Pentagon officials admit that they lack a clear understanding of China, despite its status as America's second-largest trading partner. During nearly every U.S. official visit to China, military officials press Beijing to disclose details of its spending plans and explain why it is building up its military capabilities.
"The lack of transparency in China's military and security affairs poses risks to stability by increasing the potential for misunderstanding and miscalculation," the report says. "This situation will naturally and understandably lead to hedging against the unknown."
Beijing announced plans today to increase its military budget this year by 17.6% to $59 billion. This follows a record 17.8% hike last year. But Western observers suspect that China's actual military budget is much larger.
Chinese authorities are careful to downplay their military might, saying their spending is still a fraction of the American defense budget and most of the money will go toward peaceful purposes such as pay raises and equipment upgrades.
The infiltration of Pentagon computer networks has allowed hackers to tap into unclassified computer systems, Sedney said. But even though the hackers did not penetrate classified systems, the infiltration was still considered serious, Sedney said.
"There's a whole range of scientific and technological material that is available through people in the contracting world and elsewhere that just isn't classified that can be the subject of these intrusions," he said.
Sedney said the computer break-ins did not amount to attacks, but he said the techniques used to penetrate Defense Department computers also could be used to attack them.
He compared the intrusions to someone breaking into a house but leaving the valuables in place and instead taking pictures of the interior.
The U.S. continues to believe that China's ongoing military modernization is primarily driven by preparations for a potential future dispute involving Taiwan.
But as the scope of the modernization increases and China's strategic thinking evolves, U.S. officials believe that China is preparing its military for other contingencies, such as conflicts over oil reserves or disputed territories.
The report takes particular note of China's expanding missile inventory, including long-range missiles, cruise missiles designed to strike naval vessels and growing numbers of shorter-range missiles.
