In early March 2019, before starting the second session of the 13th National People’s Congress (NPC), China announced a draft defence budget of 1.19 trillion yuan (about 177.61 billion U.S. dollars)[i] highlighting an increase from 1.11 trillion yuan (175 billion U.S. dollars) in 2018. However, the growth rate has hit a dip with 7.5 per cent as compared to 8.1 per cent in 2018. To note, this single digit growth rate is consecutively fourth in row, as noted- 7.6 per cent in 2016, 7 per cent in 2017 and 8.1 per cent in 2018 against 10.1 per cent in 2015.[ii] Here the query remains: Does a slow growth rate call for a limitation in China’s military ambitions?
What makes it so is that China’s defense budget runs contrary to its slow growth rate, as defined to be China’s ‘new normal’. As observed, with the slow growth rate, China’s defence spending has witnessed an upward trajectory. China’s military spending has surpassed its economic growth, which projects a significant shift in China’s own policy. That is, there is a reversal in China’s own 2015 policy that emphasised on the need to closely match spending on the armed forces with slower growth rate. But China has failed to bridge the gap, as witnessed in Figure 1 and 2 below.
Figure 1: China’s Defence Spending 1978-2017 (in 100 million yuan)
Figure 2: China’s Defence Spending 1978-2017 (Share of GDP)
Source: Dang Yuan.[iv]
As noted above, China’s official spending on defence accounts for 1.3 percent of Chinese GDP. In this perspective, to suggest that a lower growth rate is directly proportional to China’s military ambitions is a faulty assessment. As in the global chart, China currently spends more on defence than Japan, South Korea, the Philippines, and Vietnam combined, and China’s military spending is second only to the United States (US).
In view of this, the upswing in China’s defence spending significantly clarifies China’s ambitious goal of building a ‘world class military’. Validating the ambition, Chinese Premier Li Keqiang in his 2018 Work Report stated: “Faced with profound changes in the national security environment, we must treat the Party’s goal of building stronger armed forces for the new era as our guide, […] We must stick to the Chinese path in strengthening our armed forces, advance all aspects of military training and war preparedness […]”.[v] Following suit, justifying China’s ‘defensive’ posture behind the current increased military expenditure, Zhang Yesui, spokesperson for the second session of the 13th NPC stated that: “Whether a country is a military threat to others or not is not determined by its increase in defence expenditure, but by the diplomatic and national defence policies it adopts”.[vi]
Drawing from the past Chinese responses, providing justifications for its increased military spending has become a Chinese norm. That is, a response mainly to alleviate the fears largely associated with the China threat syndrome. Wherein, the increased budget is mainly balanced by China’s defensive reasoning based on ‘safeguarding national sovereignty, security and territorial integrity’. And most importantly, following its ‘peaceful rise’ stance, China tries to dispel the external scepticism by issuing the categorical statement that it “poses no threat to any other country”.[vii] In addition, Beijing also justifies by posing a counter argument that despite the increase, China’s defence spending accounts for only 1.3 per cent of its GDP, which is significantly lower than the world average of 2.6 per cent, wherein, US and Russia account for around 4 per cent.[viii] However, these justifications fail to cast a shadow on the doubt over its military spending.
What calls for this scepticism? Here, the discrepancy lies in the lack of transparency given China provides opaque data, which accounts for only limited information of its defence spending. This discrepancy is witnessed in the asymmetry in China’s official defence budget and the estimates drawn by external sources. For instance, the SIPRI 2018 Report suggests that China has increased its military spending by 5.6 per cent to USD 228 billion in 2017, and that China’s spending as a share of world military expenditure has risen from 5.8 per cent in 2008 to 13 per cent in 2017. This gap in assessment between Chinese official figures to that of other sources is highlighted in Figure 3 below.
Figure 3: China’s Defence Spending (Chinese official figures versus external sources)
Source: China Power Project.[ix]
As noted in Figure 3, compared to China’s official estimates of defence spending each year, the outside estimates of China’s defence budget are often significantly higher than data given by Beijing. What calls for this mathematical divide is that in Beijing’s perspective, as the Chinese Defense White Paper posits, the defence budget broadly includes three main categories: personnel, operations and maintenance, and equipment- each group accounting for approximately one third of the overall military budget.[x] In applying this framework of assessment, China excludes a wide range of military items that remain unaccounted in the official military spending, which RAND lists out as: procurement of weapons from abroad, expenses for paramilitaries, nuclear weapons and strategic rocket programs, state subsidies for the military-industrial complex, some military-related research and development, and extra-budget revenue.[xi]
In addition to the faulty numbers, what further raises a doubt over China’s official military spending is its growing military ambitions. As noted in its increasing military muscle flexing and infrastructure build up in South China Sea, East China Sea, along the 21st Century Maritime Silk Road in Gwadar, Hambantota and others. This is indicative of China’s rapid military modernisation, which in view of Xi Jinping is targeted to be achieved by 2035. More specifically, this characteristic feature also highlights a change in China’s intention in terms of seeking a departure from fighting wars of attrition to that of ‘winning informationised local wars’. To say so, as for Xi, the larger goal lies in making China a security maximising state, which can only be achieved by building a strong military in fulfilling the ‘Chinese Dream’.
Therefore, an upward swing in China’s defence expenditure is indicative of its increasing military capabilities and undeterred military intentions. That is to say, given China’s growing need for power projection, an increased defence spending further provides a boost to its quest in securing its strategic space both regionally as well as globally. Therefore, with ambitious intentions at play, China’s increased defence spending does call for an alarm.
[x] The personnel category includes the cost of salary, food, and clothing for both military and nonmilitary personnel. Operations and maintenance encompasses training, construction, maintenance of facilities, operating expenses, education, and combat costs. Lastly, the costs for equipment, research and development, procurement, maintenance, transportation, and storage are all broadly included under equipment. See, John Feffer and Sean Chen (2010), “China’s Military Spending: Soft Rise or Hard Threat?”, Institute for Policy Studies, 06 May 2010, URL: https://ips-dc.org/chinas_military_spending_soft_rise_or_hard_threat/ (Accessed on 15 March 2019).