HONOLULU—China’s ruling Communist Party is “rejuvenating” and preparing for a military conflict in Asia, the outgoing intelligence chief of the Navy’s Pacific Fleet is warning.
“The strategic trend lines indicate the Communist Party of China is not only ‘rejuvenating’ itself for internal stability purposes, but has been and continues to prepare to use military force,” Navy Capt. James E. Fanell said on Saturday during his retirement speech at Pearl Harbor.
Speaking on a pier across the harbor from the battleship USS Missouri, where Japan’s surrender was signed ending World War II, and near the memorial over the submerged wreckage of the USS Arizona, sunk in 1941 during the Japanese attack, Fanell said he believes Beijing prefers not to use its growing military force for achieving regional dominance.
“But let’s not deceive ourselves. The evidence I’ve been chewing on over the past 15 years is overwhelming,” he said. “Beijing has prepared for military action and [Chinese] President Xi Jinping’s ‘China Dream’ has a defined timeline to reach this ‘rejuvenated’ end state.”
On the Obama administration’s policy of shifting forces to the Pacific, called the “rebalance,” Fanell said the program is a good first step to counter the challenge of China.
“But it must be backed up with a real, tangible deterrent force and we must stand up to Beijing’s propaganda and bullying campaign, especially those that come at the expense of our allies and partners,” he said.
The rebalance includes the shift of some troops, naval, and air forces to the region but it has been limited as a result of sharp defense cuts under the Obama administration and continuing U.S. military commitments in the Middle East.
The career intelligence captain called on his fellow intelligence officials to present honest assessments of the danger posed by China’s growing military power, an indirect criticism of what officials have said have been numerous U.S. intelligence failures in assessing China’s military build up over the past three decades.
“The challenge, as I have seen it, is for intelligence professionals to make the case, to tell the truth, and to convince national decision and policy makers to realize that China’s rise, if left unchecked or undeterred, will necessarily disrupt the peace and stability of our friends, partners, and allies,” he said.
“We should not have to wait for an actual shooting war to start before we acknowledge there is a problem and before we start taking serious action,” Fanell said.
The Communist Party of China has plans that “stand in direct contrast to espoused U.S. national security objectives of freedom of navigation and free access to markets for all of Asia,” he added.
In particular, the Chinese navy, Fanell said, is taking steps to achieve strategic objectives that include the restoration of what Beijing says is “sovereign maritime territory,” specifically thousands of square miles of water inside the so-called first island chain—a string of western Pacific islands near China’s coasts stretching from Northeast Asia through the South China Sea.
Fanell is retiring after more than 28 years in the Navy. He told more than 100 guests attending the Pearl Harbor ceremony, including several admirals, that he was inspired to join the sea service in 1986 by President Ronald Reagan.
“It was the words, the images, and his vision for a strong America, one that would combat the global spread of communism, that motivated me to sign on the dotted line,” Fanell said of Reagan.
“This ‘calling’ is what drew me into the United States Navy and kept me going.”
Fanell has held the storied post of U.S. Navy Pacific Fleet “N2,” the chief of fleet intelligence, since 2011. That post was held by some of the most senior U.S. intelligence officials.
One famous Pacific Fleet N2 was Edwin Layton, who from 1940 to 1945 pioneered the use of secret electronic communications intelligence in war planning.
Other Pacfleet N2s include former Adm. Bobby Ray Inman, a former director of the National Security Agency; and Adm. Mike McConnell, another former NSA director; and former Defense Intelligence Agency Director Lowell Jacoby, a former admiral.
“There is no finer intelligence officer in the United States Navy than Jim Fanell,” retired Rear Adm. James. D. Kelly said in remarks during the ceremony. Kelly was a former commander of the aircraft carrier strike group led by the USS Kitty Hawk and is currently a dean at the Naval War College.
Fanell said writing the retirement speech was “one of the hardest events of my career.”
“For the past 90 days I have truly struggled to come up with the right words to wrap up 28 and a half years of service in the U.S. Navy,” he said.
In often emotional farewell remarks, Fanell noted that an early intelligence innovator, World War II Navy cryptanalyst Joseph Rochefort pushed the envelope of using communications intercepts to target the Japanese fleet.
“Joe Rochefort came out of the disaster of 7 December  with a firm resolve to provide the U.S. Pacific Fleet the best assessed location of the Imperial Japanese navy’s fleet,” he said.
“And Joe did this despite knowing that his ‘masters’ in Washington at OP-20-G/Navy Communications did not want Station Hypo to provide this intelligence directly to the Fleet. Joe knew he was bucking the system and it was something he would pay for dearly later on in 1942, but that is another story for another time.”
Rochefort, who died in 1976, helped break Japanese codes that were the key to locating, attacking, and ultimately defeating the Japanese fleet in the Pacific.
But Rochefort was twice denied medals by senior Navy officials who he had angered. In 1986 Reagan awarded him the Presidential Medal of Freedom posthumously.
Fanell’s career was cut short after he made two speeches in San Diego in 2013 and last year bluntly describing the threat posed by China.
In February 2014, Fanell said that Chinese military exercises indicated Beijing was preparing for a “short, sharp war” with Japan.
Tensions between China and Japan remain high over Beijing’s efforts to claim the Senkaku Islands, Japanese islets located between the southern end of Japan and Taiwan.
China is claiming the Senkakus as its territory and last year imposed an air defense identification zone over the East China Sea that covers the uninhabited islands.
Both the United States and Japan announced they would not recognize the Chinese defense zone.
In 2013, Fanell, during a similar conference in San Diego, warned that China was escalating what he said was the bullying of regional neighbors.
The blunt comments by the captain triggered criticism from pro-China analysts in the U.S. government and academic community.
In November, Fanell was removed from his post and assigned to another position after an anonymous complaint to the Pacific Fleet inspector general triggered an investigation.
An investigative report produced by the U.S. Pacific Command concluded that Fanell on several occasions improperly “discussed classified information in the presence of foreign nationals.”
“The anonymous IG complaint alleges that Capt. Fanell repeatedly discussed classified information in the presence of foreign national staff members, or otherwise allowed foreign national staff members to come into contact with classified information not authorized for release to foreign nationals,” the report, dated Dec. 5., states.
Additionally, the report indicates the issues involving the briefings was initially handled by the Navy’s Pacific Fleet but was taken over by the U.S. Pacific Command inspector general. No reason for the takeover was given.
The commander of the U.S. Pacific Command at the time of the investigation, Adm. Samuel Locklear, is among the most assertive in seeking closer relations with the Chinese military as part of the Pentagon’s policy of trying to build trust with the People’s Liberation Army.
Last week, however, the Pentagon suspended military exchanges with China over a lack of agreement for setting up rules for aerial intercepts of U.S. surveillance aircraft in Asia by Chinese jets, the Wall Street Journal reported.
The PACOM investigative report said numerous officials interviewed by investigators “spoke highly of Capt. Fanell’s dedication and commitment to proper safeguarding of classified material.”
“Capt. Fanell explained that he believes there is a tension between ‘operationalizing’ and “internationalizing’” intelligence information, the report, obtained under the Freedom of Information Act states, noting that the Navy staff in recent years has included the addition of regional allies.
“Capt. Fanell sees these as diametrically opposed to one another and ripe for challenges.”
Additionally, the report said an online news clipping service moderated by Fanell called “Red Star Rising” was criticized by unidentified critics as “a potential security problem,” “unprofessional,” and “inappropriate.”
However, the Naval Criminal Investigative Service said the website “did not pose any security concerns.”
Fanell declined to comment on the investigation.
A Pacific Fleet spokesman said the investigation “had nothing to do” with Fanell’s earlier comments in San Diego.
But other defense officials said they are convinced the investigation of Fanell and his reassignment was an outgrowth of the comments that angered pro-China officials and intelligence analysts within the U.S. government.