Despite the global recession, China's defense budget continues to climb (7.5 percent in the next year.) China is buying more modern aircraft and warships (especially nuclear subs), as well as a wide range of modern military equipment. The U.S. believes that China is building up a force of cruise-missile equipped aircraft, missile equipped submarines and ballistic missiles that can hit moving ships, to interrupt American efforts to reinforce allies in East Asia (Taiwan, Philippines, South Korea, Japan.) China's neighbors are increasingly nervous because Chinese Navy ships are showing up in distant waters more often, and China is becoming louder and more insistent about settling, in China's favor, old territorial disputes. What the neighbors remember is how, for thousands of years, China was the regional superpower, treating all other nations as inferiors. For the last two centuries, the intrusion of more powerful Western nations, the Westernization of Japan and economic and political decline inside China, removed China as the neighborhood bully. But now, the bully is back and the little kids are not happy. Much to China's dismay, the neighbors are looking to America as an ally against China.
India is not happy with growing Chinese espionage efforts against Indian military, government and commercial organizations. China is also acting more aggressively over old border disputes (in India's northwest and northeast.) China insists this is not the case, but Chinese diplomatic and military moves say otherwise.
Taiwan now believes as many as 1,600 Chinese ballistic missiles are pointed at it. So the Taiwanese are moving forward with building anti-missile defenses over the next five years. The main weapon here is the U.S. Patriot anti-aircraft missile system, but using the anti-missile version of it.
China is sending over a thousand troops, along with aircraft and other equipment, to participate in counter-terror exercises this month in Kazakhstan (Central Asia.) Over 5,000 troops are participating, coming from Russia, Kazakhstan, Tajikistan and Kyrgyzstan.
September 7, 2010: Taiwanese police raided a firm that, it was discovered, had illegally exported two computer-controlled machine tools to North Korea. These were shipped via a Chinese firm, which then moved the equipment to North Korea. These computer-controlled machine tools are essential for manufacturing precision components needed for rocket engines and nuclear weapons. Taiwanese firms have been caught smuggling forbidden items to North Korea before. If the payment is large enough, many companies will attempt it. Same thing in China, where the major impediment is North Korea not having the cash. But in many technology areas, Taiwan is still ahead of China. It was believed that a tip from American intelligence led to the machine tools raid.
August 30, 2010: North Korean dictator Kim Jong Il visited China for five days, and at one point was seen being escorted around business and industrial districts of several Chinese cities near the North Korean border. This was seen as another effort to convince Kim Jong Il to implement the same kind of economic reforms that were undertaken in China three decades ago. It was also reported as a nostalgia trip to places his father lived while in China. Kim Jong Il, whose health is failing, apparently succeeded in getting the Chinese to accept his youngest son, Kim Jong Un, as his successor. Meanwhile, China, and South Korea, have offered food and other aid for North Korea, to help deal with damage to farms and crops. The floods over the last few weeks destroyed over 7,000 homes and a lot of this year's food crops. China, however, refused to provide as much economic and food aid as North Korea wanted. The Chinese want the North Koreans to switch to a market economy, but too many in the North Korean leadership aren't willing to give up economic control.