1

The Dragon Awakes: China, the United States and the New Cold War

A Master Thesis

Submitted to the Faculty

of

American Military University

by

Brian Curtis Moody

In Partial Fulfillment of the

Requirements for the Degree

of

Master of Arts

February 2016

American Military University

Charles Town, WV

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The author hereby grants the American Public University System the right to display

these contents for educational purposes.

The author assumes total responsibility for meeting the requirements set by United States

copyright law for the inclusion of any materials that are not the author’s creation or in the

public domain.

© Copyright 2015 by Brian Curtis Moody

All Rights Reserved.

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Dedication

I dedicate this thesis to my loving wife. Without her never ending support and

constant belief in me this project and long-term goal would have never been realized, and

to my children who have been patient and understanding while daddy does his

“homework”.

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Acknowledgements

I wish to thank and acknowledge all the dedicated and superior staff at American

Military University and to thank Dr. Paul Medhurst who guided me through this process

and gave excellent advice helping to refine my topic. The professors within the

Intelligence Studies program have been consummate professionals who have given me

the tools to succeed within the Intelligence Community.

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Abstract of the Thesis

The Dragon Awakes: China, the United States and the New Cold War

by

Brian Curtis Moody

American Military University, December 6, 2015

Charles Town, West Virginia

Professor Dr. Paul Medhurst, Thesis Professor

This paper examines the rising tensions between the Chinese and United States

government and to determine if the tension between the two governments has escalated to

a Cold War status. It will advance the study within the region and it will outline

possibilities the U.S can take in regards to responding to the Chinese threat. Qualitative

methods are used to explore two primary models and theories in the International

Relations theory. These models will assist in the determination of the papers hypothesis.

The findings of this paper will demonstrate that tension has risen in the area of the South

China Sea with the potential risk of a military conflict high. Espionage between the two

countries is conducted in the realm of cyberspace and these attacks occur daily with an

increase in severity. Economic tensions remain high and these tensions will be outlined in

the paper. These arguments will help support the papers conclusion that tensions between

the Chinese and United States will continue to rise and may escalate into a wider conflict.

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Table of Contents

Chapters Pages

Introduction………………………………………………………………………7

History of U.S. Foreign Policy in Asia……………………………………7

Current Conflict………………………………………………………….10

Literature Review………………………………………………………………12

Historical Conflicts………………………………………………………12

Military Modernization and Cyber Capabilities…………………………16

Economic Issues…………………………………………………………22

Methodology…………………………………………………………………….26

Identification of Independent and Dependent Variables………………...26

International Relations Theory…………………………………………..28

Study Limitations and Bias………………………………………………31

Findings…………………………………………………………………………32

The Modernization of the People’s Liberation Army and Navy………...32

Cyberwarfare……………………………………………………………..38

Resource Driven Conflict………………………………………………..40

Analysis………………………………………………………………………….45

Countering China’s Navy………………………………………………..45

Cyberspace Vulnerabilities………………………………………………49

A Diversified Economy………………………………………………….51

Conclusion………………………………………………………………………55

References……………………………………………………………………….57

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Introduction

There is a conflict brewing between nations in the Pacific region and two

superpowers are currently on a collision course not only in the South China Sea but

economically as well. So far the conflicts between these two nations have been fought

primarily in the cyber realm with each country engaging in their own form of cyber

warfare and cyber espionage. With increasing technology and the modernization of the

People’s Liberation Army and Navy (PLAN) the confrontational approach by all

interested parties in the region could lead to incidents that will potentially spin out of

control.

The United States has had a historical interest in this region since the founding of

the nation. After the United States won its independence from Great Britain the westward

expansion included into the Pacific and the establishment of trade with the Chinese. In

the winter of 1784 the Empress of China sailed from the United States to China. This

merchant vessel introduced American goods into China, and many more merchants

would soon follow. As more merchants entered into China the United States sought to

formalize relations by establishing diplomatic relations. In 1844 relations were

formalized between China and the United States with the ratification of the Treaty of

Wangxia. This treaty established consuls and provided protection for missionaries and

merchants.

Shortly after the United States formalized relations with China the United States

sought to formalize relations with Japan. In 1853 Commodore Matthew Perry sailed into

Edo (Tokyo) Bay to convince the Japanese to open their ports to American merchants and

allow American ships to resupply. Previous attempts at contact with the Japanese ended

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with Japanese refusal to allow American’s to land on their shores. It was believed that by

bringing naval warships it would intimidate the Japanese to allow the American’s to

establish ports for resupply. A year later Commodore Perry returned with more warships

and the Japanese unenthusiastically signed the Treaty of Kanagawa in 1854 allowing the

United States to provision and resupply ships from two Japanese ports. This treaty also

granted most favored nation status to the United States so that any future treaties or

agreements entered with other nations would be applicable to the United States as well.

Conflict has plagued the Pacific region and the United States has been involved in

a number of the conflicts within the region. A number of these conflicts have involved

the United States and China either directly or indirectly. The Opium Wars that was

primarily fought by the British Empire is one conflict the United States was involved in.

The United States was not primarily involved militarily but achieved its goals

diplomatically. John Ward the chief diplomat of negotiations was able to negotiate a

treaty that included a clause that granted the other powers such as the British and French

the same rights and privileges as the United States. Since China required a tribute system

for foreign powers to conduct trade and business prior to the ratification of the Treaty of

Tianjin when the Treaty of Tianjin was ratified and gave foreign powers an advantage, it

created resentment amongst the Chinese against Western Imperialism.

In the Pacific, Japan had a national defense strategy that was more offensive than

defensive. Taking their cue from Western Imperialism the Japanese sought out building

an empire in Asia modeled after the British Empire. This started with the invasion of

Manchuria and Indochina. Seeking out territory and resources the Japanese expanded

their attacks into the Dutch East Indies to secure oil fields. Realizing that the primary

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threat to Japanese expansionism was the U. S. military the Japanese conducted a surprise

attack at Pearl Harbor attempting to destroy the U.S. Navy while it was at harbor. The

attack was devastating, however it did not have the intended effect the Japanese

government wanted. The Japanese were hoping that a devastating strike would bring

America to the negotiating table and would keep the American’s from entering the war in

defense of the Chinese.

In World War II the United States fought on the side of the Chinese after the

Japanese invaded Manchuria and began seizing territory. However this support was

minimal and mainly consisted of war material and supplies rather than actual combat

troops. This support also did not occur until a few months prior to the Japanese attack on

Pearl Harbor. In July of 1941 volunteers began flying aircraft purchased by the Chinese

into Burma. These volunteers became known as the Flying Tigers and would be the first

Americans to fight alongside the Chinese. Six months later the Japanese attacked the

American fleet at Pearl Harbor ratcheting up American involvement in the Pacific and

causing the United States to declare war on the Japanese Empire.

Post World War II the Communist Party came into power forming the People’s

Republic of China in October 1949. The Nationalist Government that was supported by

the United States fled to Taiwan and established a government on Taiwan with the

eventual goal of taking over and reestablishing a ruling government on the mainland. Due

to the Chinese Communist policies that suppressed freedoms the United States severed

diplomatic ties with the People’s Republic of China.

Even though President Nixon reopened relations with the Chinese government in

1972, relations between the United States and China are still tenuous. Prior to President

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Nixon’s overtures the Chinese and American’s were bitter enemies who both had

engaged in open conflict during the Korean War. The opening of trade with China may

have been less of a pragmatic approach by Nixon but more of another way to help contain

the Soviet Union and further drive a wedge between the Soviet Government and the

Chinese Communist Party.

When Nixon approached the Chinese government in 1972 he reestablished

diplomatic relations however this relationship has been frosty and at times adversarial.

The Chinese government is currently involved in land reclamation efforts in the South

China Sea with The People’s Liberation Army and Navy (PLAN) conducting dredging

operations around small coral reefs and shoals creating man made islands. The PLAN is

establishing military infrastructure on these islands and in the case of Fiery Cross Reef

has completed an airfield capable of handling most military aircraft. These islands are in

a disputed region that many regional powers lay claim to. The fact that the Chinese are

actually developing these islands has caused consternation amongst United States allies

in the region and is leading towards a potential conflict if not properly addressed.

It is not only the land reclamation efforts that has caused a further rift in U.S.

Chinese relations but an onslaught of perceived cyber attacks that have taken place at the

behest of the Chinese government or at the very least the official ignorance that lends

itself to plausible deniability. The Chinese have been accused of cyber espionage and

hacking into Department of Defense databases and targeting DOD contractors stealing

sensitive data and military technologies. In fact newer Chinese equipment in development

and being currently fielded have a remarkable resemblance to American military

technology.

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Not only have defense networks been targeted, other government infrastructure

has been targeted with valuable and sensitive background investigation data stolen.

Financial data has been stolen as well although the perpetrators have not necessarily been

linked to the Chinese government. A source of tension between the United States and

China is the fact that the Chinese government rarely denounces any cyber attack and does

not act on groups that have perpetrated attacks within Chinese borders. As more

infrastructures are put online and networked, the cyber attacks will increase and tension

will increase between these two governments.

Economically both China and the United States are world leaders. It is projected

that China’s economy will surpass the U.S. in the mid 2020’s although that number may

be revised due to the current economic woes gripping China. One area where China is

lacking is in energy resources. While China does have access to oil and natural gas fields

they are the worlds leading consumer of energy resources. It is this consumption that is

partially behind the land reclamation efforts within the region of the South China Sea.

This region is rich in natural resources such as oil and gas deposits as well as abundant

fishing grounds. As China increases its territory it increases its ability to access these

resources spurring conflict with its regional neighbors who dispute Chinese territorial

claims.

China is also diversifying their portfolio when it comes to energy trading partners.

Some of the trading partners are also trading partners with the United States and a battle

between two nation’s vying for most favored status can occur if diplomatic overtures are

misinterpreted. A few of the trading partners with China are countries that the United

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States does not support and Chinese financial support will allow these countries to

develop infrastructure that can be used to challenge the United States.

It is this ability to challenge the United States not only directly but also indirectly

through economic involvement with countries that have an adversarial relationship with

the United States. This leads to the question of Chinese foreign policy. Is China’s

aggressive foreign policy and military modernization challenging the status quo and

leading to a potential Cold War relationship with the United States? The global

ramifications that can occur if the United States enters into a cold war with China could

be disastrous.

Literature Review

There are several thematic viewpoints when reviewing the literature associated

with this topic. The literature can be broken into groups of conflicts as the Pacific region

has numerous territorial disputes ongoing at the moment. These territorial disputes

involve one principle nation, that being China, and several other nations such as the

nation of Japan, Korea, Philippines, Vietnam, Taiwan and Indonesia. Not only are these

countries disputing China’s claims to territorial waters and island chains but several of

these nations are important allies to the United States.

From these conflicts emerging themes begin to develop within the prevailing

literature. These themes coincide with the topic itself and are: defense, economics, and

cyberspace. These themes can be broken down even further and subcategories from the

main themes can be developed. The thematic element of defense can be broken down into

the categories of military modernization, weapons technology, and tactics and defense

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strategies. Within the economics theme the literature can be broken down into defense

spending, development of natural resources, and market and currency manipulation.

Cyberspace can be broken down into cyber attacks, cyber espionage, and critical

infrastructure.

The literature on each conflict within the region has similar themes throughout the

scholarly articles and peer reviewed sources, however there are subtle differences within

each conflict that cannot be ignored. While the United States does not have any territorial

claim at stake within the Pacific region, the United States has treaties and pacts with

nations that do have claims and the United States could be drawn into a deeper conflict

depending on other nations reactions.

One theme in the literature that stands out as its own category is exploring the

conflict from a historical perspective. The United States and other Western powers have

been involved in Pacific affairs since early trading began with the British Empire. There

have been numerous conflicts within the region involving the British, Russians,

Americans, Chinese and Japanese. There were the Opium Wars and Boxer Rebellion

against the British and the Russo-Japanese war as well as the Sino-Japanese War. The

Spanish American War saw the United States seizing territory from Spain such as the

Philippines.

The ramifications from the Sino-Japanese War have led to tensions today. The

Japanese and Chinese are disputing territorial claims over the Senkaku/Diaoyu island

chain. This island chain along with other territorial disputes is leading to an increase in

tensions.

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It is history that both China and Japan are using to claim the islands as their own.

Jean-Marc Blanchard starts by cataloging when each country claims they discovered the

territory. In 1372 China claims to have discovered the island chain. Documents from the

Qing and Ming courts such as travel records help support China’s long-term claim to the

island chain. Erdem Denk writes in his article titled Interpreting a Geographical

Expression in a Nineteenth Century Cession Treaty and the Senkaku/Diaoyu Islands

Dispute about the Shimonoseki Treaty, which helped end the war between China and

Japan during 1894-1895 that this treaty ceded the islands to Japan to end the dispute.

Understanding the historical conflicts within the region can assist policymakers

when navigating the difficult foreign policy process in dealing with all of the disputes

that are popping up within the region. This understanding can also help U.S.

policymakers in dealing with China while tensions currently continue to rise.

One form of foreign policy that is utilized within the region is gunboat diplomacy.

Christian La Miere defines gunboat diplomacy as:

“A definition of the nebulous concept of gunboat diplomacy could, then, run

along these lines: the overt use of naval or paramilitary power in kinetic or non-kinetic

operations designed to intimidate militarily to further a political goal, often unstated, of

deterring or coercing an opponent. Gunboat diplomacy is essentially a muscular form of

negotiation, with gunboats as the instrument”1

This form of foreign policy has been used in the region numerous times either by

the United States or China. The earliest use of “gunboat diplomacy” by the U.S. was

when Commodore Perry headed a diplomatic mission to forcefully open Japan to U.S.

1 Le Mière, Christian. 2011. The Return of Gunboat Diplomacy. Survival (00396338) 53 (5) (Oct): 53-68

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businesses and trade. The Japanese were convinced to open up trade because Perry sailed

warships into Tokyo harbor to begin negotiations. Presently any joint military operation

with Korea or Japan by the United States can be viewed by China as a form of gunboat

diplomacy as the Chinese may view the exercises which are labeled as joint defense

operations being a preparation to defend against the Chinese.

The Chinese also engage in gunboat diplomacy to achieve foreign policy.

“In November 2004 a Chinese nuclear submarine cruised into Japan’s territorial

waters near the Okinawa Islands. In response, the Japanese government dispatched

several Japanese naval ships and planes to chase the Chinese submarine until it navigated

into international waters. This event, which potentially could have become the first

exchange of fire between Japan and China since the Second World War, illuminated

increasingly problematic security relations between the two neighboring countries in the

twenty-first century.”2

The Japanese have strong political, economic, and military relations with the

United States, however historically the Japanese relationship with the Chinese has been

strained at best and openly hostile at its worse. This relationship could further strain

relations between the U.S. and China especially if the Japanese escalate issues over

disputed territories such as the Senkaku /Diaoyo island chain.

Coinciding with the historical theme that is prevalent in the literature is the

thematic element of military and defense. The United States has been involved militarily

within the Pacific region since the Spanish American War. Historically the Chinese and

Americans have been cooperative within the region with the United States coming to

2Tsukasa Takamine, “A New Dynamism in Sino-Japanese Security Relations: Japans Strategic use of Foreign Aid” The Pacific Review, Vol. 18 No. 4 December 2005: 439–461

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China’s defense during World War II. With the rise of communism in the region this

cooperation changed as U.S. forces fought Chinese forces in the Korean conflict. From

then on the relationship between the United States and China has been less than amicable.

China is challenging the United States militarily with its land reclamation efforts

and aggressive foreign policy and is in the process of intimidating American allies within

the region. When Secretary of State Hilary Clinton stated “freedom of navigation in the

South China Sea as a national interest”3 the Chinese government responded by organizing

and conducting one of the largest live fire drills within the history of the People’s

Liberation Army and Navy (PLAN). This drill demonstrated how China would respond

to threats within the region and shows that they are willing to use force if necessary to

achieve political and national security gains.

The Chinese have learned from historical mistakes when it comes to military

operations. During the Sino-Japanese war the Chinese were thoroughly embarrassed by

the more modern Japanese military. Large swaths of territory was ceded to the Japanese

upon their victory and the Chinese were forced to pay 200 million taels a form of silver

currency as part of the peace deal negotiated with the Japanese.

The history demonstrates that the Chinese do not want to be militarily

disadvantaged again when it comes to disputes within the region. This is why the

modernization of the PLAN has been such a priority for China. Historical tactics such as

gunboat diplomacy that have demonstrated success have been employed by the Chinese

to project power and strength.

3Le Mière, Christian. 2011. The Return of Gunboat Diplomacy. Survival (00396338) 53 (5) (Oct): 53-68

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Industry leaders in military analysis such as IHS Jane’s Information group and

online magazine National Interest discuss the modernization of the PLAN at great length.

The National Interest outlined several weapons that the Chinese have that the United

States should be concerned about. One such weapon is the DF-21D anti-ship missile

known as the Dong Feng. This missile is a hypersonic land based system that is launched

from a mobile platform. Due to the kinetic energy and payload this missile carries it is

possible that a direct hit on a U.S. aircraft carrier would result in the total destruction of

the ship causing it to sink or at the very least rendering it completely ineffective and out

of the fight.

Another weapon system that not only is the United States concerned about, but

also other nations that are currently engaged in territorial disputes are concerned about is

the Type 071 Landing Platform Dock. This vessel can carry one battalion of Chinese

Marines the total force being approximately 400-800 personnel. 18 armored vehicles

would support these Marines.

China is modernizing their military especially their naval capabilities. The efforts

of the Chinese to transition from a brown water navy with the goal of coastal defense to a

blue water navy with the goal of open sea power projection are quite evident in the

literature. This modernization has caused concern with countries in the region and has

spurred vigorous debate about the Obama administration’s policies on the subject matter.

While China is modernizing their military not all scholars agree that the Chinese

are the threat that they are made out to be. John Ganumt writing for the journal Foreign

Policy argues that Chinese military leaders may be overestimating their power and that

the Chinese military is handicapped with corruption, and communication and

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coordination between the branches is minimal. Ganumt is not the only scholar who

expresses this sentiment as J. Marshall Beier also agrees. In his work Bear Facts and

Dragon Boats: Rethinking the Modernization of Chinese Naval Power Beier compares

the Chinese naval fleet to the old Vladivostok Maritime Fleet that was stationed at the

port of Vladivostok.

“From our vantage point at the beginning of the twenty-first century, these

revelations might be little more than an historical curiosity were it not for a range of

compelling similarities between the Soviet-era assessments of the VMF and recent

interpretations and characterizations of Chinese naval modernization.”4

While these scholars are not alone in their thinking they are in the minority. After

all the portrayal of a nation that engages in a more hostile form of diplomacy becoming a

superpower can help drive defense budgets and influence lawmakers. Even though the

threat of China may be exaggerated and the Chinese military may only be a “paper tiger”

the literature agrees that China is currently engaged in a modernization and

reorganization of their military.

Another aspect of military modernization and a theme that represents a stand-

alone argument throughout the literature on the subject is the thematic element of cyber

warfare. This is a relatively new issue and even with it being such a new topic a vast

amount of literature has been written on the subject. Cyberspace has added a new battle

space when it comes to warfare. This is a dimension that has been exploited by China and

the United States.

4 J Marshall Beier “Bear Facts and Dragon Boats: Rethinking the Modernization of Chinese Naval Power” Contemporary Security Policy, Vol. 26 No. 2 August 2005: pp. 287-316

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Defining cyber war is a difficult task as it is a new dimension of warfare and it is

considered asymmetrical warfare due to the unconventional nature in the way it is

utilized. Thomas Rid offers this description of cyber warfare:

“Consider the definition of an act of war: it has to be potentially violent, it has to

be purposeful, and it has to be political. The cyber attacks seen so far, from Estonia to the

Stuxnet virus, simply don’t meet these criteria”5

Other scholarly articles have challenged the definition of cyber war offered by

Rid and the definition has been challenged by events themselves. Denial of service

attacks occurred before the Russian’s invaded Georgia in 2008. Similarly when the

Russian’s invaded the Crimean Peninsula in Ukraine the cellular networks the Ukrainian

parliamentarians used to communicate with each other was disrupted. This disruption

especially in the case of Georgia caused significant communication failures that enabled

the Russian’s to move virtually unopposed quickly capturing military outposts.

Cyber attacks are not a new tactic being used by the Chinese against the United

States or U.S. interests. When the Chinese Embassy was accidently struck by a B-2

bomber in the Kosovo air campaign in 1999 the Chinese responded by attacking

government websites in denial of service strikes. After the midair collision between a

Chinese fighter and a U.S. P-3 Orion in 2000 the same Chinese nationalists defaced U.S.

government websites and disrupted the White House website. Even though no critical

infrastructure was affected these attacks demonstrated the Chinese were not afraid to

5 Rid, Thomas. "Think Again: Cyberwar." Foreign Policy, no. 192 (Mar, 2012): 80,84,9, http://search.proquest.com/docview/927664011?accountid=8289.

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conduct attacks in the cyber realm and they were not afraid to conduct these operations

overtly.

Recent news headlines have shown that the Chinese are still actively engaging in

a cyber campaign against the United States. An article from Forbes details a new cyber

attack perpetrated by the Chinese government. This attack targeted defense contractors

and stole terabytes of data. This attack called Operation Iron Tiger occurred over a period

of several months. The recent hack of the Office of Personal Management (OPM)

exposed thousands of U.S. government employee’s personal files. These files contained

financial data and other sensitive data such as the detailed information given during a

background investigation. It is reported that the Chinese government is building a giant

index of government employees keeping track of the employees most intimate and

sensitive data. The fear by members of the intelligence community is that this

information could be used to expose or embarrass a professional within the intelligence

community and have him/her work for the Chinese government. While this attack is the

most recent it is one of many attacks conducted by the Chinese. The Chinese have

targeted companies like Boeing, Lockheed Martin, Northrup Grumman stealing

intellectual property and gaining access to classified programs. The Chinese have also

accessed databases on critical infrastructure like power stations and natural gas pipelines.

These attacks have demonstrated the vulnerabilities of cyberspace and computer

networks and the reason to develop a strong cyber defense network. James Adams who

wrote an article titled “Virtual Defense” for the journal Foreign Affairs proposes this type

of defense. In this article Adams gives examples of historical operations such as “Eligible

Receiver” and “Zenith Star” which were operations where National Security Agency

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(NSA) hackers using publicly available hardware and software were able to break in and

demonstrate the havoc that can be caused by an unprotected cyberspace.6

Not only is critical infrastructure affected but other areas are affected as well. The

Sony hack by the North Koreans demonstrated that cyber attacks can and will target

every aspect of American culture and values. After the release of “The Interview” by

Sony pictures the North Koreans hacked into Sony networks and released damaging

information about the company. This released information lead to the resignation of the

CEO of Sony Pictures over the damaging emails. More disturbing than the release of

leaked emails by executives from Sony Pictures was the veiled threat on anyone who

attended a theater to watch the movie. The North Koreans implied that it would be

dangerous to see the movie in theaters and referenced the Aurora Colorado movie theater

attack. This was a blatant attack on America’s value of freedom of speech. While the

Chinese did not perpetrate this attack it is a tactic that they can use in the future.

The critical infrastructure is important and developing a cyber defense is crucial

especially as adversarial nations develop their cyber capabilities. Not only will the United

States need to develop a strong defense to counter cyber attacks from nations and nation-

states but it will also need to address the capabilities of “hacktavists” groups such as

Anonymous and others as these groups could be persuaded or manipulated to act on

another nation’s behalf.

Col. Matteo Martemucci argues that while the majority of literature on topics

related to the cyber domain discuss cyber defense and cyber attacks the literature ignores

the most significant and pressing threat from cyberspace and that is the economic damage

6Adams, James “Virtual Defense” Foreign Affairs Vol. 80 No. 3 (May/June 2001)

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done by cyber espionage. While the government defends the domains it is responsible for

such as .mil and .gov domains the commercial sector in the Internet or public sector such

as .com, .edu, .org domains are left to fend for themselves. It is this area that a nation

such as China has chosen to exploit. Government hackers have stolen voluminous

amounts of data and have suffered little repercussions for their actions.

“The greatest single threat to the American national existence we enjoy today is

the systematic, long-term economic espionage by nation-states, like China, that

contribute to the shifting of the balance of economic power away from the U.S.”7 This

argument not only sounds the alarm over the intellectual property that has been stolen but

that it gives the thief a distinct advantage that possesses that property. Theft of

intellectual property will save money and time in research and development because that

process is entirely skipped. It may also allow a company to get a counterfeit product out

ahead of the actual products release. All of these scenarios undermine our economic

output and allow a country that engages in these practices to increase their economic

output thoroughly burying their rivals.

Economics and economic warfare is another important theme in the exploration of

this topic and a theme that helps paint the picture of the tension between the Chinese

government and the American government. Currency and market manipulation as well

as the battle for control over natural resources such as oil, gas, and abundant fisheries will

continue to drive the conflict with regional powers vying for control and potentially

relying on foreign alliances for support.

7Martemucci, Matteo “Unpunished Insults-The Looming Cyber Barbary Wars” Case Western Reserve Journal of International Law Iss. 47 (2015)

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Harry Hongyi Lai outlines three steps the Chinese have taken when it comes to

resources in his article for the Third World Quarterly. China has expanded its overseas

supply of oil from the Middle East, they have diversified their trading partners reaching

out to Africa, the Americas, and Russia, and they have secured oil routes. Currently

China imports half of its oil but this is projected to grow as China’s economy grows and

demand for oil increases. Japan and China combined consume 15% of the world’s oil

resources and while China imports approximately half of its oil for consumption Japan

imports all of the oil it consumes. With the discovery of oil reserves in the continental

shelf in the disputed regions this becomes important territory that China will want to

control. “Currently, this region retains proven oil reserves of seven billion barrels and a

production capacity of 2.5 million barrels per day.”8 Chinese analysts believe that within

the region there is 2000 trillion cubic feet of natural gas, however most analysts believe

that the Chinese data is grossly exaggerated.

The United States Geological Survey estimates that there are 5 to 22

billion barrels of oil and that there are 70 to 290 trillion cubic feet of natural gas in the

South China Sea. These numbers are just estimates and in some cases new technology

needs to be developed to exploit these resources. In fact China just commissioned a semi-

submersible oilrig in May. This rig is known as the Haiyang Shiyou 981 (HYSY 981) and

it is technologically advanced enough to open up everything but the deepest seabeds or

trenches. With the vast amount of potential resources in this area and the entire region of

Asia clamoring for more resources as their economies develop this area has the potential

to be a flashpoint of conflicts in the future. 8Rowan, Joshua P. 2005. The U.S.-Japan Security Alliance, ASEAN, and the South China Sea Dispute. Asian Survey 45 (3) (May/June): 414-36, http://www.jstor.org/stable/10.1525/as.2005.45.3.414.

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Dr. Martin Murphy writing for the Naval War College Review comments on how

the Chinese are using deep-water oil rigs as strategic weapons. He quotes Wang Yalin of

the China National Offshore Oil Corporation of saying that mobile deep-sea oilrigs

should be “our mobile national territory and a strategic weapon”9. This commentary,

which was made by a chairman of a company and not an official from the Chinese

government, does not necessarily mean that this statement is official government policy.

However any nation involved in territorial disputes especially one pertaining to the

exploitation of resources involving a deep sea oil rig seeing these statements would be

less likely to engage in friendly negotiations.

This aggressive talk has many nations in the region and nations that have

economic powers worried. The South Pacific in particular the Malacca Straits is the most

heavily sea trafficked area in the world. Approximately 50% of the world’s merchant

fleet tonnage transits through this region. While piracy has been an issue in the Malacca

Straits it is a minor issue comparatively to a hostile nation blocking the straits or seizing

the region as their own.

Another issue in the economic theme that is throughout the literature is the

economic manipulation by the Chinese government. This manipulation is caused by the

Chinese manipulating the markets or by devaluing their currency the Yuan. Devaluing

the Yuan allows the Chinese to buy domestic products at a cheaper rate than import.

Heavy government subsidization has resulted in Chinese companies being able to

produce and sell their marketable goods at rock bottom prices undermining foreign

companies. This ability to sell exports to the United States domestic market well below

9Murphy, Martin. "Deepwater Oil Rigs as Strategic Weapons." Naval War College Review 66.2 (2013)

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the price enables the Chinese to gain more revenue from our market and it damages

domestic businesses and ensures that start up companies do not survive. The Chinese then

attempt to purchase these companies at prices well below market value and will achieve

monopolies in certain industries.

Not only is subsidization of Chinese companies an issue that is creating tension

amongst China and the United States, the fact that counterfeiting and piracy in China is a

rampant problem that is unaddressed gives the Chinese a distinct advantage.

“What’s more important is the theft of the blueprints for high technologies. I hear

all the time about American companies who find themselves competing in the

marketplace with a Chinese product, and they take it apart, and they find themselves

looking in the mirror because the Chinese have just stolen the plans of their own

product.”10

This is an issue that is addressed in the literature related to cyber security and

cyber defense. As an economic issue it gives the Chinese company an advantage as the

theft of intellectual property saves the company that pilfered the secrets to skip the entire

research and development process and all the time and financial investment that occurs

during that process. Counterfeited products also flood the market with cheap products

that without intimate knowledge of the product the average consumer will believe came

from the original company. In cases that these products do not live up to standards then it

will be the name brand company that will get the blame and not the company that has

produced the counterfeit products. This undermines the credibility of the original

manufacturing company and the public loses trust in the company even though the 10Navarro, Peter. “China’s Currency Manipulation: A Policy Debate” World Affairs September/October 2012

26

company is not at fault.

The conflict between the United States and China will continue to grow. The

literature on this topic provides numerous examples of issues between these two nations.

As has been demonstrated by the literature the relationship between China and the United

States is a complex relationship made more so by the various alliances and different

political power struggles in the region. This is an important topic that will require smart

leadership and decisive action when navigating the pitfalls of foreign policy.

Methodology

During this study the data will be collected using secondary sources. These

sources will include scholarly articles from journals and publications within the field of

study as well as press releases, government reports and statistics, and news reports from

respected and credible journalistic outlets. The data collected will attempt to answer the

research question of this study; “Due to aggressive foreign policy and military

modernization is China challenging the status quo and entering into a Cold War with the

United States?”

Identifying the independent and dependent variable is important for any scholarly

study or research. An independent variable is a variable that is causal in nature and it will

effect or influence a dependent variable. The dependent variable is just the opposite of an

independent variable as the dependent variable does not cause an effect but it is affected

by other variables whether they are the independent variable or other variables not listed.

Some of these other types of variables that influence the dependent variable are:

mediating variables, antecedent variables, and intervening variables. The dependent

27

variable in this study will be the relationship between the United States and the Chinese

government. The independent variables are the variables that will affect this relationship

between the two governments. These variables include economic data, military

deployment and strategies, and operations in the cyber realm including cyber espionage

and sabotage.

The measurement of these variables is what helps the reader to understand the

data that is being analyzed and how it affects the relationship between the two nations.

Economic data can be measured in several ways to help determine the tension and strain

that it puts on the Chinese and American relationship. A measurement of economic

output can be used as supporting evidence for rising tensions. Using data that

demonstrates the differences in currency and measuring it over a 10-year time period will

help demonstrate the differences in the currency rate and help to prove the hypothesis that

China is devaluing the Yuan fueling tensions between the United States and China. The

importation of natural resources as opposed to domestic production will give the reader a

good indicator of the imbalance that exists between the two countries. This will also be

an indicator of why tensions have increased between the United States and China. The

measurement of data demonstrating economic imbalances will support the hypothesis that

China is challenging the United States for a more dominant role on the world stage. A

third measurement of economic data such as military expenditures will also paint a

clearer picture of the ongoing diplomatic issues and it will also be used as supporting

evidence in the measurement of the military deployment and strategies independent

variable.

28

Measuring the military strategy and tactics variable that affects the dependent

variable of the relationship between China and the United States is measured using

qualitative and quantitative data. The quantitative data that is used to measure China’s

military modernization is the analysis of military expenditures and the percentage of the

budget that has been allocated towards the military over a period of ten years. Also

statistical analysis of new weapon systems and the number of weapons systems that have

been fielded will serve the purpose of measuring the modernization of the military. The

qualitative measurement of the military issues as well as the political issues that are

causing a rise in tensions in the region is measured by reviewing scholarly articles and

news reports. These articles are analyzed using social theories of international relations

such as the realist theory and institutionalism theory.

The independent variable of cyber attacks is also measured using a mixed

methods approach of measuring qualitative and quantitative data. The qualitative data is

gathered by the review of journals and articles written by the experts in the field of cyber

operations. This data will be analyzed looking for specific patterns within the literature to

determine if certain sectors or industrial areas in the economy are being targeted. The

quantitative data will measure the frequency and number of attacks. The increase of

attacks could help prove the hypothesis of the paper that tensions are escalating between

the Chinese and the United States and these tensions are precipitating a Cold War

atmosphere.

The primary theories used to examine this paper will be modeled from the

International Relations model. The two primary theories that will be used to view the

issues of the relationship between the United States and China are Realism and

29

Institutionalism. Both of these theories can help understand the complex issues that are

involved within the relationship between the United States, China, and other regional

powers.

Realism is a theory that looks at the international system as a system that is in

anarchy and lacks a centralized power structure. The realist approach would look at the

power shifts in each conflict. Each influencer on international security would be weighed

by where the concentration of power is and where it would be shifting too. A realist

would look at the conflict as winners and losers and who would benefit from these types

of conflicts. The only authority that a realist theory would recognize would be the law

maintaining peace. This authority would be difficult to enforce and issues that have

occurred with United Nation’s intervention and involvement with conflict scenarios have

demonstrated this difficulty of central control or authority. This method is really only

enforceable against smaller nations as it is very difficult to get a consensus for larger

nations to act. Under this theory power is crucial especially state power because this is

how the states retain their autonomy and survive as a singular sovereign state. A realist

theory believes that survival is the most important goal of a state. A foreign invasion

either militarily or by other means are seen under this theory as the most urgent need that

needs to be addressed.

This theory looks at the situation between the United States and China and views

it as two governments in conflict. Both governments are retaining their autonomy when

dealing with each other. The Chinese have unilaterally began land reclamation efforts in

the South China Sea even though numerous nations within the region have protested. The

30

United States has strongly condemned the Chinese for failing to reign in cyberattacks and

industrial espionage.

The other theory that will be used to help analyze this topic is institutionalism and

the theory of institutionalism views international relations similarly to the realist theory.

However there is one key difference and that is an institutionalist believes that states can

cooperate with each other. The reason for this cooperation is that the states are acting in

their self-interest. This self-interest may be an economic interest or it could be a smaller

nation relying on a more powerful nation for protection. An institutionalist sees this

cooperation as genuine while a realist would see the cooperation as a coercive act by the

state. A subset to this theory is the liberal theory of international relations. A liberal

would highlight the transitioning democratic governments and encourage international

organizations and cooperation. In this approach to conflict a liberal would not see one

nation as more powerful than other or as the parties involved in the conflict as winners or

losers. Instead they would focus on cooperation and compromise whereas the hopeful

resolution to the conflict would be peaceful with both sides coming to a mutual

agreement. The cooperation between states is what makes the liberal theory and

institutionalist theory very similar.

This theory is applicable to the relations between the various regional powers

within the geographical region of study. As China strengthens and flexes military muscle

smaller nations such as the Philippines, Vietnam, and Japan may put aside historical

differences to promote cooperation and unite against a bigger perceived threat. If we look

at France and Germany as a model of cooperation these two nations have successfully put

the past conflicts and differences behind them. France and Germany cooperate

31

economically and politically to achieve the highest potential for both the respective

nations. The past conflicts may be more difficult for China and Japan to overcome

especially as both nations continue to stoke the past conflicts with inflammatory rhetoric

and controversial memorialization. It is important to look at this theory in relation to the

hypothesis as the relationships of other nations specifically any sort of military alliance or

pact will have an effect on the relationship between the United States and the Chinese

government.

With any study there will be limitations within the research design that need to be

addressed to understand the topic and to allow further research to fill in the gaps that may

have been missed due to limitations and constraints. The limitations of this study will be

the timeline in which the study will be conducted as the short timeline prevents the

analysis and review of all pertinent data. Another limitation is that since the study is an

analysis of foreign relations between two powers the access to material that would be

relevant may be blocked due to government classification. A language barrier is another

limitation of the study. Important documents and even relevant news articles will be

written in the native language. There are numerous countries within the region of study

and the lack of knowledge of the written language of these countries prevents a total and

complete analysis of the subject. The timeline of the project will make it difficult to

properly request documents under the Freedom of Information Act. These requests need

to be properly completed and usually take several months to process. This may leave out

data that may be relevant and crucial to the study.

The biases that will affect the study will be related to the access of material. Any

foreign material produced by the Chinese government would obviously be slanted in a

32

way as to promote Chinese values. Due to the lack of knowledge of Mandarin Chinese,

reports and documents by the Chinese government and Chinese news outlets and other

media will be written in English. Since an English speaking audience is targeted the

documents will primarily promote the Chinese government’s policies. The similarity may

also be found in documents produced by American government officials but it would be

much less pervasive in American documents as the American government is more open

and transparent than the Communist party in China. However careful vetting of Western

media sources that have been used as secondary sources is needed as these media sources

may be biased towards supporting American government or similar Western style

policies within the region. Similarly access to material that would paint a clear picture of

the situation and give a greater understanding of the roles being played out may be denied

further limiting a complete and comprehensive study.

This methodology section outlines the research design so that other researchers

can replicate the study to further add information and data to the topic being studied. It

describes the methodology used and the theoretical framework used to reach the

conclusion of the paper. This is an important section as it validates the work and lends

credibility to the study.

Findings

The Chinese government has been steadily increasing the military budget and

increasing funding for specialized programs and purchasing upgraded military

equipment. The Chinese military budget has been averaging an annual ten percent growth

since 2005. This growth has gone into weapons development and to upgrading military

equipment. Not only has the budget gone into upgrading military equipment but it also

33

went into pay raises for the troops. Large pay raises went into effect in the year 2006,

2008, and 201111. As well as pay raises the Chinese government upgraded living quarters

and raised the standard of living for the soldiers serving in the armed forces. The Chinese

recognized that upgrading a military also requires increasing the morale of the troops

serving in the military.

It is difficult to measure the exact figures of China’s military budget as a lot of

data is excluded from public view. Some of the exclusionary data is the budget allotment

for paramilitary forces, strategic forces, and specific research and development. Due to

the opaque nature of the budget in China it is difficult to provide accurate analysis

however the current trend of double digit increases in military spending is forecasted to

continue.

The Chinese government has been modernizing the PLAN with new weapons

systems under development and being fielded as well as the procurement of more modern

military technology. Recently China reached an agreement with Russia to purchase 24

Sukhoi-35 fighters. This is a deal that is estimated to be worth 2 billion dollars and it is

the largest sale between the Chinese and the Russians. The Sukhoi-35 is a multi-use

fighter with a range of 1,944 nautical miles and the capabilities to carry a max armament

payload of 17,636 lbs. of a variety of different weapons from air-to-air to air-to-ground

missiles as well as guided bomb units.

The Chinese J-20 is another indicator of PLAN modernization. This is an

indigenous 5th generation stealth fighter. While it is manufactured independently in China

a number of U.S. officials suspect that data stolen from defense contractors in acts of 11Blasko, Dennis J. 2011. "An Analysis of China's 2011 Defense Budget and Total Military Spending -- The Great Unknown." China Brief 11, no. 4: 4-6. International Security & Counter Terrorism Reference Center, EBSCOhost (accessed November 25, 2015)

34

cyber espionage have aided the development of this fighter. The airframe suggests that

the J-20 will be an air superiority fighter. The J-20 is in its final testing phase and is set to

be operational in 2018.

While it is important to have offensive aircraft these aircraft will have limitations

such as range and length of time spent on station. Important logistical requirements such

as fuel will need to be considered. The Chinese have ordered 10 IL-78 aerial tankers from

Russia and 3 IL-78 tankers from the Ukraine. Currently they have one IL-78 tanker that

has been delivered from the Ukraine. The tankers ordered from Russia have not been

delivered due to contract negotiations and labor disputes with the manufacturing

companies. These tankers will be an updated addition to the Chinese aerial tanker fleet a

fleet that consists of 12 H 6-U tankers currently. If the Chinese want to continue the trend

of modernization of the air force than they will need to invest in the infrastructure to base

the tankers as well as invest in more capable and modern tankers to sustain future air

campaigns. The deal with Russia is an attempt to modernize their tanker fleet however

the longer the deal stalls the more likely it is that the Chinese modify an existing airframe

and begin domestic production of a tanker.

The Chinese are currently developing an aerial platform that will not require

refueling. This airship is a lighter than air aircraft inflated with helium and equipped with

solar panels to power the propellers allowing the aircraft to be moved into a position of

the aircraft operators choosing. This airship is called the Yuanmeng and will allow the

Chinese government new capabilities in surveillance and can be used to detect enemy

ships and relay-targeting data to land based missile systems or other aircraft. While

lighter than airships are not new technologies the ability for the Yuanmeng to achieve an

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altitude of 328,000 is remarkable as this is considered the edge of space and no other

military aircraft can fly at that altitude.

It is not only the air force that the Chinese are modernizing but the Chinese have

focused on modernizing the naval forces of the Chinese military. The Chinese have three

naval fleets the Beihai Fleet, the Donghai Fleet, and the Nanhai Fleet. The Donghai and

Nanhai Fleets are headquartered in the southern portion of China. Both of these fleets are

headquartered very close to Taiwan. The Beihai fleet is in Shandong province, a province

that is farther north and is geographically situated to be able to respond to any threat from

Japan or Korea.

The Chinese commissioned the Liaoning in September 2012 the first aircraft

carrier of the PLAN. The Liaoning originally started out as the Russian aircraft carrier

Varyag however it was not completed and sat in a Ukrainian naval shipyard until it was

purchased by the Chinese. The Liaoning is a medium class carrier and can carry thirty-six

fixed wing and rotary wing aircraft.12 The Liaoning has finished sea trials and while it is

operational it has not been assigned to any of the three PLAN fleets it currently is being

used to conduct training in flight operations and carrier operations. The Chinese are

pursuing a domestic carrier program and IHS Jane’s has photographs of a ship being built

in the Dalian shipyard that has remarkable similarities to the Liaoning. While the Chinese

have not confirmed that this is a new carrier being built if the ship in the Dalian shipyard

once completed is another carrier it will demonstrate that the PLAN is committed to

developing a domestic carrier program.

12Scobell, Andrew. McMahon Micheal, Cooper Cortez “China’s Aircraft Carrier Program: Drivers, Developments, Implications” Naval War College Review Autumn 2015 Vol. 68 Iss. 4

36

Even though the Liaoning is an older Russian style aircraft carrier the Chinese

have made several upgrades to modernize the carrier and bring it on par with other navies

aircraft carriers. The Liaoning will have a complement of 26 J-15 fighters, 18 anti-

submarine warfare (ASW)/search and rescue (SAR) helicopters, and 4 anti-electronic

warfare (AEW) helicopters. The Liaoning also has impressive defensive capabilities. It is

armed with 3 FL-3000N surface to air missile batteries. Each launcher holds 18 missiles

for a total of 54 missiles. These missiles are not only designed to take out enemy aircraft

but the missile is also capable of intercepting anti-ship missiles. With the FL-3000N

batteries capable of destroying aerial threats the Liaoning also has 2 ASW launchers that

fire rockets capable of destroying submarines. These launchers have a total of 12 barrels

each bringing the total number of ASW rockets to 24. Included in the Liaoning’s

defensive arsenal are 4 chaff launchers with 24 barrels each. The chaff will be launched

as a last resort to hopefully confuse incoming missiles. The final defensive weapons on

the Liaoning are 3 Type 11 30mm CIWS weapons.13 This weapon system literally lays

out a wall of lead in front of incoming missiles to destroy them before they impact the

carrier. These weapon systems make the Liaoning a formidable offensive platform

capable of projecting naval air power beyond the shores of China.

The development of a domestic carrier program demonstrates that the Chinese

have committed to modernizing the PLAN and shifting from brown-water littoral

operations to a blue-water navy that is capable of projecting power farther from the

Chinese shoreline. Not only are carrier’s expensive propositions to build but they also

require extensive support in maintenance and logistics this also requires significant

13Lockie, Alex. “Here’s How China’s Aircraft Carrier Stacks Up To Other World Powers” Business Insider September 10 (2015)

37

funding and a political commitment to ensure adequate funding for the life of the

program. Aircraft carriers also require protection and modern escorts to defend the carrier

from external threats. If the PLAN pursues a domestic carrier program it will need to

ensure that the escort ships are modernized and upgraded as well as the crews properly

trained so the PLAN is not unnecessarily risking an important asset.

As the Chinese continuously fund the PLAN to pay for new ships and equipment

upgrades the Chinese government is also engaged in controversial land reclamation

efforts within the South China Sea. Currently the Chinese are involved in territorial

disputes with the Philippines, Taiwan, and Vietnam over the Spratly Islands and are

engaged in disputes with Japan over the Senkaku/Diayou Island chain. The Chinese are

claiming these island chains as sovereign territory and are developing facilities on reefs

that are being developed in to islands by land reclamation to support these claims.

An example of this can be seen on the island known as Fiery Cross Reef. This

was just a small reef before Chinese vessels began dredging around it and expanding it to

a size where facilities could be built. According to satellite imagery a runway is nearly

complete on this island. The runway once complete would be able to support most

military aircraft in the Chinese Air Force and would allow the Chinese to have air

coverage in most of the disputed area in the South China Sea.

China has been aggressive with the land reclamation efforts creating seven new

islets from submerged reefs in the past few years. While Fiery Cross Reef has an airstrip

near completion two other reefs Subi Reef and Mischief Reef would also have an airstrip

when the islands are completed. This would give the Chinese a total of three airfields in

38

the region with the ability to sustain intelligence-gathering operations and air patrols. It is

another example of power projection and challenging the status quo in the region.

Not only have the Chinese modernized their military and engaged in aggressive

tactics that have worried the other neighboring countries but the Chinese have been

accused of repeatedly conducting cyber attacks and cyber espionage on the United States

and other Western interests. These attacks have created tension between the two nations

and have been a sticking point when it comes to diplomatic negotiations.

The Chinese have taken a methodical approach when it has come to developing

cyberwar capabilities. The Chinese have developed offensive capabilities such as: the

recruitment of civilian hacker groups, the development of military cyberwarfare units, the

distribution of compromised hardware for networks, and the placement of logic bombs

and other exploitive back doors and viruses in foreign networks.14

The civilian hacker groups that operate independently but target certain foreign

government websites or monitor internal dissidents do so for “patriotic” reasons. This

actively engaged network of hackers has conducted numerous operations such as denial

of service attacks and defacing of government websites. These groups more than likely

are receiving orders from the Chinese government although there is enough distance

between the civilian hackers and the government to maintain plausible deniability. This is

where the government can deny any knowledge or responsibility for the action conducted

and will not confirm that they initiated the action. Confirmation of these actions, are

generally unlikely due to the lack of evidence confirming participation by the agencies

14 George Patterson Manson III (2011) “Cyberwar: The United States and China Prepare For the Next Generation of Conflict”, Comparative Strategy, 30:2, 121-133 (accessed October 2015)

39

running the operation. Plausible deniability can only be maintained if the operation is

kept secret. Exposure or leaks of any kind will damage the operation and may bring

embarrassment to the officials in charge as well as limit the success of the operation and

could compromise valuable assets.15

These civilian networks of hackers are not the only aspect of cyber operations that

the Chinese engage in. The Chinese have also exploited the position of being the leading

exporter of electronics for hardware and software development. The Chinese have sold

compromised network systems to various foreign governments allowing them to glean

information. In one such case compromised routers that were reverse engineered Cisco

servers were sold by the Chinese company Hauwei to Department of Defense (DoD)

contractors and clients. The compromised software would allow Chinese intelligence to

steal information, take down the networks, and degrade cryptographic capabilities.

Along with the manipulation of software and hardware produced in China the

Chinese have operatives that have placed logic bombs within vital networks in the United

States. These bombs will sit and wait until activated by the operative to damage and

degrade vital systems. The systems that have been targeted are in sectors such as the

power grid, water and sewage, air traffic control, and the financial sector. When activated

these bombs can cause widespread chaos and be used to further exploit a crisis. Deputy

Undersecretary of Defense Robert Lawless admitted that the Chinese have a “very

sophisticated capability to attack and degrade our computer systems…to shut down our

critical systems”16

15Moody, Brian “Cyber Operations: A New Frontier in Covert Operations” American Military University Mar. (2015) 16MansonGeorgeIII(2011)“Cyberwar:TheUnitedStatesandChinaPrepareFortheNextGenerationofConflict”,ComparativeStrategy,30:2,121-133(accessedOctober2015)

40

Since 2005 there have been numerous incidents of cyber attacks that can be linked

to the Chinese. In 2005 10-20 terabytes were stolen from defense contractors like

Lockheed Martin and from the DoD. In 2006 the State Department was targeted as well

as the U.S. Naval War Colleges network and in 2007 the United States Nuclear Labs

were attacked with malicious emails. In 2009 devices were left behind by Chinese

hackers in the U.S. power grid that could be used for exploitation at a later date. More

recently the Office of Personnel Management suffered a data breach where data on

sensitive background investigations was compromised. Prior to this data breach Anthem

Blue Cross Blue Shield suffered a data breach where more sensitive information was

stolen. Social Security Numbers as well as medical records were taken in this breach.

A map from the National Security Agency’s (NSA) National Threat Operations

Center (NTOC) reveals that over a five year time period 600 United States companies

and businesses have been hacked or breached and have had data stolen. This map shows

that most of the attacks have been located on the East Coast from Washington to Boston

and Silicon Valley. The state or region that had the highest amount of attacks was

California with the number of attacks totaling 50. These attacks stole data on hybrid cars

and pharmaceutical formulas as well as information related to defense technology and the

United States power grid.17

The conflict between China and the regional powers in the South Pacific such as

Japan, Vietnam, Taiwan, and the Philippines stems from territorial boundaries and the

fact that China is claiming nearly the entire South China Sea an area that is rich in

resources. These claims have led to China acting aggressively and challenging the United

17Windrem Robert “Exclusive: Secret NSA Map Shows China Cyber Attacks on U.S. Targets” NBC News July 30, 2015

41

States on the world stage emphasizing that the United States should not get involved as

this is a regional matter.

The Chinese government has diversified the country’s energy portfolio to include

more consumption of natural gas. Since the energy output of China has fallen due to

higher energy consumption by consumers the Chinese are looking for more avenues of

energy production. The U.S. Energy Information Agency (EIA) estimates that proven and

probable reserves of natural gas in the South China Sea are 190 trillion cubic feet

however this number may be higher as there are many areas in the region that are

underexplored due to the hotly contested territorial claims in these specific geographic

areas.

The Chinese have developed technology that allows them to explore and access

even the deepest areas within the South China Sea. The semi-submersible deepwater rig

Haiyang Shiyou (HSY 981) allows the Chinese to drill in the deepest waters of the South

China Sea.18 Other nations within the region do not have access to the kind of technology

that will allow them to conduct deepwater drilling operations. Even though China has the

ability to conduct deepwater drilling operations this technology is costly and unique and

it is doubtful that the Chinese will unnecessarily risk HSY 981 in disputed waters as the

political damage from any incident may be too difficult to control or deescalate

effectively.

China’s quest for natural resources have seen them enter into an area that brings

them into conflict with Russia and the United States. While not losing focus on the hotly

contested territorial disputes in the South and East China Seas the Chinese have focused

18Murphy, Martin. "Deepwater Oil Rigs as Strategic Weapons." Naval War College Review 66.2 (2013)

42

northward to the Arctic. China is not considered an Arctic state, as it does not have any

territory that borders the Arctic region unlike the United States and Russia. Even though

China does not border the Arctic region it has invested a significant amount of money for

research purposes. China “has maintained a vast, well funded Arctic research apparatus

since the mid-1990’s and has invested heavily in Arctic-resource projects in recent

years”.19 It is because of this that the Chinese feel that they should have a say in Arctic

affairs. The Chinese consider themselves a “near Arctic state” although geographically

speaking the Chinese do not possess any territory within the Arctic region. The Chinese

are also not members of the Arctic Council, a government organization that consists of

countries such as: the Kingdom of Denmark, Finland, Iceland, Norway, Sweden, Russia,

Canada, and the United States.

The Chinese have upgraded the war fighting naval capabilities of the PLAN and

are interested in upgrading the research capabilities of the PLAN as well. Currently the

Chinese operate the Xuelong translated as “Snow Dragon” a vessel that was built in the

Ukraine in 1993. This vessel has been modified to be a research vessel as well as a supply

vessel to the Arctic outposts the Chinese maintain. The Chinese have ordered a more

capable icebreaker to be built and commissioned in 2016. The icebreaker will be built in

a Chinese shipyard and Aker Arctic Technology of Finland is designing the ship.

It is important to note that the Arctic has abundant natural resources similar to the

South China Sea. Oil and natural gas have been discovered in the Arctic and the area

offers abundant fisheries as well. The Chinese with the exception of Japan would be the

19Rainwater, Shiloh. “Race to the North: China’s Arctic Strategy and its Implications” Naval War College Review Vol 66, No 2. Spring (2013)

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only country within the Southeastern Asian region to be able to exploit the riches in the

Arctic.

The Asian region has a diverse set of economies. Thailand, Vietnam, and the

Philippines are countries with developing economies while Burma is an economy that is

classified as emerging. South Korea, Japan, and China are the most developed countries

in the region with China and Japan being the primary leaders in the regional economy.

The Chinese labor force numbers at one billion and is the largest labor force in the

world. The labor force is evenly broken down by occupation as 30% of labor force works

in the industrial occupations, 36% works in the service industry, and 33% work in the

agricultural sector.20 This is in comparison to the American workforce where 70% of the

workforce is in the service industry.21 It should be noted that classification of service

industry jobs could be country specific and there may be differences in the total

percentage.

The Chinese labor force is very productive and China is the number one exporter

of goods in the world. China exports electrical machinery, data processing equipment,

and integrated circuits. China is the third largest importer in the world and it primarily

imports commodities such as: oil, natural gas, and mineral fuels as well as various ores,

medical equipment, and soybeans. The importation and exportation of goods is very

important, as this is a key driver of the global economy. Due to China’s size and power

when it comes to the global import/export market it can have a variety of effects on

foreign markets.

20World Factbook www.cia.gov (accessed November 28, 2015) 21“The Service Sector: Projections and Current Stats” http://dpeaflcio.org/programs-publications/issue-fact-sheets/the-service-sector-projections-and-current-stats/ (accessed December 1, 2015)

44

It is this ability to impact the global economy that has caused several accusations

of currency manipulation by the Chinese government. China has also been accused of

stealing jobs by luring American manufacturing to China raising tensions between the

U.S. government and the Chinese. Theft of business and industrial data and the lack of

intellectual property laws in China have also contributed to tensions between China and

the United States. In fact in 2010 the United States filed a complaint with the World

Trade Organization (WTO) against the Chinese involving intellectual property rights.

The complaint alleged that China did not do enough to criminally prosecute businesses

that engaged in the theft of intellectual property and counterfeiting manufactured goods.

Lack of regulations and environmental controls have made manufacturing cheap

in China. Minimum wage laws and worker compensation have also allowed companies to

produce and manufacture products cheaper in China than the companies would be able to

in the United States. Subsidies that are provided to businesses by the Chinese government

also give an advantage to Chinese manufacturing. These subsidies provide an unfair

advantage to businesses within China and distort the overall trade picture. In a case

regarding auto part subsidies the United States challenged the fact that China was

providing export subsidies to auto part industries a practice prohibited by the WTO.

These subsidies devalued the price of American auto parts and automobiles hurting

American businesses and increasing trade deficits.

Again in 2012 the United States filed a complaint against China with the WTO

that the Chinese were limiting the export of rare earths like tungsten and molybdenum.

This was causing a shortage on the international markets and driving up prices. China

argued that this was conserving exhaustible natural resources and that the export limits

45

were legal. The WTO did not agree with the Chinese and reached a different conclusion.

The WTO found that due to the lack of domestic conservation of tungsten and

molybdenum by the Chinese there was no necessity to limit the export market and

conserve the materials in the international market.22

China provides a variety of subsidies to its various industries. There are subsidies

for energy consumption as well as subsidized land and facilities. The Chinese also offer

tax incentives that allow a manufacturer to sell products into the U.S. market at cost but

the company will still make a decent profit. This coupled with currency manipulation has

strained ties between the United States and China as well as strained ties with other

economic powers in Asia.

Analysis

China and the United States appear to be heading into a period where relations

between the two countries are reaching a Cold War status. There is no question that the

PLAN is modernizing and upgrading the naval capabilities and transitioning into a naval

power that is not only focused on littoral or coastal defense. The Chinese recently

completed sea trials of the Liaoning and it is the first aircraft carrier in the Chinese Navy.

The land reclamation efforts in the South China Sea with the dredging and island building

are another form of power projection.

To respond to these actions and counter the threat that China can be in the region

the United States needs to solidify relationships with regional powers such as Japan and

Taiwan.

22Dispute Settlement DS 431 “China – Measures Related to the Exportation of Rare Earths, Tungsten and Molybdenum” World Trade Organization (2012) https://www.wto.org/english/tratop_e/dispu_e/cases_e/ds431_e.htm

46

“The Pacific is a vast body of water and even though technology has made

logistics easier it would still be a monumental task to move troops, equipment, and

supplies. A strong military alliance with Japan would allow the U.S. to establish a

“beachhead” in the area in the case of conflict.”23

Establishing a “beachhead” would allow the United States to respond more

quickly in the case of a conflict breaking out. Stronger ties with Japan, Taiwan, and the

Philippines would allow a U.S. presence in the region that may have the Chinese back off

and act less aggressively. Establishing a beachhead is exactly what the Chinese are doing

with the land reclamation projects and island building in the South China Sea. While

these island chains would not be able to sustain large advanced military bases they would

support airfields and small postings with communication towers and sensor relays. This

would give the Chinese the ability to have stand off distance and prevent more capable

navies from breaking through and striking the homeland.

The Chinese recognize that the United States Navy (USN) is a powerful opponent

and that one of the primary symbols of power is the aircraft carrier. This is one of the

reasons the Chinese have started a domestic aircraft carrier program. The recognition of

the USN’s carriers being a threat by the Chinese have led them to develop a weapon that

has been dubbed the “carrier killer”. The DF-21 Dong Feng is an anti-ship ballistic

missile that is fired from land based mobile truck launchers. Depending on the variant it

has a range of 930 miles to 1100 miles and it carries a 600kg warhead with the capability

of being nuclear tipped. Due to the supersonic nature of the weapon and the amount of

23Moody, Brian “The Rise of the Dragon: The Growing Chinese Threat” American Military University (Mar. 2015)

47

kinetic energy it would gain after launch it is entirely feasible that this missile would be

able to sink an aircraft carrier.

Even with the DF-21 a very capable missile the missile itself needs a significant

amount of targeting data from satellites and sensors before it is able to hit a non-

cooperative moving target. The Chinese have begun to address this both with creating

artificial islands that radar installations and other communication outposts could be

stationed on and developing technology that would assist in the location of a mobile

carrier group. The development of the Yuanmeng a lighter than air airship that is capable

of staying aloft for a 24 hour time period would be critical in feeding data to targeting

computers for any strike on a carrier group or any U.S. naval fleet operating within the

region.

The United States is very capable of destroying and disrupting the sensor network

that the Chinese would be reliant on during an open conflict. Even though the Yuanmeng

is at an altitude that is out of range for most missile systems the United States does have a

weapon that can reach it. The SM-3 Block IIA ballistic missile interceptor can reach the

altitude that the Yuanmeng operates at. This missile has been used in the past to destroy a

satellite that was in a decaying orbit and posed a threat. Another platform that can

potentially be able to destroy the Yuanmeng is the Air Force’s new space plane X-37B.

This program is highly classified and little is known about its mission or its operational

capabilities however it could be designed specifically for a mission to target airships like

the Yuanmeng or satellites that would have the effect of blinding an enemy during a

conflict.

48

The Chinese have modernized the PLAN in ways the United States has neglected.

The Chinese have made sure that PLAN warships are often armed with a complement of

anti-ship missiles capable of inflicting severe damage to most naval vessels. The USN

has focused mainly on land attack outfitting USN warships with cruise missiles designed

to hit stationary targets. The PLAN also recognizes the potential for mine warfare and

how a cheap mine can severely damage or destroy a multi-million dollar advanced vessel.

With a foothold in the Spratly Island chain the Chinese could lay out a barrier of mines

protecting the islands from any naval incursions. Laying out a minefield of sea mines

would funnel China’s adversaries to a battle space of China’s choosing.

A counter to this would be for the United States to realize that a new player has

emerged in the realm of blue-water naval operations and to modify and retrofit naval

vessels to respond to an emerging threat. Outfitting naval vessels with anti-ship missiles

as well as the typical Tomahawk cruise missile would allow the naval vessel to be more

versatile and be available for a wider range of operations. Upgrading and building more

mine warfare capable ships and outfitting existing ships with better anti-mine capabilities

should also take place.

Activities that take place between the two countries that read like they are from a

Soviet spy novel take place between China and the United States. While the Cold War

between the Soviet Union and the United States did not have the technology that allowed

for the operations that take place in the cyber realm today, similar operations of

espionage and intelligence gathering are taking place between China and the United

States. These operations are now online in cyberspace instead of the back alley meetings

that take place in cloak and dagger stories.

49

Cyber warfare can be perpetrated by state and non-state actors and because of its

nature it is very difficult to trace to a particular group and even more difficult to provide

enough evidence to sanction or punish the offending group. While undoubtedly the U.S.

uses cyber warfare to achieve its national security objectives other countries are also

engaged in cyber warfare as well.

Data breaches in government agencies as well as defense contractors have been

traced back to Chinese servers. These breaches have resulted in the loss of terabytes of

data and will give the thieves the ability to gain a rather intimate look in government

operations and insider knowledge of future weapon systems. Many analysts point to the

remarkable similarities of Chinese weapon technology specifically the Chinese J-31 as

evidence of how the Chinese used the information that was stolen and evidence that the

Chinese government was behind the data breaches

If the United States does not address cyber attacks or cyber espionage properly

then the United States will continuously be on the defensive. The situation is very serious

and it can level the playing field for nation states that would have no hope of standing up

to a superpower. If other nations with cyber capabilities see that the United States is

vulnerable then those nations may exploit the lack of cyber defense and conduct

operations similar to the Chinese.

The United States needs to invest in network defense and strengthening cyber

security. Not only do federal agencies need a strong cyber defense, businesses and

corporations need a cyber defense as well. Legislation mandating a federal minimum for

cyber defense networks should be proposed. Even if private corporations do not adopt a

strong cyber defense any company that does business related to national security or

50

defense or a company contracted by the federal government should have a mandatory

minimum set for cyber defense networks.

The reasons that private companies need a stronger cyber defense is that breaches

in private corporations can expose vulnerabilities at the federal level. The recent hack of

Ashley Madison a company that promotes discreet liaisons between married adults

exposed a number of federal employees who had signed up for the service. This exposure

wasn’t just a personal embarrassment but it opened up the employee to exploitation by

foreign services. The employees using this service became compromised and had

material that could be used to manipulate them into revealing sensitive or classified

information.

A data breach at the Office of Personnel Management (OPM) exposed thousands

of personnel files of employees working in the federal government. These files contained

sensitive information about background investigations, discipline, and information on

family members. The Chinese have been building a Facebook type database of federal

employees, this online lexicon will give the Chinese an idea of a specific individual that

should be targeted for possible exploitation.

The United States has lodged formal complaints about Chinese cyber practices

with the WTO however it may be time for more aggressive action from the United States.

Using cyber operations as a form of covert action the United States can inflict damage on

the Chinese as well potentially staving off more attacks or reducing the frequency of the

attacks. The United States can use cyber warfare tactics to disrupt Chinese

communications and undermine military capabilities. This can decrease morale within the

PLAN especially as the PLAN grows in strength and confidence. If any open conflict

51

were to break out between China and the United States the cyber realm would be an

important battle space to control.

As the quest for resources drives conflict in the disputed regions the Chinese will

look into expanding into other areas that will cause conflict with the United States. While

the United States does not claim any of the resources located in the China Sea the United

States will want to ensure that shipping through the heavily trafficked Malacca Straits

would remain free of harassment and unopposed. A naval presence by the United States

in this region would ensure that those vital shipping lanes remain open and that they do

not become a target in the case of a conflict or that any minor military incident does not

occur near the shipping lanes.

With the Chinese eyeing the Arctic as a potential area for energy exploration this

is an area that China will come into conflict with the United States. Since the Chinese do

not possess territory that is in the Arctic region the Chinese government will have more

of a difficult time claiming any of the resources in the area. The United States can engage

in a form of legal warfare citing historical documents and past treaties and agreements

with other nations that possess Arctic territory to try and block the Chinese from gaining

a foothold in the area.

For the United States to secure the resources located in the Arctic the United

States needs to invest in icebreakers that can open up lanes within the ice to allow for oil

and natural gas exploration. Currently the United States operates two icebreakers

although one has been stuck in dry-dock in Seattle. The United States has not currently

commissioned any new icebreakers to be built. While China only has one icebreaker

currently the Chinese government has commissioned the building of another icebreaker.

52

When it is completed it will give the Chinese the same number of icebreakers as the

United States and the Chinese have proposed as many as three more icebreakers. The

United States will continue to have the advantage in nuclear submarines that can patrol

the Arctic and maintain a presence under the ice however these submarines won’t be able

to break the ice, a necessary requirement if shipping lanes and exploration of the Arctic is

to occur.

The United States can avoid tensions with China if the United States can diversify

the way they procure certain resources such as rare-earth metals. While China has a

significant amount of rare-earth elements Australia and India also have areas that have

minable rare-earth elements. As tensions remain high the United States can use Australia

or India as a new supplier of rare-earth elements solidifying relationships with those

countries and sending China an economic message.

When it comes to the economy many feel that China has an advantage due to the

expanding trade deficit. This may not necessarily be the case. Using the example of a

bank if a person owes the bank one million dollars than the bank can control the terms of

that loan. The bank is in a better position and will hold all the chips when it comes to

negotiations. If a person owes a hundred million dollars to the bank than the person has

more power over the bank. The bank cannot afford for the person to default, as it is an

existential threat to the banks survivability. This is a similar situation between the United

States and China. The Chinese government could not afford for the United States to

default on the trade debt. It would be politically destructive to both nation’s if the

Chinese decided to collect the debt and the United States did not have the money. The

53

trade deficit while an issue that is a sore point between the two countries is not an issue

that will drive the two countries to open conflict.

The larger economic issue that has caused tensions is the theft of intellectual

property by Chinese corporations. This is not only an issue that the United States has

addressed the European Union has addressed as well. This is an area where nations are

reliant on the dispute process by the WTO and while it negatively affects diplomatic

relations it is not an area that will cause armed conflict between the United States and

China.

Going forward it is important to recognize the areas of tension between the United

States and China. The Chinese have shown signs of aggression to the U.S. And have been

openly hostile to their neighbors. The United States has several alliances and pacts with

nations in the region. The United States cannot continue the policy of always fighting the

last war. The United States will need to assess the three major types of security as it

develops a national defense strategy in particular as it deals with China.

The first is systemic security and it is best described as a global environment

where the policies have led to the elimination of war or have limited warfare within the

world. The next type of security is state security and it is considered the security of the

government. This security is to ensure that the state continues to exist in its present state.

Primary threats to this system are insider type threats. Economic collapse, insurgency,

and terrorism all affect a nation’s state security. The third type of security is societal

security and this primarily refers to the people within a nation and the type of security

that the population enjoys. This is a very autonomous form of security and it refers to the

54

ability of the people to protect themselves. This is a type of security that can be eroded by

strong state security.24

Assessing the type of security that the United States needs when developing a

policy towards China the United States can also look at successful collaborative efforts as

ideas to help contain China and deal with aggressive actions. Using the example of the

North Atlantic Treaty Organization (NATO) a similar organization could be proposed

amongst the Asian regional powers.

NATO is a political and military alliance made up of 28 countries that believe in

the collective defense of all. This treaty is known as Article 5 in the Washington Treaty.

It stipulates that if one member state is attacked then all of the members have been

attacked and should provide for the mutual defense of each other. Forming a military

alliance in the Pacific with nations such as Australia, Japan, Korea and the Philippines

could be helpful and to dissuade Chinese concerns have the primary mission as

containing the North Koreans. This Pacific Rim alliance can have as a mission statement

the provision for providing safe and secure international shipping. This statement will

deal with piracy in the Malacca Straits and the coastal regions of Thailand and the

Philippines as well as Indonesia and Malaysia.

There can be several advantages and disadvantages to a collective security

arrangement or organization. One such advantage is safety in numbers. A nation is less

likely to attack another nation if it knows that the attack would incur the wrath of other

nations that would come to the defense of the nation being attacked. Not only is mutual

defense an advantage another advantage is mutual aid. In the event of a disaster mutual

24Morgan, Patrick M. "An Introduction to Security in International Relations." International Security: Problems and Solutions. Washington, D.C.: CQ Press, 2006.

55

aid is usually another stipulation of a collective security agreement. Any type of natural

disaster or man-made disaster and you could rely on your allies to give you support either

in humanitarian aid or defense and security.

Another advantage is information and intelligence sharing. All member states can

share information about adversary capabilities, pending attacks, or criminal and terrorist

organizations. This helps improve response time and can disrupt potential plots. Of

course these advantages also come with disadvantages too.

The disadvantage to mutual defense is that a small conflict can escalate into a

larger war as more and more countries get involved due to mutual aid and defense

treaties. In the case of information and intelligence the more parties that are involved the

higher probability that a member’s intelligence service will be penetrated exposing

valuable information.

These advantages and disadvantages will need to be weighed very carefully as

well as whether the creation of a Pacific Rim Alliance will escalate tensions to a level

where de-escalation is impossible.

Conclusion

In conclusion this paper set out to answer the research question “Is China’s

aggressive foreign policy and military modernization challenging the status quo and

leading to a potential Cold War relationship with the United States?” The findings show

that China and the United States have entered into a time period where tensions are high

and there is potential for conflict. Defining what a Cold War is can help interpret the

results of the findings in this paper. A Cold War is a term defined as “ a conflict over

ideological differences carried on by methods short of sustained overt military action and

56

usually without breaking off diplomatic relations”25 Using this definition clarifies that the

relationship between China and the United States has reached the status of a “Cold War”.

The actions taken by the Chinese and the United States are methods that are short of overt

military action and the differences between the two nation’s ideologies are very apparent.

Conflicts between naval vessels and in the cyber realm will continue unless a unified

overwhelming show of force or support for one nation occurs. Even with this support it is

unclear on if it would change either the United States or Chinese foreign policy.

It is unlikely that the Chinese will seek out open conflict with the United States.

The ramifications for China as well as the rest of the world are too severe. Likewise the

United States will press China aggressively but will also stop short of calling for open

warfare. This is an area that requires further study and review as tensions within this

region and the foreign policies between China and the United States are fraught with

areas that could lead to misinterpretations or military incidents that could lead to

escalation of hostilities. In a global environment and an environment that is so

interconnected the smallest military incident can quickly spiral out of control while other

nations attempt to join in the fray. This is why this topic is of the utmost importance for

national leadership within China and the United States to understand the complexities of

diplomatic relations between the two nations and the policy decisions that can lead to a

better future for both parties involved.

25 "Cold War." Merriam-Webster.com. Accessed December 1, 2015. http://www.merriam-webster.com/dictionary/coldwar

57

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