An agenda for the Federal Reserve’s review of its monetary policy framework


An agenda for the Federal Reserve’s review of its monetary policy framework



Where Are U.S.-P.R.C. Relations Headed

Chairman Thomas, Ranking Member Kerry, and other members of the subcommittee, it is an honor to appear before the Senate today to discuss the important matter of the future direction of U.S.-PRC relations. Because my expertise is in the general area of defense policy, I will focus on the military aspects of those relations.

China and the United States are in the uncomfortable position of trying to be friends while increasingly becoming each other’s chief military rivals. Given the very real possibility of conflict, particularly over Taiwan, and the need of military organizations to conduct plausible worst-case planning, it is nearly inevitable that this paradox will be with us for many years to come.

Against this backdrop, we need to prepare ourselves for the fact that we are indeed engaged in a protracted military competition with China. In this sense, President Bush is surely right to call China a strategic competitor. That term may be unfortunate, and even somewhat incendiary, if used to describe the broader relationship; hence I would encourage Mr. Bush to be more selective about the context in which he employs the phrase. But in a military sense, Mr. Bush’s description is fair, and Americans as well as Chinese need to steel ourselves to that reality rather than be surprised when the other country takes certain actions we find less than friendly.

There is no reason to think that we are headed for an increasingly dangerous competition with China. But even those of who are sanguine about the long-term prospects of the US-PRC relationship and impressed by how far China has come in the last 25 years must acknowledge that there is a real possibility of war and that both sides will continue to prepare for it.

That said, the United States begins the 21 st century with several striking strategic advantages vis-a-vis China, and these advantages are in my judgment likely to endure for the foreseeable future certainly much more than a decade. They are as follows:

  • The United States greatly outspends China on defense- presently by a ratio of about 5:1 or even more;
  • The United States owns roughly $1 trillion of modem defense equipment, in contrast to China’s total of $100 billion or less, and these numbers will not change quickly;
  • China’s large armed forces, roughly twice the size of the U.S. military, drain resources away from modernization and training accounts. Ironically, partly because it has a large military, China also has a poorly equipped and trained military;
  • There are no plausible circumstances under which the United States would wish to mount an invasion of China, so China’s large but largely immobile armed forces would do it little good—and China would not have the same type of “home court advantage” that countries such as Iraq or North Korea might possess in a future war against America;
  • China’s domestic defense industrial base is large and improving, but of mediocre quality. China produces no top-notch fighter jets, for example, and is also weak in areas such as submarine and ship production. Moreover, China’s domestic and economic problems are severe enough—as my colleague Nicholas Lardy has convincingly shown in a 1998 Brookings book, China’s Unfinished Economic Revolution—that it will not easily transform its science and defense industrial sectors into first-class operations anytime soon.
  • Regarding Taiwan, although China has Russia as a ready and willing arms supplier, Taiwan has access to the weaponry of the United States and France; the value of Taiwan’s arms imports exceeded the value of China’s by a ratio of more than 5:1 in the 1990s.
  • Taiwan’s proximity to China would allow the PRC to use land-based aircraft in any conflict over the Taiwan Strait. However, the Strait is sufficiently wide, and Taiwan sufficiently well-armed and sufficiently difficult to invade, that amphibious assault is well beyond China’s means.

Of course, China has some advantages as well, even if they are not as impressive on the whole as those of the United States. In addition to its proximity to the most likely combat theater Taiwan and surrounding waters—it is firmly devoted to the cause of getting the island back. It probably has a greater tolerance for casualties than the United States. If China’s main interest were in coercing or harming Taiwan rather than seizing it, its geographical proximity would become a significant advantage. For example, it could probably mine Taiwanese harbors rather easily, could use submarines in occasional hit-and-run attacks against commercial shipping going into and out of Taiwan, and could undertake missile strikes against the island. Finally, it might be able to profit from certain vulnerabilities in the technology-dependent American and Taiwanese militaries, especially if they let down their guards. For example, to the extent that the United States has reduced its efforts to harden military electronics against high-altitude electromagnetic pulse (EMP)—as appears to be the case. China may be able to detonate a nuclear weapon high in the atmosphere east of Taiwan and destroy many American and Taiwanese electronics systems (without necessarily causing any significant loss of life or otherwise provoking U.S. nuclear retaliation).

What of future trends? The first point to make is that change is not that fast in military affairs; building high-quality armed forces takes many years if not decades. In particular, I would strongly disagree with a recent Pentagon report claiming that China will probably have the ability to conquer Taiwan by 2005. The second point is that China’s military wastes too much money maintaining a large force structure—further limiting its ability to modernize quickly. (The PLA’s official annual budget is increasing 18 percent, but that increase is designed partly to help the military get by without owning as many private industries.) That is the relatively good news.

Third, however, China will have the means to improve certain capabilities in significant ways in the years ahead. For example, it should be able to acquire significant stockpiles of several types of advanced missiles Sunburn antiship missiles, improved air-to-air missiles, increasingly accurate cruise missiles, as well as accurate homing submunitions that may be released by ballistic missiles. Such capabilities will put Taiwan at increasing risk of surprise attack against its airfields, command posts, ports, and ships, unless Taipei and Washington redress their vulnerabilities.

The long and short of this brief assessment is that the United States, and its friend Taiwan, enjoy a relatively strong strategic position vis-a-vis China that they can expect to retain for many years. However, they will have to be vigilant and responsive to improved PRC capabilities. They will also have to be careful to avoid actions that could provoke war (as of course will Beijing). The fact that Taiwan and the United States could prevail in any conventional conflict in the Western Pacific for the foreseeable future does not mean that they have anything to gain by winning such a war. In fact, such a war would lead to the embitterment of the world’s most important and largest rising power, and could quite possibly entail a sustained period of low-level PRC attacks against Taiwan and the United States even after most hostilities were over. Even more than some wars, it is a conflict that we must do everything to avoid.