October 23, 2011:
Western analysts have two, quite different, opinions of Chinese military power. The more popular analysis is that most Chinese military developments of late have displayed a keen ability to design and build very modern weapons. This makes for scary (and profitable) headlines. Politicians and military leaders love it, because it provides a foreign threat. With that scary monster, the voters can be persuaded to pay for more weapons and troops. That means more jobs for the military and weapons manufacturers, and more ways to attract votes to reelect politicians.
Then there's the other view, usually obtained over drinks with Chinese, Japanese, South Korean or Taiwanese businessmen. All of these guys have experience with Chinese industry, and often some direct knowledge of military industries. All tell the same story. Chinese military procurement is as corrupt as they come, and the wonder weapons are much more impressive on paper than they are in reality. Western military people, especially those in the navy (who see their Chinese counterparts up close), or military intelligence (who collect all sorts of inside information on the Chinese armed forces) also tell the same story. The bottom line is that the Chinese military is much less than it appears to be, and it's been that way for a long time.
It's all about the culture of corruption that has long been present in China. Too many Chinese take it as a given that, if you get a government job, you have a license to steal. In the military, this means weapons are built in substandard ways, and equipment is not properly maintained. Military corruption is an ancient Chinese custom, and accounts for most of the poor military performance in the past.
The current Chinese government has long been aware of this problem, but has had a hard time dealing with it. For example, four years ago, the government established an organization to find and punish fraud in academic research. Corruption in China tends to be worst when there is more money involved. Given the importance of technology in military affairs, lots of money has been directed towards defense research. The misbehavior that ensues is kept quiet, as is the case with most instances of military corruption. But this is the reason why so many military weapons and equipment development projects have failed. It's not just the inability of the scientists to do what was asked of them, there was outright lying, fraud and theft involved. Thus the eagerness to buy, or steal, foreign military technology. But China also wants to develop, or at be able to use, the latest technology. To make this happen, there has to be less fraud in the scientific research community. You can't hustle the laws of physics.
It also particularly dangerous trying to root out corruption in the military and security forces. All the suspects have weapons, and are accustomed to using them without restriction. The corruption in the military has been the main reason why all the money spent on the military in the last decade has not had a bigger impact on Chinese combat capabilities. Taiwan apparently realizes that corruption in the Chinese military is the best way to protect Taiwan from invasion. Some corruption deals in the Chinese military have involved Taiwanese interests making payoffs. This may not be strictly business, but rather another example of the ancient Chinese practice of weakening your military opponent with bribes instead of battles. The ancient Chinese military sage Sun Tzu was a big fan of this tactic. The Chinese government is cracking down on the corruption, not for military reasons, but to forestall a rebellion against Communist Party rule. Opinion surveys and reports from the security services indicate a major irritant for the Chinese people is the growing corruption among Communist Party officials who dominate the government bureaucracy.