China Shrewdly Diverted Military Spending as City’s Island Building

The large airport on China’s artificial island on Yongshu Reef (Fiery Cross Reef).

In my post “Why China Can Win in Its Arms Race with the US?” on January 16, 2016, I said:

In the arms race between China and the US, China is the sure winner because China relies on its enterprises including state-owned and private ones for the development and production of advanced weapons. Those enterprises do not live on the country. They have to make money through their own sales. Only when their products meet the country’s needs in its arms race with the US can they sell their products to the state. Even so, they can only make normal profits. Often they cannot sufficiently recover their R&D costs by their sales to the state alone and have to make ends meet through their sales to other customers or of other products.

A typical example is Chinese state-owned aircraft producer’s development of J-31 stealth fighter jet on its own without government funding.

In the US however, weapon developers and producers live on their country. They are ensured not only recovery in full their R&D costs but also a substantial profit in developing and producing weapons for their country.

That is why China can win even though its military budget is much smaller than the US.

In addition, state owned enterprises (SOEs) may be ordered to provide military hardware at very low prices with little profit. That is no problem for the state as after all the profit belongs to the state. However, the burdens on military budget are shifted on SOEs so that the military can get hardware with a much smaller budget.

The above are shrewd ways to make do in its arms race with the US with a much smaller military budget than the US. However, the shrewdest way to divert military spending to civil one is China’s treatment of the construction of artificial islands for defense against US submarines as a civilian project for fishery, fish farming, energy exploitation and tourism.

China’s military budget will be far from enough if the huge costs of island building are included in the budget. However, China has justified reasons to do so as the islands will indeed be used as fishery, fish farming and energy exploitation bases and tourist resorts. China has indeed been building the islands as parts of its prefecture-level Sansha City for civilian purposes as it claims though first of all for military purpose.

Everybody is clear that the islands have been built for defense, but cannot deny their civilian usage. That upsets US military especially profoundly as China is now able to fully control the South China Sea if those islands have been militarized. US military can do nothing except sending warships to conduct freedom of navigation operations, but that gives China the excuse to militarize the islands as it wishes.

Article by Chan Kai Yee


Undoubtedly China Is Conducting Arms Race with US

Whatever the defense budget that China has made public, China is conducting an arms race with the US. There is no doubt whatsoever about that.

We shall judge by what China is doing instead of what it is saying. Good relations with the US are very important for China’s economy as the US is China’s major trade partner. China certainly is not so stupid as to upset the US by declaring that it is conducting arms race with the US.

However, judging by China’s great efforts in developing top weapons such as hypersonic glide vehicles, scramjet engine, stealth fighter jets, etc., China is certainly conducting an arms race with the US in order to have the capabilities to defend itself against US attack.

In fact, if China had not developed such advanced weapons as aircraft killer ballistic and cruise missile and fleet of Type 022 stealth fast missile boats that can remain undetected by radar, sight and sound until they come close to their target, the US would have driven Chinese land reclamation ships away to stop China’s construction of artificial islands.

I had a post titled “Chinese Military’s Unlimited Budget” on March 10 as comment on SCMP’s report on March 9, 2017 titled “Is China avoiding arms race with US by setting ‘low-key’ defence budget?’.

In the report, SCMP quotes Beijing-based naval expert Li Jie as saying that the 7 per cent increase (in defense budget), which is the smallest annual increase since 2000, showed that ‘Beijing wants to clarify a long-standing misunderstanding’ at home and overseas that the PLA is in an arms race with the US.

Misunderstanding? No, not misunderstanding but reality. Li himself says, “The US wants to be the global police, but China just takes care of its peripheral security environment”. That determines that there is bound to be an arms race between them.

Being global police, the US wants to impose the Hague arbitration award on China to deprive it of all its historical right and interests in the South China Sea. That certainly damages China’s peripheral security environment that China has to take care of. China has to enhance its military capabilities to deal with the issue.

Therefore the misunderstanding at home and overseas is not about the existence of the arms race, which is a reality, but about China’s goal in its arms race with the US.

Previously the Soviet Union incurred heavy burden in conducting an arms race with the US for world hegemony, which perhaps caused its collapse. Since Soviet collapse, the US has been the sole hegemon in the world. However, in order to maintain its hegemony, it has become heavily in debts. Will China repeat Soviet and US failures? Chinese leaders are simply not so stupid. Their goals are to make all Chinese people moderately well-off by 2021 and turn China into a developed nation by 2049.

Therefore, China’s goal is entirely different from that of the US in conducting arms race with the US. The US wants to maintain its world hegemony while China only wants to grow strong enough militarily to deter US attack.

The situation is a little similar to the fairy tale of Snow White. Uncle Sam asks a mirror everyday who is the strongest in the world while Snow White’s step-mother asks who is the prettiest. When the step-mother learns that Snow White is prettier, she uses a poisoned apple to remove her, but when Uncle Sam hears that China will be stronger, he has no poisoned apple. Even if he has one, he is unable to make China eat it. He has first try to use aircraft carriers, then attack submarines and finally to spend billions of dollars to develop B-21 bombers to attack China.

For the US it is an arms race to get more advanced weapons to attack China while for China it is an arms race to develop weapons to resist US more advanced weapons of attack.

It is as stupid as Snow White’s step-mother, but China cannot help that.

Further comment by Chan Kai Yee on SCMP’s report, full text of which can be found at

Exclusive: Japan to speed up frigate build to reinforce East China Sea – sources

By Nobuhiro Kubo | TOKYO Fri Feb 17, 2017 | 6:25am EST

Japan plans to accelerate a warship building program to make two frigates a year to patrol the fringes of the East China Sea, where it disputes island ownership with China, three people with knowledge of the plan said.

Japan previously was building one 5,000-ton class destroyer a year, but will now make two 3,000-ton class ships a year, beginning from the April 2018 fiscal year, the people said, declining to be identified as they are not authorized to talk to the media.
It aims to produce a fleet of eight of the new class of smaller, cheaper vessels, which may also have mine-sweeping and anti-submarine capability.

Naval shipyard operators including Mitsubishi Heavy Industries, Japan Marine United Corp (JMU) and Mitsui Engineering and Shipbuilding are expected to bid for the work, the people said.

Japan and China dispute ownership of a group of islands in the East China Sea, about 220 km (140 miles) northeast of Taiwan. In Japan, they are known as the Senkakus, while China calls them the Diaoyu islands.

Senior Japanese military officials have said they are concerned that China may seek to increase its influence in the East China Sea around Japan’s southern Okinawa island chain. Japan provides military aid to Southeast Asian countries including the Philippines and Vietnam that oppose China’s territorial claims in the neighboring South China Sea.


In a departure from normal procurement practice, Japan’s Ministry of Defense said in a report published on Wednesday it will require the winner of the – eight frigate – contract to offer major portions of the build to other bidders.

The change is meant to ensure naval shipyards remain open.

In the past two years, JMU has won contracts to build the larger Aegis-equipped destroyers, raising some concern among defense ministry officials that rivals could shutter their shipyards, one of the sources said.

“We need to ensure our ability to build naval vessels at home,” the person said.

The new ships will cost 40-50 billion yen ($353-$443 million) each, another of the sources said.

(Reporting by Nobuhiro Kubo; Writing by Tim Kelly; Editing by Ian Geoghegan)

Source: Reuters “Exclusive: Japan to speed up frigate build to reinforce East China Sea – sources”

Note: This is Reuters report I post here for readers’ information. It does not mean that I agree or disagree with the report’ views.

Motherland-lover v. Money-lover in Arms Race

With much smaller military budget than the US, China is able to develop weapons rival to and even better than US.


Chinese weapon developers are motherland lovers. They begin development of weapons they think useful for national defense with their own funds before asking for the government for funding.

That is why J-31 stealth fighter jets is being developed even when the government has decided to develop J-21 only. Development of a stealth fighter is very expensive, but J-31’s developer is willing to do so with its own funds.

The developer hopes the military will buy J-31 so that it can recover the costs, but it cannot be sure about that. Anyway, it wants to strengthen China’s national defense and believe that J-31 will be useful as long as it is successfully developed.

Some speculates that J-31 will grab quite a big market share from US F-35 and thus enable the developer to make big money. In that respect, the developer’s goal, again, is to benefit China in making money for the growth of China’s weapon industry and reduce the profit of the weapon producer of a potential enemy.

Whatever the developer’s goal, it is patriotic.

That is what a big weapon player has been doing.

There are lots of Chinese firms and organizations enthusiastic in developing unmanned aerial and underwater vehicles (UAV and UUV) for military purpose without government funding. That is why China is able to catch up with and surpass the US in UAVs and UUVs.

China is making big money in exporting UAVs so that other countries are helping Chinese patriots with funds in developing UAVs.

China’s weapon developers are motherland-lovers. A patriot is willing to sacrifice even his life for his motherland. He certainly is willing to take financial risk in developing weapons for his country. Experience tells us those who are willing to take great risk may make great money. That seems the case with Chinese weapon developers.

In the US, however, the military has first to ask Congress for funds before telling US weapon developers to develop weapons as US weapon developers are money-lovers instead of motherland-lovers.

They usually do not take initiative in developing weapons but wait passively for government funding. Sometimes, they do have some initiative in developing new weapons but only for the goal of attracting government funds for the development and production to enable them to make big money. As soon as it is clear that the government is utterly not interested, they give up no matter how good the weapons will be in strengthening US military.

If the situation remains so, there is no hope for the US to win its arms race with China.

Article by Chan Kai Yee.

China Needs Only Weapons for Active Defense Not All US Weapons

US B61-12 smart nuclear bomb. SCMP photo

US B61-12 smart nuclear bomb. SCMP photo

SCMP says in its report “United States’ first ‘smart’ nuclear bomb signals new arms race with China and Russia: analysts” yesterday that China may intensify its arms race with the US in developing such nuclear bombs. It warns China that if China follows the example of the Soviet Union in conducting arms race with the US, it may also be bankrupt and collapse.

I have described China’s arms race with the US for quite a long time but not stressed that China’s arms race with the US is quite different from the Soviet Union.

China’s arms race is to obtain equal or better military capabilities to resist US attack instead of seeking world hegemony like the Soviet Union.

China needs but the capabilities: 1. to resist US attack from near it; 2. to prevent its trade lifeline from being cut by the US; and 3. the conventional deterrence to utterly prevent US attack.

With the above focuses, China may win the arms race with much less spending.

China has developed sufficient air force, navy and anti-ship ballistic and cruise missiles to prevent attack by US aircraft carrier battle groups and built artificial islands in the South China Sea to deter US submarine attack from the South China Sea. When it has satisfactorily developed its J-20 fighter jet to grab air supremacy from US stealth fighters, it will have achieved capabilities 1.

Its One Belt, One Road initiative, if has succeeded, will ensure its trade lifelines to its west. It can ensure its trade lifelines to its east by building 2 to 3 float artificial island battle groups, each consisting of two conventional aircraft carriers and a number of conventional submarines. That will not cost too much as the islands may bring income from tourism, fishery and fish farming and even from exploitation of mineral and energy resources from sea bottom. That is for capabilities 2 while the float artificial battle group may also constitute capabilities 3 with the ability to attack US homeland if the US attacks China.

One float artificial island battle group will not cost more than one sophisticated US aircraft carrier and two US attack nuclear submarines.

The third and most expensive and complicated is the development of aerospace bombers capable to bomb US homeland within a couple of hours. The aerospace bomber project at maximum will not cost more than US B-21 project.

As for other US weapons such as the expensive B61-12 “smart” nuclear bombs why shall China need them?

They are useful for the US to achieve world hegemony, but useless for China’s active defense. For active defense, submarine launched or aerospace bomber-fired precision cruise missiles can do the job satisfactorily without the smart bombs. The ability of such weapons to cause destruction to US homeland is quite enough to prevent US conventional attack of Chinese homeland.

Comment by Chan Kai Yee on SCMP report, full text of which can be viewed at

South China Sea Ruling Intensifies China’s Arms Race with the US

China offers talks. Photo from SCMP's report

China offers talks. Photo from SCMP’s report

When China realized that the US aimed at attacking China when it began its pivot to Asia, China began its arms race with the US. I have quite a few posts on the arm race since then (see my posts “CHINA STEPS UP ITS NAVY BUILDUP” on January 29, 2012, “A NEW ERA OF ENMITY BETWEEN CHINA AND AMERICA” on February 7, 2012, “The beginning of a new Cold War: On Putin’s Beijing visit” on June 6, 2012, “Arms Craze: Aircraft Carrier Style takes off in China” on November 27, 2012, “Arms Race between China and America” on March 5, 2013”, etc.).

Due to China’s arms race with the US, China has developed lots of anti-ship ballistic and cruise missiles and built seven artificial islands to prevent the US from attacking it with its aircraft carriers and nuclear submarines.

However, the arms race is not intensive enough as China has not allocated as large a proportion of its funds as the US does to its military budget. As the US is threatening China with its warships in the South China Sea in order to force China to respect the arbitration ruling and give up its interests in the South China Sea, China has to greatly intensify the arms race in order not to be bullied by the US.

SCMP has the vision to see that in its report “South China Sea: ‘provocative US action’ could prompt faster Chinese military build-up” i.e. intensified arms race.

China differs with the US in following its gifted strategist Sun Tzu’s teaching to put diplomacy before military in subduing the enemy. Therefore, while developing its military, “China has called for fresh dialogue with the Philippines to resolve their South China Sea disputes following the landmark ruling by an international court on Tuesday”, says SCMP in another report titled “China calls for fresh talks with Philippines to resolve South China Sea disputes after UN ruling”.

China is more skillful in diplomacy. US President Obama had a summit with ASEAN leaders and had them agreed to “(s)hared commitment to peaceful resolution of disputes, including full respect for legal and diplomatic processes”. (See paragraph 7 of their joint statement.)

It means ASEAN leaders will follow the US in telling China to respect the ruling of the arbitration submitted by the Philippines. However when the ruling came out on July 12, no ASEAN member has done that. Why? Chinese Foreign Minister Wang Yi has persuaded ASEAN members not to share US commitment in his meeting with his ASEAN counterparts. (See my post “China Makes ASEAN Refrain from Asking It to Respect Arbitration Award” on June 16, 2016.)

Even the Philippines has refrained from asking China to respect the arbitration ruling so as to dismantle the artificial islands that China has built and that are regarded by the ruling as illegal. Nor has it told China to withdraw its navy and coast guards ships to allow Philippine fishermen to fish near Scarborough shoal.

On the contrary, SCMP says in another report titled “How will Philippines and China move on after South China Sea ruling?”, “Philippine Foreign Affairs Secretary Perfecto Yasay has rejected suggestions he issue a strong statement against China if the decision went Manila’s way. He also said the country was willing to share natural resources with Beijing in the South China Sea area even if it wins the tribunal case next week and that the Philippines will seek to launch talks with China ‘as soon as possible’”.

Comments by Chan Kai Yee on SCMP’s reports, full text of which can be viewed respectively at (“South China Sea: ‘provocative US action’ could prompt faster Chinese military build-up”), (“China calls for fresh talks with Philippines to resolve South China Sea disputes after UN ruling”) and (“How will Philippines and China move on after South China Sea ruling?”)

The Underwater Arms Race between US and China

China's submarine drone the Haiyan that Tianjin University has developed for both civilian and military use.

China’s submarine drone the Haiyan that Tianjin University has developed for both civilian and military use.

China's homegrown remote-controlled submersible Seahorse that is able to operate at the depth of 4,500 meters, which proves China lags behind no one in submersible technology. Photo from SCMP's report

China’s homegrown remote-controlled submersible Seahorse that is able to operate at the depth of 4,500 meters, which proves China lags behind no one in submersible technology. Photo from SCMP’s report

On January 29, 2012, I said in my post “CHINA STEPS UP ITS NAVY BUILDUP”, “In July 2010, China reacted angrily at statements concerning South China Sea disputes by US Secretary of State Hillary Rodham Clinton during an Asean security gathering.” Since then China has been “conducting an arms race with America in earnest. It now wants to catch up with and surpass America in military strength as soon as possible because it believes that America wants to bully it.”

Later on March 5, 2012, I described the arms race in my post “Arms Race between China and America”.

It was followed by my posts such as:

“Chinese Admiral and NPC Spokeswoman Justifies Arms Race with the US” on March 4, 2014, showing China’s official stance towards the arms race;

“In Its Arms Race with America China Launches Two Satellites for Its GPS System” on April 30, 2012;

“China: Intensive Arms Race Causes Stress on Elite Engineers” on November 26, 2012;

“Chinese Dream and China’s Arms Race with the US” on January 8, 2013,

too many to give a full list.

However, perhaps the term “arms race” had better be avoided; therefore, SCMP uses the term “fight for supremacy” in its article today titled “China and US in silent fight for supremacy beneath waves of South China Sea”

China is indeed fighting in silence; therefore, it has not made public the development of its fourth-generation super quiet and super fast nuclear submarine with magnetic fluid propulsion (see my posts “China Developing Super Quiet and Fast Strategic Nuclear Submarines” on July 26, 2013, “Official on Successful Development of 4th-generation Nuclear Submarine in past decade” on August 20, 2013 and “Shocking Exposure of China’s 098 Fourth-generation Strategic Nuclear Submarine” on February 23, 2014).

As nuclear submarines are China’s top secret, what I said in my posts may be but speculation. However, my post “Official on Successful Development of 4th-generation Nuclear Submarine in past decade” on August 20, 2013 is reliable as it is based on local Chinese newspaper’s report on a provincial official’s speech at a provincial meeting not intended for readers outside the province, let alone outside China.

From my posts, you can see that US intelligence has been unable to know what China is capable of. SCMP quotes Pentagon as saying in its report to US Congress that China was also developing an improved, third-generation nuclear-powered ballistic missile submarine, the Type 096, to be fitted with JL-3 long-range missiles that could reach the US from the waters of the South China Sea.

China has successfully built a prototype of its fourth-generation Type 098 nuclear submarine, but Pentagon is still talking about China’s development of its third-generation Type 096 submarine!

In fact, the two incidents mentioned in SCMP’s article must have been enough to wake Pentagon from its arrogant dream of underwater superiority to China:

SCMP says in the article:

In 2006, a People’s Liberation Army Navy Type 039 (Song class) diesel-electric submarine surfaced within five nautical miles (9km) of the USS Kitty Hawk when the aircraft carrier was on a training exercise in the East China Sea between Japan and Taiwan.

And last October, officers on board the aircraft carrier USS Ronald Reagan were shocked when they discovered that a People’s Liberation Army Navy attack submarine had sailed “very close” to it near Japanese waters, the Washington Free Beacon reported, citing American defence officials.

I said in my previous posts that China has incurred huge costs in building 7 artificial islands to prevent US nuclear submarines from attacking Chinese homeland with cruise missiles launched from US submarines in the South China Sea.

US military experts’ suggestion on such attack has made China realize the danger and allocate huge funds to build the artificial islands.

The US is clear that with the artificial islands, China has geographic advantages in the South China Sea to annihilate US nuclear submarines if they attack China from the South China Sea. That is why SCMP quotes US Secretary of Defense Ash Carter as saying that the US would spend more than US$8 billion next year to ensure it had “the most lethal and most advanced undersea and anti-submarine force in the world”. That budget – a roughly 14 per cent increase – will include spending on the development of undersea drones.

The US now wants to attack China with undersea drones that are able to operate in shallow waters in the South China Sea without being detected by China.

That will certainly cause China to make much more investment than the US in developing drone submarines and the surveillance system to detect enemy submarines and submarine drones.

SCMP quotes British-based IHS Jane’s Defence Weekly as reporting that state-owned China’s state-owned shipbuilding giant had proposed building a sound surveillance network of ship and subsurface sensors to detect US underwater vehicles.

Suggested sub defense system

Suggested sub defense system

That is precisely China’s goal in building its artificial islands. It is certainly very clear that China has been building such a network. It has better technology to do so as the shipbuilding giant wants to export the technology of the sound surveillance network. China certainly will not export the top technology that it is using and will use in the surveillance network it is building.

In response to US submarine drone development, Chinese media says in its report on June 16 that as a part of China’s State High Technology Research and Development Program (863 Program), Tianjin University has conducted the research of a new generation of underwater robot focusing on mixed propulsion technology and made its Haiyan submarine drone that has successfully passed tests of single, multiple and long-range trips.

The submarine drone is superior in small energy consumption, low cost, long range, all-weather operation, controllability, and convenient deployment for both military and civilian application.

China does not lag behind the US in submarine drone technology.

What will be the possible consequence? Carter gives China the idea that China can use submarine drones to attack US homeland just like US military experts in giving China the idea that its most advanced super quiet and super fast submarines can attack US homeland with submarine-launched cruise missiles.

What is China’s active defense strategy? Attack for defense.

To understand that, one shall think about the nuclear second-strike capability as nuclear deterrence to prevent nuclear war.

China is developing its conventional deterrence through its development of global prompt strike capabilities with hypersonic glide and flying vehicles. It is making great efforts to develop aerospace bombers to obtain integrated space and air capabilities for both attack and defense that Chinese President Xi Jinping told Chinese air force to develop.

Now, Carter and US military experts tell China it can use nuclear submarines and submarine drones for conventional deterrence. That is indeed very good news for China as China can obtain such deterrence capabilities more readily.

It is time for Carter and others not to tell China how to attack US homeland and pay attention to US homeland defense as China is winning its arms race with the US because the US is simply not aware of the arms race.

Comment by Chan Kai Yee on SCMP’s article, full text of which can be viewed at