The Pentagon's new China report and the coming budget war.

Last week, the Pentagon released its annual report on China's military power. Although required by Congress, many administration officials no doubt view the report as an annoyance and needlessly provocative. Yet few can claim that the Pentagon, assisted by the interagency process, didn't take the project seriously. This year's edition was as detailed and comprehensive as any yet published. Even more notable, Barack Obama's administration did not hesitate to increase the U.S. government's level of alarm over Chinese military modernization. As he briefed the Pentagon press corps on the report, Michael Schiffer, deputy assistant secretary of defense for East Asia, asserted that China's military investments are "potentially destabilizing to regional military balances, increase the risk of misunderstanding and miscalculation, and may contribute to regional tensions and anxieties."

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Equally alarming, the report discussed growing debates among China's policymakers about whether China should assume a more assertive "great power" status, backed by its expanding military power. The report noted that until recently, China's security strategy followed former paramount leader Deng Xiaoping's advice to maintain a low profile and focus on internal development. Today, China's growing nationalism, renewed attention to regional disputes, and concerns about access to global markets and raw materials over sea lines of communications have opened internal debates about whether China now needs to discard Deng's long-standing advice.

The U.S. government has hoped to influence these debates inside China. The Pentagon's Quadrennial Defense Review (QDR) in 2006 explicitly stated an intention to "shape the choices of countries at strategic crossroads." The 2010 QDR restated a commitment to enhancing deterrence, notably for "large-scale conflicts in environments where anti-access weaponry and tactics are used." These missions were clearly aimed at China, with a goal of dissuading Beijing from challenging the U.S. strategic position in the Western Pacific.

The report noted that between 2000 and 2010, the Chinese government increased military spending at a 12.1 percent annual rate, accounting for inflation. Recently, military programs have included progress on China's first aircraft carrier, first stealth fighter, new submarines, more amphibious shipping, new surface-to-air missiles systems, and further additions to its substantial inventories of land-attack ballistic and cruise missiles. The report concludes that China is preparing to extend the reach of its naval and air power beyond its regional waters and into the Indian Ocean and the central Pacific area.

The 2006 and 2010 QDRs aimed to influence China's debate about its national security strategy. That debate remains unsettled. But the continued rapid expansion of China's military power reveals that Chinese leaders believe such an investment will eventually provide useful leverage. U.S. military power in the Western Pacific is not "shaping the choices" as it hoped to in 2006. China's leaders have not concluded that it is futile to challenge the U.S. military position in the region as the QDR reports hoped would be the case. This increases the odds of a clash over an area that both China and the United States and its allies in the region regard as economically and politically vital.

To persuade China that challenging the status quo is a waste of its resources, the United States needs to permanently increase its naval and air power in the region, while also reassuring China that the status quo is no threat to its interests. But with Pentagon spending facing a 5 to 10 percent cut over the next decade, something else is going to have to pay for such an expensive expansion in naval and air power. That something is the U.S. Army, which may be making plans to cut 10 or even 15 of its 45 active-duty brigade combat teams.

The Army, Navy, and Air Force have maintained a decades-long truce over money by agreeing to a roughly constant distribution of the Pentagon's pie. The rise of China's military and the demands that will place on naval and air power during a time of shrinking budgets is about to void that interservice treaty. This year's report on China's military power may spark a long-simmering budget war inside the Pentagon.

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