China's Military Intentions Help Drive U.S. Technology DebatesChina's Military Intentions Help Drive U.S. Technology Debates

WASHINGTON — 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.

China has long sought to integrate its growing economic power with its emerging military posture in Asia. At the heart of this “civil-military integration” is indigenous technology development coupled with access to foreign technology through joint ventures. The Defense Department report highlighted these efforts, and China experts have stressed that Beijing is beginning to invest heavily in its defense industry. The result could be the creation of a military infrastructure patterned closely after the U.S. model.

Tai Ming Cheung, a China military expert at the University of California-San Diego, told a recent conference here on technology and China’s growing influence in Asia that China’s leaders made integrated civil-military technology development a priority in the late 1990s. The goal is balanced development of a dual-use technology base, Tai said. Despite some areas of technology expertise, he added that much of China’s output remains low-tech and relatively inefficient. Still, civil-military integration “underlies [China’s] entire strategy,” Walsh said, affecting a broad range of U.S. policies, especially how to handle dual-use technology exports to China that are vital to its military reforms. Industry groups like the U.S.-Taiwan Business Council want Washington to ease rules on technology exports to Asian companies, especially those with fabs in China and Taiwan.

However, many experts agree that U.S. export control policies toward China remain unclear. The Bush administration has a “muddled approach” to dual-use exports to China, Walsh said, and it needs to develop a coherent policy similar to Cold-War limits on technology exports.

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.

A comprehensive U.S. research strategy must take into account rules on dual-use technology exports to China, Walsh added. “We can’t keep moving on an ad-hoc basis.” Instead of a thoughtful debate, however, she warned that the process “will probably be event-driven, [hence] it will be nasty.”