Military budget of China

The military budget of the People's Republic of China (PRC) is the portion of the overall budget of the People's Republic of China that is allocated for the funding of the Department of Defense . This military budget finances employee salaries and training costs, the maintenance of equipment and facilities, support of new or ongoing operations, and development and procurement of new equipment.

Various studies

The claim of the People's Republic of China that its defense spending is far lower than other major powers is correct, on the condition the official military budget number of the People's Republic of China is the real budget number.

The (unofficial) calculations about the military spending of the People's Republic of China tend to differ between the different organisations.

According to a recent RAND Corporation study, Chinese defense spending is indeed higher than the official number, but this study also states that the United States Department of Defense overestimates this number. The defense spending of the People's Republic of China is estimated to be between 2.3 and 2.8 percent of the nation's GDP. This is 40 to 70 percent higher than official Chinese Government figures, but substantially lower than previous outside estimates of the share of GDP devoted to defense. Chinese military spending nevertheless doubled between 1997 and 2003, almost catching up with the United Kingdom and Japan, and keeps growing with an annual 10% for the period 2003-2005. [1] If this RAND study gives a correct indication, the People's Republic of China could very well be the second highest spender in percentage of the GDP of the countries in the below tables, surpassing Japan and Russia in absolute terms.

A study of the SIPRI also comes to the conclusion that the military spending of the People's Republic of China is higher than the official budget. This study does however have a lower budget estimate than RAND: Of the major powers, the People's Republic of China surpasses only Japan relatively and only Russia absolutely. [2]

A comparison

Tabel 1. Absolute expenditures (in USD).

Country	Official budget	SIPRI	RAND	DoD
People's Republic of China (PRC)	$29.9 billion	$35.4 billion	$42.0-51.0 billion	$90.0 billion
United States	$419.3 billion	$455.3 billion	/	$419.3 billion
United Kingdom	$58.6 billion	$47.4 billion	/	/
Japan	$45.8 billion	$42.4 billion	/	/
Russia	$14.5 Billion	$19.4 billion	/	$70.0 billion
Republic of China (ROC, often referred as Taiwan)	$7.6 billion	/	/	/

Tabel 2. Relative expenditures (as % of GDP).

Country	Official budget	SIPRI	RAND	DoD
People's Republic of China (PRC)	1.4%	1.8%	1.9-2.4%	4.2%
United States	3.7%	3.9%	/	3.7%
United Kingdom	2.7%	2.2%	/	/
Japan	1.0%	1.0%	/	/
Russia	2.8%	4.3%	/	12%
Republic of China (ROC, often referred as Taiwan)	2.6%	/	/	/

Data: Official: 2005; SIPRI: 2004; RAND: 2004; DoD: 2005, except the data for the U.S. which is a 2006 estimate.

Note that this data have been adapted to the revision of China's 2004 GDP. This revision increased China's GDP number with 16.8% (or 283 billion USD). These figures were issued by the Chinese National Bureau of Statistics following a survey that aimed to gather more accurate data. Service industries accounted for 93% of the revision. [3]

Note also that many observers claim that the yuan, the Chinese currency unit, is undervalued. Other observers also note that the revised number of China's GDP is still not accurate. These uncertainties should be taken into account, especially becauses this increases the already existing uncertainty about China's military expenditures.

Hurdle in Sino-American relations

The PLA's official budget for 2005 is $30 billion, but this does not include money used for foreign weapons purchases, military-related R&D, or the paramilitary PAP, and critics label it a deliberately misleading low estimate. It is widely assumed and estimated that China's military budget exceeds this estimate.

The U.S. Pentagon estimated in June 2005 that China's military spending exceeds 90 billion USD. This is a point of conflict between the U.S. and China. US Defense Secretary Donald Rumsfeld has accused China several times of hiding its real military spending. He also said he could not understand why China increased its military expenditure with no threats from other countries, and that it fuels U.S. suspicions about China's motives. [4]

Extensive investment by the PRC in its navy is also very troubling for the United States. [5] Many believe that China has a long term plan to transform the Chinese Navy (PLAN) into a blue-water navy capable of power projection and challenging the United States and its neighbors.[6][7]

See also: Sino-American relations.

Hurdle in Sino-Japanese relations

In December 2005, Japan's Foreign Minister Taro Aso has said China was "a neighbour [...] [that] has expanded its military outlays by double digits for 17 years in a row, and it is unclear as to what this is being used for," he said. "It is beginning to be a considerable threat." He said this in response to a question in a news conference about a comment made by the head of Japan's Democratic Party (the main opposition party), Seiji Maehara, who had said he felt China was a threat. [8]

See also: Sino-Japanese relations.

China's reaction

China justified its annual increase in 2005 by referring on one hand to the Taiwan independence, and on the other hand stressed that much of it was needed to boost soldiers' pay and cover the social costs of cutting 200,000 personnel. China also states that its defence spending is far lower than that of other major powers, in relative (percentage of GDP) and absolute terms (in USD dollars). [9]

China's leaders have been trying to squash concerns abroad, particularly in the US and Japan, about Chinese nationalism and increased global competition for resources, in their speeches in 2005. This effort is believed to be echoed in the country's 2005 policy paper on the country's development strategy, called "China's Peaceful Development Road". This paper describes how soaring economic development in China would not pose a threat to other nations, but was instead creating opportunities and bigger markets for the rest of the world. [10]

In March, 2006 China said that it further will increase its military spending by 14.7% in 2006 to 283.8 billion yuan (this is in March 2006 comparable with 35.3 billion USD). China also added that much of the rise would be to cover fuel and salaries and that China was a "peace-loving nation". Jiang Enzhu added in line of previous statements of China that the USA spent a greater proportion of its economy on defence and that China had "no intention of vigorously developing armaments". [11]

Various studies

A comparison

Hurdle in Sino-American relations

Hurdle in Sino-Japanese relations

China's reaction

References

See also