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S E C R E T SECTION 01 OF 02 CANBERRA 001430 
 
SIPDIS 
 
NOFORN 
SIPDIS 
 
E.O. 12958: DECL: 09/15/2016 
TAGS: PARM MOPS PREL CH PM AS
SUBJECT: AUSTRALIAN COMMENTS ON DOD REPORT ON CHINA'S 
MILITARY POWER 
 
REF: STATE 82425 
 
Classified By: Political Counselor James F. Cole, for reasons 1.4 (a),( 
b),(d) and (g). 
 
SUMMARY 
------- 
¶1. (S/NF) An Australian Government interagency review of the 
U.S. Defense Department's 2006 Report on China's Military 
Power has yielded broad agreement with most of the report's 
key conclusions.  Australia estimates that China's military 
spending for 2006 is approximately USD 70 billion, twice the 
budget publicly announced but at the lower end of the range 
suggested by the DOD report.  It attributes the reason for 
China's military modernization to its determination to deter 
Taiwan from becoming independent, including by developing the 
capability to deter or delay the United States from coming to 
Taiwan's aid militarily.  It also concludes that China's 
longer-term agenda is to develop "comprehensive national 
power," including a strong military, that is in keeping with 
its view of itself as a great power.  The review underscores 
the potential for misconceptions that might lead to a crisis, 
citing such factors as China's antipathy towards tranparency, 
the possibility it could overestimate its military 
capability, and the confluence of China's rising nationalism, 
prediliction for strategic deception, and difficulties with 
Japan and Taiwan. Australia welcomes increasing U.S. 
engagement with China, including defense engagement, and 
intends to use its defense relationship with China to promote 
increased transparency in China's military development and to 
deepen cooperation in peacekeeping, counterterrorism and 
junior leadership exchanges.  An outline of the review 
follows at para 3, below.  End summary. 
 
¶2. (C/NF) The Department of Foreign Affairs and Trade (DFAT) 
briefed us on September 14 on the results of a GOA 
interagency review of the U.S. Department of Defense's 2006 
Report to Congress on China's Military Power.  DFAT briefers 
included Peter Rogerro, Director, China Political and 
External Section; Adrian Lochran, Director, Defence Policy 
and Liaison Section; and Melissa Hitchman, Executive Officer 
for Defense Policy and Liaison.  Agencies contributing to the 
review included DFAT, the Australian Department of Defence, 
the Office of National Assessments, and the Defence 
Intelligence Organisation. 
 
¶3. (S/NF) Following is the text of the Australian 
Government's response to the demarche contained in reftel: 
 
Begin text: 
 
SECRET (RELEASABLE TO UNITED STATES) 
 
SIPDIS 
 
US DEPARTMENT OF DEFENSE 
2006 REPORT TO CONGRESS ON CHINA'S MILITARY POWER 
 
AUSTRALIAN RESPONSE TO THE US DEMARCHE 
 
We welcome the opportunity to exchange views on China. 
 
Australia shares the US view that the emergence of a peaceful 
and prosperous China, with an open market economy, and 
constructively engaged in global and regional institutions, 
is beneficial to the Asia-Pacific region and the wider world. 
 
Increased transparency about China's capabilities and 
intentions, budgets and policies would help to address some 
of the concerns associated with China's military modemisation 
program. 
 
-- We believe China's military spending to be higher than the 
official figure of $35 billion and estimate it as being in 
the vicinity of $70 billion. 
 
We assess that the immediate rationale for China's military 
modemisation is to deter Taiwan from taking steps towards 
 
CANBERRA 00001430  002 OF 002 
 
 
independence, particularly by developing the capability to 
deter or delay any US attempt to come to Taiwan's aid 
militarily. 
 
--  However, China's longer-term agenda is to build its 
'comprehensive national power' - of which a strong military 
is a key element   to a level that China feels commensurate 
with that of a great power. 
 
--  We agree that the trend of China's military modemisation 
is beyond the Scope of what would be required for a conflict 
over Taiwan. 
 
--  Arguably China already poses a credible threat to modem 
militaries operating in the region and will present an even 
more formidable challenge as its modemisation continues. 
 
We would welcome more detailed explanations by China about 
its capabilities, budgets and policies, especially regarding 
its future intentions. 
 
--  At the same time, we see some of China's military 
modemisation as understandable in the context of China's 
economic development and emergence as a major regional power. 
 
However, the pace of modem is at ion and the opacity of 
Beijing's intentions and programs is already altering the 
balance of power in Asia and could be a destabilising 
influence. 
 
--  Australia would be concerned at any development which 
could lead to instability in the region. 
 
There is the potential for possible misconceptions which 
could lead to a serious miscalculation or crisis. 
 
--  The nature of the PLA and the regime means that 
transparency will continue to be viewed as a potential 
vulnerability. This contributes to the likelihood of 
strategic misperceptions. 
 
--  The rapid improvements in PLA capabilities, coupled with 
a lack of operational experience and faith in asymmetric 
strategies, could lead to China overestimating its military 
capability. 
 
--  These factors, coupled with rising nationalism, 
heightened expectations of China's status, China's historical 
predilection for strategic deception, difficulties with 
Japan, and the Taiwan issue mean that miscalculations and 
minor events could quickly escalate. 
 
In our dealings with China, we continue to advocate the value 
of transparency with regard to its defence capabilities and 
strategic policies and regular and frank exchanges with the 
region and United States. 
 
As an alliance partner, we welcome the United States' 
increasing engagement with China, including defence 
engagement, as we believe the United States has influence to 
shape positively China's behaviour. 
 
We will continue to use our defence relationship with China 
to promote increased transparency in China's military 
development plans and evolving doctrine. 
 
--  We remain focused on deepening the Australia-China 
defence relationship in areas such as peacekeeping, 
counter-terrorism and junior leadership exchanges. 
 
--  While remaining cautious to avoid practical co-operation 
that might help the PLA to fill capability gaps. 
 
End text. 
 
MCCALLUM