China has also set up electronic surveillance stations on the Coco islands off the Myanmar coast to monitor the Indian Ocean, the report says.
An intelligence source, who spoke on condition of anonymity, said the Santoli report had not mentioned the fact that besides the Coco islands, China has obtained two other islets from the SLORC government.
"Intelligence information shows China is building military facilities on the two islets, which are uninhabited but rich in natural resources such as iron ore," the source said.
"The SLORC government must have given the two islets to China in return for the annual financial aid it gets from Beijing."
"China's ownership of the two islets has sparked strong protests from India, which suspects China has ulterior motives. The Indian government is, apparently, seeking for help from the US in the matter," he said.
"India has reason to suspect every move that is made by China in the region. But Taiwan should also worry about China finding a foothold on seas so close to passages taken by oil tankers from the Middle East to East Asia," he said.
"With the two SLORC-given islets as bases, the Chinese military can choose to block Taiwan's oil tankers from passing through the Straits of Malacca at any time it likes," the intelligence source said.
He praised the Santoli report for calling attention to the potential military threat of China to its surrounding countries, framed in a larger geo-political context, but he said it was a pity the China-SLORC agreement had been brushed over.
He said Santoli over-emphasized the power struggle within SLORC, without seeming to realize that SLORC members were successful at keeping power between themselves.
The report emphasizes the power struggle between Brigadier General Khin Nyunt, first secretary of the Myanmar military junta, and army chief Brigadier General Maung Aye, to succeed General Tan Shwe as junta supreme leader.
"This is based on a misunderstanding of the power structure of the junta. As the first secretary of the junta, Khin Nyunt is already the most powerful man in the country. He does not need to fight with Maung Aye for the figure-head position. He has secured power largely because it was given to him in trust by the former leader of Burma, Ne Win -- who is widely suspected to still manipulate local politics from behind the curtain," the intelligence source said.
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