[House Hearing, 112 Congress]
[From the U.S. Government Publishing Office]


 
    INVESTIGATING THE CHINESE THREAT, PART I: MILITARY AND ECONOMIC 
                               AGGRESSION 

=======================================================================

                                HEARING

                               BEFORE THE

                      COMMITTEE ON FOREIGN AFFAIRS
                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED TWELFTH CONGRESS

                             SECOND SESSION

                               __________

                             MARCH 28, 2012

                               __________

                           Serial No. 112-137

                               __________

        Printed for the use of the Committee on Foreign Affairs


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                      COMMITTEE ON FOREIGN AFFAIRS

                 ILEANA ROS-LEHTINEN, Florida, Chairman
CHRISTOPHER H. SMITH, New Jersey     HOWARD L. BERMAN, California
DAN BURTON, Indiana                  GARY L. ACKERMAN, New York
ELTON GALLEGLY, California           ENI F.H. FALEOMAVAEGA, American 
DANA ROHRABACHER, California             Samoa
DONALD A. MANZULLO, Illinois         DONALD M. PAYNE, New Jersey--
EDWARD R. ROYCE, California              deceased 3/6/12 deg.
STEVE CHABOT, Ohio                   BRAD SHERMAN, California
RON PAUL, Texas                      ELIOT L. ENGEL, New York
MIKE PENCE, Indiana                  GREGORY W. MEEKS, New York
JOE WILSON, South Carolina           RUSS CARNAHAN, Missouri
CONNIE MACK, Florida                 ALBIO SIRES, New Jersey
JEFF FORTENBERRY, Nebraska           GERALD E. CONNOLLY, Virginia
MICHAEL T. McCAUL, Texas             THEODORE E. DEUTCH, Florida
TED POE, Texas                       DENNIS CARDOZA, California
GUS M. BILIRAKIS, Florida            BEN CHANDLER, Kentucky
JEAN SCHMIDT, Ohio                   BRIAN HIGGINS, New York
BILL JOHNSON, Ohio                   ALLYSON SCHWARTZ, Pennsylvania
DAVID RIVERA, Florida                CHRISTOPHER S. MURPHY, Connecticut
MIKE KELLY, Pennsylvania             FREDERICA WILSON, Florida
TIM GRIFFIN, Arkansas                KAREN BASS, California
TOM MARINO, Pennsylvania             WILLIAM KEATING, Massachusetts
JEFF DUNCAN, South Carolina          DAVID CICILLINE, Rhode Island
ANN MARIE BUERKLE, New York
RENEE ELLMERS, North Carolina
ROBERT TURNER, New York
                   Yleem D.S. Poblete, Staff Director
             Richard J. Kessler, Democratic Staff Director



                            C O N T E N T S

                              ----------                              
                                                                   Page

                               WITNESSES

Mr. Dean Cheng, research fellow, Asian Studies Center, The 
  Heritage Foundation............................................     8
Mr. John J. Tkacik, Jr., senior fellow and director of the Future 
  Asia Project, International Assessment and Strategy Center.....    25
Larry M. Wortzel, Ph.D., Commissioner, United States-China 
  Economic and Security Review Commission........................    70
Taylor Fravel, Ph.D., associate professor of political science, 
  Security Studies Program, Massachusetts Institute of Technology    81

          LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING

Mr. Dean Cheng: Prepared statement...............................    10
Mr. John J. Tkacik, Jr.: Prepared statement......................    27
Larry M. Wortzel, Ph.D.: Prepared statement......................    72
Taylor Fravel, Ph.D.: Prepared statement.........................    83

                                APPENDIX

Hearing notice...................................................   112
Hearing minutes..................................................   113


    INVESTIGATING THE CHINESE THREAT, PART I: MILITARY AND ECONOMIC 
                               AGGRESSION

                              ----------                              


                       WEDNESDAY, MARCH 28, 2012

                  House of Representatives,
                              Committee on Foreign Affairs,
                                                    Washington, DC.
    The committee met, pursuant to notice, at 10 o'clock a.m., 
in room 2172 Rayburn House Office Building, Hon. Ileana Ros-
Lehtinen (chairman of the committee) presiding.
    Chairman Ros-Lehtinen. The committee will come to order.
    Welcome to my fellow members on the committee and to our 
distinguished panel of witnesses who are joining us today.
    If they could take their spots, thank you so much.
    After recognizing myself and my friend, Mr. Berman, the 
ranking member, for 7 minutes each for our opening statements, 
I will recognize the chairman and the ranking member of the 
Subcommittee on Asia and the Pacific for 3 minutes each for 
their opening statements, followed by 1-minute opening 
statements for all other members wishing to speak.
    We will then hear from our witnesses. I would ask that you 
summarize your prepared statements to 5 minutes each before we 
move to the questions and answers with members under the 5-
minute rule.
    As Mr. Wilson, Mr. Bilirakis, and Mr. Duncan were unable to 
ask questions during the hearing with the Secretary of State, I 
had said publicly toward the end that I will be recognizing 
them, when they come, first by seniority for questions before 
returning to the regular order of questioning for the majority 
side.
    So, without objection, the witnesses' prepared statements 
will be made a part of the record.
    Members may have 5 days to insert statements and questions 
for the record, subject to the length limitation and the rules.
    The Chair now recognizes herself for 7 minutes.
    Napoleon once famously remarked that ``China is a sleeping 
dragon. Let her sleep, for when she awakes, she will shake the 
world.''
    The 21st century is the era of China's awakening. The 
decades to come will test whether China will truly shake the 
world.
    This hearing is a first in a series to examine the range of 
threats to U.S. national security, our interests, and allies, 
posed by a rising China and, also, to receive recommendations 
on how to counter such threats. Today we will examine recent 
military and economic actions taken by the People's Republic of 
China and evaluate what they mean for United States interests 
and those of our allies.
    In advance of his transition to the presidency of China, 
China's Vice President visited the United States last month. 
The White House went to great lengths to ensure that the visit 
went smoothly, reiterating a commitment to a peaceful and 
stable relationship. The actions taken may have included a 
turning-away of a high-level asylum-seeker at a consulate in 
China and included Vice President Biden's dismissal of a 
meeting request from the spouse of one of China's most 
prominent dissidents.
    With respect to Mr. Wang, the reported defector, China's 
dissent news service posted an audio broadcast of a Chinese 
official who read the report from the Chinese Party of China, 
CPC, Central Committee on Mr. Wang. Allegedly, the report 
stated that Wang entered the U.S. Consulate in Chengdu on 
February 6th, spoke to U.S. officials about ``relevant exchange 
and cooperation projects, then asked for asylum.''
    The report allegedly goes on to say that, at the request of 
U.S. personnel, Wang filled out an application for political 
asylum, but late the next day, on February 7th, after ``a face-
to-face talk with a comrade directly dispatched from the CPC 
Central Committee,'' Wang agreed to leave the U.S. Consulate.
    The possibility that the administration turned away an 
asylum-seeker, and possibly a high-value intelligence source, 
raises a number of serious questions that require immediate 
answers. I have a pending request with the Department of State 
for specific information on this matter.
    Generally, the administration's overtures have failed to 
alter Beijing's behavior or its policies. China continues the 
artificial depreciation of its currency, which steals American 
jobs away. China continues to undermine the U.S. technological 
edge through all available means, including circumvention of 
U.S. export controls and by hacking into private and 
governmental computer systems. China's ongoing participation in 
industrial espionage is evidenced by a recent criminal 
indictment of individuals charged with stealing trade secrets 
from the DuPont Corporation.
    Also, piracy of intellectual property rights remains a 
significant problem for U.S. companies doing business in China, 
such as the Illinois-based paper shredder manufacturer 
Fellowes, Incorporated.
    Through such illegitimate means, China has made tremendous 
advances in the modernization of its military with a budget 
that some experts expect by the year 2015 will surpass the 
totality of all 12 of its Asia-Pacific neighbors. Along with 
increased maritime capacity, Chinese aggression has manifested 
itself in its broad territorial claims throughout the South 
China Sea, the East China Sea, and the Yellow Sea.
    Last November, the White House finally acknowledged 
Beijing's bullying of its neighbors and President Obama 
announced a pivot to emphasis the U.S. strategic and economic 
interests in the Asia-Pacific region. In reaction to President 
Obama's pivot, one People's Liberation Army general wrote a 
commentary which quickly spread across Chinese Web sites. The 
general said, ``This is aimed at China, to contain China. The 
United States has committed a fatal strategic error. It has 
misjudged its foes.''
    Among the expert panel of witnesses today is Dr. Larry 
Wortzel, Commissioner of the U.S.-China Economic and Security 
Review Commission, who will testify that China has prepared for 
cyber warfare. According to the Commission's latest report, the 
PLA has the cyber attack capacity to cripple computer networks 
in the U.S. Pacific Command.
    China also remains a significant benefactor of other 
authoritarian regimes, providing missile defense, missile-
related technology to Iran, investing heavily in Iran's energy 
sector, blocking strong action in Syria, expanding its 
relations with and seeking energy resources from Sudan, 
Venezuela, and Cuba. And Beijing has supplied Castro with a 
massive $750-million oil rig designed to extract offshore oil 
from sites near the United States. Any future accident would 
risk a nasty oil spill into Florida's coastline.
    China's refusal to cooperate with sanctions contributed to 
North Korea's acquisition of nuclear weapons. Although North 
Korea's new leader recently announced that he would suspend 
nuclear tests and allow inspections in exchange for food, North 
Korea shortly followed up by announcing that it would launch a 
satellite in April. This would be in violation of U.N. Security 
Council resolutions.
    China is North Korea's major supplier of food, energy, and 
weaponry, but Beijing does nothing in the face of North Korea's 
threatened missile launch. The Nuclear Security Summit, which 
President Obama recently attended in South Korea, does not seem 
to have affected the North Korean decision. In fact, Pyongyang 
responded to the President's warnings by moving the missile to 
the launch pad. When push comes to shove, Beijing always sides 
with its authoritarian allies, be they in Damascus, Havana, 
Tehran, or Pyongyang.
    The Obama administration spent its first 2 years seeking 
accommodation with Beijing with little in return. Having failed 
with charm, the administration has come belatedly to seeking a 
more realistic approach to the China issue. Hopefully, it is 
not too little too late.
    Now I am pleased to turn to the distinguished ranking 
member for his opening statement. Mr. Berman is recognized.
    Mr. Berman. Thank you very much, Madam Chairman, for 
calling this hearing.
    It was 40 years ago last month that President Nixon 
undertook his historic trip to China, a visit that changed the 
course of world events and continues to reverberate today. That 
trip and the establishment of diplomatic relations with China 
were rooted in a Cold War strategic context in which the 
ultimate goal was to prevent Soviet expansionism.
    In the early years of the U.S.-China relationship, the 
interactions between our two nations were narrowly-focused and 
took place almost exclusively at the government-to-government 
level. Today, four decades later, the bilateral U.S.-China 
relationship has its own strategic rationale that is global in 
scope. In addition to the ties between our two governments, the 
two countries have formed deep and wide economic, educational, 
and cultural connections that resonate not only in Washington 
and Beijing, but in the farmlands of Iowa and rural China.
    At the time of the Nixon visit, China was a poor and 
isolated nation. Today, after decades of astonishing economic 
growth, hundreds of millions of Chinese citizens have been 
lifted out of poverty; a large middle class is forming.
    China has become the world's second-largest economy and 
plays an integral role in the international system. With 
China's rise as a global power, Chinese influence can be seen 
and felt all over the world, from the boardrooms in the world's 
major financial centers to the back roads of Africa.
    There are some in this country, and some on this committee, 
who argue that a rising China poses a significant threat to the 
United States, that China is looking to supplant America's 
leadership role in the world. And in China, some believe that 
the United States is in decline and determined to contain China 
and curb its rise.
    However, many others, including on this committee, believe 
that U.S. cooperation with a rising China is both possible and 
desirable, and that a bitter and acrimonious rivalry between 
our two countries would have detrimental impact on global 
stability. As Henry Kissinger recently wrote in Foreign 
Affairs, ``The U.S.-China relationship should not be considered 
a zero-sum game, nor can the emergence of a prosperous and 
powerful China be assumed in itself to be an American strategic 
defeat.''
    Even if the U.S. and China are able to work together on a 
positive basis to address regional and global issues--and I 
hope that we are--there will inevitably be disagreements and 
points of friction in our bilateral relationship. When those 
arise, the United States must never hesitate to speak out and 
take action, particularly when American interests and those of 
our allies and partners are at stake.
    This means calling on China to end its discrimination 
against U.S. companies, stop the theft of U.S. intellectual 
property, cease its unfair currency practices. It means shining 
the spotlight on Beijing's appalling lack of respect for human 
rights, democracy, and rule of law. It means calling on China 
to renounce the military option in resolving its ongoing 
political dispute with Taiwan. And it means demanding that 
China explain its rapid military buildup, abide by 
international maritime laws and norms, cooperate with the 
international community to end violence in places like Syria 
and Sudan, and work with the United States and others to solve 
the North Korean and Iranian nuclear problems.
    It remains to be seen how China will ultimately address 
these issues, what kind of role Beijing wants to play on the 
world stage, as it continues its economic growth and 
geopolitical rise. At times, China seems to want to be treated 
like a great power. Yet, it often ducks the responsibility that 
comes from being a leading player or, even worse, as we saw in 
the Chinese veto of the U.N. Security Council resolution on 
Syria, blocks the rest of the world from doing the right thing.
    China has benefitted greatly and achieved prosperity for 
its citizens from an open international economic system. Yet, 
China has engaged in mercantilist behavior, sometimes ignored 
rules of the global economy, and constructed a playing field 
for non-Chinese companies in China that is unfair, opaque, and 
corrupt.
    All of this boils down to a choice for China. Will it use 
its growing power and newfound standing in the world solely for 
its own benefit or will it pursue a constructive path that 
strengthens the global order for the benefit of all nations?
    I thank the panel of witnesses for being here today and 
look forward to hearing their views on the future of the U.S.-
China relationship, and yield back the balance of my time.
    Chairman Ros-Lehtinen. Thank you, Mr. Berman. Thank you for 
your opening statement.
    And the Chair wishes to send greetings to that heckler in 
the back, Harry Wu, a wonderful friend of our committee, and 
who understands a thing or two about China's brutality.
    Mr. Smith is recognized for 1-minute opening statements, 
and we will recognize everyone to speak for 1 minute.
    Mr. Smith. I thank you very much, Madam Chair, and I would 
ask unanimous consent to have my full statement made a part of 
the record.
    Chairman Ros-Lehtinen. Without objection.
    Mr. Smith. China's declared defense budget, already the 
second-highest in the world, will increase by 11.2 percent this 
year to $106.4 billion. This follows a nearly unbroken string 
of double-digit increases over the last two decades.
    As Beijing has escalated its military buildup, China has 
also expanded its geopolitical ambitions and increased its 
claim within the South China Sea. China's Asian neighbors have 
started to strengthen their own defenses and sought new 
security ties with the U.S. and other partners.
    The challenges of China that it presents are not limited to 
any corner of the globe. China continues to advance its 
capabilities to initiate cyber attacks and exploit U.S. cyber 
security vulnerabilities, which present grave threats to U.S. 
national security and economic interests.
    Finally, China's economic investments into Africa and other 
parts of the world also pose significant threats, such as 
locking up the supply of strategic minerals or rare earth 
elements used in high-tech products, including smart bombs, and 
offering a poor policy example of the respect for human rights 
to its partners.
    Tomorrow I will chair my fourth hearing on China's growing 
influence in Africa and the bad governance model that it is 
exporting to African countries like Sudan and elsewhere.
    Chairman Ros-Lehtinen. Thank you. Thank you so much, Mr. 
Smith.
    Mr. Sherman is recognized.
    Mr. Sherman. If we had balanced trade with China, our 
unemployment rate would be under 5 percent and the cost of 
containing China's aggressiveness in its region would be far 
less. But there are high, enormous profits available by 
maintaining the present trade system.
    And so, a huge propaganda effort is deployed to convince 
the American people that our current trading system is both 
fair and beneficial. We have a choice between two roads. One is 
to renounce the current MFN treatment of China and demand the 
negotiation of a balanced trade agreement, with a voucher 
system perhaps, that you need a voucher to import anything from 
China.
    But the road more traveled is to keep repeating empty 
criticisms of China, in order to lull the American people to 
sleep, as if such repetitions for decades are going to cause a 
change in Beijing's policy, and to leave us with an aggressive 
China, unemployed Americans, and a highly-contempted foreign 
policy and economic establishment.
    I yield back.
    Chairman Ros-Lehtinen. Thank you, Mr. Sherman.
    Ms. Schmidt is recognized.
    Ms. Schmidt. Thank you, and I want to thank you for this 
hearing.
    I am increasingly concerned about this administration's 
approach with China, be it its relationship with Taiwan, the 
issue with the Dalai Lama, and, most importantly, the issue 
currently about AsiaSat, which is an issue whether the 
administration is agreeing to transfer communications satellite 
to munition controls for China. And that concerns me greatly. 
So, I hope we touch on those issues in this hearing.
    Chairman Ros-Lehtinen. Thank you very much, Ms. Schmidt.
    Mr. Sires is recognized.
    Mr. Sires. Thank you, Madam Chairlady, and thank you for 
being here today.
    You know, I have many concerns with China: Their abysmal 
human rights record, their increase in defense budget, their 
disregard for total international norms. So, I just want to 
hear what you have to say about some of those concerns that I 
have about China.
    Thank you very much for being here.
    Chairman Ros-Lehtinen. Thank you very much.
    Mr. Chabot is recognized.
    Mr. Chabot. Thank you, Madam Chair, for pulling together 
such a distinguished panel here as you have this morning.
    Having been one of the founding chairs of the Congressional 
Taiwan Caucus, and having served as co-chair of that for about 
a decade, I do hope that our witnesses will take at least some 
time today to focus on China's military threat to our long-time 
friend and ally, Taiwan.
    I remember when I first came to Congress back in 1995, I 
learned at that time that China had approximately 100 missiles, 
and every year it would go up. There would be a few hundred 
more and a few hundred more and a few hundred more. Now they 
are up to approximately 1,600 missiles, both medium-range and 
short-range ballistic missiles aimed at Taiwan. So, I hope 
during the hearing that we can focus some time on that.
    I know Mr. Tkacik and I have discussed the threat to Taiwan 
many times. So, I particularly look forward to hearing his 
testimony and the other members as well.
    And I yield back.
    Chairman Ros-Lehtinen. Thank you, Mr. Chabot.
    Ms. Bass is recognized.
    Ms. Bass. Thank you, Madam Chair and Ranking Member Berman.
    I do look forward, as the chair of the Subcommittee on 
Africa mentioned a few minutes ago, tomorrow we are going to 
have a committee hearing on China's role in Africa, and I look 
forward to that. Also, perhaps some of the panelists might 
comment on that relationship as well. Specifically, I am 
interested in the labor issue, so when the Chinese go into 
African nations, bringing Chinese labor with them as opposed to 
hiring the local population.
    As China continues down a path of growth, there are 
important questions that must be answered regarding China's 
military power, its foreign exchange policies, human rights, 
cyber espionage, China/Taiwan relations. While China's ascent 
can neither be stopped nor ignored, we must continue to focus 
attention on ensuring responsible Chinese policies and 
practices that promote peace, growth, and opportunity.
    Thank you.
    Chairman Ros-Lehtinen. Thank you very much, ma'am.
    Mr. Connolly is recognized.
    Mr. Connolly. Thank you, Madam Chairman, and thank you for 
holding this hearing.
    The U.S.-China relationship is absolutely one of the most 
important, obviously, in the world, and it is a relationship 
that must be worked out. But the United States has to insist on 
its interests in this relationship; otherwise, it is one of 
unequal partners.
    And we need to focus, obviously, on our human rights 
values, as we interact with the Chinese, and we also have to 
insist economically on the increasing pressure of intellectual 
property rights. Intellectual theft is epidemic in China, and 
it must be addressed as we move forward in this relationship on 
behalf of not only our interests and our business interests, 
but, frankly, for the future maturation of China itself as an 
interest of the family of nations.
    I thank the chair.
    Chairman Ros-Lehtinen. Thank you. I thank all the members 
for their opening statements.
    And now, the Chair is pleased to welcome our witnesses.
    First, Dean Cheng, who is currently the research fellow for 
Chinese Political and Military Affairs at the Heritage 
Foundation. Prior to joining the Heritage Foundation, he was 
the Senior Analyst with the China Studies Commission and also 
served with the Science Applications International Corporation.
    Welcome.
    Next, I would like to welcome John Tkacik, a senior fellow 
and director of the Future Asia Project at the International 
Assessment and Strategy Center. Mr. Tkacik is a retired Foreign 
Service officer who has devoted over 20 years of government 
service to Chinese/Taiwanese affairs. From the years 2001 to 
2009, Mr. Tkacik was also a research fellow on China at the 
Heritage Foundation.
    We welcome you, sir.
    And we are also pleased to welcome Larry Wortzel, the 
Commissioner of the United States-China Economic and Security 
Review Commission. Dr. Wortzel was reappointed by Speaker 
Boehner for a 2-year term, expiring on December 31, 2012. He 
has a distinguished career in the U.S. Armed Forces, which 
included two tours of duty as a military attache at the 
American Embassy in China. And he likes to go bass fishing in 
my home state of Florida.
    And finally, I would like to welcome Taylor Fravel. He is 
associate professor of political science and member of the 
Security Studies Program at MIT. Dr. Fravel studies 
international relations with a focus on international security, 
China, and East Asia, and is currently completing a study of 
China's military doctrine since 1949.
    A wonderful set of panelists. I welcome you all. I ask that 
you, again, keep your presentation to no more than 5 minutes. 
And without objection, your prepared statements will be made a 
part of the record.
    So, Mr. Cheng, please proceed.

  STATEMENT OF MR. DEAN CHENG, RESEARCH FELLOW, ASIAN STUDIES 
                CENTER, THE HERITAGE FOUNDATION

    Mr. Cheng. Thank you, Chairman Ros-Lehtinen, Ranking Member 
Berman, and distinguished members of the committee, for the 
opportunity to be here this morning.
    The views I express in this testimony are my own and should 
not be construed as representing any official position of the 
Heritage Foundation.
    My comments today will focus on the military aspect of the 
threat from the People's Republic of China, but I would like to 
emphasize that the Chinese concept of national security is a 
holistic one, rooted in the idea of comprehensive national 
power, which includes not only military capabilities, but 
economic capacity, level of science and technology, diplomatic 
respect, and even culture.
    The Chinese People's Liberation Army is the most visible 
aspect of China's comprehensive national power. China fields 
the world's largest military and has enjoyed double-digit 
increases in its defense budget for the last two decades. 
China's official defense expenditure, generally seen as 
understating actual defense spending, has now passed the $100 
billion mark.
    These expenditures have funded what Jiang Zemin termed 
``the two transformations'' involving a shift from quantity to 
quality and emphasizing the ability to fight high-tech wars, 
what the Chinese now call informationized wars. In short, this 
is not your father's or your grandfather's PLA.
    Chinese military writings regularly note that future 
warfare will require networks of sensors and communications in 
order to win the contest between systems of systems. So, China 
is building, for example, a constellation of high-resolution, 
multi-spectral earth observation satellites to support its new 
fighters, tankers, submarines, and missiles. At the same time, 
Chinese tests of anti-satellite capabilities in 2007 and again 
in 2010 underscore the growing ability of the PLA to deny 
opponents C4ISR capabilities.
    To be fair, it is important to recognize that China, as the 
world's most populous country and second-largest economy, is 
bound to have a very large military, given its expanding 
economic interest and substantial manpower pool. And it is 
wishful thinking to expect that China will follow the Soviet 
path and bankrupt itself on defense spending. And indeed, the 
Chinese leadership regularly emphasizes that national economic 
construction is higher priority than army-building.
    But while weapon systems are important, how the Chinese 
think about employing them is vital. And one of the great 
concerns that should worry us is that the Chinese do not 
necessarily think the way we do, especially in terms of 
deterrence and crisis management.
    The American outlook has been heavily shaped by the Cuban 
missile crisis, itself affected by President Kennedy's lessons 
drawn from World War I. This has focused American attention on 
avoiding inadvertent escalation and accidental war.
    By contrast, the PRC chose to precipitate a conflict with 
the USSR in 1969, when both nations were nuclear-armed. And 
this different attitude is also reflected in the Chinese 
refusal to talk about creating maritime rules of the road. In 
the Chinese view, such rules allow both sides to feel safe when 
operating in close proximity, but the Chinese have very little 
interest in making the United States feel safe in the western 
Pacific in disputed waters, when they are engaging in what 
Beijing sees as illegitimate activities. The solution to 
avoiding accidents or crises, in their view, is for the United 
States to pull back.
    This fundamentally different perspective on deterrence and 
crisis management is symptomatic of the reality that China is 
different from Iraq, Serbia, or Afghanistan. China has a 
substantial indigenous military industrial base. It possesses 
space and cyber capabilities on a rough par with the United 
States, as well as its substantial nuclear arsenal. The Chinese 
pose a fundamentally different scale of threat than have other 
states in the past or even North Korea or Iran would in any 
calculation in the future.
    These differences are exacerbated by what U.S. analysts 
have termed China's anti-access/area denial strategy. As the 
PRC takes a holistic view toward assessments of national power, 
so Chinese efforts to prevent the United States from readily 
deploying to the western Pacific involve strategic and 
operational as well as tactical elements.
    At the strategic level, the Chinese pursue a range of 
political warfare measures, including the so-called warfares of 
legal warfare, public opinion warfare, and psychological 
warfare, all of which seek to influence domestic, adversary, 
and third-party audience perceptions and attitudes by 
undermining legitimacy, strengthening friendly will, and 
arousing sympathy.
    At the operational level, Chinese military writing suggests 
an emphasis on establishing information superiority or 
dominance over an opponent, which, in turn, involves securing 
space and cyber dominance, thereby preventing an opponent from 
coordinating their forces or targeting their weapons.
    When coupled with tactical systems, such as anti-ship 
ballistic missiles, we then see a unified approach that links 
tactical to operational to strategic, the objective being to 
allow the Chinese leadership to dissuade local states from 
supporting the United States for allowing it to operate in its 
area.
    The Chinese have a consistent approach with persistent 
actions. The challenge from Beijing seems clear. It is up to us 
to respond.
    [The prepared statement of Mr. Cheng follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
        
                              ----------                              

    Chairman Ros-Lehtinen. Thank you very much.
    Mr. Tkacik, did I get your name, more or less? Nailed it?
    You are recognized, sir. Thank you.

    STATEMENT OF MR. JOHN J. TKACIK, JR., SENIOR FELLOW AND 
 DIRECTOR OF THE FUTURE ASIA PROJECT, INTERNATIONAL ASSESSMENT 
                      AND STRATEGY CENTER

    Mr. Tkacik. Madam Chairman, Ranking Member Berman, 
distinguished members, thank you for giving me the opportunity 
to appear here today.
    I have submitted extensive written remarks, and I 
appreciate the chairman's offer to put them in the record.
    Let me say at the outset, China, since 1989, and, indeed, 
since the collapse of the Soviet Union in 1992, has assumed an 
adversarial posture toward the United States, Europe, and 
Japan, and others, in a variety of foreign policy and war-
fighting areas.
    As one Chinese strategist puts it, ``In the world today, 
virtually every one of America's adversaries are China's 
friends.'' This is not a coincidence. China's leadership sees 
the United States as a challenge to the legitimacy of the 
regime. And indeed, across the board, from nuclear and missile 
proliferation to human rights, to global climate change, and 
fisheries, China adopts a diametrically-opposite policy to the 
United States.
    And even during the Iran and Iraq wars--or excuse me--the 
Iraq and Afghanistan wars, China has gone out of its way to 
provide weapons and explosives, and I would argue computer 
network assistance, to hostile states and insurgents in direct 
combat with U.S. coalition and NATO forces.
    My job is to look out into the future of Asia 20 years or 
so and calculate what we are likely to see. Basically, I am 
following straight-line trends over the past 20 years, and I 
will project them into the next 20 years. What we have is not 
reassuring.
    When you try to integrate multiple trend lines and 
aggregate the results, the margins for error grow and the 
conclusions are necessarily speculative. But if 20 years ago 
one had done a straight-line projection of China's previous 
decade of economic and population growth, or for military 
spending, or even foreign exchange reserves growth, your 
projections 20 years later in 2012 would be low. They would be 
sort of on the mark, but they would have been low. China is now 
the largest industrial power on earth. China's industrial 
sector has overtaken America's.
    Now, many of the international threats that the United 
States faces around the world are discrete military, 
transnational terrorism, et cetera, but, as such, analyzing 
them is more or less straightforward. Not so with China. China 
poses a direct, multidimensional matrix of threats and 
approaches it with a strategy which I believe the Beijing 
leadership has thought through in great detail over the past 
two decades. China is now clearly following a broad national 
strategy of state mercantilism which has scant regard for 
international norms, intellectual property. It has an immense 
industrial spying apparatus. And in fact, any tools that expand 
China's wealth are utilized without regard to legality, 
proprietary, or convention.
    The threats are economic. They are industrial. They are 
commercial and financial. They are technological, scientific, 
territorial, and political. They involve transnational crime 
and environmental challenges. There are also colossal 
demographic challenges that, too, can turn into threats on very 
short order. The military threats posed by China are intensely 
more complicated by the non-military dimensions. And all these 
threats can blow up in America's face in a moment's notice.
    My written remarks are quite extensive, but they only touch 
upon a few areas where America's national security is already 
in jeopardy. Let me start with the economic threats from China.
    They include trade, financial, industrial, and 
technological factors and the Chinese strategies that underpin 
them. There's no question but that the cyber threat is the 
single greatest threat to the United States, and to be a bit 
dramatic, to the entire rules-based international system that 
China now has approached.
    Chinese intelligence and the entire Chinese state have 
access to everything in everyone's computers. I wish I were 
exaggerating, but, alas, I am not. Imagine what you could do 
with complete, unfettered access to the emails of your 
political rivals, your economic rivals, your banks, your news 
organizations, the personal emails of anybody you wanted, all 
of the Fortune 500 companies of America, the Fortune 1,000 
across the world. That is precisely the threat.
    In my written submission, I will also touch upon China's 
territorial sea claims, but not its threats to its continental 
neighbors because those are penumbral to America's core 
interest and to those of our treaty allies. Suffice it to say 
that China's territorial sea claims in the South China Sea, the 
Taiwan Strait, the East China Sea are absolute. They brook no 
challenge.
    China's own legislation, its supreme national law, permits 
only the intrusion on these waters of foreigners who ``abide by 
Chinese law.'' And I must say, recent Chinese statements that 
no country claims the entire South China Sea are true, except 
that China claims 1.5 million square kilometers of it. The rest 
of it is negotiable.
    I will leave that as my oral presentation. I would like to 
get into the issues of Taiwan and others in the questions and 
answers.
    Thank you.
    [The prepared statement of Mr. Tkacik follows:]

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    Chairman Ros-Lehtinen. Thank you very much, sir. Thank you.
    Dr. Wortzel?

  STATEMENT OF LARRY M. WORTZEL, PH.D., COMMISSIONER, UNITED 
      STATES-CHINA ECONOMIC AND SECURITY REVIEW COMMISSION

    Mr. Wortzel. Madam Chairman, Ranking Member Berman, 
committee members, thank you for the opportunity to appear 
today.
    On March 7th, the U.S.-China Economic and Security Review 
Commission released a report on Chinese capabilities for cyber 
espionage and cyber warfare. The report concluded that the 
People's Liberation Army has developed information warfare 
capabilities to defend military and civilian computer networks 
while seizing control of an adversary's information system. In 
peacetime, cyber espionage is a cornerstone of China's 
intelligence-collection operations.
    Cyber attacks are appealing to China because they leave no 
clear fingerprints, and such attacks would be preemptive. The 
PLA calls its strategy for cyber attacks ``Integrated Network 
Electronic Warfare.''
    And I would like to depart from my role as a commissioner 
for a minute and give you my personal views on this war-
fighting doctrine. During the Cold War, the Soviet military 
planned to start a war with radio electronic combat, a 
combination of electronic warfare with artillery, aircraft, and 
missile strikes. The Soviets expected to degrade an enemy's 
combat capability by 60 percent before a shot was fired.
    The PLA's Integrated Network Electronic Warfare doctrine is 
Soviet doctrine on Chinese steroids. INEW added computer 
network attacks and space attacks on satellites.
    The commission's report also expresses concerns about some 
of China's largest telecommunications firms. These firms 
benefit from a network of state research institutes and 
government funding and programs that have the sponsorship of 
the military. Also, Chinese Government research organizations 
and universities are working on national programs for research 
on cyber technology.
    The report notes that the U.S. military's NIPRNET, or Non-
Secure Internet Protocol Routing Network, is particularly 
vulnerable to computer attack and exploitation, and any 
assistance to Taiwan in a crisis could be disrupted.
    Finally, the report documents vulnerabilities in the U.S. 
telecommunications supply chain where backdoors built into 
hardware or coded into software may give unauthorized access to 
systems. The U.S. Army ordered a large number of computers from 
a Chinese company for installation on our NIPRNET-based 
logistics system. Army officials believe that they can only 
exclude purchases from foreign firms for equipment controlled 
on the United States Munitions List, but not for the whole 
Army. It seems to me that the entire enterprise information 
architecture of the Department of Defense, if not the whole 
government, should be a national security concern.
    If existing legislation cannot be interpreted differently, 
then new legislation may be required. Congress should consider 
directing the Executive Branch to maintain a classified list of 
countries, people, and companies that pose a serious cyber 
threat to our Government and industry. Such a list should be 
validated across the intelligence community and vetted by the 
Foreign Intelligence and Surveillance Court. During the 
procurement process, cleared government officials should be 
required to consult that list and to exclude people or 
companies on the list from introducing hardware or software 
into government networks.
    When our security officials can attribute an attack to a 
foreign person, in a closed Federal court, such as the Foreign 
Intelligence and Surveillance Court, they should be able to 
seek a warrant for arrest. And in the case of a foreign 
company, there should be a statutory prohibition on a company 
judged to be involved in cyber espionage from doing business in 
the United States. And we should encourage our allies to do the 
same. The Australian Government just barred Huawei, a Chinese 
company, from work on Australia's national infrastructure, 
cyber infrastructure.
    The United States also should have a clear policy that it 
declares that attacks in cyber space are acts of war and a 
cyber attack may generate a weapons strike and a state of war.
    Thank you for the opportunity to testify today, and I 
welcome any questions you may have.
    [The prepared statement of Mr. Wortzel follows:]

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    Chairman Ros-Lehtinen. Thank you, sir.
    Dr. Fravel is recognized.

   STATEMENT OF TAYLOR FRAVEL, PH.D., ASSOCIATE PROFESSOR OF 
  POLITICAL SCIENCE, SECURITY STUDIES PROGRAM, MASSACHUSETTS 
                    INSTITUTE OF TECHNOLOGY

    Mr. Fravel. Madam Chairman, Congressman Berman, and 
esteemed members of the committee, thank you for inviting me to 
participate in today's important discussion.
    I would like to discuss one particular challenge that China 
poses, its behavior in the territorial and maritime disputes in 
the South China Sea. Orally, I would like to make four points.
    My first point, first, between 2007 and 2011, China adopted 
a much more assertive approach toward the disputes in the South 
China Sea. During this period, China challenged, and in some 
cases threatened, foreign oil companies, including American 
ones, investing in Vietnam's offshore oil and gas blocks, 
emphasized its own expansive claims in these waters, detained 
hundreds of Vietnamese fishermen near the Chinese-held Paracels 
Islands, and harassed Vietnamese and Philippine vessels 
conducting seismic surveys in waters that Beijing claims.
    China adopted this more assertive approach for several 
reasons. First, China was often reacting to efforts by other 
claimants, especially Vietnam, to strengthen their own position 
in the South China Sea. As there are some conflicts, 
territorial disputes are prone to negative spirals of 
instability because one state's efforts to defend its claims 
will be viewed by others as a challenge that requires a 
response.
    Second, more generally, China's leaders were more willing 
to assert interest in the region after successfully hosting the 
Olympics and weathering the financial crisis in 2008.
    Third, various Chinese maritime agencies competing with 
each other for greater authority and resources also played a 
role in China's behavior.
    The second point: Since June 2011, China has adopted a 
less-assertive approach in the South China Sea disputes. China 
has stopped the most confrontational aspects of its assertive 
approach, especially the frequent detention of Vietnamese 
fishing vessels and the harassment of oil and gas exploration 
activities in waters that China claims.
    In addition, China's new approach has several components, 
including reaffirming cooperation through joint development, 
holding summits with leaders from the Philippines and Vietnam, 
reaching agreements for managing tensions with the association 
of Southeast Asian nations and with Vietnam, and directly 
engaging other claimants, for example, by establishing a $70 
million Maritime Cooperation Fund.
    China adopted a less-assertive approach because it realized 
that it had overreached and overreacted. By threatening other 
claimants, China tarnished the cooperative image that it had 
sought to cultivate since 2000, created a common interest among 
these states encountering China, and created strong incentives 
for states in the region to improve their ties with the United 
States.
    Central to the change in China's behavior was the firmness 
displayed by both states in the region and the United States, 
especially when Secretary of State Clinton declared a U.S. 
national interest in the South China Sea in July 2010. In sum, 
China's actions had undermined its broader grand strategy, 
which emphasizes maintaining good relations with both its 
immediate neighbors and with great powers like the United 
States.
    My third point: China's recent behavior in the South China 
Sea has important implications for understanding China's 
foreign policy today. In the South China Sea, China's 
assertiveness has sought to deter other states from acting 
against Chinese interest and claims. China has not acted to 
compel states to accede to China's claims, however. The 
emphasis on deterrence in China's foreign policy is consistent 
with the emphasis on deterrence in China's military strategy 
today.
    Although China is actively modernizing its armed forces, it 
remains reluctant to use them in many political and military 
issues. In the South China Sea, for example, China has relied 
primarily on civilian maritime law enforcement agencies to 
assert and defend its claims, not the Chinese navy.
    With 14 neighbors on land and eight at sea, China's foreign 
policy remains constrained by its external security 
environment. China has limited room for maneuver and must seek 
to maintain good relations with neighboring states, especially 
when faced with resistance to China's policies from its 
neighbors and from states like the United States.
    My final point concerns several brief policy 
recommendations: First, the United States should maintain and 
consolidate its military and diplomatic presence in East Asia 
currently being undertaken as part of the rebalancing of 
American strategic priorities.
    Second, the United States should continue to underscore its 
national interest in international norms that are threatened by 
China's more assertive policies, especially freedom of 
navigation and the peaceful resolution of disputes.
    Third, the United States should maintain its longstanding 
principle of neutrality in territorial disputes of other 
countries to prevent transforming them into bilateral conflicts 
between the United States and China.
    Fourth, the United States should ratify the Convention on 
the Law of the Sea to increase the effectiveness of U.S. 
efforts to pursue a rules-based approach to managing and 
resolving disputes over maritime jurisdiction.
    Madam Chairman, thank you.
    [The prepared statement of Mr. Fravel follows:]

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    Chairman Ros-Lehtinen. Thank you very much. Thank you to 
all of our panelists for excellent testimony.
    I would like to ask you gentlemen about China's relations 
with North Korea and with Iran. I know that we don't have much 
time. But China's enablement of North Korea's nuclear 
development program has allowed Pyongyang to become a de facto 
nuclear power. Does Beijing really desire a nuclear-free Korean 
peninsula or does China prefer a situation where an erratic and 
unpredictable North Korea ties down the United States and their 
East Asian allies while China pursues its own regional 
ambitions in the South China Sea and elsewhere?
    And on Iran, news reports of Beijing supplying Tehran with 
surveillance equipment to spy on Iranian citizens is only the 
latest example of extensive Chinese/Iranian security links. 
There have been reports of Chinese military cooperation with 
Tehran in the upgrade of Iranian fighters, missile technology, 
and production of speed boats to patrol the Gulf and the 
Strait. Have the U.N. sanctions against Iran, including an arms 
embargo, diminished Beijing's supply of weapons and missile 
technology to Tehran?
    A former Los Alamos nuclear engineering analyst said that 
Beijing's nuclear cooperation with Iran ``created the 
foundation of the Iranian nuclear program today.'' Would you 
agree with that assessment?
    So, North Korea and Iran, we will start.
    Mr. Cheng. It is obviously difficult to determine what 
China prefers, given the opacity of Chinese decision making. 
But I would suggest that China prefers neither a nuclear-free 
North Korean nor necessarily an erratic and unpredictable North 
Korea.
    Instead, at the moment, given the leadership transition 
that is ongoing in China, it would seem most likely that the 
Chinese would prefer, frankly, that just somebody else deal 
with the North Korean situation, most likely the United States, 
while China deals with its internal power shift.
    Now, in the longer-term, China would most prefer a docile 
North Korea that it can control and manipulate, which it 
currently does not necessarily have. Given the unlikelihood of 
this situation, it would prefer a North Korea that does not 
precipitate a war on the peninsula, but which would not be 
reunified with the South, and which would focus American 
attention elsewhere away from Beijing.
    Chairman Ros-Lehtinen. Thank you.
    Mr. Tkacik. One has to remember that North Korea is China's 
oldest, and I think right now still the only, treaty ally in a 
military mutual defense treaty. I have watched China/North 
Korea for 20 years, and I have come to the conclusion that 
China seems, indeed, to want North Korea to behave the way it 
does. China has pretty much total control in North Korea, both 
by virtue of its economic and trade relationship and the 
military treaty. And it seems evident from the latest 
succession that China was absolutely critical in giving the 
benediction to the ascension of Kim Jong Un.
    In late 2010, a senior American nuclear weapons specialist, 
Sigfried Hecker, went and visited North Korea and was taken to 
the uranium enrichment plant in Yongbyon that had just opened 
up within the previous several months. Hecker said that this 
was the most modern thing that he had ever seen.
    Chairman Ros-Lehtinen. Thank you.
    Let me just give--I have got 1 minute left. Thank you.
    Mr. Wortzel. Madam Chairman, I see, and have seen, despite 
the rhetoric out of Beijing, I have seen nothing in Chinese 
nuclear doctrine writings other than the position that a weaker 
country threatened by a hegemonic state--and that means the 
United States--ought to be able to deter aggression with 
nuclear weapons. So, they have no problems with a nuclear-armed 
North Korea. They have no problems with nuclear-armed Pakistan. 
They pretty much encourage that. They left behind the 
infrastructure that helped Iran with its nuclear program.
    And I will just conclude with that.
    Chairman Ros-Lehtinen. Thank you.
    Mr. Fravel. Very quickly, I will just echo some of the 
comments that my colleagues have made. I think that China 
prefers above either a nuclear-free peninsula or erratic DPRK 
behavior, a divided peninsula in which the DPRK continues to 
exist as an independent state. I don't think that they are 
actively encouraging erratic behavior by the DPRK because, 
ultimately, it causes more problems for them than it solves.
    Thank you.
    Chairman Ros-Lehtinen. Thank you very much.
    Mr. Berman?
    Mr. Berman. Yes, I would like to get responses to three 
questions without using all my time to ask the questions.
    First, to Dr. Fravel, the Director of the National 
Intelligence sort of confirmed your analysis or shared your 
analysis regarding China's less-assertive behavior over the 
last 10 months in the South China Sea. Do you think this was a 
deep change or a tactical change on the part of China? And how 
do we turn it into a long-term change in behavior rather than 
just a shift that shifts back into a reactionary cycle that 
could lead to open conflict?
    Second, I would be curious if one of you could address the 
question of whether, in your opinion, the upgrade program for 
Taiwan's F-16s is sufficient for Taiwan's self-defense in the 
near-term as well as the long-term.
    And finally--and I think, Dr. Wortzel, you touched on 
this--regarding Iran, it seems to me the odds of our current 
policy achieving its goal may be very dependent on the extent 
to which China becomes a cooperating partner in the sanctions 
leading to a diplomatic resolution strategy that we are now 
pursuing.
    What would the likely impact on U.S.-China relations be if 
Chinese energy companies involved in Iran were to be sanctioned 
by Washington? While China may not have any naturally-negative 
view of another country having nuclear weapons to deter a 
``hegemonic power,'' us, why wouldn't China's fear of a 
military confrontation and its impact on its need for reliable 
and relatively-cheap energy be enough of an incentive to get 
them to join that?
    Dr. Fravel, first, as quickly as possible in the 2\1/2\ 
minutes left.
    Mr. Fravel. Thank you very much.
    Very quickly, I would say that China's change in behavior 
in the South China Sea was initially a tactical shift, but I 
believe it has a strategic logic and has the potential to 
endure for a period of time, although it will certainly not 
resolve the underlying conflicts in the region. It has a 
strategic logic because, from Beijing's perspective, the goal 
is to limit sort of states in the region from pursuing deeper 
security ties with the United States. And the way to do that, 
from Beijing's perspective again, is to try to address some of 
the concerns that the states in the region have about China's 
behavior.
    So, I think it has some likelihood of enduring for some 
period of time, but, ultimately, what would be needed is a much 
longer-term solution that would address the conflicting claims 
in the region.
    Thank you.
    Mr. Berman. Thank you.
    Taiwan, and then Iran.
    Mr. Cheng. Sir, on the issue of the Taiwan upgrades, the 
upgrades are to a series of aircraft that are already 20 years 
old. Every aircraft that is being upgraded is pulled off the 
line for an extended period of time, which means the net number 
of aircraft that Taiwan can put in the air is reduced.
    The proposed sale of F-16C/Ds would replace aircraft that 
were designed in the 1950s. Not doing so, basically, means that 
Taiwan has an air force that, through sheer attrition and age, 
will be reduced over time without China having to do anything.
    Mr. Wortzel. Mr. Berman, first of all, I think the upgrade 
helps, but it is insufficient for Taiwan.
    On Iran, I think that if energy companies were sanctioned, 
it would certainly help if Chinese energy companies were 
sanctioned. They are still very dependent on Iran and very 
reluctant to do anything to sever that. Obviously, Russia is 
part of that equation.
    Mr. Berman. But why wouldn't the fear of the exercise of a 
military option to set back Iran's nuclear program and the 
consequences of that on China's energy needs become a more 
dominant factor?
    Mr. Wortzel. One would think it would, but, first of all, 
it hasn't----
    Mr. Berman. So far.
    Mr. Wortzel [continuing]. Obviously, so far. And second, if 
you are going to conduct surgical strikes on that nuclear 
program, you really haven't affected the pumping in the ports. 
It would have to be a completely different form of warfare. And 
so far, nobody is contemplating that, and they are probably 
aware of that.
    Chairman Ros-Lehtinen. Thank you so much. Thank you, Mr. 
Berman.
    Mr. Smith is recognized.
    Mr. Smith. Thank you very much.
    Dr. Wortzel, tomorrow Carolyn Bartholomew, your fellow 
commissioner, will testify at our hearing on the impact of 
China on Africa. But let me ask a question. China's population 
control has been employed as a weapon of mass destruction 
imposing a devastating impact on women and death to children, 
especially the girl children. Last September, in yet another 
hearing on these crimes against humanity, and a look at 
possible consequences, two consequences that are grossly, I 
think, under focused on were brought out during the hearing.
    There is a book--many of you or all of you may have read 
it--Valerie Hudson's book called the ``Bare Branches: The 
Security Implications of Asia's Surplus Male Population.'' In 
that book--and she testified at our hearing and updated her 
information--her argument is that the one-child-per-couple 
policy has not enhanced China's security, but demonstrably 
weakened it.
    She points out, as Nick Eberstadt famously phrased it, 
``What are the consequences for a society that has chosen to 
become simultaneously both more gray and more male?'' She 
points out that, by 2030, the ratio for seniors-to-workers will 
be 2.5, and 1.6 workers for senior citizens in 2050; and also, 
that the number of boys, 118 boys for every 100 girl babies, 
and the ratio may be as high as 122.
    She points out that these surplus males, as she calls them, 
and others have called them, the bare branches, a colloquial 
Chinese expression, will disproportionately be poor and less-
educated Chinese young men, and the possibility for 
destabilizing China itself. Certainly the corresponding 
propensity or invitation to the Chinese Government to expand, 
to use international aggression as a safety valve, is laid out 
both historically in her book and her testimony as something 
that might happen.
    And she says, and I will ask you the question then, ``When 
we look at global aging, China is aging, and the likely 
economic effects of aging, and combine them with the analysis 
of the effects of abnormal sex ratios on society, the 
synergistic effects are likely to be quite dangerous for the 
Chinese Government.'' And again, she talks about the 
possibility of war with Japan and certainly Taiwan and others 
in the crosshairs.
    Your thoughts?
    Mr. Wortzel. Mr. Smith, I know Nick's work very well, Nick 
Eberstadt, and he has documented these problems very well. I 
don't subscribe to the theory that a surplus of males 
necessarily leads to a Spartan state. It leads to a lot of 
problems in getting people in the military, but, I mean, this 
is an authoritarian country; they will get who they need. And 
it does lead to potential instability, but not a Spartan state 
necessarily.
    Mr. Smith. Well, I wasn't saying Spartan state. I was 
saying----
    Mr. Wortzel. Well, I mean, it doesn't necessarily, when I 
say a Spartan state, I mean to aggression as a channel. The 
thing it certainly does lead to is an awful lot of 
prostitution. It leads to a lot of trade in persons, and women 
from Southeast Asia and Korea and Mongolia suffer because of 
that.
    Mr. Smith. Yes?
    Mr. Tkacik. No, I agree with that. I think that the 
demographic challenge of a male population I think does mean 
that China's military will be, I think, more disciplined. And, 
No. 2, there will be a tremendous demographic aggression 
against Chinese neighbors where populations in the periphery 
are out looking for women to bring into China as wives. It will 
cause instability.
    I don't think, if there is a war, China is going to lose 
it, though.
    Mr. Smith. I wasn't just saying it would lose it. It is 
that it would be a safety valve. That is what the thesis of her 
book, in part, was all about.
    Mr. Tkacik. Yes.
    Mr. Smith. And I did ask her whether or not the Pentagon 
has shown any interest. It ought to be factored into at least 
their thinking. And she said----
    Mr. Tkacik. I have not seen any interest. No, I think 
people think about this, but when you consider that the main 
concern of the Chinese Communist Party is economic growth and 
stability, that sort of aggression reverses that. So, I mean, 
one thinks they might think that through.
    Mr. Smith. Yes?
    Mr. Cheng. Sir, two other considerations. One is in a post-
war environment, what happens to the parents and grandparents 
of the casualties? Since currently they are supported by the 
children, assuming that China is not able to fight an 
immaculate war with no casualties, you wind up with political 
consequences afterwards.
    The flip side to that is that there is also an inherent 
public health issue with the growth in prostitution, issues 
like that. Things like AIDS, et cetera, can spread like 
wildfire through the Chinese surplus male population.
    Chairman Ros-Lehtinen. Thank you so much, Mr. Smith.
    Mr. Connolly?
    Mr. Connolly. Thank you, Madam Chairman.
    An observer listening to you all on this panel, and to our 
byplay with you, could, if you landed from Mars not knowing 
much about this relationship, conclude all is dark and the 
relationship is unrelentingly hostile; we are dealing with a 
growing and powerful adversary in the People's Republic of 
China from intellectual property issues to military posture, to 
actually countering U.S. foreign policy issues on nuclear 
proliferation, North Korea, Syria, their own hegemony in the 
Pacific Basin and military posture to one-child-per-family 
policies, to all kinds of things.
    I wanted to give panelists an opportunity to comment on 
that because surely there is more to the relationship, though 
these are very serious issues and cannot be swept under the 
carpet. But I haven't heard you talk much about how we move 
forward and what is at stake in trying to work out some kind 
of--forgive me again, Madam Chairman--modus vivendi with this--
--
    Chairman Ros-Lehtinen. You are going to start getting 
penalized for that.
    Mr. Connolly. I'm sorry.
    Dr. Wortzel, do you want to start?
    Mr. Wortzel. I would be happy to. Thank you for the 
question, Mr. Connolly.
    First of all, as our 2011 report on the commission pointed 
out, things have gotten worse.
    Mr. Connolly. Worse? Worse?
    Mr. Wortzel. It may not be dark, but it is pretty cloudy. I 
think what we have to do is work with friends and allies to 
reinforce rule of law in China and to reinforce the observation 
of international common practice by China, because they don't. 
And we have to work with allies and friends to make sure they 
do and that they comply with their WTO obligations. They have 
really backed away from many of them.
    Mr. Connolly. Let me ask you, if I may, Dr. Wortzel, to 
expand. What is U.S. leverage and how well do you think we use 
it?
    Mr. Wortzel. I think, first of all, our leverage is 
weakened slightly now by the economic relationship and the need 
for vestment in Europe from China. So, it is less leverage.
    But I think the big leverage we have is the fact that we 
have a strong economy and that the Chinese really do want to 
take advantage of that for their own exports in the near-term. 
There are a lot of problems to resolve with respect to that, 
but that is our primary leverage.
    Our secondary leverage, well, perhaps as important is, 
frankly, our ability to prevent a state that sees itself 
culturally as the center of at least Asia, if not the world, 
from exercising the coercion against its neighbors that it 
traditionally has as a regional suzerain surrounded by vassal 
states.
    Mr. Fravel. One perspective might be to look at the 
exchanges between our two countries. I believe the U.S. Embassy 
in Beijing is now the second-largest diplomatic post after the 
Embassy in Baghdad. That sort of reflects the fact that in all 
segments of society there are close relations between many 
Chinese and many Americans, especially at the person-to-person 
level, not necessarily the government-to-government level.
    Just as a quick anecdote, when I started studying Chinese 
in the fall of 1989 at a small liberal arts college in Vermont, 
there were seven students in my class. Today at that same small 
liberal arts college in first-year Chinese there are now 55 or 
60 students.
    And so, I think, despite all the challenges that Larry has 
laid out and that other panelists have laid that, the fact that 
there are greater exchanges at the people-to-people level is 
arguably one source of optimism in the much longer-run. But, 
again, I certainly recognize and acknowledge the challenges.
    Thank you.
    Mr. Tkacik. I would point out that China is a rising power, 
and that the United States, Europe, Japan are status-quo 
powers. There is a grave potential for collision as the 
international systems enter into a power transition phase.
    I think the University of Chicago's John Mearsheimer 
pointed out in 2008 that, as history shows, powerful states on 
the rise often fight wars with other major powers. Now this is 
a replay of 100 years ago in Europe, 100 years ago in Japan, 
50-60 years ago in Central Europe.
    I have a feeling that what we are looking at is a 
historical problem, and we have not yet dealt with it.
    Mr. Connolly. Thank you, Madam Chairman.
    Chairman Ros-Lehtinen. Thank you, Mr. Connolly.
    Mr. Connolly. I'm sorry, Mr. Cheng, my time is up.
    Chairman Ros-Lehtinen. Thank you.
    Ms. Schmidt?
    Ms. Schmidt. Thank you.
    I actually have two questions. I will deliver them both and 
allow the experts to answer them.
    The first deals with George Friedman's book, ``The Next 100 
Years,'' and his assessment of where we will be militarily in 
2050. He believes that we will be engaging more through 
satellites and space more than with men on the ground.
    Given that, and given the position of this administration 
to sell restricted satellite technology, the AsiaSat issue, 
what risks do you see for the U.S. in doing this, not just now, 
but in the future?
    And the second deals with Taiwan. When President Mao was 
elected in Taiwan, he began a closer relationship and tie with 
China, especially with the Olympics and getting the ability of 
people to get in and out of China more easily. That, I believe, 
has put a seemingly larger presence of China into Taiwan's 
economy.
    Given that, and the issue with the waterway issue between 
China and Taiwan, how real do you see the economic/maritime 
threat to Taiwan with China? And what resolution would you see 
for it?
    Mr. Cheng. On the issue of space warfare, I think it is 
very important to recognize that PLA writings make very clear 
that one of the essential aspects to successfully fighting what 
they term a local war under informationized conditions is the 
ability to secure space dominance. The Chinese ASAT test in 
2007 was the single worst debris-generating event in all of 
history. People forget that afterwards China conducted another 
ASAT test in 2010.
    I would suggest that the current administration's efforts 
to implement an international space code of conduct in the hope 
of getting the Chinese to then sign on, when China and other 
space faring countries have already said that they will not do 
so, is perhaps the ultimate triumph of hope over experience.
    And in this regard, I think that the announcement that we 
are thinking of selling space technology to China, when the 
administration has repeatedly said that export control reforms, 
which arguably are necessary, will not affect our controls on 
China, raises real questions about what direction the 
administration thinks it is heading in.
    Mr. Tkacik. I would point out that, Congresswoman Schmidt, 
you are absolutely correct. The new Taiwan President has 
adopted a policy of accommodating China. Just in the last 
several months, we have seen an entire new change in the 
political posture of Taiwan, which basically agrees that Taiwan 
is part of China. I think once Taiwan has made that choice, 
then you are now looking at Taiwan moving out of the column of 
the Western democracies and the community of democracies in 
East Asia and moving into the column of the sphere of China's 
security interests.
    The thing you have to remember is that Taiwan still has a 
sophisticated basing structure. It has phased-array radars 
mounted high up in Taiwan's mountains which used to be or which 
are designed to scan the Chinese mainland for ballistic missile 
launches, and now will be turned out into the western Pacific 
to scan for the U.S.
    Taiwan's deepwater ports, submarine bases in eastern 
Taiwan, just a few dozen miles from Japanese territory, which 
had enabled friendly submarines to slip undetected into one of 
the deepest maritime trenches in the Pacific, they will likely 
give Chinese diesel/electric submarines home in the future.
    There is also a possibility of China and Taiwan cooperation 
against Japan and the United States in the East China Sea. The 
importance of the Senkakus for defining East Asia's and Japan's 
and the United States' maritime depth opposite the new Chinese 
superpower I think cannot be overstated.
    And all this may result--I think this is what we are 
looking at, is that Ma Ying-jeou, the President of Taiwan, now 
has a very clear China policy. What is also clear is that he 
does not have an America policy.
    Mr. Wortzel. I would only say that I fundamentally disagree 
with Friedman, that until we get space-based weapons or rods 
from God--and that is not real likely--no part of a maritime 
domain was ever controlled from space. Space is fundamentally 
important to our military operations. We have a very powerful 
Navy, a powerful Air Force, and troops that can go in and put 
boots on the ground.
    Chairman Ros-Lehtinen. Thank you, Ms. Schmidt.
    Mr. Sherman is recognized, unless you would like to have a 
few minutes. Then, we can go to Mr. Chabot. Mr. Chabot is 
recognized.
    Mr. Chabot. Okay. Thank you, Madam Chair.
    Could I hear the other members of the panel? We had a 
meeting in back and just got in, but I heard Mr. Tkacik 
discussing Taiwan.
    Well, let me go to you first, Mr. Tkacik, again, and then 
to the others.
    Is what I just heard you say about Taiwan and the shift 
under President Ma, the direction that he has gone, do you 
think that is irreversible at this point? Or what is your 
opinion there?
    Mr. Tkacik. Well, I don't think it is irreversible. I think 
what has happened is that, over the last, I have to admit, the 
last two administrations, the Bush administration and the Obama 
administration, basically, we have cut Taiwan loose. Taiwan is 
now in a phase where they basically feel they have no support 
in the United States, that the U.S. Government, the U.S. 
administrations are not supporting a Taiwan that is part of the 
network of Asian democracies that comprises island Asia as 
opposed to mainland Asia.
    When you are faced with that kind of a situation, the 
Taiwanese voters basically say, ``There's no sense in me voting 
for any kind of government that is going to challenge China 
because we are not going to get any support.'' I think that in 
2000 they thought they were going to get support, and in 2004 I 
think the Taiwanese voters thought they were going to have the 
support of the United States, but no more.
    Now, if that were to change, I think, yes, it would make a 
big difference in Taiwan's electoral process. But, right now, 
the policies that the government in Taipei are adopting are 
moving inexorably toward the Chinese sphere of security 
responsibility.
    Mr. Chabot. Would the other members of the panel like to 
comment on that? Mr. Cheng or Dr. Wortzel?
    Mr. Wortzel. I certainly would, and I thank you for the 
opportunity to do so.
    I think John, Mr. Tkacik, is right. But the operative word 
he used is the elections and the voters. So, it is not like Ma 
Ying-jeou has just come up with this policy that has no 
support. And the legislature hasn't helped either Taiwan or 
itself or the United States when they had a good armed sales 
package. So, part of that is partisan politics on Taiwan.
    Mr. Chabot. And let me stop you there for a second, Doctor. 
By that, my recollection is that the United States was trying 
to get the needed weaponry into their hands. The legislature at 
that time, for political reasons or whatever, was so divided 
that they couldn't get their act together enough to approve 
much of----
    Mr. Wortzel. That's exactly right. The legislature was and 
still is divided. I think much of the populace was divided, and 
that is reflected in the legislature.
    And then, finally, in my personal view, Taiwan's military 
piecemealed a little bit of a whole bunch of good things, 
instead of going for a major defensive architecture that would 
have allowed them to engage in cooperative target engagement 
with all their ships and aircraft and ground systems. So, that 
was mismanaged, too.
    Mr. Chabot. Okay. Mr. Cheng?
    Mr. Cheng. Representative, I think that I am certainly not 
in any kind of position to give advice on Taiwan because they 
are a democracy and they make their own choices. All I can say 
is that, for the United States with regard to Taiwan, and 
throughout the region, what we need is a consistent strategy 
and persistent actions, a consistent strategy of defending our 
interest in standing up for our principles, persistent actions 
that are consistent with that strategy, whether it is the sale 
of needed arms under the legal terms of the Taiwan Relations 
Act, not simply upgrades, as has been inquired about, or 
whether it is the commitment of American forces on a persistent 
basis, unlike the vast relation we saw with the George 
Washington Battle Group back in 2009. Our failure to do so I do 
believe has political repercussions, including in democracies 
like Taiwan.
    Mr. Chabot. Thank you.
    And I have limited time. So, let me make just a comment 
real quickly here.
    I think the fact that the Taiwanese Government has decided 
to move itself in the direction of the criminalization of 
politics is unfortunate as well. Their previous President, 
President Chen, still is behind bars. I think for an 
administration to come and essentially jail the previous 
administration is a tragedy, and I think that they ought to 
deal with that sooner rather than later.
    I yield back.
    Chairman Ros-Lehtinen. Thank you so much, Mr. Chabot.
    Mr. Sherman is recognized.
    Mr. Sherman. Thank you.
    I ask anyone on the panel to comment. Is there serious 
discussion in Taiwan of developing an independent nuclear 
weapons capacity? And would they have the capacity to do so 
within a few years?
    Mr. Tkacik. I think the answer is absolutely no. Taiwan did 
have a fairly robust nuclear weapons research campaign in the 
1970s and again right up until January 1988. Probably, if they 
had been successful, we wouldn't be discussing this now.
    But both the major political parties in Taiwan I think are 
adamant against any such thing now. The ruling party is called 
the Chinese Nationalist Party, and it supports Taiwan's 
eventual reunification with China.
    The opposition party, the Democratic Progressive Party, is 
adamantly anti-nuclear. So, there is just no----
    Mr. Sherman. Thank you. I would like to go on to another 
question.
    Mr. Wortzel. Well, I would like to add to that, if I may.
    Mr. Sherman. But I am sorry, I----
    Mr. Wortzel. They don't have the strategic depth to 
confront China with nuclear weapons.
    Mr. Sherman. I would like to move on to another question. 
We have a toxic trade relationship with China, a $300-billion 
trade deficit. What that means is they send us $300 billion of 
stuff every year and we send them $300-billion worth of paper.
    I can understand why Americans like this. It produces huge 
profits, helps consumers. With this ideology of free trade, we 
can simply ignore that the Chinese Government controls import 
decisions, not through tariffs but through other means. And so, 
it fits our theoretical model of the way the world should work. 
So, that provides us with an intellectual underpinning to 
support the huge profits and the wonderful stuff we get.
    What I don't understand is China. Every year they ship us 
$300-billion worth of fine things, and they get bonds. Can 
anyone here explain the bond fetish of the People's Republic of 
China?
    Mr. Wortzel. Well, I personally can't. I can say that our 
commission's reports over a series of about 4 years and a 
number of hearings that we have held make it pretty clear that 
the United States treasuries market and bond market remains 
still the most stable place to park that money and to get it 
back, and that the undervalued currency and the continued 
undervaluation of that currency is based on the ownership of 
those treasuries.
    Mr. Sherman. Yes, I can understand that, if you are going 
to save money, U.S. Treasury bonds are a wonderful place to put 
it. What I don't understand is why a developing country insists 
upon saving several hundred billion dollars a year rather than 
importing.
    Let me move on to another question. Germany has a balanced 
trade relationship with China. So, we could reach the 
conclusion that German workers and entrepreneurs are better 
than their counterparts in the United States or that the 
foreign policy establishment in Germany is doing a better job 
for the German people than the foreign policy establishment in 
our country.
    How has Germany conditioned access to its market on fair 
access for its exporters to China? Dr. Wortzel or anyone else 
may answer.
    Mr. Wortzel. Well, I don't know the answer to that, but I 
can tell you, from having dealt with German defense and high-
technology firms and their relationships with China, they take 
a very different approach to transferring technology. They 
recognize it will be stolen. They don't worry about sales and 
transfers. But what they do is take already outmoded technology 
for them and manufacturing and are quite willing to sell it and 
transfer it with the idea that their research and development 
is far ahead.
    Mr. Sherman. Does anyone else have a view as to why Germany 
is able to have a balanced trade relationship with China?
    Mr. Tkacik. Well, the Germans have a robust industrial 
infrastructure. They produce very good----
    Mr. Sherman. So do we.
    Mr. Tkacik. Well, I don't know if we do any more. I think 
that in the last 10 years I think----
    Mr. Sherman. So, you would blame the American worker and 
manufacturing companies rather than the foreign policy----
    Mr. Tkacik. I would blame a political decision in China not 
to buy American goods. I would point out that, while we have a 
$300-billion trade deficit with China, China basically, all 
told, has a $100-billion trade surplus. So, they are using 
American money to buy other people's goods and other people's 
resources and commodities. It seems to be a conscious economic 
decision on the part of China not to buy American.
    Mr. Sherman. I agree.
    Chairman Ros-Lehtinen. Thank you. Thank you very much.
    Mr. Royce is recognized.
    Mr. Royce. Thank you, Madam Chairman.
    My subcommittee held a hearing on China's so-called 
indigenous innovation policy, and indigenous innovation is just 
basically the concept for the Chinese Government extortion of 
U.S. technology, in the view of many.
    For years, American businesses were afraid to speak out on 
this issue. I think they feared they would be shut out of the 
Chinese market. But now we have a different attitude. Now, at 
long last, you see U.S. businesses speaking out long and hard 
about this indigenous innovation issue.
    I would like your views on these policies, the forced 
transfer of U.S. technology over to the government in China. I 
would just like to underscore that this is some of the most 
valuable technology that U.S. companies possess.
    I should add that Mr. Connolly and I have legislation 
coming out of that hearing that we held that I introduced 
changing these practices. That is H.R. 2271.
    But let me just get your thoughts on the record.
    Mr. Cheng. Representative, I think that it is important to 
put all this in the context of the Chinese emphasis on 
comprehensive national policy, the idea that a nation's 
position is a reflection of science and technology and 
industry.
    In this regard, then, the emphasis is on technological 
development as a means of bringing China up the value chain to 
get it out of making the low-end items, becoming more of a 
manufacturing power and a post-industrial set of capabilities. 
This is consistent with what the Chinese have termed the two 
bombs/one satellite policies, which also emphasize domestic 
development, partly a fear that it would be cut off, as it was 
after the Sino-Soviet split, from foreign technology. But, 
also, partly the idea that you want to obtain foreign R&D which 
is, therefore, going to be lower cost, and the creation of 
state champions to create better.
    The aspect of indigenous innovation should also be seen in 
the context of cyber warfare, in the sense of, if I can't get 
you to invest here, I may be willing to use cyber methods to 
try to, frankly, steal it from you.
    Mr. Royce. And some argue that they are not that great at 
innovation, and that is why they steal. That is why they steal 
it.
    But go ahead.
    Mr. Wortzel. Well, I mean, there are cultural impediments 
to creating new ideas, and there are structural because of the 
Communist Party organization, and they recognize that.
    But I have to say our commission looked at--I haven't seen 
your legislation, sir, but we looked last year at Mr. Webb's 
suggestion, Senator Webb's suggestion. We were not able to come 
to an agreement on it.
    But I will give you, if I might, the position that I 
suggested on this issue. That is, you take a look--somehow 
pharma for me is a decent model. I mean, you don't want to 
limit the transfer of technologies that may have been developed 
with government funding and research or taxpayer-funded 
research and development to China. But, after a while, it 
doesn't always pay to control it. You know, the M1911A1 pistol 
was 1911.
    But pharma for me, because there is this sort of 5-year 
window, 7-year window, where the patents then go away, and 
other companies can use it, is a reasonable model to think 
about. The taxpayers deserve some return and not to lose what 
they funded certainly for a fixed period of time. But how far 
that should go, we couldn't agree.
    Mr. Tkacik. I mean, I would add that the Chinese have gone 
out of their way to steal America's most advanced technologies. 
They have done this to Applied Materials. They have done it 
Cisco Systems. They have done it to Google. They have done it 
to Microsoft.
    And just in the last week, we saw a very interesting report 
from, I guess it was, Business Week, on how the Chinese stole 
the software and blueprints from American Superconductor, a 
Massachusetts company, basically, leaving American 
Superconductor with $700 million in unpaid equipment bills. And 
the Chinese basically turned around and said, ``That we don't 
need anymore. We can build this ourselves.'' It was 
breathtaking.
    The problem I have, though, is that when the Chinese go and 
steal this technology from us, after a while they do begin to 
develop an indigenous research and development capability 
that----
    Mr. Royce. Let me make one last point. Last year, the DoD's 
annual report on the Chinese military reported an extensive 
tunnel network underneath China designed to hide its nuclear 
weapons. It could be 3,000 miles long, as I understand it. That 
would imply, they say, that the often-cited 300 to 400 weapons 
may, in fact, be many times that. Yes or no?
    Mr. Tkacik. The answer is yes.
    Mr. Royce. Thank you.
    I yield back, Madam Chair.
    Chairman Ros-Lehtinen. Thank you so much.
    Mr. Manzullo is recognized.
    Mr. Manzullo. I am always intrigued by how Americans try to 
work with Chinese based upon an American model of thinking.
    Mr. Cheng, I commend you in your paper for talking about 
something that most people don't even imagine, and that is the 
manner in which the Chinese approach something. If I could call 
your attention to page 5 of your testimony, you make the 
statement, paragraph 3, line 3, ``The first issue is that the 
Chinese do not think the way we do.'' Then, you point that out 
by way of various examples. Also, the same pattern appears in 
Mr. Tkacik's testimony and, actually, across the board.
    I was at a remarkable meeting of the U.S.-China Business 
Council on April 22, 2004. I wrote this down, keep it in my 
BlackBerry, as quoting Madam Wu Yi, at the time who I guess was 
the equivalent of the Secretary of Treasury perhaps.
    She said that China has a ``market-based, managed, unitary 
floating exchange rate.'' I wrote that down, and I said this 
can't be. And then, my aide there said, well, this is in the 
official English translation of what she said in Chinese.
    What is particularly bothersome is the fact that we tend to 
deal with the Chinese based upon Western thinking. I just want 
to throw that out to Mr. Cheng and other members of the panel. 
I know you agree with me on that, but talk about it and the 
impact it has on American diplomacy with China.
    Mr. Cheng. In brief, sir, I would submit the following: 
That in many ways we tend to think of China as a rising power. 
We think of ourselves as a status-quo power, which is hardly 
surprising given that we are happy with where we are after 
about 250 years of history.
    I would suggest that China actually thinks of itself as a 
status-quo power. The problem is how you define the status quo. 
For us, in our history, China has always been a weak power and 
only now has been rising over the last, say, 20 years. For 
China, with its 3-, 4-, 5,000 years of history, it has almost 
always been the dominant power in Asia and, therefore, the 
known world for them.
    China, therefore, is seeking to re-establish itself. This 
is not Germany in 1900 newly-unified. This is a country that 
sees itself as returning to the world stage in its proper 
place. That is a very different perspective.
    Mr. Manzullo. Anybody else want to comment on that? Dr. 
Fravel?
    Mr. Fravel. Well, just a different example would be Chinese 
negotiating behavior. So, for example, many Chinese 
negotiations, the Chinese will want to first talk about 
principles and get agreement upon principles and, then, sort of 
establish a friendship or reach an agreement; whereas, I think 
the Americans approach it sort of the opposite. You reach the 
agreement first and, then, you sort of become friends 
afterwards.
    And so, I think it creates a lot of challenges in 
negotiations with China. I think it is very important to 
understand what these differences are and how they will affect 
various aspects of U.S. foreign policy.
    Mr. Manzullo. Dr. Wortzel?
    Mr. Wortzel. Well, I think that we want to stick to a 
Western viewpoint because essentially those are the legal norms 
and the international norms by which the world conducts itself, 
conducts warfare and trade. I think the mistake that we 
sometimes make is to think that Chinese perceptions and policy 
mirrors our way of looking at it.
    So, I think it is very important to understand, as Dr. 
Cheng did, how the Chinese--or Mr. Cheng--how the Chinese think 
about things. But I don't think we should depart from a Western 
viewpoint. The goal of our policy in the World Trade 
Organization is to get them to adopt that or at least live by 
it.
    Mr. Manzullo. Mr. Tkacik?
    Mr. Tkacik. Tkacik.
    Mr. Manzullo. Tkacik.
    Mr. Tkacik. I would just say that China is no longer a 
rule-taker. China is now a rule-maker in the international 
system. And imagine what the world is going to be like when 
China makes the rules.
    Chairman Ros-Lehtinen. Thank you very much. Thank you, Mr. 
Manzullo.
    Mr. Rohrabacher is recognized.
    Mr. Rohrabacher. Thank you very much, Madam Chairman, and 
thank you for holding this hearing, providing this kind of 
leadership to focus our attention on some real threats to our 
prosperity and to our security.
    Let me just note for the record, Madam Chairman, that when 
we refer to China, we are not referring to the people of China. 
We are referring to the regime that controls the people of 
China and its entourage. But the people themselves are not 
responsible for the policies that we are talking about because 
China is the world's largest dictatorship and human rights 
abuser, to the degree that we are upset by the way the Chinese 
are setting up the rules on how they relate to us. One can only 
imagine the horror of having to live under a regime as arrogant 
and as oppressive as they do in China. So, let us reach out to 
the Chinese people.
    What we have seen is the greatest transfer of wealth and 
power in the history of the world. In the last 30 years, we 
have seen a transfer of wealth from the United States and other 
Western countries, but especially the United States, to China, 
to a China that, as I say, is governed by the world's worst 
human rights abuser/dictatorship.
    This transfer of wealth, it should be no surprise. You 
know, are we really astonished that this has happened? No. We 
have seen it going on, and it is a result of specific policies 
that we have had in our Government, policies that we have not 
been able to change here in Congress because we have a business 
elite in the United States who are making profit for 
themselves, for the elite, off this policy, even though it may 
transfer wealth away from the rest of us, and, of course, a 
policy that has been also supported by people in the Executive 
Branch, for whatever their grandiose schemes of trying to make 
China a more peaceful country, a less dictatorship, because we 
are going to make them more prosperous.
    That theory, of course, the what I call a ``hug-a-Nazi/
make-a-liberal theory,'' has not worked. And surprise, 
surprise, they are still the world's worst human rights abuser, 
but now they have all of our technology and they are building 
high-tech weapons based on what we have given them, the wealth 
as well as the technological capabilities.
    And, of course, they are the ones responsible, Madam 
Chairman, for the greatest and just most blatant theft of 
American technology and the investment that it took to create 
that technology of anything that any of us have witnessed in 
our lifetime.
    And for the record, it has been reported that the head of 
the EU Space Agency recently met with the Chinese in order to 
see if it is possible we can permit them to be partners and 
dock their rockets onto the International Space Station.
    I was a little late for today's hearing. I was at a meeting 
of the Science Committee. I will put on the record here as 
well: The United States should not in any way agree to having 
Chinese rockets and Chinese participation in the International 
Space Station.
    Of course, the rockets are made up of technology that they 
have stolen from us. Thus, they have no R&D cost, which has 
drained our money and our resources. To permit them now to 
participate in the International Space Station would be adding 
much harm and much insult to already something where there is 
harm and insult.
    I noticed that Ambassador Gary Locke, our Ambassador to 
China, in a recent speech indicated that the Obama 
administration expects to loosen export controls ``that will 
enable more high-tech goods to be exported to China.''
    There has been a recent, for example, loosening of those 
export controls by a company called AsiaSat, which now has been 
given an export license. It is a Hong-Kong-based company. But 
it has got tremendous and very identifiable roots and contacts 
and controls by the Beijing regime.
    And Ambassador Locke disclosed that China has submitted a 
list of 141 high-tech items that they want from the United 
States. Madam Chairman, I would request that this committee ask 
for that list. And Ambassador Locke has indicated that 46 of 
those items are readily available and could almost go without 
any controls. I would ask that this committee request----
    Chairman Ros-Lehtinen. I will be glad to make that request, 
and we will put it in writing and make sure that he receives 
it.
    Thank you. The gentleman's time is up, if you want to 
conclude with some----
    Mr. Rohrabacher. Thank you, gentlemen. I am sorry, but I 
needed to put that on the record.
    Chairman Ros-Lehtinen. Thank you. We will make that 
request, and thank you so much.
    Mr. Kelly is recognized.
    Mr. Kelly. Thank you, Madam Chairman, and I thank the panel 
for being here.
    Now China is the world's most active and persistent 
perpetrator of economic espionage. Every day U.S. businesses 
are targeted by China for cyber exploitation and theft, 
resulting in huge losses of valuable intellectual property and 
sensitive information.
    So, China has stolen a wealth of IP from companies such as 
Google, which somebody talked about; Yahoo, Northrop Grumman, 
as well as a number of smaller companies that are afraid of 
speaking up, lest they provoke even further attacks from China.
    U.S. companies have reported an onslaught of Chinese cyber 
intrusions that steal sensitive information like client lists, 
merger and acquisition data, pricing information, and the 
results of research and developmental efforts. This information 
is used to give Chinese companies an unfair competitive 
advantage against our American companies from whom it was 
stolen.
    Now while these hackers continue to steal intellectual 
property, they take new high-paying jobs from American workers 
right along with it. Estimates of this loss and economic 
espionage are hard to make, but they range anywhere from $2 
billion to $400 billion a year. Just as important, many of 
these same vulnerabilities used to steal intellectual property 
can also be used to attack the critical infrastructures we 
depend on every day.
    My question is, what is your assessment of this 
administration's actions in light of its solemn duty to protect 
U.S. businesses and infrastructure from cyber exploitation and 
theft? In fact, we even have a clearly-defined policy. Any of 
the folks on the panel?
    Mr. Wortzel. I think the administration's approach has 
improved and is improving. I think having a U.S. Cyber Command 
and I think the great work by the Department of Justice and the 
Federal Bureau of Investigation in notifying U.S. industry--94 
percent of the penetrations of American industry are discovered 
by agencies of the U.S. Government, not those industries. It is 
the government that tells them. Unfortunately, sometimes it 
takes 400 days or so for that to happen. So, they can use more 
assets. But I think they have a very good effort.
    If you look at espionage convictions, if you look at 
convictions for violations of the Arms Export Control Act, the 
Export Administration Act, and the Industrial Espionage Act, 
Economic Espionage Act, I think Justice has done an excellent 
job over the past 6 or 8 years in bringing people to justice.
    What we lack in the cyber arena are the things that I 
actually put into my testimony. We don't have a way to take a 
Chinese company to task or a Chinese actor and prohibit them 
from entering the U.S. market. I have suggested ways to do 
that. I think they are practical and reasonable.
    Our commission held a hearing on this same subject on 
Monday. We had a couple of very good suggestions from cyber 
specialists who suggested companies adopt annual audits, in 
addition to defenses. And that with these annual audits, 
instead of waiting for the FBI or the Department of Homeland 
Security to tell them they have been penetrated, they will 
discover it.
    General Cartwright, the former vice chairman of the Joint 
Chiefs of Staff, made an excellent suggestion, in fact, cited 
times of cooperation when the United States Government found 
penetrations by China. They went right to the Chinese 
Government.
    Mr. Kelly. Well, let me ask, because time is of the essence 
in all of this. As you said, sometimes it takes 400 days.
    Mr. Wortzel. Yes.
    Mr. Kelly. So, what kind of a price are U.S. businesses 
paying on this and the workers and the rest of the people that 
are involved in this theft? It just seems to me that, while we 
may have some policy, we don't have a clearly-defined policy. 
Where I am from in northwest Pennsylvania, we are losing jobs 
all the time and people are wondering, what are you going to do 
to stop this?
    Mr. Wortzel. Network monitoring is extremely important.
    Mr. Kelly. But in terms of losses, what do you think we 
have lost?
    Mr. Wortzel. Well, again, you have to document it. You have 
to have a legal mechanism to go after it and get it back. I 
mean, it is a legal problem.
    Mr. Tkacik. I would just add one thing, that it was very 
unsettling to me that the one agency in the entire U.S. 
Government that knows what it is doing in cyber penetration was 
not given the lead in America's cyber penetration strategy by 
the Obama administration. I think NSA has to be in the lead 
because they are the only ones that know what they are doing.
    I had one other profound thought, and it slipped my mind. 
So, I will just----
    Chairman Ros-Lehtinen. I have had those senior moments so 
often. [Laughter.]
    Mr. Kelly. Thank you, Madam Chair.
    Chairman Ros-Lehtinen. Thank you very much.
    Mr. Burton is recognized.
    Mr. Burton. First of all, I want to apologize for my 
tardiness. I had another meeting I had to go to. So, I am sorry 
I missed a lot of your testimony. And if my questions sound 
redundant, please forgive me.
    The first thing I want to ask is, when I walked in, I heard 
you say there is 3,000 miles of tunnels in China that are used 
to conceal weaponry. First of all, why would they be doing 
that? I don't understand it. They are a nuclear power. We all 
know their nuclear capability. They have enough nuclear 
warheads and delivery systems to annihilate almost everybody on 
earth. Why in the world would they want to have 3,000 miles of 
tunnels to conceal more weaponry when they have already got 
enough? Anybody?
    Mr. Wortzel. First of all, there probably are about 3,000 
miles of tunnels. They are not all storing nuclear weapons. 
There are underground national command centers, command-and-
control equipment. There are military stores. There are civil 
defense stores in there. So, there are logistics and petroleum 
and ammunition in there.
    But all of China's nuclear doctrine, so far as I understand 
it--and I think I do--is that if they are attacked, and it is 
unclear whether that would be a conventional or a nuclear 
attack, but if they suffer a very strong attack, they want 
their nuclear forces to be able to emerge even 2 to 4 days 
later and fire a very, very devastating second strike.
    Mr. Burton. Wow.
    Mr. Wortzel. So, part of this is denial and deception.
    Mr. Burton. Maybe I should check and ask the question, what 
do we have in response to that?
    Mr. Fravel. One other element to add here is that the 
building of the tunnels in China began, actually, in the 1960s 
when China was very worried about whether or not it would have 
a secure strike capability because many of its missiles were 
quite vulnerable to first strike. And so, these tunnels have a 
very long history, primarily, as Larry just mentioned, in terms 
of ensuring some second-strike capability. And then, they are 
also used for other purposes in terms of storage of supplies, 
and so forth.
    But it is not a new, the point I want to make, it is not a 
new phenomenon. It is part of a very sort of longstanding 
practice.
    Mr. Burton. But it may be, but to build 3,000 miles of 
tunnels is going to take more than a week anyhow.
    Mr. Fravel. It has taken about four decades.
    Mr. Burton. Sure, it took more----
    Mr. Tkacik. I would add that a Georgetown study, which I 
thought was very good, documented that I think at least half of 
the tunnels had been built since the mid-1990s.
    The other thing is that we do have a good sense of what 
China's fissile material production capacity is. They 
absolutely refuse to discuss fissile material cutoff and any 
kind of enforcement or inspection.
    Mr. Burton. Okay.
    Mr. Tkacik. So, we don't know.
    Mr. Burton. The other thing I would like to ask--and you 
may have already answered this question--when Mr. Wang went 
into our Embassy and was there for some time and he was refused 
asylum, and he was a real potential source of intelligence 
information, I would like to get your take on why we would even 
consider letting him out and letting him be captured by the 
Chinese.
    Mr. Tkacik. Well, I think China----
    Mr. Burton. Well, just 1 second. And I understand that we 
had the Vice President of China coming in, and that might be 
part of it.
    And the other thing is, I read in my preparation here that 
there are some instability prospects in China and there is a 
possibility that there might be some kind of a coup.
    So, if you could comment on those two things in the 
remaining time I have, I would appreciate it.
    Mr. Tkacik. In my days in the State Department, I had to 
deal with a couple of walk-ins, three separate walk-ins. I have 
to say that the State Department doesn't really train you in 
how to deal with these things. You sort of learn about it by 
experience. I think, by the last one, we figured it out.
    But in the case of Wang Lijun, who seems to have gone into 
the American Consulate, I really don't know if the reports that 
he filled out an application form for asylum are correct. I am 
not sure that that is----
    Mr. Burton. Well, my goodness, he was there for 24 hours.
    Mr. Tkacik. Well, he was there for----
    Mr. Burton. I mean, I can't imagine him just saying, ``I 
want asylum. I am a high-level person in the Chinese 
Government. I am here. I want to stay. I have got information 
for you,'' and we say, ``Oh, we haven't filled out the forms. 
We are going to keep you.''
    Mr. Tkacik. Yes, I don't think that is--I think what had 
happened is that he actually did fear for his life. My 
understanding is that he approached the British Consulate in 
Chongqing first, and this whole mystery surrounding the death 
of a British citizen in Chongqing last November really 
heightens this enigma. I think he went to the American 
Consulate because he thought that was the only place he 
wouldn't be killed.
    My hypothesis is that what we had was that he probably was 
negotiating with the Chinese Government for his life. It is 
basically up to maybe the committee here or the Intelligence 
Committee to get a briefing from the State Department on what 
actually happened. But we just don't have enough information.
    I mean, I would also add that, if this guy wanted asylum, 
going to the American Consulate in Chengdu is probably the last 
place he should have gone. We, I think, believe that if he had 
really wanted asylum, he knew that he had to get out of China 
first before he applied for asylum and not apply for it inside.
    Chairman Ros-Lehtinen. We will make the proper inquiries, 
Mr. Burton. Thank you for bringing that case up.
    Mr. Burton. Thank you, Madam Chairman.
    Chairman Ros-Lehtinen. And our Part II of this China 
hearing will be on human rights. And so, I am sure that we will 
consider his case at length.
    Thank you, gentlemen, for joining us. Thank you to the 
audience and to the press who is here. Thank you most 
especially to our members. And with that, the hearing is 
adjourned. Thank you.
    [Whereupon, at 11:55 a.m., the committee was adjourned.]
                                     

                                     

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