05 March 2014

Full Steam Ahead: China’s Ever-Increasing Military Budget

Andrew S. Erickson and Adam P. Liff, “Full Steam Ahead: China’s Ever-Increasing Military Budget,” China Real Time Report (中国实时报), Wall Street Journal, 5 March 2014.

China’s official defense budget is projected to increase 12.2% in 2014 to roughly 808 billion yuan ($132 Billion), while the country’s economic growth is expected to hold steady at 7.5%, according to the annual budget report released Tuesday in Beijing. This year’s projected growth in the People’s Liberation Army budget is higher than last year’s defense spending increase of 10.7%, and marks the third year in a row that official military spending is projected to outpace GDP growth.

Rear Admiral Yin Zhuo, director of the Chinese navy’s Expert Consultation Committee, was paraphrased by the official Xinhua news agency on Wednesday citing “increasingly severe security challenges” as a reason for these increases.

While increases to China’s defense spending are nothing new, they are coming at a time when China’s leaders increasingly struggle to meet (declining) annual GDP growth targets.  Gone are the heady days of double-digit GDP growth. Yet leaders in Beijing continue to harbor ambitions to build military power “commensurate with China’s international standing.” With the world’s second largest economy, it’s not surprising that China can afford the world’s second-largest defense budget. Less certain is how great this divergence will become, and how long it can continue.

An Enviable Ride

As it steams ahead, China’s large defense budget increases stand in stark contrast to trends in the U.S. and among U.S.  allies, and indeed much of the rest of the world. The U.S.—together with its European allies—has accounted for the majority of global defense spending reductions in recent years. It is no coincidence that Chapter 5 of the U.S. Quadrennial Defense Review, released by the U.S. Department of Defense the same day as China’s budget report (pdf), is devoted to “Implications and Risks of Sequestration-Level Cuts.” China also vastly outspends its neighbors in East Asia, particularly those with whom it has territorial and maritime disputes.

Despite Beijing crying foul over Japan’s recently-announced plans to raise its own defense budget over a five-year period—a direct response to China’s own increased defense spending and destabilizing behavior in the East China Sea—Tokyo’s actual planned increases to defense spending for 2014 and 2013 are a mere 2.2% and 0.8%–a minor reversal after ten straight years of annual decreases (pdf).

One exception is Russia, whose defense spending rose 12% in 2012-13, according to calculations by the International Institute of Strategic Studies. Reverberations from recent events in Ukraine might well generate further military emphasis, but Moscow lacks China’s economic engine to sustain such military growth over time.

Bottom line: China’s double-digit increases to defense spending are without peer among the major powers.

Decoupling or Derailing?

China’s remarkable increases in defense spending have significantly strengthened its military capabilities, particularly vis-à-vis potential conflicts on its immediate periphery. But it won’t always be this easy or simple. Not only is economic growth slowing, but domestic and social headwinds are worsening. PLA personnel and equipment costs are surging. There may already be an example of China having adjusted defense spending to economic realities. In 2010, China’s military budget increased by single digits in nominal terms for the only time since 1989, an anomaly some Chinese sources attribute to an adjustment in priorities following the global financial crisis (pdf).

A rebalancing of domestic priorities may ultimately allow Beijing to see greater benefits to cooperating with other countries in certain security situations. At the same time that they encourage China to increase its military transparency and contributions to cooperative security, the challenge for the U.S. and its allies will be how best to expend funding and focus to deter China from using force—or the threat of force—to resolve island and maritime claims disputes in its favor. Any such development would be disastrous for the interests of all concerned parties within the region and beyond, China included.


Andrew S. Erickson, “Testimony before the U.S.-China Economic and Security Review Commission,” Panel II: “Inputs to China’s Military Modernization,” “China’s Military Modernization and its Implications for the United States” hearing, Washington, DC, 30 January 2014.

Andrew S. Erickson, “China’s Near-Seas Challenges,” The National Interest 129 (January-February 2014): 60-66.

Andrew S. Erickson, “China’s Naval Modernization: Implications and Recommendations,” Testimony before the House Armed Services CommitteeSeapower and Projection Forces Subcommittee, “U.S. Asia-Pacific Strategic Considerations Related to PLA Naval Forces” hearing, Washington, DC, 11 December 2013. Click here for oral statement.

Adam P. Liff and Andrew S. Erickson, “Demystifying China’s Defence Spending: Less Mysterious in the Aggregate,”The China Quarterly 216 (December 2013): 805-30.

Nathaniel Austin, “Lifting the Shroud on China’s Defense Spending: Trends, Drivers, and Implications—An Interview with Andrew S. Erickson and Adam P. Liff,” Policy Q&A, National Bureau of Asian Research, 16 May 2013.

Andrew S. Erickson, “China’s Defense Budget: A Richer Nation Builds a Stronger Army,” Inaugural Presentation in “China Reality Check” Speaker Series, Center for Strategic and International Studies (CSIS), Washington, DC, 8 April 2012.

Andrew S. Erickson and Adam P. Liff, “China’s Military Development, Beyond the Numbers,” The Diplomat, 12 March 2013.

Andrew S. Erickson and Adam P. Liff, “A Player, but No Superpower,” Foreign Policy, 7 March 2013.
Andrew S. Erickson, “China’s Military Budget Bump: What it Means,” China Real Time Report (中国实时报), Wall Street Journal, 5 March 2013.