China and the United States: Conflict or Co-operation?

James H. Nolt is a senior fellow at the World Policy Institute in New York City.

Recurring crises and hostile language between the United States and China sometimes give the impression that the two countries are slipping into a new Cold War. Some advisers to President George W. Bush promote this idea, using the slogan that the United States and China are strategic rivals rather than strategic partners, as former president Bill Clinton contended. In fact, there is no new Cold War. The efforts of hardliners on both sides to stimulate Cold War fears have had some influence on the media and public opinion, but they have been less successful in diverting national leaders from maintaining and even expanding mutually profitable relations rooted in business ties. The US–China relationship may not be a strategic partnership, but it is at least a business partnership. This is a good illustration of the maxim, “History repeats itself, the first time as tragedy, the second time as farce.” If Cold War with the Soviet bloc was a tragedy, the notion of a comparable threat from China is a farce.

 

There are two broad reasons why there will be no US–China Cold War. First, the two countries are not strategic rivals in the way the United States and Soviet Union were. China’s military effort is minuscule compared to that of the former Soviet bloc. Despite oft-repeated rhetoric about its military modernisation and build-up, China has actually been a declining military power for the last three decades. Numerically, the People’s Liberation Army (PLA) is shrinking faster than the armed forces of India and of the United States and its allies in the region—Taiwan, South Korea and Japan. The PLA is also falling behind the armed forces of these countries in terms of modernisation, i.e., it is becoming relatively more backward as increasingly obsolete weapons are not replaced. China was the first major power to opt out of the Cold War. During the 1970s it began making deep, unilateral military cuts. Downsizing continues today. In fact, the numerical decline of the PLA will have to accelerate if it is to have any hope of arresting its qualitative decline. Since China is already much weaker than the United States, especially considering America’s numerous wealthy allies, the continuing relative decline of the PLA hardly portends a serious strategic rival.

 

Second, important and growing business relations provide strong incentives to both the United States and China to manage their differences peaceably. China is heavily dependent on the US market, which is the destination for over two-fifths of its exports.

Friction

Several incidents in recent years have created the impression that US–China relations are under increasing strain:

 

● 1989—Chinese leaders order the PLA to suppress pro-democracy demonstrations in Beijing’s Tiananmen Square and elsewhere; the United States cancels all weapons-related contracts with China and suspends military-to-military contacts.

 

● 1995—the United States grants a visa for Taiwan’s president, Li Denghui, to visit and give a speech at Cornell University; China protests vehemently and tests ballistic missiles near Taiwan.

 

● 1996—China again tests ballistic missiles near Taiwan and holds military exercises in the Taiwan Strait; the United States responds by sending two aircraft carrier battle groups to the strait.

 

● 1999—the congressional Cox Report alleges substantial Chinese spying in the United States.

 

● 1999—the United States bombs the Chinese embassy in Belgrade during the Kosovo War; anti-American riots erupt throughout China.

 

● 1999/2000—the US government accuses Wen Ho Lee, a scientist at the Los Alamos nuclear weapons laboratory, of spying for China; the spying charges are eventually dismissed.

 

● 2001—several ethnic Chinese scholars with US citizenship or permanent resident status are arrested in China as spies.

 

● 2001—the new Bush administration announces its determination to push ahead with national missile defence (“Star Wars”), a system that could jeopardise China’s ability to attack the United States and thus undermine its potential to deter a possible US nuclear strike on China.

 

● 2001—President George W. Bush renounces the Kyoto Protocol on global warming; among the reasons he gives is that the protocol would exempt developing countries from the mandatory reduction of greenhouse gases; he singles out China as one of the countries exempted.

 

● 2001—a Chinese fighter jet collides with a US electronic surveillance plane, causing it to make an emergency landing in China, where the crew and plane are temporarily detained.

 

● 2001—China protests after the United States approves the largest arms sales package to Taiwan in almost a decade, including weapons previously banned for sale to the island.

 

While none of these incidents caused any serious rupture in US–China relations, together they seemed to many to signal a deterioration of those relations.

 

However, a close look at the outcome of these disputes indicates clearly that both sides are exercising restraint. After the Tiananmen Square massacre, former US president George Bush resisted calls for broader sanctions against China. By 1992, US commercial relations with China were expanding far beyond pre-Tiananmen levels. The 1995–6 incidents were smoothed over by the time President Clinton visited China in 1998. There he pledged support for China’s “Three Noes” demands: (1) no two Chinas (i.e. Taiwan plus China), only one; (2) no independence for Taiwan; (3) no membership for Taiwan in any international organisation that requires statehood as a condition of entry (e.g., the United Nations). Allegations of Chinese spying in the United States died down after the dismissal of the case against Wen Ho Lee. The United States apologised for bombing the Chinese embassy in Belgrade and paid reparations. Despite several incidents in 2001, the US Congress renewed Normal Trade Relations (NTR) with China with little controversy. And President Bush scheduled a visit to China in October to attend the economic leaders summit of the Asia–Pacific Economic Co-operation council.

 

Furthermore, there has been considerable progress toward deepening US–China co-operation. The November 1999 US–China agreement on terms for China to join the World Trade Organisation (WTO) was the single most important advance in US–China relations since formal diplomatic relations were established in 1979. (In September 2001, the WTO officially approved membership terms for China, paving the way for its legal entry later in the year.) US private investment in China expanded considerably after 1992. WTO entry will probably further promote expansion of US trade with and investment in China. In sum, none of the incidents listed above caused any interruption in the growing US–China commercial relationship.

Commercial Constraints

China’s entry into the WTO will be the culmination of a profound shift in the substance of US‑China relations. When Richard Nixon and Henry Kissinger opened ties with China in 1971, their primary interest was strategic: they wanted Beijing to help end the Vietnam War and to counterbalance Soviet power. China’s usefulness as an ally against the Soviet Union was consolidated during the Reagan years, when military-to-military contacts increased and US companies began to work on a number of projects to upgrade existing Chinese weapons and develop new ones, including the J-10 fighter aircraft and modern warships. At the same time, President Reagan tightly restricted US arms sales to Taiwan. Reagan formally pledged gradually to reduce arms sales to Taiwan in a joint communiqué with China in 1982. All US arms contracts with mainland China were terminated by President Bush in June 1989 after the Tiananmen Square massacre. Military-to-military contacts were also suspended at that time. These relations resumed during the 1990s, but have not been restored to the level of 1989. However, Tiananmen merely hastened what would probably have happened anyway. The demise of the Soviet bloc during 1989–91 eliminated the United States’ strategic interest in China as a counterweight to Soviet power.

 

In the absence of a common enemy such as the Soviet Union, business interests have emerged as the new glue binding China and the United States together. US–China trade was negligible in 1980, when the United States first granted NTR (also known as most-favoured nation or MFN status) to China. Since then, US–China trade and investment have grown rapidly, especially during the past decade. Over two-fifths of China’s exports go to the United States. This ranks China fourth as a source of US imports, ahead of any European country. China is less significant as a buyer of US exports, ranking only tenth. China’s total two-way trade with the United States places it fourth in importance after Canada, Mexico and Japan. (Hong Kong is included in all economic figures, unless otherwise noted.)

 

China receives more direct investment from the United States than from any other country. US investment in China is almost as large as that of the entire European Union and has been growing recently as Asian sources decline. Although total US investment worldwide remains overwhelmingly concentrated in Europe and North America, for China US investment now accounts for about one-sixth of new realised and over one-fifth of new contracted direct investment. After the United States, other large sources of investment for China are US allies: the European Union, Japan, Singapore and Taiwan.¹ China has also become a major customer of various multilateral institutions that are part of the liberal world order established by the United States and its allies after the Second World War. China is the second largest recipient of World Bank development loans, for example. China is an important commercial partner for the United States, but even more, the United States is a vital partner for China.

 

China’s dependence on exporting to the US market is one of the strongest guarantees that Beijing will avoid doing anything to jeopardise its relationship with the United States. A US economic embargo would devastate China’s economy, especially the fastest growing and most advanced sectors, which depend most on foreign trade. If the formal military allies of the United States also participated in such an embargo, China’s foreign trade and investment would virtually disappear. China’s economic dependence on the United States contrasts strongly with the situation of the Soviet bloc during the Cold War, which depended little on foreign trade or investment and was therefore nearly immune to US/Nato economic pressure.

 

The United States’ economic dependence on China is less significant. This means that the United States might be less restrained than China by the economic consequences of its actions. Admittedly, many powerful US corporations lobby for good relations with China. These companies might be harmed by any rupture in US–China commerce, but the US economy as a whole would suffer little impact.

 

China’s asymmetric economic dependence on the United States makes it difficult to imagine Beijing initiating a severe confrontation. Only if there were a radical realignment of political power in China might such an eventuality occur. China’s current political leadership strongly favours outward-oriented development, encouraging growth of trade and foreign investment. The benefits of this policy so far are rather narrowly concentrated in a few cities and provinces in eastern China. Industry in much of the Chinese interior is still protected from competition by local government regulations, subsidies and a poorly developed transportation system. As China’s internal transportation links are improved (especially the highway system) and WTO entry helps erode administrative barriers to internal trade, vulnerable industries in the interior provinces will come under increasing competitive pressure. Many will go bankrupt. Unemployment and economic dislocation, already serious problems in much of China, will increase. It is conceivable that economic nationalists with support from elements of the PLA might win power and radically redirect China’s development effort towards protectionism, perhaps also reviving the moribund domestic arms industry. Although this scenario is conceivable, it seems unlikely while the current course of development is so successful. Even if it did occur, it would not necessarily portend a serious threat to the West since China’s economic growth would be stunted by isolation. It is also unlikely that a protectionist China would earn enough foreign currency to undertake substantial modernisation of its backward military or import the raw materials its economy needs.

The Blue Team

Despite these hopeful signs that mutually beneficial US–China relations will endure, some hardline US elements continue to portray China as a dangerous and growing power that is a likely adversary of the United States. At the heart of this effort is a loosely organised group within US policy circles that has dubbed itself the Blue Team. Among the Blue Team’s leading figures are a handful of aides and former aides to conservative Republican congressmen such as Senators Jesse Helms of North Carolina and Robert F. Bennett of Utah, and Representative Christopher Cox of California. William Triplett, a former aide to Bennett and former CIA China analyst, adopted the name Blue Team from China’s own military exercises, in which Chinese forces are designated the Red Team and the enemy is designated the Blue Team. He and Edward Timperlake, a former Republican foreign policy aide in Congress, teamed up to write two books promoting the “China threat”: Year of the Rat and Red Dragon Rising.

 

Other leading Blue Team proponents include Frank J. Gaffney, a former congressional aide and Defence Department official who now runs a think tank called the Center for Security Policy; Jim Doran, an aide to Helms; Richard Fisher, a former aide to Cox; and Mark Lagon, a political scientist who joined the staff of the Senate Foreign Relations Committee. Lagon organised a study group on the “China threat” in 1998 under the auspices of the Project for the New American Century, funded by Pittsburgh billionaire Richard Mellon Scaife, a major contributor to right-wing causes. Blue Team congressional aides were recently able to shape several pieces of legislation to include anti-Chinese clauses. Blue Team views have attracted support in the conservative media, being endorsed by several radio talk show hosts, the Washington Times and Bill Kristol, editor of the Weekly Standard. The Blue Team and other proponents of the “China threat” discount China’s economic dependence on the United States and exaggerate its military potential.

 

The Blue Team is one voice on China within Republican policy circles, but not necessarily the dominant one. According to the Blue Team’s own analysis, its major opponents include powerful business lobbyists who favour maintaining and developing cordial US–China ties. Within the Bush administration, proponents of the “China threat” are most prominent in the Defence Department under Donald Rumsfeld. Vice-President Dick Cheney and the State Department, led by Colin Powell, seem more moderate. Bush’s National Security Adviser, Condoleezza Rice, started out sounding moderate on China, but seems to be moving more towards a more hardline position. On balance, President Bush so far appears to favour a moderate line on China, as did his father during his presidency. His rhetoric during the spy plane collision was measured and his actions were not inflammatory. He might have used that incident to inflame opinion against China, but he did not. Instead, he has sought to continue “business as usual” with China, no doubt reassuring many big business contributors to the Republican Party.

A Paper Tiger?

China’s military power, relative to the United States and its allies, peaked around 1971 and has been declining ever since. This simple fact is obvious upon a serious examination of the number and quality of troops and armaments. Yet the public media in the United States seem largely unaware of this trend because of the efforts of some, notably the Blue Team, who seek a rationale for higher US military spending. They exaggerate the “China threat” by highlighting China’s military efforts without showing how small they are in relation to those of possible adversaries.

 

Ever since 1978, when Deng Xiaoping proclaimed the Four Modernisations (of industry, agriculture, science and technology, and the military) as China’s national goal, the military has been running a poor fourth. While the PLA remains the world’s largest military, measured by numbers of personnel, weapons procurement has been cut so much since the early 1970s that nearly all Chinese troops are equipped with ageing and increasingly obsolete weapons. Only a very small proportion of the Chinese forces is equipped with weapons as modern as those typical abroad. Chinese military equipment is, on average, considerably less advanced than what the Iraqis used during the 1991 Gulf War. In contrast to the rapid growth and modernisation of the civilian economy, China’s military technology is actually falling further behind that of the other major powers and most of China’s neighbours.²

 

China’s military effort peaked at over 10 per cent of GDP during 1969–71, when Beijing feared imminent war with the Soviet Union, and has been declining ever since. It is now about one-quarter of that peak percentage. The biggest cuts were in 1972, after the death of Defence Minister Lin Biao, and in 1978, after the accession of Deng as China’s paramount leader. Military procurement was cut in half from 1978 to 1982 and fell another 20 per cent by 1986. Real military spending continued to fall by about 3.5 per cent per year during the 1980s. It has increased slightly since 1989, but still continues to decline as a percentage of GDP. Most of the recent increases in the defence budget have been used not for weapons procurement, but to raise military pay in order to compete with the increasingly prosperous civilian sector, especially for skilled personnel. During the Deng years, factories producing for the military were encouraged to switch to civilian goods. By 1994, about 70 per cent of the gross output of former arms factories was civilian products. That figure recently reached 80 per cent. Part of the reason China has converted so many of its arms factories to civilian production is their inability to produce modern weaponry. This is imported instead, but in small quantities.

 

China’s major military cuts preceded the post–Cold War reductions in the United States, Russia and Europe. US military spending has decreased recently, but not nearly as much as China’s did earlier. Other major Asian powers, including Japan, the Koreas, Taiwan, India and Pakistan, did not cut back their military efforts as China did in the 1970s and 1980s. Instead, these nations have steadily increased their real military spending in line with economic growth. Japan, India and Pakistan have expanded military spending at roughly the same rate as their economies grew, so that spending as a percentage of GDP remained roughly constant at about 1, 3 and 7 per cent respectively. During the 1990s, military spending rates in Taiwan and South Korea did not quite keep pace with their booming economies, but nevertheless real spending expanded significantly while China’s stagnated. South Korea increased spending during the 1970s from around 4 per cent of GDP to over 6 per cent, maintained this during the early 1980s, then slowly reduced it back to around 4 per cent during the 1990s. Taiwan’s military effort fell from around 9 per cent during the 1970s to 4.6 per cent in 1998. China’s military spending, relative to that of its neighbours, has declined over the last three decades. China’s military has declined relatively in both the quantity and quality of its arms. Meanwhile, Taiwan during the 1990s re-equipped virtually its entire air force and navy with advanced weapons far superior to China’s.

 

Although the PLA has been declining in size since the 1970s, deeper cuts are likely since new weapons are being procured in numbers far too small to replace its huge stock of obsolete and worn out equipment. The PLA now numbers about 2.4 million personnel, less than half its peak in the 1970s. Cuts of hundreds of thousands per year continue. Yet China has not cut the size of the PLA nearly as much as it has reduced its arms procurement (domestic production plus imports). Most of its old weapons are not being replaced, and the average age and relative obsolescence of Chinese weaponry are actually increasing—a fact seldom acknowledged amid the constant talk of China’s military “modernisation”. Old weapons are not only technologically dated, they are also more likely to wear out and difficult to maintain in serviceable condition. For example, the Chinese-made J-6 (MiG-19) fighter flown to South Korea in May 1996 by a North Korean defector was so decrepit that a Japanese air force officer who inspected it said: “The aircraft could disintegrate if it engaged in air combat”.³

 

Much of China’s existing inventory of weapons was compiled during the Cultural Revolution when production standards (not to mention technological skill) were quite low. Meanwhile, other armed forces in the region, though smaller, have not made the deep personnel cuts that China has and are re-equipping more rapidly with modern weapons. The large size of China’s armed forces is therefore deceptive as a measure of strength. China’s actual military might is much less than raw numbers would indicate, and is declining relative to that of most of its neighbours, including Taiwan. Furthermore, given China’s vast geographical size and poor transportation network (China is three times larger and twice as rich as India, but only has a similar railroad mileage), it would have difficulty in concentrating a large proportion of its armed forces against any one adversary.

 

The Blue Team and other alarmists about China hail every Chinese arms acquisition, no matter how small, as evidence of military modernisation and even of superpower ambitions. Meanwhile, much larger arms acquisitions by China’s neighbours (not to mention the United States) are ignored. During the 1990s, China resumed major arms purchases from Russia for the first time since the 1950s. The main reason for this, ignored by the alarmists, is the near complete failure of China’s numerous domestic weapons development programmes. China has long tried to develop and manufacture modern combat aircraft without success. The main model, the J-10 fighter, has been under development for decades, but not one example has yet entered squadron service. The technology embodied in this design is now so backward that should its development ever be completed, it will be inferior to most aircraft in frontline service in most countries of the world.

Air and Sea

The most backward of China’s military branches is the most important for modern warfare: the air force, or PLAAF. In numerical terms, China has the world’s second largest air force, but this is only because it maintains a huge inventory of aircraft long considered obsolete elsewhere. In fact, China’s warplanes on average are more backward than those of any other of the top sixty air forces in the world (including all those with more than one hundred combat aircraft). Of China’s roughly four thousand combat aircraft, two-thirds are obsolete Soviet models from the late 1940s and early 1950s, mostly MiG-19 variants. The Soviets stopped producing the MiG-19 in the late 1950s, at about the same time China began producing it as the J-6. Chinese production of the J-6 continued into the early 1980s, years after the last MiG-19s retired from Soviet service. Production of the Q-5 ground-attack variant continued throughout the 1980s. The Il-28 (Chinese H-5) was the first Soviet jet bomber, developed fifty years ago, yet it still constitutes almost two-thirds of the Chinese bomber force. These thousands of obsolete aircraft would be worthless death traps in any campaign against a modern air force.

 

Aircraft quality in even the best third of the PLAAF is no better than any other of the world’s top sixty air forces and inferior to every other significant air force in Asia, except the North Korean, which is similar. Pilots in the United States, Taiwan, Japan, India, Pakistan and South Korea are also better trained than those in China, averaging more than twice as many flight-hours per year. Nearly all of the best third of the PLAAF comprises Chinese-made F-7 and F-8 fighters and old Soviet Tu-16 (H-6) bombers, which are all decades behind the latest technology. The PLAAF has only a few hundred of the radar-equipped J-7-III and J-8 jets, which are comparable to the MiG-21MF and MiG-23: front-line Soviet fighters of the 1970s that still form a major part of some Russian-equipped air forces, such as those of India, Syria, Libya and Iraq.

 

China’s only really modern aircraft are fifty Su-27s (also known as J-11s) purchased from Russia during the 1990s, plus a handful assembled so far in China. China also agreed recently to purchase thirty modern Su-30 fighters from Russia at a cost of US$2 billion for delivery starting next year. Su-27/30s are in the same class as the Russian MiG-29, used by India and Malaysia; the French Mirage 2000, used by India and Taiwan; and the standard US fighters, the F-15, F-16 and F-18, used by Japan, South Korea, Taiwan, Indonesia, Malaysia, Singapore and Thailand. Japan, India and Taiwan each have at least five times as many modern, high-performance aircraft as China does. Any one of these three would probably prove superior to China in the event of an air war because China’s large numbers of obsolete aircraft would have little effect. China is no longer mass-producing the J-7 or J-8, instead using its scarce funds to assemble in China about fifteen per year of the much superior J-11/Su-27. At that rate, the PLAAF’s overall combat strength will continue to plummet as thousands of obsolete aircraft wear out during this decade.

 

The Chinese navy seems to be the most favoured of the three services today. The navy is the only branch of the PLA that has actually increased its strength since Deng came to power in 1978. The surface navy grew throughout the Deng years, adding two or three seagoing warships (destroyers and frigates) each year during the 1980s. However, new construction has recently slowed down to about one per year and seems to be slowing further in order to release funds to purchase Russian-built ships, beginning with two recently delivered Sovremenny-class destroyers (aping the import-dependent trend of the PLAAF). Acquisition of two more Sovremenny-class destroyers is expected. A rapid building programme during the 1970s brought the Chinese navy to a peak strength of over one hundred submarines by the early 1980s. The submarine force has since declined to about half that, however, because old submarines wore out, while new construction dropped to two per year. This is now slowing down even further to cover the cost of importing expensive Russian Kilo-class submarines. The Chinese navy has become, at best, the world’s sixth most powerful fleet (after the United States, Russia, Britain, France and Japan), but is more backward than any other major navy. Chinese naval technology has made few advances over the standards inherited during the co-operation with the Soviets in the 1950s. Maintenance and operational levels are not very high. The navy’s best equipment is imported, but China can afford such imports only in very small quantities.

 

China possesses no aircraft carriers, and nearly all of its fighter force has limited range. China’s surface navy is thus quite vulnerable to air attack beyond China’s coastal waters. Therefore, the navy’s most important element is the submarine force. Submarines, being easier to hide than surface vessels, can operate more safely beyond the range of friendly air cover. China has the world’s third largest submarine force, but much of it is non-operational and the entire force is technologically backward.

 

China does have the world’s largest ground army, but it is ill equipped and has been shrinking faster than the armies of most of China’s neighbours. The PLA would certainly be able to inflict heavy losses on any force attempting to invade and occupy Chinese territory, but its capacity for sustained offensive operations against any neighbouring power is quite limited.

 

China is a nuclear power. Its nuclear weapons give it a potentially devastating capability against non-nuclear neighbours. (Among China’s neighbours, India, Pakistan and Russia are also nuclear powers.) However, it is inconceivable that China could unleash a nuclear attack without at the very least suffering enormous economic losses from a US-sponsored economic embargo. China would also have to take into account that any use of nuclear weapons might invite retaliation by the United States, with its vastly larger and more technically sophisticated nuclear and conventional forces.

A False Analogy

China’s willingness to participate in the liberal world economic order designed and sustained by the United States and its allies illustrates a fundamental difference between this era and the 1930s or Cold War period. During the 1930s, Germany, Japan and Soviet Russia were all in revolt against the world economic order that the victorious allies had attempted to construct after the First World War. All three tried, with varying success, to create autarkic economic empires that would enable them to pursue their nationalist aims with little regard for the broader economic consequences. Likewise, the Soviet bloc that emerged from the Second World War could spurn the Marshall Plan, the World Bank, the International Monetary Fund, the General Agreement on Tariffs and Trade, and other institutions of the global economic order that the United States and its allies had created because it had a functioning alternative: a fairly self-sufficient, centrally planned economic bloc. China has made no such attempt to create an alternative economic order or to shun the existing one.

 

As long as China continues on its present course and does not fundamentally challenge or abstain from the world economic order, its success as a nation will require it to maintain peaceful and constructive relations with the major economic powers: the United States, the European Union and Japan. A severe conflict with any of these would shatter the trade-dependent Chinese economy. It would also weaken China militarily, since it could no longer earn the foreign currency it needs to purchase weapons from abroad (now mostly from Russia), upon which its military modernisation depends.

 

There are indeed some “rogue nations” in the world today—North Korea, Cuba, Iraq, and perhaps Iran—that seem to accept economic isolation as the necessary price for following an autonomous national course. But their economic isolation also leaves them militarily very weak and vulnerable since they cannot produce their own high-tech weapons nor afford to import sufficient quantities to secure their defence against potential superpower adversaries. China has shown no willingness to join the ranks of those so isolated. Only a major internal political realignment could conceivably move it in that direction. If this did occur, China would become even weaker economically and militarily, and therefore even less of a potential strategic rival of the United States and its allies.

 

Isolated rogue nations can create annoying regional problems, but they cannot fundamentally challenge the security of the United States or that of the global economic system. If, according to the worst-case scenario, China became such a rogue state, a “Cold War” of sorts might develop between the United States and China, but it would be a local problem, confined to East Asia, and easily contained. And this “Cold War” would be nothing like the bipolar global confrontation between the West and the Soviet bloc during the decades after the Second World War. A global Cold War like that cannot recur in the foreseeable future.

Endnotes

1. Chinese official figures include investment from Hong Kong as foreign investment, but I consider as foreign only non-Hong Kong investment in China (excluding Hong Kong itself, where the laws and political circumstances governing foreign direct investment are very different from those in the mainland).

 

2. For more detail, see Jim Nolt, “The China–Taiwan Military Balance” [www.comw.org/pda/nolt99.pdf].

 

3. Jane’s Defense Weekly, 10 July 1996, p. 18.