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Judging China's military intentions

George Leopold:

China’s emergence as an economic and military power continues to influence debates here on its military intentions, the direction of its closely-linked economic strategy and how the U.S., Europe and the rest of Asia should respond.

The annual debate over Chinese military power was reignited by a Defense Department report to Congress this week warning that China is emerging as a regional military threat. Beijing reacted angrily to the report, calling it meddling in Chinese internal affairs. But U.S. analysts noted that the Pentagon report was far less scathing than expected.

What’s more, observers noted that Chinese government officials merely complained about the report’s tone, but did not dispute its findings. “China is in the midst of a large [military] buildup,” said China technology analyst and consultant Kathleen Walsh. “What’s it for?”

In an apparent attempt to mollify its congressional critics, Beijing revalued its currency, the yuan. While technology groups praised the move, critics stressed that the revaluation fell far short of the 10 percent to 15 percent change sought by U.S. officials.

Walsh said the DoD report and related moves underscore the notion that Beijing has reached a strategic crossroads over its role in Asian security affairs. Beijing continues its saber rattling towards neighboring Taiwan, but beyond that its intentions in the region are unclear. One positive sign, Walsh said, is that China’s annual military white paper is beginning to shed more light on its intentions.

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As China’s civilian and military sectors become more integrated, Tai said it will become more difficult to prevent China from obtaining certain dual-use technologies. Hence, he said export restrictions against China will come under increasing pressure.

Technology exports to China are also a component of a larger debate here on developing a comprehensive U.S. policy on research and development. There are growing fears among research proponents that U.S. R&D will be the next corporate function shipped overseas. For instance, Mary Puma, CEO of semiconductor equipment maker Axcelis Technologies Inc., told an industry panel at the Semicon West show earlier this month that Axcelis is moving some tool development overseas.

Meanwhile, China — flush with foreign-direct investment and large dollar holdings — is pouring huge amounts of both into R&D as corporate America cuts R&D funding, experts said.