The annual National People’s Congress (NPC) of the People’s Republic of China (PRC) ended last week. Like every year, the first day of the NPC was dominated by the news of China’s defense spending. Its national budget projected that China’s defense spending should reach 1.45 trillion yuan ($229.47 billion) in 2022. This represents a 7.1% increase over 2021 spending, which was 1.36 trillion yuan ($209.2 billion). The People’s Liberation Army’s (PLA) defense spending has increased by at least 6.6 percent every year for the past three decades, and its defense spending has increased nearly sixfold over the past two decades . Interestingly, Budget 2022 marks the only time the budget growth rate has increased for two consecutive years in the past decade. Currently, China spends more on defense than any other country except the United States.
How to read China’s defense spending?
The 2019 China Defense White Paper outlines three broad categories of China’s defense spending: personnel spending, capital spending, and training and support spending. The white paper points out that since 2010, China’s investment spending has increased every year. In 2010, China’s capital spending accounted for 33.2% of the total budget, and it increased to 41.1% of total spending in 2017. Previously, over the past two decades, China’s defense spending were roughly equal in all three categories. However, the upward trend, especially in this decade, aligns with Xi Jinping’s rise as General Secretary of the Communist Party of China (CCP).
Interestingly, the 2015 China Defense White Paper pointed out that the PLA should focus more on high seas operations to protect its overseas interests (weihuhaiwailiyianquan) as well as defense near the sea. This would require major investment in the navy and air force, which are more capital-intensive forces than the land force. In addition, Xi’s armed forces reforms have also emphasized new weapons to achieve “multi-domain integrated joint operations” (duet yuyitihualianhezuozhan). Thus, during this decade, the defense expenditures of the PLA are mainly used for the fielding of more advanced and high-tech weapons to achieve regional supremacy and extra-regional operational capabilities.
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What does defense spending hide?
But these are only conservative estimates released by China’s State Council and Ministry of Finance. Military observers around the world have questioned these figures and say China hides more than it reveals. For example, researchers from the Stockholm International Peace Research Institute (SIPRI), the International Institute for Strategic Studies (IISS), and RAND Cooperation have all claimed that China’s defense spending is far superior to what they present. Similarly, the US Department of Defense’s (DOD) annual Chinese military might report does not provide a specific assessment, but has repeatedly asserted that China’s military spending could be much higher than expected.
Indeed, China’s military spending hides important categories of defense spending. For example, the figures published by China do not take into account the expenditure of the People’s Armed Police and the Coast Guard (paramilitary forces), which could in all likelihood be very high. Likewise, it ignores newer but capital-intensive areas like China’s space and cyber programs, nuclear programs and defense mobilization funds. Nor does it reveal the operating costs of provincial military bases. In addition, China’s defense spending also excludes expenses related to disaster relief operations, which must then be reimbursed by non-defence related agencies. Finally, China also fails to disclose the exact cost of all its military goods and services, increasing inconsistencies and ambiguities regarding its defense spending.
However, China is not the only country hiding its defense spending, as India also fails to reveal several components like its defense spending in space, cyber and nuclear programs.
China’s Defense Spending Comparison
The US DOD report forecasts China’s economic growth to slow over the next 10 years, reducing its ability to spend on defense and national security needs. However, comparing defense spending, it is clear that China is well ahead of its regional competitors, and it would take a significant leap for regional players, including India, to catch up with China.
For example, China’s total defense spending for 2022 is greater than the combined defense spending of India, Japan, Australia, South Korea and Taiwan for 2021. However, defense spending of China are about 3.5 times less than the annual military budget of the United States, which makes the United States an important extra-regional player in the Indo-Pacific region to balance the rise of China.
Suyash Desai is a researcher who studies China’s defense and foreign policy. He is currently studying Traditional Chinese Language at National Sun Yat-Sen University, Kaohsiung, Taiwan. The opinions expressed in this article are those of the author and do not represent the position of this publication.
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