March 12 (Bloomberg) -- Last July, as North Korea prepared for ballistic missile tests, Admiral William Fallon picked up the telephone to warn his Chinese military counterparts of the U.S.'s deep concern, and urge them to weigh in against the launches.

There was just one problem: The commander of all U.S. forces in the Pacific, who had spent two years cultivating ties with Chinese leaders, couldn't reach anyone to deliver his message. ``I just couldn't get somebody to answer the phone,'' Fallon says. ``Nobody wanted to talk.''

His experience shows what analysts and security officials in Japan, India, Taiwan and the U.S. say is China's lack of openness about its military plans, decision-making and actions during crises. Those traits compound international concerns created by its long-term military buildup -- officials announced a 17.8 percent increase in the official defense budget last week -- and increase the chances of miscalculation, the analysts say.

``The Chinese military is less transparent than any significant military in Asia outside of North Korea,'' says Kenneth Lieberthal, a former White House China expert who's now at the University of Michigan in Ann Arbor. That doesn't serve China's interests, he says, because ``when you are not very transparent, people assume you have something to hide.''

Says General Tetsuya Nishimoto, Japan's former military chief of staff: ``We should consider the buildup as a threat, because their goals and intentions are unclear.''

Too Revealing

China says its foreign critics -- which include some of its major trading partners -- are demanding an unacceptable degree of openness. ``If your neighbors are constantly shouting, `Why don't you open your door and let us peek in?' do you open it right away?'' Foreign Ministry spokesman Qin Gang told reporters on March 1. ``Of course not. You may be in your underwear.''

General Kui Fulin, China's former deputy chief of staff, calls the criticism self-serving. ``Which country reveals everything when it comes to national security?'' he said in an interview in Beijing.

China's official military budget has grown in the past decade at rates that routinely exceeded the country's pace of economic expansion. China's gross domestic product has grown by an average of about 9 percent annually during that period, while the defense budget has risen by an average of 14 percent a year.

Strategic Shift

The official $45 billion defense-spending level for 2007 is less than 10 percent of the $622 billion the U.S. will spend on its military this year. U.S. officials and analysts say China habitually under-reports its true budget by a factor of two to three; whatever China spends, some of its senior commanders say, it still isn't enough.

``Our staff are so poorly paid that many talented people don't even want to join the People's Liberation Army these days,'' Lieutenant General Tan Naida said in an interview.

Much of the PLA's spending goes toward a long-range plan to transform it from a manpower-intensive force designed to defend the homeland to a technology-intensive one capable of waging high-intensity conflicts outside China's borders.

That transformation is far from complete, say analysts who study the Chinese military, and China is at least two decades away from becoming a serious rival to the U.S. Lieberthal says it's also significant that the PLA lacks recent real-world combat experience.

``War puts it all on the table in a way that no exercise can fully capture,'' he says.

Destroying a Satellite

Still, China demonstrated a capacity to narrow the gap in January when it destroyed one of its orbiting weather satellites with a missile. The shoot-down served as a warning to the U.S., which depends on satellites for advanced battlefield capabilities.

China has also been able to alter the balance in the arena that matters most to its policy makers: Taiwan, which the government in Beijing regards as an integral part of China territory.

In 1995, the U.S. faced down China by sending two aircraft- carrier groups into the area. Since then, China has steadily increased its military edge over the Taiwanese, while gaining the ability to inflict considerable damage on any U.S. force coming to Taiwan's aid in a crisis, say military experts.

Targeting Taiwan

China has targeted Taiwan with short-range missiles -- as many as 790 by the end of 2005, a number that has been expanding by about 100 annually, the U.S. Defense Department says. China also has more than 700 combat aircraft based within easy reach of Taiwan, the Pentagon said last year in its annual assessment of China's military.

China has also upgraded its vessels, aircraft and anti-ship missiles. It is acquiring two destroyers and eight new diesel- powered submarines from Russia, all equipped with advanced anti- ship cruise missiles, the report said.

The military buildup, which coincides with efforts to secure access to energy supplies for its expanding economy, has prompted expressions of concern from security officials across Asia, including Japan and India.

Still, most Asian countries haven't acted on these concerns, says Evan Medeiros, an analyst with the policy research group Rand Corp. in Washington. ``You don't see most East Asian states embarking on across-the-board military modernization programs in direct reaction to China,'' he says.

Trading Nations

Countries carrying out the most trade with China are among those expressing concern about Chinese military intentions. Last year, the U.S. was mainland China's biggest trading partner, with $262.6 billion in commerce, while Japan was second at $207.3 billion and Taiwan fourth at $107.8 billion, according to data from China's Customs General Administration.

Japan plans this week to sign a security accord with Australia during a visit to Tokyo by Australian Prime Minister John Howard. ``Japan is working hard to build strategic ties as it competes with China's growing influence,'' said Hugh White, professor of strategic studies at Australian National University in Canberra.

While China is beefing up its military capabilities, Medeiros says, ``what you don't see is China buying a long-range bomber force, long-range heavy-lift capabilities, things that would indicate that it's trying to develop global power projection.''

That hasn't stopped some top U.S. officials from ringing alarm bells. In a Feb. 23 speech in Sydney, Vice President Dick Cheney said China's buildup and the satellite shoot-down ``are not consistent with China's stated goal of a peaceful rise.''

Defense Secretary Robert Gates was more measured last week, saying he didn't regard China ``at this point as a strategic adversary'' of the U.S. ``It's a partner in some respects, it's a competitor in other respects, and so we are simply watching to see what they're doing,'' he told reporters on March 7.

Soviet Comparison

Still, Gates expresses concerns about China's lack of openness about its actions and intentions, likening it during a Feb. 23 news conference to the lack of transparency in the Soviet Union during the Cold War.

China's closed approach isn't just creating uncertainty in other countries; it may also increase the chances for missteps among Chinese officials themselves, because their system is so compartmentalized, says Cynthia Watson, a professor at the National Defense University in Washington.

``I wish I knew what Beijing was going to do 20 years from now,'' she says. ``I bet Beijing wishes it knew what it was going to do 20 years from now.''

Fallon, 62, the U.S. Pacific commander being shifted by President George W. Bush to head the American military presence in the Middle East,, says U.S. officials should work to increase Chinese transparency through ``encouragement, examples from the outside'' and persistent engagement.

`How Good We Are'

He invited Chinese officials to observe a U.S. military exercise in the Pacific last July in part to encourage greater Chinese openness, he says, and in part to dispel any thoughts that the U.S. may be too preoccupied with Iraq to respond to a challenge in Asia. ``I wanted them to see how good we are,'' he says.

During the July North Korean missile crisis, Fallon says, he eventually had to deliver his message to the Chinese through the indirect channel of a U.S. military attache. The North Korean government, undeterred, fired seven missiles into the Sea of Japan.

By October, when North Korea tested a nuclear device, Fallon says his communications with Beijing had improved slightly: Chinese diplomats tipped U.S. counterparts that the test was about to happen.

``I had a definite warning, 10 minutes, by the time it got to me,'' he says. ``A lot of progress.''

To contact the reporters on this story: Ken Fireman in Washington at kfireman1@bloomberg.netAllen T. Cheng in Beijing at acheng13@bloomberg.net.

Last Updated: March 12, 2007 11:22 EDT