DEPUTY ASSISTANT SECRETARY OF DEFENSE DAVID HELVEY: Thanks very much, Cathy, and thank you to everybody that's here this afternoon. I appreciate the opportunity to come out to brief you on the release of the 2013 edition of the annual report to Congress on Military and Security Developments Involving the People's Republic of China.
The National Defense Authorization Act for fiscal year 2000, as amended in fiscal year 2010, mandates that we publish this report in both the unclassified and classified forms. The report is a Department of Defense product. It's produced in partnership by the Office of the Secretary of Defense for Policy and the Defense Intelligence Agency, but we coordinate the report with the Departments of State, Homeland Security, Energy, Commerce, Treasury, and the intelligence community and the national security staff, so it reflects views that are held broadly across the United States government.
We intend the report to be factual, descriptive, and analytical. We try not to speculate, but we let the facts speak for themselves. This report highlights where we see the military in China heading today and where we think it's going to go in the future. We talk about its strengths, we talk about its weaknesses, the opportunities and the challenges that we see going forward.
With that, I'd like to summarize the trends and developments that we've seen and that we've reported on in this year. First, China continues to pursue a long-term comprehensive military modernization program that's designed to improve the capacity of the People's Liberation Army to fight and win what they call local wars under conditions of informatization or high-intensity information-centric regional military operations of a short duration.
In this respect, we see a good deal of continuity in terms of the modernization priorities, even though we saw significant leadership transitions in China last fall and into the spring of this year.
China's leaders continue to see the modernization of its military as a central component of their strategy to advance China's national development goals in the first two decades of the 21st century. With this development, China's interests have grown and its influence has expanded not only in the Asia-Pacific, but across the globe.
Accordingly, China's military modernization has begun to focus to an increasing extent on capabilities and mission sets that extend beyond immediate territorial concerns, what have been termed the new historic missions. These include counter-piracy, peacekeeping, humanitarian assistance and disaster relief, as well as regional military presence operations.
So there's an opportunity here. There's an opportunity for China to partner with the international community to address the types of challenges that we all face in the 21st century. However, even as the PLA today is contending with this growing array of missions, preparing for contingencies in the Taiwan Strait appears to be the principal focus and primary driver of much of China's military investment. Over the past year, cross-strait relations have improved. However, China's military build-up shows no signs of slowing.
In addition to Taiwan, China places a high priority on asserting its maritime territorial claims. In recent years, China has begun to demonstrate a more routine and capable presence in both the South and East China Seas, which has increased regional anxieties over China's intentions.
China's leaders in 2012 sustained investment in its nuclear forces, short- and medium-range conventional ballistic missiles, advanced aircraft, unmanned air systems, air and missile defenses, land attack and anti-ship cruise missiles, submarines, and surface combatants, some of which appear designed to enable what we call anti-access and aerial-denial missions, or what PLA strategists refer to as counter-intervention operations.
Within two years of the January 2011 flight test of China's first stealth fighter, which we call the J-20, China tested a second prototype, which is referred to as the J-31. The first J-31 flight test in October 2012 highlights China's continued ambition to produce advanced fifth-generation fighter aircraft. We do not expect either the J-20 or the J-31 to achieve an effective operational capability before 2018.
In September of last year, China commissioned its first aircraft carrier, the Liaoning, and in November, it conducted its first and recovery of an aircraft using the carrier-capable J-15 fighter. We anticipate that China will spend the next three to four years on training and integration before achieving an operationally effective aircraft carrier capability. China will likely build several indigenous aircraft carriers over the next 15 years.
We're also monitoring carefully China's activities, including military activities in space and in cyberspace. In 2012, China conducted a total of 18 space launches and expanded its space-based intelligence, surveillance, reconnaissance, navigation, meteorological and communication satellite constellations. At the same time, China continues to invest in a multi-dimensional program to deny others access to and use of space.
China's military continues to explore the role of military operations in cyberspace as a feature of modern warfare and continues to develop doctrine training and exercises, which emphasize information technology and operations. In addition, in 2012, numerous computer systems around the world, including those owned by the United States government, continued to be targeted for intrusions, some of which appear to be attributable directly to PRC government and military organizations.
This comprehensive military modernization is supported by robust increases in defense resources. On March 5th of this year, Beijing announced a 10.7 percent increase in its military budget, raising its publicized defense budget to $114 billion, continuing more than two decades of sustained military budget growth. However, estimating China's actual defense expenditure remains difficult, due to a lack of accounting transparency, China's incomplete transition from a command economy to a market economy.
China's public defense expenditures also don't include large categories of expenditure areas. So, for example, last year, China's public defense budget was 106 billion U.S. dollars, but when all was said and done, actual military expenditure for the last year could have run between $135 billion and $215 billion.
We welcome the actions that China has taken to improve the openness and the amount of information that's made available about its military, including the regular publication of defense white papers. However, many uncertainties remain, which only underscores the importance of building a military dialogue with China that is sustained and substantive.
In this report, we describe our efforts to work towards a healthy, stable, reliable, and continuous military-to-military relationship with China. We view this type of relationship as an important component of the overall U.S.-China relationship. Indeed, having this type of relationship is an important part of our larger strategy to rebalance to the Asia Pacific region.
Over the course of 2012, the armed forces of the United States and China made progress in building positive momentum in their defense contacts and exchanges. These are highlighted by the Chinese minister of defense visit to the United States last May, the commander of United States Pacific Command, Admiral Locklear's, visit to China in June, the PRC deputy chief of the general staff, General Cai Yingting August visit to the United States and, of course, then-Secretary of Defense Leon Panetta's visit to China last September.
We also participated in the second strategic security dialogue on the sidelines of the strategic and economic dialogue, as well as the annual defense consultative talks, defense policy coordination talks, and a meeting under the auspices of the military maritime consultative agreement.
In addition to these exchanges, which can play a role in enhancing mutual understanding and improved communication between our two militaries, the two sides also explored concrete and practical areas of cooperation, including a first-ever counter-piracy exercise last September, followed by the U.S. invitation to China to participate in the Rim of the Pacific exercise in 2014.
We'll continue to use military engagement with China as one of several means to expand areas where we can cooperate, discuss frankly our differences, and demonstrate the United States' commitment to the security of the Asia-Pacific region.
In conclusion, this report has a lot of interesting information in it. We hope that it will contribute in a responsible way to the many debates that are ongoing today with respect to China's military modernization. And with that, I'd like to take a couple of questions.
Q: Phil Stewart with Reuters. Your report cites economic espionage by China over the past year and years preceding. Has any of that economic espionage -- are there concerns that that economic -- economic espionage has shown vulnerabilities in U.S. defense platforms, fighter jets, maybe the F-35 or other technologies?
MR. HELVEY: I think we've highlighted in this report a number of cases of either export control violations or potential espionage that are a matter of public record. I would say that what we've talked about in the report is about as far as I'd like to -- to say on those particular cases.
Q: But not -- but not saying any of the particular cases, could you speak to whether or not that economic espionage has created concerns over vulnerabilities in U.S. defense systems?
MR. HELVEY: We're always mindful of the potential threats to the security of our defense technology and defense systems, but with specific respect to the question of economic espionage on that, I don't have anything I can add.
Q: Spencer Ackerman with Wired. How active do Chinese submarines appear to be? To what extent do you see China proliferating unmanned aerial vehicle technology? And how reliable -- how reliable do you assess China's new warplanes to be, particularly the J-11 and the J-10 series?
MR. HELVEY: In terms of China's submarines, they're investing heavily in a robust program for undersea warfare, developing submarines that are both conventional, diesel electric-powered, air-independent propulsion, and nuclear-powered attack submarines. So in this respect, we see China investing considerably in capabilities for operations in this area.
In terms of your question on unmanned air systems, we have seen some reports of China marketing unmanned air systems in air shows around the world. And so that's something we'll have to continue -- continue monitoring very carefully.
And then lastly, with respect to China's fighter aircraft, China continues to -- to emphasize and prioritize building modern and more capable fighter platforms. The J-11 is one that is very similar to the Su-27 air superiority fighter, so it's a pretty capable third-generation platform, I believe. And I think we'll still have to monitor China's development of a J-20 and potentially the J-31, as fifth-generation fighters.
Q: As a quick follow, are you saying that you haven't really seen evidence of China proliferating UAV technology? You've just seen reports about that?
MR. HELVEY: We've seen China actively marketing UAV technologies at defense trade shows abroad. I don't have any information on specific customers for them, but there's active efforts to market those technologies to customers abroad.
Q: Yes, Chris Castelli with Inside Defense. In the last year, were there any Chinese weapons or capabilities that arrived sooner than anticipated or were surprising to see?
MR. HELVEY: I would say that we've been monitoring China's military investments and capabilities. I don't believe there's anything that we saw this year that was completely unexpected, but obviously there have been cases in the past where military equipment has arrived a little bit earlier than we thought, and that's something we have to be very mindful of going forward. I can't --
Q: Were there any cases like that this year where something arrived a little sooner than you expected?
MR. HELVEY: I can't think of anything at this point. We've been monitoring issues very, very carefully, and I think we've done a pretty good job of reporting what we've seen as we see it.
Q: Tom Bowman with NPR. You know, you just listed a whole series of things here in this report. I'm just wondering if you could tell us, when you look at this, what concerns you the most? Is it the moves in the China Sea? Is it cyber activities, the incursions you mentioned there? Is it access denial? What jumps out at you when you look at this report in particular?
MR. HELVEY: I think one of the things that -- that kind of jumps out is that, as China has made progress towards greater transparency in its defense and security affairs, I think there's a lot yet that remains to be -- to be said. This report provides a lot of information, but I think this report also poses a number of questions, questions for which we don't have answers.
So what -- what concerns me is -- is the extent to which China's military modernization occurs in -- in the absence of the type of openness and transparency that others are certainly asking of China and the potential implications and consequences of that lack of transparency on the security calculations of others in the region. And so it's that uncertainty, I think, that's of greater concern.
Q: And the stealth aircraft, the J-20, J-31, do you have any sense how it compares with, let's say, the F-22?
MR. HELVEY: I don't -- we don't make a comparison in the report on -- with U.S. platforms. We just -- just don't.
Q: Julian Barnes, Wall Street Journal. Thank you for doing this on the record. Wanted to ask about the island disputes, particularly the East China Sea islands, but also the South China Sea islands. What in this report's -- what accounts for the rise of those tensions? And do you anticipate that -- that the East China Sea matter will settle down like the South China Sea has settled down a bit? Or will there be continuing provocations on the Chinese part, in terms of things like the radar incident that we saw?
MR. HELVEY: In this report, we do highlight China's increased assertiveness with respect to its maritime territorial claims. Obviously, with respect to these claims, we encourage all parties to the -- to the -- to the different disputes or interactions to address their issues peacefully, through diplomatic channels in a manner consistent with international law.
Our policy on this has been pretty clear. We don't take sides on the question of sovereignty in maritime territorial disputes, but we certainly -- certainly expect, again, all parties to address them peacefully and diplomatically.
I'd be hesitant to speculate or offer -- to speculate on how this -- how these issues could -- could unfold in the future. We certainly don't want to see a return to -- to friction or tension in the area. And we encourage, again, as I said before, the parties to explore diplomatic measures to resolve their issues.
Q: Marc Schanz with Air Force Magazine. Is there any evidence that you've seen that some of their advanced aircraft programs, like the J-20, J-31, are actually exercising in any sort of realistic training environment? Or are they merely in the testing phase?
MR. HELVEY: I think both the J-20 and the J-31 are still in the prototype phase, actually, and so we haven't seen them participate in training or exercises.
Q: Is there any evidence that China is exercising any of their advanced capabilities with any of their partners or allies such as North Korea? Is there any evidence of joint training?
MR. HELVEY: We do detail in this report some examples of joint training in exercises with China's partners. To date, a lot of those training and exercise activities focus on, I would say, more conventional and less advanced military areas, like search-and-rescue or counter-piracy or counterterrorism. It's very rare that we've seen China use advanced military equipment in these exercises. Most of it, again, has been pretty routine types of basic interactions with foreign military forces.
Q: Wei Xuejiao from China Central Television. As we know, the Pentagon has just released North Korean military and security report few days ago, and now the South Korea president is visiting the United States. And how do you evaluate the situation of Korean peninsula at this time? And why the Pentagon choose now to release this China military report?
MR. HELVEY: Well, with respect to your first question, we continue monitoring the situation on the Korean peninsula very carefully, and we maintain very close consultation and communication with our Republic of Korea allies, our other allies and partners in the region, and diplomatically, as well, with China, and Russia. It's a very serious situation, and we'll continue to monitor it very, very carefully.
With respect to your second question, we produce the report in part -- well, actually, because we have to -- there is a law that provides for this report to be published. We strive to publish it on time every year. Many times we have -- we've been late in its production and publication, so we got the report completed, coordinated and approved, and we're putting it out to Congress and the public as soon as possible.
Q: Thank you, sir. Raghubir Goyal, India Globe and Asia Today. You said that China has been increasing their military budget 10.7 percent, but according to intelligence and other media reports, it may be even close to 18 percent to 20 percent. My question is, as far as this report is concerned, are you concerned about China's military budget or military activities increased in the region?
And, two, have you spoken with the nations or allies in the region who are really afraid or also concerned about China's activities in the region?
And, finally, are you also concerned about increasing new Pakistani and Chinese military-to-military relationships on the rise now?
MR. HELVEY: Well, with respect to your first question, we are monitoring very carefully China's military modernization, the implications of that modernization, both for opportunities to cooperate with China in a multi-national or bilateral context, but also for potential implications for regional stability. That's part and parcel of what this -- this report is all about.
We do consult and talk with allies and partners in the region about regional security, both, again, opportunities to cooperate, potential challenges to that -- to regional security, so China is part of that conversation from time to time.
And lastly, we monitor, we talk about, and we describe in this report China's bilateral military interactions with other countries, including Pakistan. China has a very longstanding historical relationship with Pakistan, and it's one that -- that we watch and we report on in this report.
Q: Just quick -- if you don't mind -- before you brought this report out, have you spoken with Chinese? Are they aware of this report in advance?
MR. HELVEY: The Chinese are aware of this report. It's an annual report. It's a requirement, so they -- they -- they know that it's coming. But we don't consult with China prior to the publication of the report.
Q: Thank you.
MR. HELVEY: Please?
Q: Gopal Ratnam with Bloomberg News. The report mentions that China has fielded or started fielding this anti-ship missile that's capable of hitting U.S. aircraft carriers. Do you have any sense of how large number of missiles they have deployed and where these missiles are deployed?
MR. HELVEY: I -- we talk about the deployment -- the development and deployment of these missiles. I don't have information I can tell you today about the numbers of missiles that have been put into the field at a location of their garrisons. But this is something that China has invested in and we're watching very carefully as it's developing that program.
Q: But is that -- what is that of -- is that of a higher concern than some of the other elements that are mentioned in the report for you, because it directly potentially affects U.S. aircraft carrier presence in the region?
MR. HELVEY: Well, I mean, we're -- we're concerned about -- about the ability of China to develop missiles that can project its military power with precision at great distances from China. Obviously, something that can hold at risk large surface ships, including aircraft carriers, is something we pay attention to, but we put it in the context of a number of China's military developments, again, that we characterize as anti-access and area denial.
And the issue here is not one particular weapons system. It's the integration and overlapping nature of these weapons systems into a regime that can potentially impede or restrict free military operations in the Western Pacific. So that's something that we monitor and are concerned about.
Q: And a quick -- so there was an invitation extended to China to participate in the RIMPAC exercises. Have you heard back? Is there a positive yes from the Chinese --
MR. HELVEY: I understand that the Chinese are interested in participating in it.
Q: They are?
MR. HELVEY: Yes.
Q: Betty Lin of the World Journal. From your observation over more than a decade, could you elaborate on why China got so many territorial disputes with many of its neighbors? And also on the SRBMs against Taiwan, are the numbers increased? And also the capabilities and systems and what your recommendation for Taiwan?
MR. HELVEY: In -- in terms of your first question, we talk about some of China's territorial disputes with many of its neighbors, but I'll also note that China over the past decade -- and decade or two -- has taken some effort to resolve peacefully a number of territorial disputes with other of its neighbors, particularly on the land borders.
So this is, you know -- so we do talk about it in the report, both the land borders and some of the maritime territorial disputes. I can't speak to why China's paying more attention to them now perhaps than they did in the past. That's something I have to leave to -- to China itself to address.
And then in terms of the -- the short-range ballistic missiles opposite Taiwan, the numbers appear to be relatively stable in terms of the specific numbers of ballistic missiles that are in garrisons opposite Taiwan. I think, based on the reporting, you've seen over the past couple of years of this report, it's kind of hovered around the same number. I think we're around 1,100 short-range ballistic missiles.
But the -- the issue that we're noting and that we pay attention to is that the -- that the capabilities of the individual ballistic missiles are improving as they're replacing some of the older air frames with newer, more capable ballistic missiles. And in addition, we also highlight that it's not just short-range ballistic missiles that are deployed opposite Taiwan. It's also medium-range ballistic missiles and land attack cruise missiles, both ground-launched and air-launched cruise missiles.
So it's taking -- taking in the totality, the precision -- conventional and precision strike weapons opposite Taiwan continue to grow and everybody.
Q: And what's your recommendation for Taiwan?
MR. HELVEY: We don't make recommendations to Taiwan in this report.
Q: Just two things. On the anti-ship missile, could you just tell us where that threat -- the anti-access threat stands now as opposed to a year or two years ago? Is it about where it was? Or have you seen advances in the capabilities of their anti-ship, anti-access weapons? And then I have a second question.
MR. HELVEY: Well, we've seen that -- that kind of -- China continues to -- to make advances in its modernization efforts. I don't know if I'd be able to quantify its, you know -- I don't know if I'd be able to quantity the difference between now and perhaps a couple of years ago, but we have seen the deployment of advanced, you know, surface combatants with new capabilities that improve their options for, you know, ship-based air defense or anti-ship cruise missiles, the advancing development of the anti-ship ballistic missile capability, advances in China's integrated air defenses.
I mean, there's -- you know, China is investing across the board, and so I think we continue to see improvements in that A2AD regime over time, and we'll continue to see them developing in the future.
Q: And then just one other question. On the territorial disputes in the South China Sea and East China Sea and so on, do you see any change in their tactics or in their approach over the past year? I notice the report talked about using civilian law enforcement ships. Do you -- is that -- is that -- is that increased -- that trend kind of increasing towards that type of approach, as opposed to the PLA Navy sending in its seven warships and so on?
MR. HELVEY: That is one of the notable developments that we've seen -- and I'd probably say over the past couple of years -- is the -- is the increasing use of civilian law enforcement or civilian maritime assets to provide a presence and to -- to assert China's claims in these areas.
And, again, just the position I said before, I mean, with -- with respect to the maritime issues, we don't take a position on the question of sovereignty, but we certainly have every expectation that -- that all parties will -- will address these issues peacefully in a manner consistent with international law.
And I would just add, on the one -- particularly with respect to the -- to the East China Sea, the unilateral actions of -- of any party will have no bearing on our position that the Senkakus remain under the administrative control of Japan.
LIEUTENANT COLONEL CATHERINE T. WILKINSON: So we have time for one more question.
MR. HELVEY: One more question. Okay?
Q: On the DF-21D, this -- this report marks the first time you've actually said it's been deployed. Accurate? Is that true?
MR. HELVEY: I think this is the probably we've said it's -- it's been deployed, but in previous editions of the report we've talked about, you know, it's been moved out to the field, but deployment is -- implies a limited operational capability.
Q: Just a follow-up question. Now, do they also -- does China also have the satellite architecture in place to provide the mid-course guidance and terminal guidance that this weapon is supposed to be known for?
MR. HELVEY: I don't have details on whether or not they have that entire architecture in place. It's something that we're watching very, very carefully. What I do talk about in the report is the pretty significant number of space launches that China conducted over the past year to help put elements of that architecture in place, but whether or not they have all the bits and pieces of it put together, is not addressed in this report, and I don't have it for you right now.
Q: So it would be inaccurate to use this report to say that U.S. carriers are now at risk from this new weapon because we don't know if the satellite architecture is in place that will allow the weapon to actually find a carrier?
MR. HELVEY: Well, we don't talk about that in this report, so I'd be -- and I would probably say -- I wouldn't frame it that way. What we talk about in this report is what we see in terms of China. We don't do a net assessment on whether or not China's -- what China's capabilities are relative to U.S. or other -- other countries' platforms. But we do know that China's developing this -- this capability, and we're watching all the different pieces of the -- of the architecture that are being put in place.
LT. COL. WILKINSON: Thank you very much, sir.
MR. HELVEY: Thank you very much.