Sino-US relations 'The US, in concert with our allies and partners, can create a regional infrastructure to expand those areas where our interests converge with China's, while discouraging China's activities of concern. China's improved behaviour on proliferation, increased transparency and co-operative approach to the North Korean nuclear question is welcome.'

Strategic objectives 'I believe China seeks to integrate Taiwan peacefully if possible. That is its policy but its capabilities suggest it is prepared to consider the use of force if peaceful efforts fail. China aspires to be the pre-eminent power in Asia. Beijing is expanding its political and economic influence in the region and generating options for military coercion.'

Nuclear programme 'It appears to me that China is building capabilities to fight short duration, high-intensity conflict on its periphery. Its near-term focus is on generating sufficient combat power to rapidly erode Taiwan's will to resist and to deter or deny effective intervention in a cross-strait conflict. China is also strengthening its deterrent posture through modernisation of its strategic forces. Its 'no first use' policy appears intact, but the shift to survivable, mobile nuclear forces gives China's leaders new options for coercion or first use in crises.'

Military modernisation 'We should monitor closely the growth of China's military capabilities, while continuing to press Beijing for greater transparency ... we should maintain our capabilities to resist China's use of force or coercion against Taiwan and assist Taipei in maintaining its self defence.'