China's military modernization strategy is to deter US involvement in a cross-strait conflict and to prevail if the US does intervene, said the US-China Commission's annual report to Congress.
The report also warned that the removal of the EU arms embargo against China currently under consideration would accelerate Beijing's weapons modernization and dramatically enhance Chinese military capabilities.
"A key element of China's military modernization program has extensive acquisitions of foreign military technologies, particularly from Russia," the report said. "[The removal of the EU arms embargo would then] dramatically enhance Chinese military capabilities and might lead Russia to authorize the export of even more sophisticated systems to China."
The commission's report includes the details of its investigations into nine specific areas that were identified by Congress for the commission's review and recommendations.
These areas include China's economic reforms, US economic transfers to China, Chinese government's media control efforts and China's economic and security impact in Asia.
To examine China's military modernization and the cross-strait balance, the commission held a hearing on Feb. 6. In addition to experts and analysts, the commission heard from senior State and Defense Department officials on developments in US-China-Taiwan relations. The commission also supported two research projects on China's arms buildup.
According to the report, China's official defense budget allocation for weapons procurement showed an approximately 1,000 percent increase over a 12-year period, outpacing China's rapid growth in GDP.
The share of the budget devoted to weapons procurement also increased, from 16.3 percent in 1990 to 33.8 percent in 2002. Although the officially announced budget this year is more than US$25 billion, the report believed that the budget is grossly underreported.
It is estimated that China's total defense-related expenditures this year may be between US$50 to US$70 billion, ranking China third in defense spending after the US and Russia.
While China's missile threat is extremely serious, Taiwan has "limited dedicated military assets to guard against such an attack," the report said.
"China's increasing ballistic missile inventory may have already in fact altered the status quo in the Taiwan Strait," it said. "The necessity of maintaining a US policy of ambiguity concerning Taiwan's de jure status should not blind us to the de facto shift that is taking place in the military balance."
The report also pointed out that China's weapon development and acquisitions are an increasing challenge to American technical military superiority in the region.
"The Chinese strategy of improving its force options versus Taiwan and the ability to deter and counter US military intervention is fast becoming a reality," the report said. "China is no longer purchasing massive numbers of weapons systems but is pursuing initiatives to obtain licenses and to co-produce weapons for export."
This was a significant emerging issue, the report said, as this level of cooperation with Russia would help China's goal of being "a modern weapons-producing nation."
"It appears the Chinese buildup is designed to forestall measures that China perceives as steps toward independence by Taiwan and to coerce Taiwan to end the island's continued separate status," it said.
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