This tunnel vision has happened before, most famously after Castro took over Cuba and at other times during the Cold War. This time, the analysis failure was noticed by members of Congress, who forced the CIA to accept an outside panel (called the Tilelli Commission after the retired Army general who led it) of intelligence experts, who studied the agency's analysis of China and reported on where the CIA and reality (or at least some members of Congress) parted company.
The panel's report was classified, but the effort was known to exist and some of the key findings were leaked. The major divergence was the CIA's belief that in the long term everything was going to be just fine between the U.S. and China. The Tilelli Commission pointed out that leading Chinese military leaders, and a powerful faction of the civilian leadership, have openly discussed war with America. The CIA responds that this is just posturing by the Chinese, as the Communist Party exploits the nationalism angle to divert public anger over corruption and dictatorial rule.
Earlier complaints about a lack of analysis, or delays in getting results, led the CIA to hire another thirty analysts for the China section. But the Tilelli Commission found that the applicants for these jobs had to prove that they were ready to follow the company line on China before getting hired.
The CIA feels the Tilelli Commission report is biased and meaningless. Big mistake. When the folks (Congress) who approve your budget and can veto the appointment of new CIA directors, disagree with your work, it's a good idea to find some way to sort things out. This is going to be difficult, for both sides have a reasonable argument. The CIA takes the long view, and assumes that the Chinese will be rational and not start a war that would ruin all the economic progress of the last few decades.
But critics outside the CIA, including the Tilelli Commission, point out that rational behavior has not always been the norm in China over the last few centuries. If you take the long view, looking at how wars start, you can see an antagonistic atmosphere that exists in China today turning into a war. The Chinese military has been aggressive in pushing what they see as China's, or their own, interests. The saber is rattled at Taiwan regularly and everyone knows what happened to an American EP-3 recon aircraft flying off China's coast. We've made mistakes before regarding China's likely behavior. Remember Korea. Vietnam had a similar dose of China's unpredictable warmaking in 1979. No one really expected China to attack Vietnam back then, but China did just that.
What we have here is a failure to communicate. This has always been a problem between the CIA and Congress (and the rest of the government as well.) Key members of Congress are given highly classified CIA briefings where the analysts are able to reveal all their evidence. At that point, it's a matter of opinion as to what direction the evidence points. The CIA position is that they have presented the evidence and this is all a disagreement over interpretation. Some members of Congress feel that the CIA isn't looking at anything they don't agree with and thus is incapable of honestly evaluating the situation. This is a serious charge, and the Tilelli Commission report appears to back up this view. But like most disputes over intelligence operations, only that small group of people in the CIA and Congress with access to all the information really know what's going on.
While the American public may not know the details of what's going on here, the outcome does effect a lot of Americans. During the Korean war, better analysis could have forced general MacArthur to pay attention to the fact that the Chinese were about to attack. This would have saved the lives of thousands of American soldiers. The same with Vietnam, where it was assumed we had to fight a limited (and thus unwinnable) war lest China join in or, worse, Russian ICBMs get involved. All this also seems similar to what was going on in the 1930s, when all the pundits (and intelligence analysts) of the day were trying to figure out what Hitler was up to. A major reason the CIA was formed after World War II was to provide U.S. leaders with better information on what potential enemies are up to. We miscalculated what Germany's and Japan's intentions were, and in the years after World War II, were faced with a hostile Soviet Union that no one could figure out. After all that, it's pretty sad if we're still facing a problem in this area. Maybe some day we'll find out what all this is really about. Maybe we'll find out before a lot of Americans get killed because of poor analysis. Then again, based on past experience, maybe not.
Following the Company Line- The CIA has apparently lost it's way again. Ignoring it's mission to gather and evenhandedly analyze information about foreign nations, the CIA has been caught reporting on China with a fixed idea of what is going on, rather than seeking to discover the truth. For the last few years, possibly in response to the Clinton administrations favorite idea of how China operates, the CIA has been ignoring any evidence that contradicted this "company line" (that China and America will get along just fine and that any current hostility from China is just a passing phase.)