This is a rush transcript from "Special Report," August 24, 2011. This copy may not be in its final form and may be updated.
(BEGIN VIDEO CLIP)
MICHAEL SCHIFFER, DEPUTY ASSISTANT DEFENSE SECRETARY: It is the overall trajectory of China's military modernization efforts and the fact they're working across a number of different dimensions of power in the maritime domain that is something that -- that I think we need to keep an eye on.
GORDON CHANG, AUTHOR, "THE COMING COLLAPSE OF CHINA": Essentially the White House and the State Department don't want to have language that talks about China's belligerence and hostility.
(END VIDEO CLIP)
BRET BAIER, ANCHOR: A new Pentagon report out about five months overdue, annual report to Congress on China's military strength. And there is concern at the Pentagon, a new aircraft carrier, new J-20 stealth fighter, the incident about Pakistan showing China the covert stealth American helicopter tail from that Usama bin Laden raid, and obviously, the spending on its military. We're back with the panel.
Steve, China doesn't have a real outside threat. And yet this buildup is happening. And why now?
STEVE HAYES, SENIOR WRITER, THE WEEKLY STANDARD: Well, that is what is so interesting about the way that this report was written. Because it's clearly written, the end goal of this report was let's not alarm anybody. We see this happening. We see this unfolding in sort of slow motion, major growth in China's military posture. But we don't want anybody to really be alarmed about this.
And what I found most interesting is the language that they use to make that point. This is from the executive summary. "Although China expanding military capabilities can facilitate cooperation and pursuit of shared objectives, they can also increase the risk of misunderstanding and miscalculation."
Well it's entirely possible that we are not misunderstanding anything the Chinese are doing and they're not misunderstanding or miscalculating what they are trying to do. And you haven't just seen this projection of power from China in the military realm. You have seen it on the softer side too in the diplomatic realm with its outreach to Pakistan. It's enabling I would argue North Korea over the past several years, things that will at the very least tie up the United States in terms of what we're doing, both in that region and around the world.
BAIER: China had 15 space launches over the past year. And when it comes to cyber-attacks, this report says, quote, "In 2010, numerous computer systems around the world including those owned by the U.S. government were the target of intrusions, some of which appear to have originated within the PRC," the People's Republic of China. That is a big topic in and of itself, A.B.
A.B. STODDARD, ASSOCIATE EDITOR, THE HILL: Right. I mean we learned in July that the Pentagon was attacked in March and 24,000 files were stolen. And they -- we were never told directly that our Department of Defense suspected the Chinese. I'm glad the report actually tried to insinuate that they do.
But this is, this is a -- we're extremely vulnerable. And we've known this for some time. And it's something that the Pentagon is trying to contend with. But the Chinese depend on our unwillingness to anger them. And there was this part of the discussion during your debate with former ambassador Jon Huntsman who is the former ambassador to China and he called it an act of war, but then he also back tracked. It is obviously the future of war, is cyber warfare.
BAIER: And this comes, this visit, Vice President Biden over to China and this report comes after he left Chinese territory.
CHARLES KRAUTHAMMER, SYNDICATED COLUMNIST: Well, look, I think what's important here is to understand that there are two questions with China. The capacity, its capacity and its intentions. And everybody pretends that its intentions are obscure. It is not. It is obvious that China wants to dominate its region. There might be a question as to whether ultimately it wants to channel us on a global level the way the Soviets did in the Atlantic and other places, but if it happens it's half a century away. What we are talk about is now and the next decade or two.
Obviously it wants us out of the western Pacific, which we have dominated. It's our waters. It's our pond. And China is developing all of these weapon systems, which would be a way to deny us access. You've got the cyber space, the outer space, the surface ships, the submarines, the aircraft carrier, the ship missiles, the J-20 fighter. All of these would be weapon systems, that would make it difficult or dangerous for America to enter the waters.
It wants to dominate its region. It does. It has the claims on the waters that a lot of countries in Southeast Asia are claiming. That's its objective. And the huge increase in its capacities is aimed clearly at making it its waters and not ours. And that is the obvious coming threat.
BAIER: Last word?
HAYES: And the broadest context is that this is all taking place while the United States is moving in the opposite direction, cutting dramatically our own defenses and our own defense capabilities.
BAIER: That is it for panel. But stay tuned to see an example of just how stubborn Libya's leader has been.
Content and Programming Copyright 2011 Fox News Network, LLC. ALL RIGHTS RESERVED. Copyright 2011 CQ-Roll Call, Inc. All materials herein are protected by United States copyright law and may not be reproduced, distributed, transmitted, displayed, published or broadcast without the prior written permission of CQ-Roll Call. You may not alter or remove any trademark, copyright or other notice from copies of the content.
Get all the stories you need-to-know from the most powerful name in news delivered first thing every morning to your inbox