Book excerpt: Contents: (1) Annual Update: Significant developments in China's military and security activities over the past year; (2) Understanding China's Strategy; (3) Force Modernization Goals and Trends; (4) Resources for Force Modernization; (5) Force Modernization for a Taiwan Contingency; (6) U.S.-China Military-to-Military Contacts; Special Topic: Political Work in the People's Liberation Army (PLA). Appendices: (I) Military-to-Military Exchanges; (II) China and Taiwan Forces Data; (III) Memorandum of Understanding Between the Department of Defense (DOD) of the USA and the Ministry of National Defense of the People's Republic of China (PRC) Regarding the Rules of Behavior and Maritime Encounters; (IV) Memorandum of Understanding Between the USA DOD and the PRC Ministry of National Defense on Notification of Major Military Activities Confidence-Building Measures Mechanism. Figures. This is a print on demand report.