Assessing China's intentions as to what kind of power it seeks to be in the future by simply looking at its military budget and modernization of the People's Liberation Army can lead to misconceptions, the China specialist at the U.S. think tank said.

	Evan Mederios

"It's important to look at the behavior of the country as well. . . . There is a lot more going on in China," Medeiros told the audience.

The sharp rise in China's defense spending -- growing at double-digit rates each year at least since the mid-1990s -- has rung alarm bells in the United States. While China's official defense budget today is around $30 billion, RAND's estimate shows that Beijing in fact spends somewhere around $68 billion to $72 billion a year -- or roughly 2.5 percent of the nation's gross domestic product, the expert said.

But he noted that modernization of the Chinese military began only after the PLA was neglected in the first two decades of the country's economic reforms, he noted.

There is no question that the PLA modernization "accelerated in scope and in depth" in the last five to seven years, but the PLA was "a loser in the first 20 years of China's economic reform and development," he said.

"It received an extraordinarily small share of the budget and in real terms China's military budget declined throughout the 1980s," he said.

The 1991 Gulf War awakened China's leaders to its military's lack of ability to conduct highly sophisticated joint military operations in a theater. The NATO-led military operations in Kosovo also served as a reminder for China about the PLA's continued weakness.

But the real cause for the PLA modernization has been Taiwan, in particular increasing concern among the Chinese leaders in the mid-1990s that Taiwan was moving toward independence, he said.

"China did not have the ability to credibly deter Taiwan moving toward independence and deter U.S. involvement in a military conflict," he said. "Military and political leaders recognized in the mid-1990s that they needed to have sophisticated military capabilities to credibly deter Taiwan and U.S. involvement, and potentially to use those capabilities to coerce Taiwan if the situation arose."

The process involved changing the PLA doctrine, the force structure, the way in which members of the military are trained and educated, according to Medeiros. Its goal is to build a combined maritime-continental force structure, which is much smaller but more mobile and sophisticated than before, he said.

The modernization efforts have extended to China's long-neglected defense industry, Medeiros said.

"The defense industry has been given a much greater mandate and greater economic resources to begin procurement for the PLA a much more sophisticated range of military capabilities, and we're beginning to see some of these capabilities actually deployed with the PLA," he said, adding that the industry is capable of producing modern high-tech naval platforms.

In the late 1990s, the government reformed the defense procurement system and the way defense firms operate, to make the industry more competitive and enable them to deliver to the PLA advanced weapons on time and of a much higher quality, he noted.

This defense industry modernization raises a serious issue for countries like Japan and the U.S., "because the defense industry in China is increasingly looking to acquire dual-use high-tech items that they can divert and use in their defense industry production," Medeiros said.

"Given Japan's growing high-tech trade with China, this creates serious concerns about the possibility that China would illicitly try and procure sensitive goods and technologies from a variety of industries in Japan that could then be diverted and used to help the PLA modernize," he said.

Medeiros said China's military modernization is such a new trend that it is difficult to assess how much of it is adequate -- making up for two decades of neglect -- or how much of it is excessive. Is it seeking to develop a broad power-projection capability that it could draw on in foreign policy objectives?

"The core aspect of this question is that the PLA is a very immature military -- immature in terms of its interactions with other regional militaries. It has very limited experience with out-of-area operations and certainly with regional interactions," he said.

And its regional operations have been clumsy as Japan knows well, as seen in the incursion of a Chinese submarine in Japanese waters and the recent deployment of Chinese surface action groups in the East China Sea, he said. Under such conditions, "the possibilities for misperceptions, miscalculations and, in particular, accidents are very high," he noted.

Medeiros said dialogue between Japan's Self-Defense Forces and the Chinese military is "critical" so that both sides can develop rules of engagement or rules of the road "that will help guide each military in understanding the operations of the other, given their potential to butt up with one another."