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04/19/2001

China Update / National Intelligence Council, Part II

Continuing our discussion of the National Intelligence Council''s
thinking on China and Asia, as delineated in their recent report
titled "Global Trends 2015," the 15-member board under the
direction of the CIA had a section titled, "China: How to Think
About Its Growing Wealth and Power."

"China has been riding the crest of a significant wave of
economic growth for two decades. Many experts assess that
China can maintain a growth rate of 7 percent or more for many
years. [Ed. The government just reported 8% growth in GDP
for Q1 / ''01.] Such impressive rates provide a foundation for
military potential, and some predict that China''s rapid economic
growth will lead to a significant increase in military capabilities.
But the degree to which an even more powerful economy would
translate into greater military power is uncertain.

"The relationship between economic growth and China''s overall
power will derive from the priorities of leaders in Beijing -
provided the regime remains stable. China''s leaders have
assessed for some years that comprehensive national power
derives both from economic strength and from the military and
diplomatic resources that a healthy, large economy makes
possible. They apparently agree that, for the foreseeable future,
such priorities as agricultural and national infrastructure
modernization must take precedence over military development.
In the absence of a strong national security challenge, this view
is unlikely to change even as new leaders emerge in Beijing. In a
stable environment, two leadership transitions will occur in
China between now and 2015. The evidence strongly suggests
that the new leaders will be even more firmly committed to
developing the economy as the foundation of national power and
that resources for military capabilities will take a secondary role.
Existing priorities and projected defense allocations could enable
the PLA (People''s Liberation Army) to emerge as the most
powerful regional military force.

--"Beyond resource issues, China faces daunting challenges in
producing defense systems. Beijing has yet to demonstrate an
assured capacity to translate increasingly sophisticated science
and technology advances into first-rate military production. To
achieve this, China must effect reforms in its State Owned
Enterprises, develop a capacity for advanced systems integration
skills, and recruit and retain technologically sophisticated
officers and enlisted personnel.

"A decision to alter priorities to emphasize military development
would require substantial change in the leadership. Internal
instability or a rise in nationalism could produce such change but
also probably would result in economic decline."

On the topic of "Political and Security Trends" in Asia, the
report offered the following opinion:

"The major power realignments and the more fluid post-Cold
War security environment in the region will raise serious
questions about how regional leaders will handle nascent great-
power rivalries (the U.S. - China, China - Japan, China - India),
related regional ''hot spots'' (Taiwan, Korea, South China Sea),
the future of challenged political regimes (Indonesia, North
Korea absent unification, China), and communal tensions and
minority issues (in China, Indonesia, the Philippines, and
Malaysia). On balance, the number and range of rivalries and
potential flashpoints suggest a better-than-even chance that
episodes of military confrontation and conflict will erupt over the
next 15 years.

"The implications of the rise of China as an economic and
increasingly capable regional military power - even as the
influence of Communism and authoritarianism weakens - pose
the greatest uncertainty in the area. Adding to uncertainty are the
prospects for - and implications of Korean unification over the
next 15 years, and the evolution of Japan''s regional leadership
aspirations and capabilities.

"Instability in Russia and Central Asia, and the nuclear standoff
between India and Pakistan will be peripheral but still important
in East Asian security calculations. The Middle East will
become increasingly important as a primary source of energy."

And then there is the issue of "Economic Dynamism."

"While governments in the region generally will accept the need
to accommodate international norms on ownership, markets,
trade, and investment, they will seek to block or slow the
perceived adverse economic, political, and social consequences
of globalization.

"The most likely economic outlook will be that rich societies -
Japan, Korea, Hong Kong, Taiwan, Singapore, and pockets in
China and elsewhere - will get richer, with Japan likely to
continue to be a leader in S&T (science and technology)
development and applications for commercial use. In contrast,
the poor societies - Vietnam, Cambodia, Laos, and rural areas in
western China and elsewhere - will fall further behind. Greater
economic links are likely to have been forged between Taiwan,
Hong Kong, and South China as a result of the development of
investment and infrastructure. China will be increasingly
integrated into the world economy through foreign direct
investment, trade, and international capital markets. Energy
markets will have drawn the region more closely together despite
lingering issues of ownership of resources and territorial
disputes.

Finally, on "Regional Interaction:"

"Given the weakness of regional political-security arrangements,
the U.S. political, economic, and security presence will remain
pronounced. At the same time, many countries in the region will
remain uncertain about U.S. objectives, apprehensive of both
U.S. withdrawal and U.S. unilateralism. Key states, most
significantly China and Japan, will continue ''hedging,'' by using
diplomacy, military preparations and other means to ensure that
their particular interests will be safeguarded, especially in case
the regional situation deteriorates.

"Japan and others will seek to maintain a U.S. presence, in part
to counter China''s influence. Economic and other ties will bind
Japan and China, but historical, territorial, and strategic
differences will underline continuing wariness between the two.
China will want good economic ties to the United States but also
will nurture links to Russia and others to counter the possibility
of U.S. pressure against it and to weaken U.S. support for
Taiwan and the U.S. security posture in East Asia. U.S. - China
confrontations over Taiwan or over broader competing security
interests are possible."

This report was put together just last December. It''s amazing
how much of it is now following form...but in four months time,
not over 15 years. I imagine that some members of the
Intelligence Council would rename their work "Global Trends
2005" if they had the chance. Everything is speeding up. The
current U.S. - China spat is not just over the spy plane, but will
reach into areas of trade as well as our defense arrangements
with Taiwan almost immediately. And there have been renewed
trade tensions between China, Japan, and South Korea in just the
past two weeks. So while the Middle East will continue to
occupy a portion of our policy-makers time, particularly in the
short run, long-term, Asia is the story.

*Hott Spotts will return on May 3 with a look at the Taiwan
Relations Act.

Brian Trumbore




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-04/19/2001-      
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04/19/2001

China Update / National Intelligence Council, Part II

Continuing our discussion of the National Intelligence Council''s
thinking on China and Asia, as delineated in their recent report
titled "Global Trends 2015," the 15-member board under the
direction of the CIA had a section titled, "China: How to Think
About Its Growing Wealth and Power."

"China has been riding the crest of a significant wave of
economic growth for two decades. Many experts assess that
China can maintain a growth rate of 7 percent or more for many
years. [Ed. The government just reported 8% growth in GDP
for Q1 / ''01.] Such impressive rates provide a foundation for
military potential, and some predict that China''s rapid economic
growth will lead to a significant increase in military capabilities.
But the degree to which an even more powerful economy would
translate into greater military power is uncertain.

"The relationship between economic growth and China''s overall
power will derive from the priorities of leaders in Beijing -
provided the regime remains stable. China''s leaders have
assessed for some years that comprehensive national power
derives both from economic strength and from the military and
diplomatic resources that a healthy, large economy makes
possible. They apparently agree that, for the foreseeable future,
such priorities as agricultural and national infrastructure
modernization must take precedence over military development.
In the absence of a strong national security challenge, this view
is unlikely to change even as new leaders emerge in Beijing. In a
stable environment, two leadership transitions will occur in
China between now and 2015. The evidence strongly suggests
that the new leaders will be even more firmly committed to
developing the economy as the foundation of national power and
that resources for military capabilities will take a secondary role.
Existing priorities and projected defense allocations could enable
the PLA (People''s Liberation Army) to emerge as the most
powerful regional military force.

--"Beyond resource issues, China faces daunting challenges in
producing defense systems. Beijing has yet to demonstrate an
assured capacity to translate increasingly sophisticated science
and technology advances into first-rate military production. To
achieve this, China must effect reforms in its State Owned
Enterprises, develop a capacity for advanced systems integration
skills, and recruit and retain technologically sophisticated
officers and enlisted personnel.

"A decision to alter priorities to emphasize military development
would require substantial change in the leadership. Internal
instability or a rise in nationalism could produce such change but
also probably would result in economic decline."

On the topic of "Political and Security Trends" in Asia, the
report offered the following opinion:

"The major power realignments and the more fluid post-Cold
War security environment in the region will raise serious
questions about how regional leaders will handle nascent great-
power rivalries (the U.S. - China, China - Japan, China - India),
related regional ''hot spots'' (Taiwan, Korea, South China Sea),
the future of challenged political regimes (Indonesia, North
Korea absent unification, China), and communal tensions and
minority issues (in China, Indonesia, the Philippines, and
Malaysia). On balance, the number and range of rivalries and
potential flashpoints suggest a better-than-even chance that
episodes of military confrontation and conflict will erupt over the
next 15 years.

"The implications of the rise of China as an economic and
increasingly capable regional military power - even as the
influence of Communism and authoritarianism weakens - pose
the greatest uncertainty in the area. Adding to uncertainty are the
prospects for - and implications of Korean unification over the
next 15 years, and the evolution of Japan''s regional leadership
aspirations and capabilities.

"Instability in Russia and Central Asia, and the nuclear standoff
between India and Pakistan will be peripheral but still important
in East Asian security calculations. The Middle East will
become increasingly important as a primary source of energy."

And then there is the issue of "Economic Dynamism."

"While governments in the region generally will accept the need
to accommodate international norms on ownership, markets,
trade, and investment, they will seek to block or slow the
perceived adverse economic, political, and social consequences
of globalization.

"The most likely economic outlook will be that rich societies -
Japan, Korea, Hong Kong, Taiwan, Singapore, and pockets in
China and elsewhere - will get richer, with Japan likely to
continue to be a leader in S&T (science and technology)
development and applications for commercial use. In contrast,
the poor societies - Vietnam, Cambodia, Laos, and rural areas in
western China and elsewhere - will fall further behind. Greater
economic links are likely to have been forged between Taiwan,
Hong Kong, and South China as a result of the development of
investment and infrastructure. China will be increasingly
integrated into the world economy through foreign direct
investment, trade, and international capital markets. Energy
markets will have drawn the region more closely together despite
lingering issues of ownership of resources and territorial
disputes.

Finally, on "Regional Interaction:"

"Given the weakness of regional political-security arrangements,
the U.S. political, economic, and security presence will remain
pronounced. At the same time, many countries in the region will
remain uncertain about U.S. objectives, apprehensive of both
U.S. withdrawal and U.S. unilateralism. Key states, most
significantly China and Japan, will continue ''hedging,'' by using
diplomacy, military preparations and other means to ensure that
their particular interests will be safeguarded, especially in case
the regional situation deteriorates.

"Japan and others will seek to maintain a U.S. presence, in part
to counter China''s influence. Economic and other ties will bind
Japan and China, but historical, territorial, and strategic
differences will underline continuing wariness between the two.
China will want good economic ties to the United States but also
will nurture links to Russia and others to counter the possibility
of U.S. pressure against it and to weaken U.S. support for
Taiwan and the U.S. security posture in East Asia. U.S. - China
confrontations over Taiwan or over broader competing security
interests are possible."

This report was put together just last December. It''s amazing
how much of it is now following form...but in four months time,
not over 15 years. I imagine that some members of the
Intelligence Council would rename their work "Global Trends
2005" if they had the chance. Everything is speeding up. The
current U.S. - China spat is not just over the spy plane, but will
reach into areas of trade as well as our defense arrangements
with Taiwan almost immediately. And there have been renewed
trade tensions between China, Japan, and South Korea in just the
past two weeks. So while the Middle East will continue to
occupy a portion of our policy-makers time, particularly in the
short run, long-term, Asia is the story.

*Hott Spotts will return on May 3 with a look at the Taiwan
Relations Act.

Brian Trumbore