(UNTITLED)

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP85T00310R000200160003-5
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 26
• Document Creation Date: January 12, 2017
• Document Release Date: September 7, 2010
• Sequence Number: 3
• Publication Date: October 1, 1984
• Content Type: REPORT

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Intelligence
China: Opening Doors
to Western
Military Imports
seefvt
EA 84-10182L
October 1984
Copy 0 7 4
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Directorate of Secret
Intelligence
China: Opening Doors
to Western
Military Imports
This paper was prepared b Office
of East Asian Analysis. Comments and queries are
welcome and may be directed to the Chief, China
Division, OEA,
Secret
EA 84-10182L
October 1984
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China: Opening Doors
to Western
Military Imports
Key Judgments Beijing has modified its policy of self-reliance in defense production to
Information available allow a still-selective, but broader range of military imports. We estimate
as oft October 1984 that in 1983 and 1984 the Chinese signed nearly $500 million in contracts
was used in this report.
for imports of weapons and weapon technology-including $200 million for
Israeli Python-III air-to-air missiles and $190 million for US and French
helicopters. Prospects are good that Beijing will conclude even larger
purchases over the next five years.
In our view, Beijing's decision to renew imports of Western military
products rests on several key factors:
? Soviet strength. China's military leaders recognize that the improve-
ments to Soviet forces in the Far East over the past five years have
widened the gap in equipment quality, and the backward state of Chinese
military equipment leaves China vulnerable to a fast-moving Soviet
invasion. Beijing's senior generals have little faith that China's defense
industries can develop advanced military hardware to counter the Soviet
threat and are pressing for some direct foreign purchases to fill major de-
fense gaps.
? Western willingness. China's leaders are capitalizing on the warming
military relations with the United States to gain access to advanced
Western military technology. We believe Beijing also considers arms
sales to be a tangible sign that the United States considers China an im-
portant partner in East Asia, and, although Beijing opposes full strategic
cooperation, the existence of some military ties gives China additional
leverage in dealing with the USSR.
? A stronger economy. After four years of economic retrenchment, the
Chinese are currently able to spend more for military modernization.
China's foreign exchange reserves have grown to over $16 billion
excluding gold. The defense sector can claim some credit for the
improved economic outlook, as the military has dramatically cut back
procurement of older designed equipment, trimmed the size of the
standing Army, and provided large profits from foreign arms sales.
We believe Beijing has identified critical gaps in antiarmor capabilities, air 25X1
defenses, antisubmarine warfare, surveillance and early warning capabili-
ties, and electronic countermeasures that it seeks to correct through
Western assistance. The Chinese are negotiating with many Western
nations trying to play off suppliers to obtain the best deals. Although
iii Secret
EA 84-10182L
October 1984
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Beijing claims it will only accept transfer of the most modern weapons and
technology available, we believe that Beijing will accept less if convinced
that the equipment is modern enough to counter the Soviet threat.
China's military establishment appears to be in general agreement on
priorities, but there are divergent views on the best route to correcting
deficiencies. China's General Staff is pressing for the immediate acquisi-
tion of some finished military equipment from abroad, while Defense
Minister Zhang Aiping and the defense industries are seeking primarily
the import of production technology. The creation of Baoli Trading
Company-under the General Staff-and its aggressive pursuit of direct
buys indicates that the operational arm of the Chinese military has gained
the senior political leadership's approval to pursue some sizable direct
acquisitions from abroad. Nonetheless, we expect that differences between
the armed forces as end users and the defense industries as producers will
continue to make arms negotiations lengthy affairs
In our view, the Chinese plan to acquire foreign equipment-mostly
components to upgrade Chinese weapons-is an interim step until Chinese
defense industries have been sufficiently modernized to begin building
their own advanced arms. Beijing is not attempting to "buy" military
modernization from abroad, but in some areas-where inadequate Chinese
production capabilities offer no alternatives-we believe they will buy
significant quantities of Western materiel.
Improvements in China's antitank capabilities through imports will proba-
bly be of greatest concern to the Soviets and may lead them to step up their
ground force modernization in the Far East. Modernization of Chinese
fighter-interceptors is unlikely to prevent the Soviets from rapidly achiev-
ing air superiority in any conflict, and we expect the Soviets easily to match
any Chinese air improvements. Upgraded naval capabilities would improve
China's coastal defenses against Soviet naval action but would not make
the Chinese Navy a rival to the Soviet Pacific Fleet in open-ocean
operations.
US willingness to transfer advanced military systems to China, particularly
F-8 fighter upgrades, is creating a constituency within the Chinese military
establishment that probably will continue to press for further expansion of
military ties. We believe the Chinese military sees the fighter-improvement
program as particularly important as a demonstration of US willingness to
improve even those Chinese military capabilities that might be detrimental
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Secret
to Taiwan. Nonetheless, significant opposition within the Chinese Govern-
ment to closer military relations still exists from those convinced that the
United States will use military transfers to justify arms sales to Taiwan.
Indeed, continuing US arms sales to Taiwan remain the issue that has the
potential to damage emerging US-Chinese military ties.
The secrecy surrounding US-Chinese military negotiations may endanger
efforts in COCOM to limit the levels of materiel sold to China. There is a
growing perception in West European capitals-created in part by Chinese
misrepresentations-that the United States is attempting to corner the
China arms market and is using COCOM procedures to restrict European
sales. We believe that some West European nations, particularly Italy and
France, are prepared to challenge COCOM limitations and will use the
liberalized US policy on arms transfers to China as justification.
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Contents
Background
Improved Relations With Washington
4
Infighting
9
Meeting the Soviet Armor Threat
10
Enhanced Early Warning/Reconnaissance Capabilities
14
Implications
15
Prospects
17
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"In a country with more than I billion people, modernization of
national defense cannot rely on the purchase of weapons from
foreign countries ... however, it does not mean that we should not
learn from the experience of foreign countries in army-building or
import advanced military technology from industrialized countries
... cooperation (with the United States) in conventional weapons
began last year when US Defense Secretary Weinberger visited
China, and there are prospects for expanding the cooperation." =
Defense Minister Zhang Aiping,
June 1984, on the eve of his
visit to the United Slates.
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China: Opening Doors
to Western
Military Imports
Background
Under Deng Xiaoping's guiding hand, China has
made remarkable progress in the past decade in
restoring professionalism to its armed forces. Greater
attention to realistic combat training and reduced
emphasis on political indoctrination have improved
military readiness. The creation of regional force
divisions along China's borders with the Soviet Union
and Vietnam has strengthened China's fighting capa-
bility. Imposing higher educational criteria for entry
and reopening military academies closed during the
Cultural Revolution have improved the quality of
officers and men. Trimming the size of the armed
forces has allowed the People's Liberation Army
(PLA) to purge its ranks of aged officers and unquali-
fied soldiers.
the research and development base is too narrow, as
yet, to design and produce the full range of systems as
advanced as conventional weapons in Soviet or West-
ern arsenals:
? China's best fighter aircraft, the F-8, has been in
development since the mid-1960s but is under-
powered, lacks modern radars, and is equipped with
dated air-to-air missiles.
? China's strategic air defenses continue to rely on
surface-to-air missiles first fielded in the 1960s and
an early warning radar network with severe defi-
ciencies in the detection of low-altitude fighters and
bombers.
? China's ground forces have no munitions, rockets, or
antitank missiles capable of piercing the frontal
China's drive to defense modernization, however, has
not met its toughest challenge, the development and
deployment of advanced weapons. China's armed
forces are equipped largely with obsolescent weapons
of the 1950s' and early 1960s' vintage. Along China's
northern border are arrayed almost 50 Soviet ground
combat divisions, some equipped with T-72 main
battle tanks two generations ahead of China's best.
Soviet airpower in the Far East includes high-per-
formance interceptors, fighter-bombers, and bombers
with capabilities far exceeding those of China's out-
dated aircraft. And the Soviet Pacific Fleet possesses
surface ships and submarines equipped with sophisti-
cated weapons that China's Navy cannot counter.
A rejuvenated indigenous weapons development pro-
gram is achieving impressive results, but China's
defense industries are not sufficiently developed to
provide quickly all the advanced systems the armed
forces need.` Beijing's engineers have proved they can,
with sufficient support, develop ICBMs, nuclear-
powered submarines, and air-to-surface missiles. But
armor on Soviet T-64, T-72, and T-80 tanks.
Between 1975 and 1982, the Chinese leadership de-
bated the role foreign imports should play in upgrad-
ing China's defenses, and foreign procurement efforts
were characterized by indecision and poor coordina-
tion.2 Defense officials and military industry procure-
ment teams traveled extensively in the West but
frustrated governments and industries alike by brows-
ing for arms yet buying little. At times, just as it
seemed the Chinese were close to signing major
contracts-for example, for British Harrier jump jets
in 1978 and Sea Dart naval air defense missiles for
destroyers in 1982-internal policy debates erupted
over the efficacy of the foreign weapons, and contract
negotiations were abandoned.
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The Chinese committed themselves to purchase some
finished weapons, but were unable to close the deals.
In 1978, for example, China was on the verge of
signing a $700 million contract with France for
several thousand HOT wire-guided antitank missiles
and 50 combat helicopters. But Chinese insistence on
a better price and full production rights for the
missiles and French reluctance to be the first Western
government to sell China modern weapons ultimately
killed the deal. Similar negotiations with the West
Germans for helicopters equipped with missiles ended
in failure when Bonn-responding in part to heavy
Soviet pressure-allowed only four helicopters but no
antitank missiles to be delivered.
Chinese arms buyers had greater success importing
production technology, but most of these ventures also
failed because of inadequate coordination between
Chinese manufacturers, design bureaus, and the mili-
tary users. In addition, Chinese insistence on self-
sufficiency and cost cutting resulted in contracts that
provided little followup support from the seller:
? In December 1975, Beijing purchased the produc-
tion rights to the Spey afterburning turbofan engine
from British Rolls-Royce at a cost of $230 million.
After a decade, Chinese engineers and designers
have not mated the engine to any existing fighter or
designed a suitable airframe for the engines, and
only five of the 50 original engine kits have been
assembled.
? In July 1979, the Chinese signed an agreement with 25X1
a Dutch firm for a complete factory to produce
night-vision devices. Although the plant was com-
pleted in 1982, the PLA reportedly has been very
dissatisfied with its products, forcing China to pur-
chase more reliable systems from the United States.
labels the program a failure.
? In mid-1980, China's aeronautics industry conclud-
ed a $100 million agreement with France for 50
Dauphin helicopters with an option for 150 more to
be manufactured in China. By March 1983, less
than 10 Dauphins had been assembled and two had
crashed, killing four Chinese crewmembers. Ac-
cording to the US defense attache in Beijing, the
Air Force refuses to evaluate the helicopter and
the Vietnamese border
Despite these setbacks, Beijing has had some modest
successes in military imports that have probably
whetted the PLA's appetite for buying more from
abroad. Between 1975 and 1977, Beijing purchased
12 Super Frelon heavy-lift helicopters from France,
which the Navy has used aboard support ships
equipped with landing pads, giving China its first
shipborne airpower. This new capability was dis-
played in 1980 when a Super Frelon, based aboard a
submarine rescue ship, recovered the reentry vehicle
from an intercontinental ballistic missile test-fired to
Pacific Ocean waters over 6,000 kilometers from
China's shores. A more recent success is the procure-
ment from the United Kingdom of Cymbeline mortar-
locating radars, used by ground forces to pinpoint
enemy fire. Purchased in 1982, the radars were used
this spring and summer during heavy fighting along
A Changing Climate for Imports
Since late 1982, marked changes have occurred in
Beijing's approach to arms imports. Central military
organizations appear to have gained increased author-
ity to guide the acquisition of weapons-related tech-
nology from abroad, and China's senior leadership is
showing a new readiness to approve funding for
military technology. We estimate that in 1983 and
1984 the Chinese signed contracts for nearly $500
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French Helicopter Acquisitions: Mixed Reviews
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The Chinese conducted an unprecedented fly-off com-
petition among US and French helicopter manufac-
turers last fall and in July placed a $165 million order
for 24 Sikorsky S-70C helicopters and a $28 million
order for six French Super Puma helicopters. In
addition, the Chinese have formally requested site
surveys and cost estimates for US Government assist-
ance in installing modern avionics on F-8 fighter
aircraft, coproducing the TOW antitank wire-guided
missile, and upgrading production facilities for large-
caliber artillery shells.
We believe these changes reflect a recognition by
senior leaders that policies of self-reliance in defense
production must be modified to allow selective, but
wider military imports. This, in part, results from
modifications to China's defense doctrine, a stronger
economic position, and the growing military relation-
ship with the United States. But it is also the product
of the PLA's impatience with the pace of domestic
weapons development by China's defense industries,
and the military's success in convincing the senior
political leadership that the threats to China's securi-
ty from the Soviet Union are sufficient to warrant
expanded weapons imports. The Chinese military is
exploiting the current political and economic opportu-
nities to open doors to a significant rise in military
imports from the West.
Improved Relations With Washington. A key factor
in China's new interest in foreign arms is the warming
political relationship between China and the United
States.' In early 1983, Beijing decided not to let
differences over continued US arms sales to Taiwan, a
major irritant for many years, stand in the way of a
more stable and positive relationship with the United
States. The decision paid off. As relations progressed,
Beijing realized the United States was willing to relax
technology transfer restrictions on military exports to
China. According to Zhang Jingyi, a senior foreign
policy expert in the Chinese Academy of Social
Sciences, the decision giving the military approval to
explore a relationship with the United States came
from the Politburo. Events of the last year show how
rapidly the Chinese have capitalized on the new
opportunity:
? In October 1983, a few weeks after Secretary
Weinberger's announcement in Beijing of US will-
ingness to sell China antitank and air defense
weapons, the Chinese defense establishment restat-
ed its interest in the TOW wire-guided antitank
missile.
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'7n the area of economic construction, China is pursuing a policy
of opening the country to the world. Similarly, we cannot build our
Army with the whole world shut out ... means we should pay close
attention to trends in world strategic developments ... (study)
trends among foreign Armies, and combine what we learn from
foreign Armies with what we have created independently ... I am
of the opinion that anything useful for the development of our
Army should be taken over and utilized by us. Armies that
implement a closed-door policy are shortsighted, and shortsighted
Armies cannot help but fall behind the development of the times."
Yang Shangkun,
Military Commission Secretary General,
August 1984
? In January 1984, US defense officials told Defense
Minister Zhang Aiping's son, Zhang Pin-a mem-
ber of Premier Zhao's delegation-that they would
welcome a visit by a Chinese military delegation to
discuss a broadened defense relationship. The Chi-
nese sent Zhang Pin back to Washington in Febru-
ary with a delegation to discuss a wide range of
potential areas for US assistance and to invite a
Pentagon delegation to visit China.
? In June 1984, Zhang Aiping made a visit to the
United States. According to the US defense attache
in Beijing, Zhang was pleased with the progress
made on military technology transfer and argued
successfully for a visit to China by the US Secretary
of the Navy in August against Ministry of Foreign
Affairs officials who wanted to delay further mili-
tary visits until after the US elections.
tangible sign that the United States sees China as a
worthy partner in East Asia, and, although Beijing is
opposed to full strategic cooperation, the existence of
some military ties gives it additional leverage in
dealing with Moscow.
The Chinese believe that US weapons are superior to
others, but they also calculate that by gaining access
to US technology they may be able to induce West
European suppliers to make their best military hard-
ware available.
Iowever, although stating
a preference for US weapons and technology, the
Chinese are quite willing to see what others may offer.
According to the US defense attache in Beijing,
Defense Minister Zhang recently presented the Brit-
ish Minister of the Armed Forces a shopping list of
arms strikingly similar to that requested of the United
States and implied that, if British prices and terms
were favorable enough, China would choose British
materiel.
Modified Defense Doctrine. China's military leader-
ship looks to the West for assistance, in large measure
because it recognizes that the backward state of
Chinese military equipment leaves China vulnerable
to a Soviet invasion. The leadership points to the
extraordinary advantages in speed, mobility, and fire-
power the Soviets have attained on China's northern
front. To meet this threat, the Chinese are modifying
their traditional defense doctrine and are permitting
the PLA to meet an attacker closer to the border,
rather than rely on Mao's doctrine of "people's war,"
which calls for retreating into the countryside.
For the new doctrine to be effective, the PLA must
have weapons and equipment similar in quality to
those fielded by the Soviets. The PLA has little faith,
however, that China's defense industries, on their
own, can develop military equipment capable of coun-
tering the Soviet threat. PLA officers often refer
disparagingly to Chinese defense industry failures,
and senior Chinese Navy and Air Force visitors to the
United States have spoken highly of US defense
industries while severely criticizing their own plants
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We believe Beijing views a military relationship with
the United States as desirable for many reasons; not
the least of these is Beijing's desire to use the United
States as a strategic counterweight to Soviet strength
in East Asia. China also considers arms sales a
and managers
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China: International Financial Stocks,
1978-83a
Billion US $
18
1978 79 80 81 82 83 84b
a Hard-currency reserves, excluding Chinese
gold holdings, end of year.
b October 1984.
Type 77-2
Amphibious Armoured Vehicle
Strengthened Economic Position. The new climate
for arms procurement is also the result of China's
improving economic situation." In 1979, China en-
tered a period of economic readjustment. Defense
spending was especially hard hit, with Chinese open-
source figures showing a 25-percent decrease from
1979 to 1981. Chinese Air Force Chief of Staff Ma
Zhanmin told a US attache that other areas of the
Chinese economy now are progressing so well that the
military has been authorized to spend more money.
Recent expenditures for Israeli air-to-air missiles and
US Sikorsky helicopters indicate that foreign ex-
change is available. The Chinese in fact uncharacter-
istically spent about $50 million more to buy Sikorsky
helicopters rather than cheaper French Super Pumas.
Part of the new funding probably comes from China's
growing foreign exchange reserves that China's de-
fense sector helped create. China today has over $16.2
billion in foreign exchange reserves and a healthy
' Beijing's renewed interest in Western military materiel is only one
facet of China's economic emergence from a three-year hiatus in its
capital import program. For a comprehensive examination of the
new economic opening to the West, see the forthcoming Intelligence
aggressive arms sales drive
trade surplus, which has benefited from aggressive
arms sales abroad, begun by Beijing in 1979. Over the
past four years, China has sold $6 billion in arms to
Third World nations, making China the seventh-
largest arms exporter in the world
ment of older weapon systems.
Frugal spending by the military over the last four
years has also contributed to a new willingness of the
national leadership to spend for defense procurements
from abroad. The Chinese military has trimmed the
size of the standing Army by over a million men since
early 1980 and cut back dramatically on the procure-
the PLA's acceptance of past budget
cuts was based on the understanding that, as econom-
ic performance improved, the armed forces would
benefit. The PLA can also argue that it has improved
training, combat readiness, and educational standards
to the point where it is now ready to integrate modern
weapons into the force
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The New Players
From the mid-1970s until late 1982, management of
foreign military technology acquisitions generally was
the preserve of trading firms established by China's
defense industries. Each defense industry has at least
one trading arm to represent it in the buying and
selling of military hardware. For example, Norinco is
the front organization for China's Ministry of Ord-
nance Industry. After the consolidation of authority
for the supervision of weapons research, development,
and production under the National Defense Science,
Technology, and Industry Commission (NDSTIC) in
mid-1982, however, the industries have found their
independent power to negotiate foreign military buys
seriously eroded.
Zhang Aiping, appointed Minister of National De-
fense and deputy secretary general of the Military
Commission of the Chinese Communist Party in
November 1982, has moved quickly to place the
ultimate authority for foreign military technology
acquisitions under the NDSTIC. Although the post of
Defense Minister is largely ceremonial, Zhang has
used his influence as a key member of the Military
Commission and his two decades of experience as a
key administrator of China's conventional and nuclear
research organizations to accomplish this goal. Zhang
acquisitions of foreign military technology.
Within the NDSTIC, Vice Chairman Wu Shaozu is
the senior official in charge of acquiring foreign
military technology. Wu has probably worked closely
with Zhang Aiping for many years on military R&D
and has been referred to as father of China's nuclear
attack submarine program. Wu is also reportedly a
close associate of party General Secretary Hu Yao-
bang, who may be grooming him eventually to replace
Zhang as defense minister. Wu cochaired working-
level discussions during Secretary Weinberger's trip
to China. He also directs two front organizations,
Yanshan and Xinshidai Corporations, which are the
key negotiating entities for the NDSTIC in foreign-
technology acquisitions.
Yanshan. Yanshan Corporation has emerged in the
last year as a key organization within the Chinese
Government for weapons-technology acquisition.
Yanshan officials negotiated the air-to-air-missile
contract with the Israelis, the largest Chinese arms
purchase since 1975, and reportedly monitor the
foreign trade activities of all defense-affiliated trade
organizations in China. Yanshan President Xu
Mingzhen-an active duty Air Force general-met
with US Embassy officers before TOW negotiations
last December and asserted that Yanshan could solve
any potential disputes, as it was empowered to act as
the final arbiter between PLA end users and the
Chinese defense manufacturers.
Although powerful, Yanshan still vies with the indi- 25X1
vidual defense ministries for control of foreign-tech-
nology acquisitions. I 25X1
Yanshan's president has tried for the last two years to
consolidate Yanshan's power over the various minis-
try-subordinated trading firms by placing them under
the Yanshan-subordinated-front organization, Xinshi-
dai Corporation. Although the companies have nomi-
nally accepted this arrangement, they still maintain
independent contacts with foreign companies. F
Baoli. The military services are also becoming in-
volved in the import of finished military hardware and
have established their own foreign weapons procure-
ment arm to bypass the bureaucratic barriers posed
by the trading arms of the defense industries. Baoli
Corporation was formed in early 1984 as a front
company for the PLA General Staff. According to the
US defense attache in Beijing, the PLA was dissatis-
fied with allowing ministerial trade offices to carry
out foreign military negotiations. The PLA claims
that the trading firms were more interested in work-
ing out coproduction agreements, which provide long-
term work for their parent industries, than in quickly
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buying the most advanced weapons available for the 25X1
armed forces. Moreover, these coproduction negotia-
tions are usually drawn out and often lead to the
procurement of less advanced equipment because
foreign firms are unwilling to transfer the know-how
for their best products. The PLA points to the ill-fated
French Dauphin coproduction venture as a prime
example.
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Baoli appears to enjoy an equal status to NDSTIC's
Yanshan and is extremely well connected to China's
top policymakers. Baoli's opening was recently cele-
brated at a reception in the Great Hall of the People,
and among the guests were Military Commission
Permanent Vice Chairman Yang Shangkun, the Di-
rector of the General Political Department Yu Qiuli,
and Politburo member Wang Zhen. Baoli's President,
He Ping, is Deng Xiaoping's son-in-law, and Vice
Chairman He Pengfei is a son of deceased PLA
Marshal He Long. Wang Jun, Second Vice Chair-
man, is the son of Wang Zhen, and Baoli's office
manager apparently is Wang Xiaochao, son-in-law of
Yang Shangkun. He Ping and He Pengfei participat-
ed in the working-level discussions at the Pentagon in
February and negotiated China's purchase of Sikor-
sky S-70C helicopters. Baoli's executives are members
of the General Staff equipment bureau and are
subordinates of its director, Li Guang. According to
the American Institute in Taipei, Anna Chennault
recently was introduced to the leaders of Baoli by
Chinese Premier Zhao Ziyang. Chennault said that
Baoli is known in Beijing as the xiao zhuang pai (the
strong young men faction) and already has become
selective in granting appointments to foreign execu-
tives.
Baoli is moving quickly to consolidate its position and
is coming into direct competition with some of the
ministerial trading firms. Li Guang, when he visited
the United States with Defense Minister Zhang, told
US executives that Baoli represented ground, air, and
naval interests.
Baoli has replaced China Shipbuilding Trading Cor-
poration, a trading company for China's shipbuilding
industry, in negotiations with Italian companies for
the purchase of torpedoes. Conversely, China Nation-
al Aero-Technology Import-Export Corporation-a
trading company for the Ministry of Aviation Indus-
try-recently was reluctant to arrange direct meet-
ings between US executives of a jet engine manufac-
turer and the PLA end users.
weapon research laboratories, the General Staff De-
partment favors the rapid introduction of advanced
weapons. According to the US defense attache in
Beijing, the General Staff Department is more in-
clined to buy a foreign weapon, and then if possible
sign a licensed production agreement, while Zhang
Aiping wants the technology transfer first. Zhang has
fought in the last two years with the Air Force and
Navy over this issue and apparently won some early
skirmishes. When the Navy signed a tentative con-
tract in late 1982 to purchase the British Sea Dart
naval missile for its destroyers, Zhang used the
NDSTIC to block the purchase. He also quashed Air
Force interests in French Mirage 2000 fighters.
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senior political leadership of the efficacy of some
finished hardware buys from abroad. The purchase of
Sikorsky helicopters may prove to be a watershed in
this regard. Baoli signed a direct-purchase contract
that only made general references to eventual copro-
duction of the helicopters and brought Aviation Min-
istry trade officials into the negotiations at the very
last minute. In a similar manner, Baoli earlier this
year purchased $10 million in US electronic monitor-
ing equipment without even mentioning licensed pro-
duction.
China's Priorities
Underlying Beijing's renewed quest for Western mili-
tary imports is its concern about the Soviet military
buildup in the Far East over the past five years.
Although the Soviets have slowed the pace of creating
new ground combat divisions in the Far East, they
have substantially upgraded their strategic and con-
ventional military power opposite China:
? Adding newer tanks, self-propelled artillery, larger
caliber multiple rocket launchers, and more motor
transportation assets to ground forces in the Soviet
Far East.
? Introducing the newest tactical aircraft and combat
assault helicopters in the Soviet inventory.
? Expanding the Pacific Fleet, the largest in the
Soviet Navy, with two Kiev-class aircraft carriers
and more ballistic missile submarines.
Infighting. Undercurrents of tension also are appar-
ent between Defense Minister Zhang and the General
Staff Department. Although the Defense Minister's
paramount concern is that China obtain the technol-
ogy transfer that will benefit China's indigenous
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? Improving its large nuclear strike force by deploying
Backfire bombers and mobile SS-20 intermediate-
range ballistic missiles in the Far East.
? Deploying air and naval forces to Cam Ranh Bay in
Vietnam and expanding patrols in the South China
Sea.
Whether through direct arms procurements or the
transfer of weapons-production technology, we believe
Beijing's priorities in foreign acquisition are clearly
aimed at redressing the growing imbalance of forces
along the Soviet front. Beijing has monitored the
Soviet buildup in the Far East over the past few years
but has had little recourse beyond increasing the
number of combat divisions-equipped with 1950s'
weapons-stationed opposite the Soviet Union. The
gap has continued to widen as the modernization of
Soviet equipment has more than offset Chinese man-
power increases.
Although the Chinese see no immediate danger of a
Soviet attack, they recognize that with the improve-
ments made to Soviet Far Eastern forces they lack a
credible defense against a Soviet air, land, and sea
goal was to survive the first two days following a
surprise attack, because it is too weak to provide a
capable initial defense. We believe that Beijing has
identified critical gaps in antiarmor capabilities, air
defenses, antisubmarine warfare, surveillance and
early warning capabilities, and electronic counter-
measures. In all of these areas, the Chinese are
looking for Western assistance and are exploring both
direct purchase and technology transfer.
Meeting the Soviet Armor Threat. Beijing considers
the fielding of newer antiarmor weapons an extremely
high priority because it faces over 29,000 Soviet tanks
and armored personnel carriers in the Far East.
Chinese infantry forces rely on short-range antitank
rockets, rocket-propelled antitank grenades, and Chi-
nese copies of the Soviet Sagger wire-guided antitank
missile to provide a three-tiered defense against Soviet
armor. Although all three can penetrate the armor on
the T-54/55 and T-62 tanks deployed by the Soviets
opposite China, none of the weapons is capable of
penetrating the frontal armor of T-72 tanks, which
the Soviets began fielding in the Far East in 1982.
To field antitank systems that will destroy T-72 and
newer T-80 tanks, the Chinese are interested in
acquiring an advanced version of the US TOW wire-
guided antitank missile. The TOW holds several
attractions for the Chinese:
? Chinese designers, using TOW missiles obtained
from Vietnam, have developed a missile similar to
the first-generation TOW. The Chinese admit their
missile cannot penetrate the armor on modern Sovi-
et tanks and concede they have failed to extend its
range beyond 3,000 meters or achieve good per-
formance in cold weather. They believe that with
limited assistance from US manufacturers they can
solve these problems and produce a missile system,
with night-fighting sights, capable of defeating T-72
and T-80 tanks at ranges over 3,500 meters.
? The Chinese also are impressed with the TOW
mounted on an armored vehicle and believe that
they can reconfigure a Chinese armored vehicle to
carry the TOW turret. In this manner, they could
equip their forces with armor-mounted TOWs with-
out the high cost of purchasing foreign vehicles and
hardware.
? The Chinese also like the helicopter-mounted TOW
but recognize that they will have to purchase or
coproduce a foreign helicopter to gain a heliborne
antitank capability. A senior Baoli official recently
told the US defense attache in Beijing that the
Chinese were looking for an inexpensive helicopter
for the TOW and would only use their new Sikorsky
helicopters as a backup because they consider them
too costly to use for this purpose
Although negotiating for the TOW, the Chinese have
not completely closed negotiations with the French for
the HOT wire-guided antitank missile.
the HOT had been the first
choice of t e General Staff Department in the late
1970s, but it was not approved because of cost-the
HOT missile price was $35,000 compared with $5,000
for the I-TOW. More recently, the US defense atta-
che in Hong Kong reports that the French firm
Aerospatiale has made a last-ditch attempt to win a
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Chinese contract by offering the Chinese full produc-
tion facilities for the HOT-II-a newly improved
missile with performance characteristics beyond the
I-TOW. The Chinese may use this offer to put
pressure on the United States to transfer to China the
more advanced TOW-II technology.
For shorter range and lighter antitank defense, the
Chinese are looking at other US and French systems.
The Chinese have pressed for access to the Viper light
antitank weapon, which failed acceptance testing by
the US Army. They believe that since the Viper has
been rejected the technology must be available at
reduced prices and they can use it to upgrade their
own weapons. The Chinese,
also are interested in French APILAS
short-range, shoulder-fired antitank weapons. Al-
though the APILAS only has a 500-meter range, if
fielded in tandem with a modern wire-guided antitank
missile like the TOW or HOT, it would provide
Chinese infantry units with a credible defense against
T-72 and T-80 tanks
We believe the Chinese have decided that a modern
tank able to match the Soviet T-64 or T-72 will be
beyond their means at least for the next five years.
Even with a new tank developed by the early 1990s,
Beijing will rely on the 8,000 deployed Type 59s and
newer Type 69s for at least another decade. The
Chinese plan to retrofit these tanks with more power-
ful main guns, improved engines, better fire-control
systems, and upgraded night-vision capabilities.
Some of the Type 59 tanks on show at the I October
military parade in Beijing carried a British 105-mm
gun, an upgrade process first used by the Israelis on
captured Soviet T-54s. In addition, the Chinese are
close to concluding a deal with a US company to
coproduce improved armor-piercing ammunition for
the standard 100-mm tank gun on most Type 59s and
Type 69s. With this ammunition, China's tanks would
be more effective against newer Soviet tanks.
Combating the Soviet Air Threat. Perhaps the great-
est challenge the Chinese face today is in air defense.
Across the board, from fighter aircraft to ground-
based air defenses to shipborne weapons, the Chinese
capacity to defend effectively against Soviet airpower
is weak. Consequently, these areas are among some of
the highest priorities on China's foreign purchase wish
list.
The Soviet Air Force would quickly gain air superior-
ity over the battlefield in any border conflict with
China. China's fighter aircraft inventory contains
2,700 F-6s (MIG-19s), 200 F-7s (MIG-21s), and about
50 F-8 fighters. The Chinese Air Force intends to
improve the F-7 with a more powerful engine and
better missiles but is pinning its hopes on the larger,
faster twin-engine F-8.
the Chinese have a three-phase program for
improving the F-8, converting it from a daytime, fair-
weather high-altitude interceptor to a day and night,
all-weather fighter:
? Radar and Avionics: The Chinese are seeking US
radars that would improve their ability to find
enemy aircraft without totally relying on ground
radar stations. The Chinese recognize that Soviet
bombers will not be attacking at high altitudes but
will come in low, where the radars on Chinese
fighters cannot distinguish them from ground
clutter:
The Chinese also seek US assistance in rede-
signing the cockpit on the F-8, with heads-up
displays that would improve the pilot's perfor-
mance in air-to-air combat.
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Some avionics work is being done on the F-7,
but the Chinese claim to be unhappy with the
help provided by the British firm, Marconi.
? Air-to-Air Missiles: The Chinese signed a contract
in 1983 with an Israeli firm for $200 million for the
Python III heat-seeking, air-to-air missile, which is
comparable to the US AIM-9L (Sidewinder). The
Python III will give the F-8 an all-aspect-includ-
ing head-on-capability at longer ranges than the
Chinese PL-2 heat-seeking missile now in service:
Beijing has opened negotiations with Italy for
the Aspide, a semiactive radar-guided air-to-air
missile. This system is capable of destroying
aircraft at ranges up to 57 kilometers. This
missile would strikingly improve Chinese pilots'
capability to shoot down Soviet aircraft in poor
weather.
The Chinese also are exploring purchasing the
AIM-7 (Sparrow) radar-guided missile from the
United States.
? Engines: The large and heavy F-8 needs a more
powerful engine to become a capable air-to-air
fighter. Modern engines from the West would not
only increase the aircraft's speed, maneuverability,
and range but also its fuel efficiency and engine life.
China has expressed a strong interest in two US-
built engines: the GE 404 engine and the Pratt &
Whitney 1117/1120.
firepower. The Chinese know they need tactical air
defense systems that can counter helicopters and low-
flying Aircraft. They have shown a strong interest in
the US Stinger shoulder-fired low-altitude SAM.
Beijing is dissatis-
fied with its shoulder-fired short-range SAM, a copy
of the Soviet SA-7 missile, and is seeking US assist-
ance to enhance its performance.
efforts to perfect an
indigenously designed, vehicle-mounted, medium-to-
high-altitude SAM are continuing at a test range in
western China. Beijing has acquired a battery of
French-made Crotale SAMs, probably from Pakistan,
and may be using them to correct problems with its
own SAM. Chinese delegations have shown very little
interest in buying the US I-HAWK and other foreign
medium-to-high-altitude SAM systems
he Chinese have signed a con-
tract with a US manufacturer for 15 Firebee target
drones and probably will use them in testing their new
mobile SAM, suggesting the Chinese believe they can
solve the problems of their mobile SAM system and
have it ready for series production soon.
The Chinese are developing self-propelled antiaircraft
guns but are looking for foreign assistance in produc-
ing modern ammunition to improve their firepower.
the Chinese have mounted
twin antiaircraft guns on a tank chassis and have
requested US technology for advanced proximity fuze
ammunition, which increases the killing radius and
decreases the need for accuracy of antiaircraft guns.
Chinese naval combatants are practically defenseless
against antiship missiles and have only antiaircraft
guns to protect them against enemy aircraft. The
Chinese Navy is showing a marked interest in improv-
ing shipborne air defenses, particularly against sur-
face-skimming cruise missiles. In mid-1983, China
purchased two French Compact 100-mm naval guns
which probably will be placed aboard a frigate for
testing and evaluation. The French gun can fire up to
90 rounds a minute-compared with the Chinese
100-mm, which fires 15 to 18 rounds a minute-and
The lack of a mobile, tactical SAM has plagued the
PLA for years. Chinese units currently rely on towed
antiaircraft guns, which lack mobility, accuracy, and
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Maximum
Range
Weight
(kg)
Use
Guidance
Attack
Capability
(km)
Python III
15
127
Limited all
Infrared
All aspects
(Israeli)
weather
Aspide
200
All weather
Semiactive
All aspects
(Italian)
radar
is designed to counter all air threats, including anti-
ship missiles. The Chinese have also expressed a
strong interest in the US Phalanx close-in defense
system, which provides a last-ditch defense against
antiship missiles or aircraft by coupling an advanced
radar with a six-barrel 20-mm gatling gun.
Countering the Soviet Submarine Threat. As the
Soviet Pacific Fleet has grown dramatically in
strength, China's attention has turned increasingly to
defending against submarine attack. Three main ar-
eas are being explored by Beijing: improved sonar
capabilities, modern engines to provide quieter run-
ning ships, and advanced torpedoes for surface ships
and submarines:
? Sonars: The Chinese want modern sonar systems for
submarines, surface combatants, and antisubma-
rine-warfare helicopters:
Last fall, the Chinese signed a $2 million
contract for the French Fenelon sonar, which
they reportedly will install on two R-class sub-
marines. This system is a major advance over
sonars now on Chinese submarines and they
may actually be fitted on China's nuclear-
powered submarines. The Fenelon sonar would
give Chinese submarines a passive range-find-
ing capability and the ability to detect and track
multiple targets at the same time.
- The Chinese also signed a $4 million deal for
two sets of the French SS-12 sonar system,
which is towed from small ships.
- The Chinese may also sign a deal with France
this year to refit Chinese Super Frelon helicop-
ters with the Lamparo sonobuoy sonar system.
Chinese and US Navy officials have also dis-
cussed the possibility of cooperation on sonars.
The Chinese expressed interest in a state-of-the-
art sonar currently used by the USS Los Ange-
les-class nuclear attack submarine, but the
United States has offered only less capable
systems.
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? Engines: The Chinese plan to use advanced US
engines to build a new series of 4,200-ton ASW
destroyers. According to the US defense attache in
Beijing, the new destroyers will use US gas turbine
engines, which are much quieter than standard
diesel engines:
China intends to build as many as 10 of these
ships by the end of the decade. In July, the
Chinese Navy signed a letter of understanding
with the General Electric Corporation and
hopes to complete a contract for up to eight
LM2500 gas turbine engines by the end of
1984.
? Torpedoes: The Chinese Navy is pressing the Unit-
ed States and other countries for access to advanced
submarine- and helicopter-borne torpedoes. China
currently has no helicopter or ships equipped with
ASW torpedoes and its submarine torpedoes are
World War II vintage:
Through foreign arms merchants, China has
indicated a willingness to buy 150 to 300 US
MK-46 deep-diving torpedoes capable of multi-
ple attacks on a target and MK-48 torpedoes
carried by all US attack and ballistic missile
submarines.
Enhanced Early Warning/Reconnaissance Capabili-
ties. A key factor in any improvement to China's
defenses against a surprise Soviet attack is increased
surveillance capabilities. China's air defense radars
have a limited range, are easily blinded by electronic
countermeasures, and are not linked by computers to
China's air defense commands. Beijing is not seeking
to replace its radar systems, but to modify and update
existing equipment. After a long battle with the
NDSTIC, the General Staff Department has now
received approval to sign a $40 million agreement
with a US firm to begin upgrading China's target-
acquisition radars and, if that program is successful,
to improve China's early warning radars. China's
radars provide coverage at low-to-medium altitudes
and the upgrade is an attempt to build a more viable
defense against high-performance Soviet fighters and
bombers penetrating at low altitudes. The Chinese
also may intend to use upgraded radars with their
medium-to-high-altitude mobile SAM now under de-
velopment.
To increase China's surveillance capabilities, Baoli
Corporation signed a contract for $9 million with a
US firm this spring to purchase 625 radio receivers
that can be used to monitor military communications.
are looking at a variety of other border-surveillance
systems ranging from side-looking radars that can be
mounted on transport aircraft to photoreconnaissance
cameras that can be mounted on Chinese fighters.
Baoli recently signed a $20 million contract for two
low-altitude reconnaissance cameras made in the
United States that will be installed on F-8 aircraft.
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Electronic Countermeasures. Beijing not only seeks to
upgrade its weapons for defense against enemy air-
craft and antiship missiles, but also is trying to
develop a viable electronic countermeasure capability.
Last December, China signed two contracts worth
$26 million with Italian firms for two sets of the
Newton naval electronic warfare system and five sets
of the Selenia ground-based electronic warfare sys-
tem. The Newton system, to be installed on Chinese
frigates, is specifically designed to deceive and defeat
antiship missiles. The Selenia gear jams enemy air-
craft radar, complicating their ability to find and
destroy air and ground targets. Delivery of both naval
systems is being delayed because of US objections to
the sale.
Other negotiations for naval electronic warfare sys-
tems are continuing.
the British firm Vospar Thornycroft is developing-
at China's request-a complete electronic warfare
package for Luda-class destroyers. This would include
electronic warning receivers that would identify the
incoming aircraft or antiship missile and trigger the
appropriate defensive response. The US defense atta-
che in Hong Kong reports that another British firm
recently met with the Chinese Navy and presented a
similar proposal for a missile radar warning system
that controls chaff countermeasure dispensers.
The deployment of upgraded Chinese F-7 and F-8
fighter-interceptors armed with modern air-to-air
missiles is unlikely to prevent the Soviets from achiev-
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costly. Soviet airpower in the Far East is already at a
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easily to match Chinese improvements. The Soviets
currently have a high potential for offensive
airstrikes against China, including Backfire bombers
and Fencer deep-strike aircraft.
Upgraded ASW and antiship missile defenses would
improve China's ability to defend its coastline against
Soviet naval action but would not make the Chinese
Navy a rival to the Soviet Pacific Fleet in open-ocean
operations. The Chinese Navy equipped with better
ASW sonars and torpedoes could use these systems to
great advantage in the shallow waters of China's
Implications
The Sino-Soviet Balance. Moscow probably will be
most concerned about the improvements that import-
ed Western hardware will make in China's antitank
capabilities and may step up its ground force modern-
ization in the Far East. By deploying antitank missiles
like the I-TOW in quantity, China could reduce the
substantial edge now held by Soviet armored forces
along the border, and Chinese helicopter-mounted
antitank missiles would be especially troublesome.
The Soviets probably will speed up replacement
schedules for the older T-54/55 and T-62 tanks,
equipping more units with newer T-72 tanks.
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continental shelf and frustrate the operations of Sovi-
et submarines. However, improvements in China's
ability to project naval power probably would be
limited to the South China Sea, where Chinese land-
based aircraft could compensate for serious weakness
that would still exist in shipborne air defenses.
Taiwan. Although foreign acquisitions are geared
primarily to the Soviet threat-and the initial fielding
of improved systems is almost certain to be along the
northern border-the new weapons will improve some
dimensions of China's military capabilities against
Taiwan. We believe that production and deployment
of modernized F-7s and F-8s will reduce the qualita-
tive advantage held by Taiwan's current F-5E fight-
ers. Beijing, however, has for several years had the
ability to gain command of the air over Taiwan if
willing to take heavy losses, and improved fighters
would simply reduce the cost somewhat. Beijing prob-
ably still would lose too many aircraft to Taiwan's
ground-based air defenses unless it corrected severe
deficiencies in ground attack aircraft and air-to-
ground weapons.
Naval military acquisitions from abroad probably will
increase the Chinese Navy's already formidable capa-
bilities to blockade Taiwan but not its amphibious-
assault potential. If modern submarine sonars and
torpedoes are obtained from abroad, China's 100
R-class submarines would make it difficult for any
navy to keep Taiwan's ports open. None of China's
priorities in weapon acquisitions will give the PLA the
materiel required to pose a real invasion threat to
Taiwan. We can detect no program to build the large
numbers of landing ships required, and no evidence
that Beijing intends to spend its limited resources to
acquire amphibious-assault ships or their technology
from abroad
The United States. US willingness to transfer ad-
vanced military systems to China, particularly F-8
fighter upgrades, is creating a constituency in the
Chinese military establishment that, we believe, will
push for even wider US-Chinese ties through military
contacts. According to the US defense attache in
Beijing, Defense Minister Zhang and NDSTIC Vice
Chairman Wu Shaozu were convinced by their mid-
June visit of the long-term value to China of the
relationship and recently lobbied senior political lead-
ers for additional official visits to further the relation-
ship. Wu reportedly has staked his reputation on
concluding a deal for F-8 avionics. We believe the
PLA sees US assistance in fighter improvements as a
positive signal of US sincerity in improving China's
military capabilities, even those that may have a
detrimental effect on Taiwan, and may be using this
program to persuade skeptics.
Discussions on technology transfer are providing US
officials new and unprecedented contacts with the
Chinese military, which traditionally has been ex-
tremely wary of direct dealings with foreigners. In
striking contrast to earlier years, the US defense
attache was sought out for discussions and toasts by
China's senior generals at the Army Day festivities in
Beijing this August. Navy Secretary Lehman in Au-
gust was given the first tour for a foreigner of one of
China's three nuclear attack submarines. Prospects
are bright for further military-to-military contacts as,
for example, senior Chinese Navy officers have in-
formed the US attache that a Deputy Chief of Staff
has been assigned to work out plans for a US Navy
port call at Qingdao.
The continuation of US arms sales to Taiwan, how-
ever, has the potential to damage emerging US-
Chinese military ties. PLA leaders reportedly face
opposition from elements in the Foreign Ministry and
elsewhere who argue that the United States will use
military transfers to China to justify continuing arms
sales to Taiwan. Army Deputy Chief of Staff, Xu
Xin, recently told the US defense attache that he
hopes US-Chinese military ties would develop further
but warned that the United States "must strictly
adhere" to the August 1982 communique, emphasiz-
ing that the Chinese people are "very sensitive to the
Taiwan problem."
Perceptions in West European capitals that the Unit-
ed States is cornering the China arms market may
endanger efforts in COCOM to limit the types and
levels of materiel sold to China. The secrecy sur-
rounding US-Chinese military negotiations and Chi-
nese misrepresentation of US policy have fueled Euro-
pean fears.
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In June, according to the US
Embassy in Rome, Italy announced its intention to
proceed with the sale of ship-mounted electronic
countermeasures equipment despite US objections in
COCOM, because the Italian Government had con-
cluded that the sale was consistent with the US policy
of liberalized military transfers to the PRC. The
Italians hinted that US objections were based less on
national security concerns than on US economic
interests. France also appears to be testing the
COCOM limits with cases now under consideration
for sonar and naval guns.
Prospects
We believe Beijing's decision to increase the level of
arms imports will result in some significant purchases
of both finished military equipment and production
know-how over the next five years. In future negotia-
tions, Beijing will undoubtedly reiterate its primary
goal of using its limited funds to develop self-reliance
in the production of modern weapons. We believe,
however, that Beijing is showing a new willingness to
purchase selected advanced military hardware that
will, in its view, fill a major gap and include the
prospect of eventual coproduction or licensed produc-
tion in China.
Beijing's search for advanced military equipment is
worldwide, and Beijing will continue to play off
various Western suppliers to obtain the best deals.
China increasingly will use such ploys as the helicop-
ter competition in Tibet not only to evaluate Western
equipment but also to place additional pressure on
Western suppliers to provide their best at the lowest
prices. Zhang Aiping's stopover in France on his way
to Washington probably was designed to remind
Washington that China has other arms-buying op-
tions, and it is probably no coincidence that Navy
Commander Liu Huaqing will visit London in No-
vember to discuss arms transfers after his August
talks in Beijing with US Navy Secretary Lehman.
aiming to acquire a "second line" of Western technol- 25X1
ogy. A knowledgeable Chinese official asserts that
Beijing will accept a level of technology similar to that
which the United States supplies to Pakistan, Egypt,
and Taiwan
We expect that differences between the armed forces
as end users and the defense industries as producers
will continue to make arms negotiations lengthy af-
fairs. Although the PLA General Staff Department,
through Baoli, has gained central leadership support
for some purchases, opponents have many layers of 25X1
Chinese bureaucracy in which to block deals not to
their liking. According to the US defense attache in
Beijing, He Pengfei estimated in May that 400 to 500
people were involved in the decision to buy Sikorsky
helicopters. Moreover, the defense industries have a
strong ally in the NDSTIC, which opposes most direct
buys that include no technology transfer.
Beijing will not, however, attempt to "buy" military
modernization from abroad. PLA leaders know that
the PLA is far too large a force for China to bear the
prohibitive price of buying outright the massive quan-
tities of weapons needed to modernize the force.
billion would be needed to "buy" defense moderniza-
tion from abroad were too low. But Beijing can
quickly redress some pressing deficiencies-such as
the shortcomings in its antitank missiles-by judi-
cious spending. The Chinese will acquire foreign
equipment-mostly components to upgrade Chinese
weapons-as an interim step until Chinese defense
industries have been sufficiently upgraded over the
next five years so that the Chinese may begin building
advanced arms. Ultimately, China's vast military-
industrial base will be the foundation on which
Beijing builds a program of comprehensive military
modernization
Although Beijing openly claims it will only accept
transfer of the most modern weapons and technology
available, we believe Beijing is willing to accept less if
it is convinced the equipment fills a major defense gap
and is modern enough to counter the Soviet threat.
The Chinese privately concede they are unlikely to
receive Western approval to purchase the best and are
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25X1
25X1
Sanitized Copy Approved for Release 2011/05/24: CIA-RDP85T0031OR000200160003-5
 Sanitized Copy Approved for Release 2011/05/24: CIA-RDP85T0031OR000200160003-5
Secret
Secret
Sanitized Copy Approved for Release 2011/05/24: CIA-RDP85T0031OR000200160003-5