05 March 2015

China’s Military Spending Swells Again Despite Domestic Headwinds

Andrew S. Erickson and Adam P. Liff, “China’s Military Spending Swells Again Despite Domestic Headwinds,” China Real Time Report (中国实时报), Wall Street Journal, 5 March 2015.

China raised its official 2015 defense budget 10.1% to 886.9 billion yuan ($141.5 billion), the government announced Thursday on the opening day of the annual meeting of the National People’s Congress. Though the real-world impact of these increases is heavily contingent on the pace of China’s often volatile inflation, this year’s People’s Liberation Army budget marks the 26th year of nominal double-digit increases since 1989.

Many analyses conclude that China’s military spending is significantly higher than officially reported (pdf). To be sure, no nation’s official military budget covers all its defense-related spending, but most other countries close to China’s level of military development offer far greater transparency. Regardless of what specific additional line items are not reflected in the official figure, however, this much has been clear since 2010: China has climbed firmly into elite company —with the world’s second-largest economy and military budget, both of which are increasing at a rapid clip.

Today’s announcement also provides further evidence of an important emerging trend in the post-financial crisis era: 2015 marks the fourth consecutive year that the increase of China’s nominal official defense spending is projected to outpace its also rapid, but slowing, GDP growth (7.4% in 2014, with 7% targeted for 2015). This “new normal” marks a moderate departure from the two-decade trend prior to the financial crisis of average annual defense spending increases roughly commensurate with the pace of China’s economic expansion.

In an era when Beijing faces additional numerous headwinds stemming from manifold challenges on the home front— an aging population, surging debt, and a looming national health crisis caused by, among other things, the heartbreakingly harmful air pollution documented by former CCTV reporter Chai Jing in “Under the Dome”—the domestic opportunity costs of such spending will only increase in the years ahead. Nor does the effective relative increase in prioritization of military spending appear to be a transient phenomenon. As Xinhua notes, “some experts believe the expenditure is still far from the level it needs to be in the face of increasingly severe security challenges.”

This suggests that, barring an unexpected economic or social crisis, rapid military budget increases are likely to continue in the near- to medium-term, despite China’s decelerating economic expansion.

This ratio of defense budget increases to GDP growth has thus emerged as one important metric for measuring the CCP leadership’s priorities. But the budget should also be assessed in the context of overall government expenditures – a comparison that, at least until recently, revealed that the PLA actually received a declining percentage of aggregate government largesse (pdf). China is no Soviet Union, and defense spending increases of this magnitude appear sustainable, at least in the short-term. In the long term, however, Beijing will increasingly face very tough choices with potentially high domestic costs.

At present, the basic trend line is clear—Party leaders remain determined to continue rapid, ambitious modernization of what is already the world’s second-best-resourced military. Though by no means a superpower and unable to project power far overseas like the better-funded but also globally-distributed U.S. military, decades of surging military investment have paid major dividends for China’s relative strength in its immediate region. As a case-in-point, the region-focused PLA now has more submarines than does the entire U.S. Navy.

China’s neighbors are also increasing their defense spending, though Beijing’s spending dwarfs all. The defense spending of India, a country whose population will soon surpass China’s in size, is projected to increase a remarkable 11% this year. India’s budget itself, however, still pales in comparison: Less than a third of China’s at $40 billion. Russia’s defense spending, meanwhile, rose 33% in 2015, continuing its own recent trend of staggering (and probably unsustainable) increases.

Despite provocative official Chinese claims that Japan is a “recidivous [sic] trouble maker” undergoing a resurgence of “militarism,” the administration of Prime Minister Abe Shinzo—Japan’s strongest and most security policy-focused leader in years—has only increased defense spending by an average of 1.9% per annum since 2013 (pdf). Also conspicuously overlooked in related narratives in China and beyond: These three years of increases follow eleven years in a row during which Japan’s defense spending was declining.

Despite gradual improvement in recent years, Beijing’s transparency about its defense spending remains an issue of major concern. It was only several years ago that China began submitting the most basic breakdown of spending to the United Nations, and the U.N.’s website suggests that China stopped doing that after 2010. To date, China has never released even the most basic spending breakdown for its different armed services. The text of the Ministry of Finance report issued at the National People’s Congress (pdf) offers few details beyond saying that China military spending serves “the goal of building powerful armed forces” and that China “will strengthen the military in all respects.”

China’s state media complain that Western media drum up artificial concern over the country’s military budget increases, but without more transparency overseas concerns about China’s military transparency and the intentions behind it are sure to continue. These concerns are sincere and legitimate on both specific and abstract grounds. Though Party leaders have long judged that low military transparency serves China’s strategic interests, the continuation of this practice exacerbates mistrust, uncertainty about the future, and frictions over more concrete areas of tension that exist regardless, especially in the disputed East and South China Seas.

In short, Beijing’s limited transparency does everyone with an interest in Asia-Pacific stability—including itself—a major disservice. As China’s Ministry of Finance stated in its report, “we need to make progress across the board in releasing budgets.”


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