11 March 2011

Understanding China’s Defense Budget: What it Means, and Why it Matters

Andrew S. Erickson and Adam P. Liff, Understanding China’s Defense Budget: What it Means, and Why it Matters,” PacNet 16 (9 March 2011).

Andrew S. Erickson [andrew.erickson@usnwc.edu] is an Associate Professor in the Naval War College’s China Maritime Studies Institute (CMSI). His research websites are www.andrewerickson.com and www.chinasignpost.com.

Adam P. Liff [apl@princeton.edu] is a Ph.D. Candidate in the Department of Politics at Princeton University, a Pacific Forum CSIS Young Leader and a 2010-2011 SPF Fellow.

On March 4, China announced its 2011 defense budget of 601.1 billion RMB (approximately $91.5 billion). Importantly, many experts believe actual spending is significantly higher than the official figure suggests.

Although China’s rapidly increasing defense budget is a development of considerable significance for the US and its allies, it remains poorly understood and is often analyzed out of context. There is a tendency to focus exclusively on quantitative trend lines rather than considering all available data. We provide comprehensive assessment of China’s official defense budget and military transparency, as well as its expanding capabilities and strategic intentions. The PLA budget remains unclear in many respects, but it is not necessary to count every single RMB to know that the PLA can and will do a lot more in the foreseeable future. The greatest and highest-level activity will occur in China’s homeland and near its borders, as well as in the three “Near Seas” and their immediate approaches. …