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%--E-73 c, 1 NATIONAL DEFENSE UNIVERSITY NATIONAL WAR COLLEGE Unleashing the Dragon Capt Qulhcl NWC Class of ‘96 Military Strategy and Operations Semmar G Capt Tyson / Co1 Glbeau Capt Kelso Report Documentation Page Form Approved OMB No. 0704-0188 Public reporting burden for the collection of information is estimated to average 1 hour per response, including the time for reviewing instructions, searching existing data sources, gathering and maintaining the data needed, and completing and reviewing the collection of information. Send comments regarding this burden estimate or any other aspect of this collection of information, including suggestions for reducing this burden, to Washington Headquarters Services, Directorate for Information Operations and Reports, 1215 Jefferson Davis Highway, Suite 1204, Arlington VA 22202-4302. Respondents should be aware that notwithstanding any other provision of law, no person shall be subject to a penalty for failing to comply with a collection of information if it does not display a currently valid OMB control number. 1. REPORT DATE 3. DATES COVERED 1996 2. REPORT TYPE 00-00-1996 to 00-00-1996 4. TITLE AND SUBTITLE 5a. CONTRACT NUMBER Unleashing the Dragon 5b. GRANT NUMBER 5c. PROGRAM ELEMENT NUMBER 6. AUTHOR(S) 5d. PROJECT NUMBER 5e. TASK NUMBER 5f. WORK UNIT NUMBER 7. PERFORMING ORGANIZATION NAME(S) AND ADDRESS(ES) 8. PERFORMING ORGANIZATION National War College,300 5th Avenue,Fort Lesley J. REPORT NUMBER McNair,Washington,DC,20319-6000 9. SPONSORING/MONITORING AGENCY NAME(S) AND ADDRESS(ES) 10. SPONSOR/MONITOR’S ACRONYM(S) 11. SPONSOR/MONITOR’S REPORT NUMBER(S) 12. DISTRIBUTION/AVAILABILITY STATEMENT Approved for public release; distribution unlimited 13. SUPPLEMENTARY NOTES 14. ABSTRACT see report 15. SUBJECT TERMS 16. SECURITY CLASSIFICATION OF: 17. 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THIS PAGE 14 unclassified unclassified unclassified Standard Form 298 (Rev. 8-98) Prescribed by ANSI Std Z39-18 . trokiuchon The Xatlonal Secunv Strateg definest he objecrwes and goals for obtamng and ensunng the natron’s secunty The Natronal MBtary Strategy IS denved from the Xatlonal Secunty I Strategy and 1sf ormulated to estabhsho bjecttvesa nd methods to ensuret he requrrementss et forth tn the National Secunty Strategy are met One would thmk that both the natronal and mrhtary strategtesw ould complement one another m order to maxrrmzet he probability of success Unfortunately, thts is not always the case I The Katronal Secunty Strategy stressese ngagementa nd enlargementa s two methods to promore prospenty and global stabrhty LG a result, the US has embarked on a goal of engagmg Chma v-icec ontaimng China Accordmgly, the economic sector has been the preeminent avenue of engagement In fact, some scholars have describedt he rush of US commercxalb usinessesto par&pate in Asra’s economrcb oom as an exampleo f “economrc nationahsm” Thrs type of I engagementh as had an effect on the mihtanes of both Chma and the US It has helped the 1 Chinese mtirtary and hmdered the US mrhtary : The current US defensep ohcy will, at best, meet wrth hmned effectivenessm preventmg / future conflict wtth China Although the US remamst he sole world superpower, the current tendency to engage China as an economrcw tndfall IS undermmmg the US Yauonal Witaty Strategy and decreasesU S mrlitary capability US economrc engagementp resentsa lucrattve area for the,C hmeset o evplon unlesst he US changesI ts defensep ohcy or alters the relatronshrp bemeen the Yatronal Secunty Strategy and the Nattonal Mthtary Strategy ’ Thrs paper wrll descnbeh ow the practtce of economrce ngagemente rodes the substantial mihtary edge that the US has over China It wrll also descnbe how the concentratron on economrc mcentrtes as a method of meetmg Nauonal Secunty Grate:? obJectl\es challengest he effectrvenesso f the Y anonal Wnary Strategy Qudla 3 . . Fee- The Dra, eon - e EC- Growth Factor of Ctuga‘ , Current economic engagementw ith China mvoolvess ubstantralU S trade and mvegment .Addltl@xtlly, as a member of the World Trade Orgamzatron (WTO) the US pmlclpates In re\lew of oth$r country’s requestsf or membership One of the countnes bang considered for admmance 1sC hma The prospect of admntmg Chna to the WTO coupled wnh the vast amount of US trade I and investment already commrtted to Chma has set mto motion the erosion of the US rmhtary strate,ay ’ Chma, urlth its abandonmento f a purely socialist driven economy, has become a thriving economm grant Its reports have risen to “three trmes the averagew orld rate and Chma now I runs substantial trade surplusesw ith the US, the European Union (EU) and even Japan” (Mastel 189) Thrs increase1 1e1 xports has often beenm ercantrllstic m nature and at the expenseo f China’s own productron China often “dumped” products on the world market (ie, sold items at a price / less than it took to produce) m order to gam an export excess Addrtronaily, China set protec$onist tariffs to the level that it “now maintains more formal trade barriers than any other major tradmg country-including Japan” (Mastel 191) These unfarr trade actrons have been addressedi n biIatera1t rade agreementsw rth the US China has agreedt o stop these practices, but has yet: to do so IC nfan trade practices are the predominate reason that Chma is not aIlowed to jam the (WTO) The WTO’s rules and regulations are founded on the pnncrple of an open market economy Whrle Chma is struggling to transmon to a modified open market economy rt cannot endorse or fully comply with the rules of the WTO smce they areJ uxtaposedt o the aurno f socxahste conomics Chma. therefore believesr t should be ahowed entry in the WTO under develo$mg country status Th.tss tatus would warve some of the current restnctrons to China’s entry and allow it to benefit fi-om even more trade and economrce xposure Some b&eve that continued demal of China from the WTO u11lr esult m ‘Yuelmg suspmOns that objections to WTO entry are onlv part of a larger effort to restrain China’s gro\+mg mfluence and extend pressureo n a recaicltrant go\emment” (Zhu -IL:, These opmlons Quhcr 3 continue to feed the idea that ii China IS pohreiy engageda nd gi\ en as many exemptIonsa s other countnes it will develop tres \wrh the mtemational commumty that will forestall and or make !ess likeI> Any l?m.rrea ggressivea ctivny This opmron raises some issuesb oth economrcallya nd mrhtarsly Chma’sa d economic goai is,t o transitron mto a socmahsmt arket economy wee a capualrst open marker ecorromyw l-& I the Western world deals with Chma’sc ontmued use of Central government control to pro&m / economrc goals and pohctes forebodes agmficant challengest o the C-Si f Chma were to enter the WTO Any exceptron to standmgW TO requirementsm ade on behaif of China would have long I standirig imphcauons and require substantiala djustmentsf or global trade as the Western world becam; more intertwmed wth a socralistm arket economy ’ Mthtanly speakmg although China 1st echndly substandardi n terms of the hi-tech world power$, it still possessese normous latent power Most of this power is refIected 11i1ts / “purchasing power panty” wherein “Cba already has the world’s th.ud largest economy” (Cronm 133) couple this fact wtth a foreign investment rate that “from 1983 to 1993 increaseda t an average rate of 31 percent per year” and it becomeso bvious that economic engagementh as had a substar/ttrael ffect on developing Chma’sp ower (-Mastei 195) Additronally, and possibly more importLint in terms of long term strategc inmauves, ” overseasd irect mvestmentm Chma comes overwhelmmgly from Asia, wnh 80% per cent of it accounted for by overseasC hinese” (Waldron 45) averseas Chmesec ontrol a substanaalp ortion of many Asian nation’s wealth and thereby may exert considerabieI nfluence on a natton’sp olicres For example, in Indonesia the ethmc Chinese portion of the populatton (which amounts to 5 per cent of the total) “controls 75 per cent of the wealth of the country” (Cronin 143) With mdtcattons ofmcreasmg nationahsmw nhm the Chmesec ommunmes worldwrde. it 1s plaustble that the overseasC hinesec ould exert influence on their host country’s pohcres As economic engagementb ecomess tronger. the power held by the wealth\ Chinese becomes proporuonailt greater Foreign policies found unpopular to the Chineseg overnment can be confronted at the local host goternment 1eleebl > well positioned Chineseu nhm the countr) Qu11m -I Comphcatmg the effect of economic en-e=a memenat re potennally destablhzmgf actors vvtthm Chma itself Factors such as corruptton. fracttonalism between provmces over pnce gouging, a htgh mflarron rate (25 per cent m 199-1).a nd an unevend lstnbuuon of economic gains benteen the eastern coastal mdustnahzed Chinesea nd the remammg “hate riots””f oster possible unrest All of these issuesr equn-eC hma to mamtam access“ to mtemational capital to fuel an a\;rl annual growth rate euceedmg 100,/ot”o sustame conomic and polmcal stabllny (Lord 774) These very issuesh ave forced Chma to reexammei ts mrhtary and mamtam its readmessf or any eventuality , Past US attempts to produce a mutually beneficial trade relationship wnh Chma have failed ’ The US conducts half of the export businessw nh Chma that Japand oes and about 75 per cent of what the EU does More .si&cantly, the US runs a trade deficit with Chma that is almost four times that of Japan’sd eficit and a little over double that of the EU’s deficrt This trade deficit, equatest o about “40 to 60 billion” (Marsel 198) per year wnh Chma alone Forecasts I gust of fU&re deficits using today’s economic engagementa s a standardm dicate a still increasing deficrt!l evel At some point the econornrct ies wtth Chma will become an entanglementf ?om which the US cannot extract itself Or worse. future economtct ies WINb e so lopsided that the I US, bkcommg ever more dependento n China’sv ast market, may not be able to successfully exercise independent actron m the Pacific regron or m its own interests : The trade imbalance, as deletenous as It IS for the US m losmg money out of the country, IS not as harmful to the US defenses tructure as other foreign investment policres that Chma pursues In fact. these other policies result m a quicker erosion of the US rmhtary’s edge rn capabthty They also present an rapidly mcreasmgp roblem to the US mthtary’s abihty to meet its Yational Mtlitarq Strate,o oblectlves Chma 1st he greatest practmoner of the forced technology transfer process lhs 1s the process Lsherema company vvantmgt o Invest tn or eupon:t o China must also cornpI> wth transfemng product and manufactunng technoios? to Chma m order to do busrness In man! recent casest he rschnolog> transferred fell into the realm of dual use technoiog Transfers QUIIKI 5 mvo h mg fibre optrcs telecommumcauonst echnoio,T, “sophrsucatedm achmet ools sole to C xna by plane maker McDonnell Douglas” and “the sale of satelhtesb y three L S firms technology that could have both mrhtary and c~vthana pphcatlons” have apparently found therr way to Chmese 1 mrhtary productton and researchf acrhtres( Holoway 14) 1I n all the casesm entioned, the transfer of the technology was formally approved However, as with the caseo f the telecommumcatlonst echnology, controversy within the DOD I suggestst hat some doubt exrsteda s to the wsdom of approvmg the transfer Sm~Iarly, transfers such as the aerospacem achinery were approved contingent upon a commercraiw ritten agreement that the equxpmentw ould not be used for mrlitary purposes Although the agreementI S well intentioned, there is no mechamsmt o prevent vioIation of the agreemento r to ascertain comphance once the equipment 1sm Chma / These casesp oint out that a sign&ant portion of Chma’sm rlitary modennzation is a result of US companxese xpandmg mto the Chmesem arket The fact that the miI.itary modemizatron I rmght be the result of a loosely controlled effon to engageC hina by econormcm eanss hould not be mrssed Some feel that the outcries over the transfer of dual use technology are over rated As a result some hold the oprmon that “a few controversralm -tech transfers from over eager Western firms that end up in the handso f the Chmeser mhtary hoId the potentral to politicize trade and destroy the opportunmes for peaceful commerce so many have worked so long to create” (Crovttz 5) What is missing m thrs statement IS the recognmon that the majonty of Chmese I commercral busmessesth at deal wrth foreign mvestors or companreso n the mtematronal scenea re pnmarily backed and managedb y the People’sL rberatlon Army (PLA) which 1so ften referred to as PL.4 Inc Therefore. Just about any foragn investment that mcludes any type of technology I transfer puts that technology mto the handso f the Chinesen ulitary The effect of technology transfers. foreign mtestments. and trade rmbalancesa ll play into the evpansrono f Chma’se conomy whrch m turn helps to burld Its mlhtar) Pubhcly Chma states it rarsedI ts defenseb udget 75 percent smce 1335 to a current level of SZS3 brlhon This amount QU~ICI o correlates to about a “5100 biihon defenseb udget m the M est” 1K nsrs~50) Smce much of Chmese rmhta~ modermzauon IS not pubhcly avowed. this value 1sp robably underestimated Indeed; some analysts contend that It is a factor of Z or 3 times greater than reported and fed by the mf?,rsrono f foreign capnal / In summary, even without being m the WTO Chma has not oni) Ikeled Its economy at the expense of the L-S commercial market, but has also managedt o establisha rapidIy developmg modermzatxonp rogram for Its rmhtary agam at the cost of the CS . . . . at&& the Dragon - The GrowuggMU.arv Factor of Cb The Chinese mrlitary IS rapidly modemizmg Its equipment and forces as tllustrated by the development of an “esttmated 200,000-50Q,OCOra pid reaction forces” which are highly tramed, modern and mobile (Lm 28) With nearly 3 m&on people m arms and “possibly the world’s fastest growing rmlitary budget” (Krrstoff 50) it IS evident that this modernization IS second only to “its number one pnonty” which is economic development (Lord 774) The extent to which China is conductmg this modernization demonstratesa n additional disconnect between US I mrlitary strategy and natxonals trate,oy , China has gone global in an effort to acceleratei ts military modermzation For example, as recently as February 1996 Chma spent S3 2 billron to purchaseS u-37 warplanes from Russta Addrtionally, Chma has contracted Israel to develop the F-10 advancedf ighter for future purchase and also has Israel and Iran purportedly contracted to provide m-fhght refueling technology I In the maritime arena all mdicators are that China is developmg a blue water navy complete with Kilo class submarinesa nd a bevy of amphtbious ships Chma has also made tt well known! that it desrrest o obtam an aircraft carrier whether it has to buy one or build one Chrna IS / also purchasing “anti-submanne warfxe technolog>. and radar technolog for combat aircraft” and 1sr eceiving technical assrstancefr om former USSR techmctansa nd scienttstsw ho “are belle\ ed to be ex3erts m the fields of cruise mIsslIes anti-submanne iiafare. and nuclear evploslons “( HIC tey and Harmel 243) QWIICI 7 1l +-har 1st he purpose oi-he immense modermzatlon program for Chma’sn uhtarl;’ Some :bould’behece “that Chma’sr ncreasmgr mhtary might 1ss imply a function of its growing econormc pouerl IGch nations spend more on ecerythmg, mcludmg Weapons”( Rachner 132) But the hstonkal facts of Chma’st erntonal confhcts bespeaka nother, more probable posssbllity ’ The current rmhtary modermzatlon mvolves more than Just obtammg high technology I weapons (le, laser guided weapons and etc) that could be attnbuted to mcreasmgt he effectiveness and efficiency of xtsr miltary Chma has embarkedm a program that indicates the mtentlon to develop a power projection capabtity Previously, Its military was developed to protect its I bordeis Now It IS berg developed to protect the proJectxono f power outside Its borders This desired ability correlates with the current rhetoric China usest o explain to the world its mterests and sovereign nght to regam Its former temtones In February of 1992 Chma issued its -Mafltune Law which “asserteds overeignty over wide areas partxcularly the Spratly Islands and T+wan” (Lm 28) Of pamcular interest 1st he Spratly Island area where roughly “25 percent of the horid’s shipping passes”a nd 90 percent of Japan’s( and increasingly China’s) oil transits / (Cromh 155) As oil supphesb ecome more crucial for Chma. the perceived necessityt o have a I rrulxtaryf orce capable of mamtammg open seal anes becomesg reater Additionally, If the hoped for 011‘a ndg as reservesa re found m the South Chma Sea regon Chma wlli need the modermzed military forces with power projection capablhty to enforce Its 1992 -MantIme Law Likewise, rf Chma wants the option to titanly retake Taiwan It ~11 require a modermzed rmlltary wth the ability to control both the strats and the overlymg ar space,a nd also to project an amphibious force t’o the shore of Tawan 1T he L S rmlltary 1sf aced with a potentlai adversaryw ho day by day 1sb ecommg stronger and ci?smg the once bide gap between the capablhtleso f the t\+o rmlltanes If the recently conducted war game simuiatrons are correct and Chma drd win oker the US m 3005 and 32 I C. then one must ask how and at \+hat point did Chma’sm liltan sh& :he gap m INSt -8Lor I The answer probabI> lres pamalI\ In the fact that todab’s economic engagementI S preclpl’ratmy the transfer of recnnoio-q and the saleso f usapons and Lteapon s\ stemsf rom nations around the NorId Subsequentl\, the modernization of Chma’sn xhra~ IS hheh to ctiba an evponentlal Increasem capabthc vice a hnear increasea s some lvould hope The exponential mcreasf m capablllty will quickly close any gap that presently e-ustsa nd demonstrably reduce the time available for developing aitematrves I /T hrs rate of capabrhtyI ncreasep oses one of the more perpIeulng challengest o both the I National Secunty Strategy and the Xatlonal -MrhtaryS trategy As stated earlier, the current econormc ties wrth Chma promote the engagements ought for by the Kational Security Strategy, but that same economrc engagementp uts the National Military Strategy at nsk The questron is what can be done to erther throttle the rate of China’sI ncreasem capability so that the US can maintain a capability edge or, how to nulIifj, and/or neutrahze Chma’sc apabrlity increase It is a I gven fact that China’sr mhtaxym odermzauon will occur The problem extsts over how quickly it I will occur and more pointedly, how China wrll use rt once it does occur ,The National Military Strategy suggestst hat vital US interestsa re best protected by use of overseasp resencea nd power proJectron That bemg the caset he strategy must now contend with the combrnation of China’s growing natronabsm,r ts associatedo utreach to reclarm former I terntones, and its nsmg abihty to proJect power To exacerbatet he srtuation all of this IS mextn@ly linked to a power-M economic engmet hat the economrce ngagementp rocessf uels / ~O verseasp resencem the Asia region IS now hrmted to approxrmately 100,000 troops The troops are forward stationed m South Korea and Japan The presenceo f US forces in Japan I IS contmually being revrewed by the Japanesea nd cannot be counted upon forever Recently the Issueo f US forces in Japanr an up against some economrcallyb asedr ancor from Japan In fact. “nsmg ;opposmont o the L S presencea mong the Japanesep ubhc hasa lso been a factor behmd the IS-Japan plan to return some property used by the US mrlitary ” (Sullivan C3) Although the Issue IS resoLeedt ‘or the moment \\lth the status quo presened CS forces stationed m Japan