier this decade, China began a new phase of military development by articulating roles and missions for the People’s Liberation Army that go beyond China’s immediate territorial interests.  China’s expanding military capabilities have enabled it to contribute cooperatively in the delivery of international public goods -- and this includes its greater involvement in peacekeeping operations and anti-piracy operations to point to two areas, as well as humanitarian assistance and disaster relief.

                Yet at the same time, the lack of transparency surrounding China’s growing capabilities and its intentions have raised certain questions about Chinese investments in the military and security sphere.  This report in that respect can be probably best read as a simple, straightforward and factual enumeration of what we know or what we think we know about China’s military modernization, as well as the questions where we would like to be able to engage with China in a sustained -- in a sustained dialogue so that we have an opportunity to discuss with them at greater length those areas where we have concerns and where there are ambiguities.

                That’s particularly the case for some areas where we see Chinese capabilities as potentially destabilizing to regional military balances.

                Some -- such capabilities increase Beijing’s options for using military force to gain diplomatic advantage, for example, or to resolve disputes in their favor.

                In the near term, the Chinese military remain focused on preparing for a Taiwan contingency.  In addition, however, the PLA is also developing the capability to attack at long ranges military forces that might deploy or operate within the Western Pacific.  China’s ability to sustain military power at a distance, however, remains somewhat limited today.

                As I said, we remain concerned about the lack of transparency from China into the force projection and anti-access, area denial capabilities it is acquiring, the intentions that underlie those acquisitions and the resources dedicated to that task.

                Let me now provide a brief enumeration of some of the indicators that we are observing as China continues to undertake this long-term comprehensive military modernization effort.  I would underscore that there is nothing particularly surprising as we look at these indicators.  And I think for those of you that have read this year’s report or started to read through it, you would see that there’s nothing particularly surprising in that respect.

                But these are areas where we continue to see developments and continue to see data points that raise areas of concern for us.  First, China has the most active land-based ballistic and cruise missile program in the world.  It is developing and testing several new classes of offensive missiles, qualitatively upgrading certain missile systems, and developing methods to counter ballistic missile defenses.

                For example, China’s developing an anti-ship ballistic missile that has a range in excess of 1,500 kilometers, which is intended to provide, we believe, the PLA with the capability to attack ships, including aircraft carriers in the Western Pacific.

                China’s active ballistic and cruise missile development program also extends over into the area of its -- of its nuclear force modernization, where China appears to be focusing on developing more survivable delivery systems. 

                China’s developing a road mobile solid propellant ICBM system in the DF-31 and DF-31A, and, again, these systems speak, we believe, to the logic for sustained dialogue between the United States and China on strategic issues, a dialogue that we believe is in both of our mutual interests. 

                Turning to the maritime realm, the PLA navy has the largest force of principal combatant submarines and amphibious warfare ships in Asia.  China continues to invest heavily in undersea warfare with a mixture of nuclear-powered submarines and conventionally-powered diesel electric boats.  This is complemented by investment in new surface combatants designed to improve the PLA navy’ capability and capacity for anti-surface and anti-air warfare.

                China’s strategic focus continues to be on Taiwan and the maritime approaches to China towards the east and southeast.  China, therefore, has placed a higher priority on generating maritime capabilities and asserting and strengthening its maritime territorial claims.  In the South China Sea, China’s primary interests are related to securing its extensive sovereignty claims and exploiting natural resources.  A stronger military presence in the region would also position it for force projection, blockade and surveillance operations to influence critical sea lanes.

                Third, an essential element of China’s emerging anti-access and -- (inaudible) -- regime is the pursuit of the ability to dominate across the spectrum of information in all its dimensions and modern battlespace.  China’s investment in advanced electronic warfare systems, counterspace weapons and computer network operations reflect the emphasis and priority China’s leaders place on building capability in these areas.

                China still has much work to do to translate its aspirations into operational capabilities, but we note that China is in fact working to translate those aspirations into operational capabilities.

                China’s comprehensive military modernization is supported by the continued increase in government funding.  On March 4th of this year -- March 4th, 2010 -- Beijing announced a 7.5 percent increase in its military budget to approximately 78.6 billion (dollars), continuing more than two decades of sustained annual increases in China’s announced military budget.

                Our estimate, the DOD estimate, of China’s total military-related spending for 2009 stands at some $150 billion, including -- or using 2009 price and exchange rates.  And we’re happy to talk to you at greater length if you’re interested in exactly how it is that we arrived at that calculation.

                Lastly, as I know this is an area of interest to some of you, I wanted to wrap up by offering a couple of comments on where we stand right now in the military-to-military relationship between the United States and the People’s Republic of China.

                The complexity of the regional and global security environment, as well as the advances in China’s military capabilities and its expanding military operations and mission, call for a stable, reliable and continuous dialogue between the armed forces of the United States and China to expand practical cooperation where our national interests converge and to discuss candidly those areas where we have disagreement.  Such dialogue is especially important, we believe, during periods when there is friction and turbulence.

                The relationship between the United States and China is a complex and multi-faceted one.  It has elements of cooperation as well as elements of competition, opportunities as well as challenges.

                Those fundamental dynamics form a key underpinning of our approach and our thinking about the military-to-military relationship.  We had, as many of you know, several senior-level military-to-military engagements with China over the course of 2009, including the defense consultative talks chaired by Undersecretary Flournoy and when General Xu visited the United States last October, and was hosted by Secretary Gates.

                Those were positive engagements we saw that provided the opportunity for the United States and China to talk about how we can further develop our military-to-military relationship, focused on cooperative activities to build cooperative capacity, foster international understanding, and develop common views on the international security environment.

                Unfortunately, following the announcement by the United States consistent with the Taiwan Relations Act of our arms sales to Taiwan earlier this year, we saw the Chinese once again decide to spend a number of the planned exchanges and a number of our planned mil-mil engagements in response to the U.S. announcement.  And we saw them bring to an end the period of civility and progress in the military-to-military relationship that we witnessed in 2009.

                The result of this Chinese decision was the perpetuation of an on-again, off-again cycle in our military-to-military relationship, a cycle that we see as limiting the extent to which we can explore areas of cooperation, but also -- and perhaps even more troubling given China’s increasing military capabilities -- a cycle that increases the risk that miscommunication and misperception could lead to miscalculation.

                As President Obama has said, the United States-China relationship has not been without disagreement and difficulty, but the notion that we must be adversaries is not predestined.  To that end, we believe that it’s important to use the military-to-military relationship and our military engagements with China as one of several means to demonstrate the U.S. commitment to the security of the Asia-Pacific region, to encourage China to play a constructive role in the region and to press China to partner with the United States and our Asian allies and partners in addressing common security challenges.

                Moreover, we believe that it is in our mutual interests -- China’s as much as -- as much as the U.S. interest -- that we have a balanced and reciprocal dialogue allowing us to build mutual trust, cooperative capacity, institutional understanding, and develop common views, all of those things on our normal -- on our normal checklist, and that there -- that there is a real cost to the absence of military-military relations.  But we also believe that China needs to demonstrate that it is in their interest to stay in that relationship and that they desire to sustain these engagements through periods of turbulence.  This is not something that we can -- that we can do for them or we can do by ourselves.

                We do, however, as Secretary Gates has stated, stand prepared and ready to work and engage with China should they be ready and prepared to engage and work with us to get the military-to-military relationship back on track.

                So with that, by way of some opening comments and an overview on the -- on the report, we’re open to your questions, and we’ll try to work through things as best we can.

                Q    Does the report address in any way the sinking of the South Korean warship and China’s position on that, its response to that in any way?

                SR. DEFENSE OFFICIAL:  The report is purely on the military and security developments as they -- as they relate to the People’s Republic of China in 2009.  So that’s out of the scope of the report.

                Q/SR. DEFENSE OFFICIAL (?):  (Off mike) -- work this front row and then back.

                Q     Two missile questions:  In the executive summary, you say that China’s military buildup opposite the island continues unabated.  The missiles listed, the buildup opposite Taiwan, are the same as a couple years ago.  It’s basically 2,200 CSS-6s and 7s.  Factually, it’s not changed much?  Is that the conclusion one can take?

                SR. DEFENSE OFFICIAL:  I think the -- as I said before, there aren’t, you know, new surprises or game changers, whether it’s in this area or other areas of the report, but we do see a continuation of troubling -- of troubling trends.  And that includes what we perceive as an increased Chinese activity in strengthening their hand across the strait.  This is at a time when we’ve seen progress on the diplomatic front and the economic front, and yet in the security in the military field, we’ve seen -- we’ve seen no change in Chinese behavior.

                Q     But it’s factually accurate to say that your report doesn’t indicate a major increase in missiles facing Taiwan in the last year.

                SR. DEFENSE OFFICIAL:  The numbers are very similar because it’s a ranged estimate.  But one of the things that we do -- we do talk about is improving quality of some of those missiles as well.

                So, I mean, as you’re getting newer versions that have increased ranges, accuracies, those types of things, we’re seeing qualitative improvements in the missiles as well as in cruise missiles.

                Q     Second question on missiles:  The -- Secretary Gates has brought up a few times the potential threat of the anti-ship ballistic missile.  It doesn’t seem that your report has anything new to say there; you had the same sketch from last year, the same general warning. 

                A couple of weeks ago, there was a story re-hashing a lot of the -- what’s been known about the missile.  How close are they to operationalizing this anti-ship ballistic missile? 

                SR. DEFENSE OFFICIAL:  We continue to be concerned about their efforts to development this -- this particular system.  I would say the primary area -- and Defense Official Number 2 can hop in here as he wants -- where we see them still facing roadblocks is in integrating the missile system with the C4-ISR.  And they still have a ways to go before they manage to get that integrated so that they have an operational and effective system. 

                But nonetheless, this is an area that, for all the obvious reasons, remains, you know, of great concern for us.

                Q     For the trans -- (inaudible) -- in layman’s language, C4-ISR.

                SR. DEFENSE OFFICIAL:  Command and Control Communications Computer Surveillance, Intelligence and Reconnaissance. 

                Q     Thanks. 

                SR. DEFENSE OFFICIAL:  Sorry.  This is a -- an occupational hazard around where you just start speaking in -- and you did it.  (Chuckles.)

                Q     Are you talking about the on -- off-again relationship with the Chinese, which is troubling because of their growing sort of military strength.  What attempts are you making to try and get yourself back on an even keel with the Chinese?  You say it’s up to them, they also have to play a role.  So maybe if you could just expand a little bit on that. 

                SR. DEFENSE OFFICIAL:  Well, I think we have been -- we have been quite clear from the -- from the start that we’re prepared and willing to engage with the Chinese in the range of activities and exchanges that Secretary Gates and General Xu had ratified last year to engage in the range of activities that we normally have on an annual basis, such as the defense consultative talks, the defense policy coordination talks, the -- what should be regular and ongoing efforts under the military maritime consultative agreement.  It was the Chinese that suspended these activities earlier this year.

                And as Secretary Gates has said, we stand -- we stand ready to work with China on these issues should they be prepared and stand ready to work for us -- work with us.  And we await, you know, their -- a -- an indication from them that, in fact, they have an interest in pursuing these platforms.

                As I said, I think from our perspective there is a rather compelling logic for why this is in the mutual interest of both of our countries, particularly when we think about the need to decrease the risk of miscommunication, misperception, misapprehension, miscalculation and the like and to establish a stable, reliable, and continuous ongoing strategic dialogue across a number of issue areas.

                But this is something where our Chinese friends need to indicate that they have an equal interest and desire to engage as well.

                Q     So they’re stonewalling you, in other words?  They’re not interested?

                SR. DEFENSE OFFICIAL:  The -- it’s been -- it’s been ambiguous over the past several months.

                Q     Well, continuing on that same question then, I mean, it seems that the U.S. policy then is literally sit on hands and wait; that nothing is changing, there’s no other overtures.  Or, you know, again, what can be done if -- that -- if -- one of your answers was that, looking back towards last year’s statement from the visit here, you know, which are almost a year old now, you know -- short of not selling arms to Taiwan, are there any proactive U.S. steps that are being made to bring them -- to bring them back to the table?

                SR. DEFENSE OFFICIAL:  Well, I mean, we have -- we have indicated and Secretary Gates himself has said on a number of occasions that we stand prepared to work with the Chinese if they’re prepared to work with us.  I mean, the difficulty is that, you know, if we -- if they have made statements about suspending the mil-to-mil relationship, if they let it be known, as they did, that it was, quote/unquote, "not a convenient time for Secretary Gates to visit China" -- even though his reciprocal visit to China was one of the -- one of the areas that the secretary and General Xu had agreed on last year -- that makes it somewhat difficult for us to be able to, by ourselves, move the relationship forward. 

                I think we’ve been very, very clear with our Chinese friends the areas where we think there is value and it serves our mutual interests, and very, very clear with them on -- of our interests in sitting down and working with them in areas like the Military Maritime Consultative Agreement, where we think that there is in our mutual interests a real value and interest in having a strategic dialogue with them that allows us to have a deeper discussion on nuclear weapons and ballistic missiles, for example, and a number of other areas.  But it only does us so much good to show up to a meeting, if we’re the only ones that are there. 

                Q     You said that China is working to narrow the gap between its aspirations and its capabilities.  And I think in the report, although I can’t find it at the moment, it says that one of China’s goals is to be the pre-eminent or predominant military power in the Pacific, which is also the U.S. goal and policy. 

                You say things that they’re doing change the balance.  Is that what you’re really talking about?  And what does the United States need to do to counter that? 

                SR. DEFENSE OFFICIAL:  Do you want to --

                SR. DEFENSE OFFICIAL:  Well, I mean, I think that -- you know, when we talk about China’s military developments, we put it into a very, you know, long-term, you know, kind of historical context as well.  And as China’s developing, you know, these capabilities, it is putting them in a position where they’d be able to exercise greater political and military influence in the region. 

                Obviously there are things that the Department of Defense does, both unilaterally and also work that we do with our allies and partners in the region, to be able to, you know, maintain stability and to be able to maintain the capacity and the infrastructure that allows us to be able to advance and defend our interests in the region. 

                And the report itself, which is what we’re talking about today, doesn’t really get into how the United States responds to it.  You’d have to look at other documents like the National Defense Strategy, the Quadrennial Defense Review report that talks about how we’re developing our own, you know, force planning and defense policies. 

                I think one of -- one of the main things that this report does talk about is the value and importance of maintaining the types of communications that we have with -- that we could have with the PLA, to ensure that there’s a reduced risk of miscalculation and reduced risk of misunderstanding, the types of, you know, disagreements or misapprehensions that could take a point of friction and lead it to something that would be a little bit more disruptive. 

                Q     But it’s not a matter of misunderstanding or miscalculations.  The Chinese have been very clear about their policy towards Taiwan, which you talk about in the report; towards the South China Sea, which you talk about; towards the East China Sea and the Yellow Sea, which I don’t think you talk about in the report; the commentary on Friday by General (Law ?) saying these are not joking matters, we’re serious about this.  I mean, doesn’t that put you on some kind of a collision course?

                SR. DEFENSE OFFICIAL:  Well, it would if you were to assume that these are by necessity situations that have zero-sum outcomes.  As I said at the opening of the -- in my opening statement, we welcome a China that joins the United States in being an upholder of international norms, international law, and that contributes to providing public goods for the -- for the region and for the international community. 

                When we think of issues, you know, in the maritime domain -- for example, I mean, you mentioned South China Seas, China Sea, Yellow Sea -- our actions are fully consistent with international law, and our interpretations of customary maritime -- customary maritime law.  There’s no reason why the United States and China on these -- you know, on these matters have to be in an adversarial position.

                We’re -- I’m just going to sort of go around the room, because that’s the easiest thing to do.  I apologize.

                Q     (Inaudible) -- this report took -- (inaudible) -- five month overdue.  And then March 1st -- next year’s, only six months away.  So would you expect a report next March?  I assume you want to publish it then, but it’s going to be much thinner and involving -- (off mike).

                SR. DEFENSE OFFICIAL:  The report won’t be much thinner, because each of the reports captures the previous calendar year.  So the report that will come out in March of next year will capture our assessment over the course of 2000 and -- 2010.  And we will endeavor our best to get that report out in a timely fashion.

                Oh.  Sorry.

                Q     What is the main reason to change the name of report?

                SR. DEFENSE OFFICIAL:  Because I believe Congress changed the name of the report in the legislation.

                Q     Anti-ship missiles -- (inaudible) -- how concerned -- (inaudible)?

                SR. DEFENSE OFFICIAL:  We’re obviously concerned about a range of anti-access aerial denial capabilities that the Chinese appear to be -- appear to be developing.  And that’s an area that we’re keeping a very close eye on so that we can develop appropriate responses.

                Q     Thanks.  I hope I can invoke the Bloomberg rule and get in two questions too.  (Laughter.)  The first is --

                Q     (Inaudible.)  The first is you -- an interesting phrase, that there was nothing particularly surprising in this report.  I’d like to rephrase that.  Did you find anything particularly irrational about Chinese behavior?  In other words, as you look at what they’re doing, is there anything that is not in keeping with a global political economic giant trying to pursue rational national interests in its region of the world?

                SR. DEFENSE OFFICIAL:  I guess I would say that -- I mean, it’s unfortunately not a question that can be easily answered yes or no, precisely because there are a number of questions that we have about, you know, the areas that we don’t have good visibility into.

                I mean, it’s the lack of transparency, the ambiguities that raise questions and make it very, very difficult to draw sort of a clear, you know, sort of the clear, sort of analytical conclusion that you’re pointing to.  So we’re forced to say there may be, you know, nothing to be concerned about in the sense that China’s acting perfectly consistently with other great powers who as they rise translate economic power into military power.

                Alternately, there may be things that in fact are concerning.  And this is precisely the conundrum and the challenge that we’re faced with right now that because of the opacity of the Chinese system and the PLA in particular we don’t have the degree of insight into their capabilities or their intentions that we would like.  And, again, that’s precisely what underscores for us the logic, again, in our mutual interests for being able to have the sort of sustained, reliable, continuous strategic dialogue that we think we need between the United States and China.

                You know, do you want to add to that or not?

                Q     The second one’s a little bit more narrow.  It’s about the South China Sea.  For those of us who have been here for a while, I mean, you know, all of the provocative behavior, the buzzing of the airplanes, the -- could you explain -- there are several theories that are offered.  One is it’s all about the submarine base at Hainon Island and trying to have an exclusion zone.

                The other is the Chinese are trying to assert a new norm in international law that simply doesn’t accept the three miles.  And if they want to expand that, they have to behave in real time as if they have sovereignty going out further.

                What is your interpretation for what’s going on in the South China Sea?

                SR. DEFENSE OFFICIAL:  Again, I guess I would refer back to the previous.  It’s precisely the uncertainties that we have about Chinese intentions and Chinese thinking, even as we’re seeing these additional capabilities come online that allow China to have a greater military presence in the South China Sea that raise questions.  And it’s precisely those uncertainties that drive our desire to be able to have a more sustained discussion with our Chinese friends, but also in the context of ASEAN and multilateral -- the appropriate multilateral forums about the South China Sea because it -- this could be an issue that, you know, is relatively straightforward to deal with, or there may be some complexities involved that -- you know, that will create real challenges down the line.

                SR. DEFENSE OFFICIAL:  If I could just add to that, I wouldn’t necessarily view the different theories or hypotheses that you articulate as being mutually exclusive, because the same -- some of the same concerns that we -- that -- or some of the same behaviors, I guess, that we see, you know, manifest in the South China Sea we also see in the East China Sea, for example.  So it’s not -- you know, China’s views of its rights are not limited to just to the South China Sea.

                Q     Can you give us a sense of Chinese nuclear buildup in the Indian Ocean?

                SR. DEFENSE OFFICIAL:  Well, I mean, I think the best -- probably the best example of that would be China’s participation in the multilateral effort to combat piracy in the Gulf of Aden, where China is now in their sixth rotation of a task group. 

                China does not have a permanent military presence in the Indian Ocean.  But the fact that they have been able to deploy and sustain naval forces on a continuous basis working with the international community and counterpiracy operations does address somewhat the question. 

                I wouldn’t call it a military buildup.  But they are demonstrating the capability to operate at distances from China and in the Indian Ocean. 

                Q     There’s nothing in the Indian Ocean that is of concern to you, as far as China’s military or naval power is concerned. 

                SR. DEFENSE OFFICIAL:  That wasn’t your question. 

                I mean -- I mean, obviously we’re watching as China is developing its naval capabilities and its ability to project and sustain power away from -- you know, at distances from China. 

                To the best of my knowledge, in the way that we’ve talked in this report, you know, there is no permanent naval presence in the Indian Ocean outside of right now the counterpiracy operations as part of the multinational forces. 

                Actually China is not part of the multinational force, Task Force 151.  But they are coordinating and cooperating with the international community in that area. 

                Q     And finally China has a long-pending border dispute with India.  How do you see China’s military position against India?  Do you see any activities in the last year -- (off mike)? 

                SR. DEFENSE OFFICIAL:  We do talk -- we do talk in some detail in the report on China’s territorial dispute with India.  And we provide some data on numbers of incursions across the -- into that disputed area.  China continues to, you know, maintain its position on what its -- what its territorial claim is.  But I think that the two -- the two capitals have been able to manage this dispute, in a way, using confidence-building measures and diplomatic mechanisms to be able to maintain relative stability in that border area. 

                But it’s something that China continues to watch and -- but I wouldn’t say that there’s anything in this report that demonstrates a spike or an anomalous increase in military capabilities along the border.  It’s something that China’s paying very careful attention to.  It’s obviously something that India is paying careful attention to as well.

                Q     Thank you.

                SR. DEFENSE OFFICIAL:  Sure.  As I said, we’ll just sort of march around as we go, so --

                Q     China seems to be very keen to develop air (nuclear ?) -- (inaudible) -- air craft carrier by themselves.  And what is your observation about their intentions about that?  And what implications do you think there is to the United States?

                SR. DEFENSE OFFICIAL:  Well, again, I would say that this is an area that we’re watching very closely.  But you would need to ask the Chinese what their -- what their intentions are.  This would be another area where there are some ambiguities and a lack of transparency into what China’s ultimate intentions are.  And we think that’s a rich area for discussion.  But you would have to -- you would have to ask the Chinese what the -- what the thinking behind their aircraft carrier program is.

                Q     Do you think -- will it be a -- (some ?) game changer in -- (inaudible) -- around China?

                SR. DEFENSE OFFICIAL:  I would be hesitant to say that it’s -- that it would be a game changer in the areas around China.  But, you know, there are a lot of different -- there are a lot of different pieces that interact.  And again, it gets to the question of what game it is that you suppose is being played.

                Q     Does the conclusions in this report have anything to do with the decision to send the George Washington aircraft carrier and to have those military exercises with South Korea, and then in addition to North Korea’s sinking of a South Korean ship?

                SR. DEFENSE OFFICIAL:  The exercises that we have conducted -- Invincible Spirit a couple of weeks ago; currently Ulchi Freedom Guardian, which is ongoing on the Korean Peninsula -- are about North Korean behavior.  We’ve announced that we’re going to be undertaking a series of exercises, of which Invincible Spirit was the first, that will be conducted with a range of forces in a number of locations at times of our choosing, relevant to the -- to the message that we’re trying to send and to the -- to the alliance capabilities, the U.S.-ROK alliance capabilities that we are seeking to enhance.  But these exercises are about North Korea and North Korea’s behavior.

                Q     Ask another one.  On --

                STAFF:  I’m going to suspend the Bloomberg rule so we can get around the room -- (laughter) -- with one question only, please, to finish up here.  (Off mike.)

                Q     Thanks.  China seems to be more aggressive in acting beyond the -- (inaudible) -- actually they sent 10 battleships in this -- early spring to the Pacific Ocean near Japanese territorial waters.  So how do you see this -- that kind of activity?  And how do you analyze the intention of the Chinese?

                SR. DEFENSE OFFICIAL:  Although that particular exercise, which I think occurred in April of this year, isn’t specifically addressed in this report -- because that, as we had talked about, covers 2009 -- but what we do talk about in this report, and it’s a continuation of a trend of China developing the capability to project its forces farther and farther from China’s -- you know, from China’s coast, its immediate periphery.  And so I would anticipate that we should -- we will see and we should expect to see those types of exercises in the future as the PLA navy becomes more comfortable operating at distances from China, as they develop greater sophistication in their training and in their doctrine.  So these are the types of things that we should certainly expect to see more often.  And we’ll continue to watch those and we’ll continue to report on them in this report.

                Q    Do you think such activities are related to their intention to gain the territorial dispute?

                SR. DEFENSE OFFICIAL:  I think that if you look at -- and this was a point that was raised earlier, the discussion of the new historic missions, certainly developing the military capacity to defend Chinese territorial claims would be part of the PLA’s roles and the PLA’s mission.  I wouldn’t look at any particular capability or any particular exercise as focused on a specific territorial claim, with the exception of some historical ones related to Taiwan.  But I would, you know, pay some attention to and I would focus on, you know, the fact that the PLA is developing capabilities to be able to pursue and advance China’s interests across a range of mission areas.  And defending its territorial claims would be one of them.

                We can -- go to -- go to the back row now, I guess?

                Yeah, please.

                Q     I wondered -- one point, just clarification.  In the report you make reference to the extended operational reach to the Indian Ocean and beyond the second island chain in the western Pacific.  Can you spell out what you’re talking about there? 

                And my question is related to the budget increase that you mentioned this year, announced earlier this year, the military budget -- that China’s military budget increase as announced was significantly smaller than in the last few years.  And if you combine that with the missiles across the strait from Taiwan -- across the strait from Taiwan, last year’s report said those -- the numbers generally increased -- were generally increasing at about a hundred a year, but the range is the same.  Do you not see any easing up at all from factors like that?

                SR. DEFENSE OFFICIAL:  Well, on -- in response to your first question, if you look at page 23 of the report, there’s a map that identifies our understanding of what the second island chain is.  And so there’s a first island chain which runs from Japan through the Ryukyus near Taiwan, and then, you know, it runs adjacent to the Philippines and then into the South China Sea.  A second island chain would go farther out into the Pacific Ocean. 

                And the way that we understand how the Chinese conceptualize the use of these island chains, they view them as almost like defensive perimeters.  And so you have, you know, one line and then the next basic line goes farther out.  And this is -- this is a Chinese kind of concept in -- that they talk about.

                And with respect to your second question, I think we actually answered that with the -- with the Bloomberg question.  I mean, the numbers that are presented in the report are unclassified estimates.  We continue to see improvements in the -- in the capabilities for precision or near-precision strike, as manifested in the short-range ballistic missile forces.  What we’re seeing is -- I guess, you know, we’re seeing not only some increases in numbers, new missiles coming in, but also qualitative improvements in -- of some of the older systems.  So you may not have, you know, the same rate of increase every year.

                But I would also just point out these are -- these are unclassified estimates, and that’s why there’s a range.  And it’s not just ballistic missiles that we’re watching; it’s a whole variety of capabilities -- you know, land-attack cruise missiles being one, advanced fighter aircraft, surface combatants.  So it’s not just one weapon system that we monitor.

                SR. DEFENSE OFFICIAL:  Hey, Laura (sp), two more, and we’ve really got to close it up.

                Q     How would you compare China on-line -- the offensive and defense capabilities, compared to the U.S.’s?  Are they more aggressive, less aggressive?

                SR. DEFENSE OFFICIAL:  We don’t -- we don’t draw that type of comparison in this report.

                Q     Will you draw one now?

                SR. DEFENSE OFFICIAL:  No.  (Laughter.)

                Q     You talk about the -- you mentioned China looking to develop its indigenous ballistic missile defense capabilities.  How do you see them doing that?  Do you see them doing it literally indigenously?  Or do you see them trying to essentially steal the U.S.’s or any other country’s technologies?  Could you expand on what it is exactly that you see them doing?

                SR. DEFENSE OFFICIAL:  China has expressed interest for a number of years in developing ballistic missile defense capabilities.  As we talk about in the report, some of the weapon systems that they’ve acquired from Russia, particularly the SA-20 PMU-2 surface-to-air missile system, as the Russians have advertised it, has a limited ballistic missile defense capability.

                And so in that respect, we see them, you know, focusing on that.  And I’m not entirely sure of what some of the technical specifications of some of their indigenous but comparable surface-to-air missile systems will have in a theater missile or cruise missile defense mode.  But if you’re looking for one example, I would definitely, you know, look at the Russian air defense systems that they’ve acquired, which are some of the most -- well, they are THE most advanced capabilities that the Chinese currently have in their inventory, and they are talking about it.

                STAFF:  Make this the last one, then.

                Q     Okay.  You mention in the report the intention for them to buy diesel submarines, and I’m wondering how you see the future of the undersea force for the PLA navy.  Is it going to be on diesel subs, or do you think that they’ll make a move to nuclear -- more nuclear-powered subs?

                SR. DEFENSE OFFICIAL:  I think that the way to characterize it is, the Chinese are pursuing a good mix.  I mean, they’ve had nuclear-powered attack submarines in their fleet for a while, based on the older Han class.  But they’ve also been investing in indigenous developments with the Song class diesel electric submarine and the Kilos that they acquired from Russia.  So they’re trying to maintain a basic balance.

                They’ve also been developing the new-generation nuclear attack submarines, with the type 093 or Shang class, and we mentioned for the first time in this report this year a type 095 next-generation nuclear attack submarine. 

                I would anticipate that they’ll maintain a balance for the foreseeable future because of the different capabilities and advantages that you get from a conventional submarine for closer in or a nuclear submarine for more -- longer endurance operations.  I don’t see them shifting decidedly in one direction or another.  They’ll try to maintain that balance.

                STAFF:  Well, thank you for your interest today.  If you have any follow-on questions as you do your reporting on this -- (off mike) -- be more than happy to take those questions and get them to our senior Defense officials and try to get you an answer -- (off mike).

                Thank you.

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