Espionage fuels China's fast-paced military buildup: Pentagon

WASHINGTON (Reuters) - China is using state-sponsored industrial espionage to acquire the technology it needs to forge ahead with a fast-paced military modernization program and cut its reliance on foreign arms makers, the Pentagon said in a new report on Monday.

"China continues to leverage foreign investments, commercial joint ventures, academic exchanges, the experience of repatriated Chinese students and researchers, and state-sponsored industrial and technical espionage to increase the level of technologies and expertise available to support military research, development, and acquisition," the U.S. Defense Department said.

The department, in its 83-page annual report to Congress on Chinese military developments, said Beijing's publicly announced defense spending grew at an inflation-adjusted pace of nearly 10 percent annually over the past decade, but its actual outlays could be much higher.

China announced a 10.7 percent increase in military spending to $114 billion in March, the Pentagon report said. But it estimated that China's actual spending for 2012 could range between $135 billion and $215 billion. U.S. defense spending is more than double that at over $500 billion.

"China continues to engage in activities designed to support military procurement and modernization," the report said. "These include economic espionage, theft of trade secrets, export control violations, and technology transfer."

(Reporting By David Alexander and Phil Stewart; Editing by Cynthia Osterman)