Every year the National People’s Congress (NPC) meets in the Chinese capital Beijing to lay out policy for the coming year. Among the first items on the annual agenda is the defence budget. On 4 March, on the opening day of the Fourth Session of the 11th NPC, the party leadership announced military spending would increase by 12.7%. This figure marks a return to double-digit growth after last year’s budget expanded by 7.5% as China weathered the global economic crisis.

The actual monetary amount of the draft defence budget is 601.1 billion yuan (USD91.5 billion), which equates to 1.4% of GDP. This is up from USD78.6 billion in 2010. Interestingly, the government never provides a breakdown of the amount each of the four PLA branches receive individually, nor does it reveal how much is spent on weapon acquisitions. (KYM TO TASHA, BPS) Li Zhaoxing, the NPC spokesman, stated: “This will not pose a threat to any country.” In defending Chinese spending, he made direct reference to the 2% of GDP that India spends on defence. Indeed, India recently announced it was boosting expenditure by 11.6% for the coming year, which is not that different to China’s rate of growth.


Targeted spending

In its spending, the government is specifically targeting training, human resource development, infrastructure and salary increases for the 2.3 million members of the People’s Liberation Army (PLA). Such measures are vital if China is to attract skilled and well-qualified recruits into the military. As the PLA modernises with an infusion of new equipment and technology, there is a corresponding requirement for suitably educated personnel to operate it. This is why the PLA recently announced a 40% pay increase for its rank-and-file members. Pay rises were also authorised in 2006 and 2008, but wages nevertheless remain low compared to Western nations. A junior officer in the PLA currently receives about CNY3,300 (USD500) per month, which is comparable to what a master’s graduate might earn in an average Chinese city. As China grapples with inflation and rising commodity prices, it is logical that the PLA should be trying to improve living standards for its members. The move to boost pay will also carry the added advantage of giving Hu Jintao, the chairman of the Central Military Commission (CMC), more bargaining power and greater standing amongst the PLA.

There is certainly a need to improve the living conditions of troops, especially in remote border regions, if morale is to be maintained amidst the country’s economic boom.  Also, as PLA institutions take on more non-traditional roles such as peacekeeping and anti-piracy missions in the Gulf of Aden, troops need to be trained accordingly for these kinds of contingencies. Take, for example, China’s first ever military operations in the Mediterranean, where the PLA Navy (PLAN) evacuated Chinese citizens from Libya during unrest in the North African country. Prior to that, two warships visited the Mediterranean after completing their Gulf of Aden counter-piracy mission, exercising with the Italian Navy for the first time. The PLAN also sailed a 17,600-tonne amphibious assault ship into the Indian Ocean to support anti-piracy operations, the first such long-range deployment of this type of vessel.

As well as the PLA, China fields the People’s Armed Police (PAP), an organisation formed on 19 June 1982 to help the CCP retain control of the populace. The PAP is an opaque organisation, with the lines between police, PAP and PLA roles sometimes hard to distinguish. The PAP force is 660,000 strong, making it larger than the militaries of most countries. It is under the joint command of the CMC and the State Council. Its operations are paid for by the Ministry of Public Security and local government, yet its personnel affairs, education and training are managed by the military. Indeed about 3% of the defence budget is allocated for training and equipment of reserve and militia personnel.

China’s last White Paper generalised that the three categories of (1) personnel, (2) training and maintenance, and (3) equipment, each receive approximately one third of the budget. Spending on hardware in the coming year would be “appropriate” said Li. “The government has always tried to limit military spending and it has set the defence spending at a reasonable level to ensure there is a balance between national defence and economic development,” he said. There is a degree of correlation between GDP and defence spending, with China’s GDP growing by 10.3% in 2010. China is taking care that defence spending does not impinge upon national economic development. This aligns with what was written in the 2008 White Paper: “In the past three decades of reform and opening up, China has insisted that defence development should be both subordinated to and in the service of the country’s overall economic development, and that the former should be coordinated with the latter.”

Year Amount (CNY billion) Percentage increase year on year
2002 166 18.4%
2003 185.3 11.7%
2004 211.701 15.3%
2005 247.7 12.5%
2006 283.8 20.4%
2007 350.92 17.8%
2008 417.769 19.1%
2009 480.686 14.9%
2010 532.115 7.5%
2011 601.1 12.7%

Table 1: Chinese military spending 2002-2011

Trailing the USA
For the past decade, Chinese military expenditure has grown by a yearly average of 15.7%. In 2007, China’s defence expenditure passed Japan’s, and it surpassed the United Kingdom’s in 2008. Now China’s investment is second only to the USA’s. However, the rate of defence spending as a proportion of GDP has varied from 1.22% to 1.42%. This appears on the light side when compared with NATO’s recommended amount of 2% of GDP, and 4.7% for the USA in 2010-11. In February the Pentagon outlined a baseline budget of USD553 billion for 2012, marking a USD22 billion increase on 2010. Although China’s global presence is expanding, it still trails the USA’s capabilities and responsibilities by a long way.

Obviously there is still ample leeway for China to increase its percentage of military spending in line with other countries. However, China is not trying to match US spending, nor is it attempting to attain compatible military capabilities. Instead Beijing aims to threaten or constrain American influence in the Far East. It is doing so by fielding weapon systems that give regional rather than global reach. China fully intends to protect sea lanes that assure the supply of oil and other raw materials, as well as all the maritime territory it has claimed in the East China Sea and South China Sea.

Chinese territorial claims are upsetting a number of Southeast Asian nations. Both the Philippines and Vietnam have had separate confrontations with China in recent weeks. Two Chinese patrol vessels harassed a Philippine oil-exploration vessel in Philippine waters, with Manila dispatching two military aircraft in response. Meanwhile, Vietnam complained about Chinese counter-piracy drills near the Spratly Islands. China and ASEAN agreed on a South China Sea accord in 2002, but China is resisting all efforts to turn this into a binding set of rules.

Beijing also dismisses outright other nations’ territorial claims in these waters, through which nearly half the world’s cargo vessel tonnage passes each year. Some Chinese studies suggest the waters around the Spratly Islands could contain more oil than Iran and more natural gas than Saudi Arabia.  US Secretary of State Hillary Clinton said the issue of Spratly Island ownership was “a leading diplomatic priority,” – with the Chinese Foreign Minister Yang Jiechi reacting that this was “virtually an attack on China.” At the moment these confrontations are low grade, but they could well be a harbinger of things to come.

Responding to China’s draft defence budget, Japanese Foreign Minister Seiji Maehara said, “We cannot help wondering about what all the money is used for…We have great concerns.” Japan has already borne the brunt of China’s more aggressive posture, in particular a dispute over the Diaoyu Islands. On 2 March the Japan Air Self-Defence Force (JASDF) scrambled F-15J fighters to warn off two Chinese Y-8 patrol aircraft just 54km from these contested islands. Facing some 1,400 missiles aimed in its direction, Taiwan is another country expressing anxiety over China’s potent military stance.

Major General Luo Yuan, a hawkish retired PLA general, agreed with the double-digit increase in the budget because China has to counter separatist movements in Taiwan, Tibet and Xinjiang. Another reason he cited was the highly visible presence of the US Navy in the Western Pacific, especially after a bilateral US-South Korean exercise in the Yellow Sea late last year.

Hidden budget

Li Zhaoxing went on to state that the draft budget was “transparent” and contained no “so-called hidden military expenditure”. However, this contention is refuted by many observers. The USA, for example, believes China spends much more than what is announced, with the Department of Defense (DoD) estimating spending of USD150 billion last year. Unfortunately there are significant differences in estimates from foreign sources, which does raise questions about their accuracy. The Stockholm International Peace Research Institute and the London-based International Institute for Strategic Studies usually offer estimates that are lower than the DoD’s. Regardless, it is believed the published budget is closer to the truth than it was ten years ago.

Andrei Chang, a commentator on the Chinese military, believes actual budget growth for the coming years is more like 25% once the ‘stealth budget’ is taken into account. The declared budget includes funding allocated by the General Logistic Department, Headquarters of General Staff and General Equipment Department of the PLA. However, it does not include money allocated to defence scientific research or to special programmes, as R&D institutes are funded directly by the Ministry of Finance. There are absolutely no channels by which R&D spending can be checked from official sources, raising the intriguing question as to whether the Chinese government itself knows exact figures. Such an obtuseness and lack of transparency tends to magnify suspicions of other countries about China’s military build-up.

Development of new equipment like the J-20 stealth fighter, indigenous aircraft carrier and new DF-21D anti-ship ballistic missile come from such research funds. It is their development that is causing so much hand wringing in the USA and in neighbours like Japan and India. As these expensive and advanced programmes near their expensive procurement phases, more money is required. This may be one reason why the budget has increased so much this year.

China does not want to unnecessarily antagonise neighbouring countries, as evidenced by the way it gave the first official confirmation of China’s aircraft carrier programme.  The “2010 China’s Ocean Development Report” stated: “Building China as a maritime power is the mission of China in the whole 21st century, and 2010 to 2020 is the critical period for accomplishing this strategic mission, with the goal to place China among mid-tier maritime powers.” Buried at the end of the 570-page report was confirmation of plans for building aircraft carriers to further this end. Sources claim China plans four 65,000-tonne conventionally powered carriers along the lines of the ex-Soviet Varyag by 2020 (including two by 2015), and even a nuclear powered carrier to be launched by 2020.


Towing the party line

The PLA and the Chinese Communist Party (CCP) have a unique relationship; indeed, the creation of the People’s Republic of China in 1949 was due solely to the military struggle against the Kuomintang, following the earlier defeat of the Japanese. The question to ask is: which one is boss – the CCP or the PLA? “Political power grows out of the barrel of a gun,” Mao Zedong once said. In theory China has no official national army, for the PLA is ultimately loyal to the CCP alone. Soldiers are to have five core values – loyalty to the party, love for the people, serving the country, devotion to missions, and upholding honour. The national constitution states the PLA is “under the absolute leadership of the Chinese Communist Party,” and essentially the military takes orders from the CMC rather than the Ministry of National Defence.

When it comes to official proclamations, the CCP has two watchwords it bandies around – these are “stability” and “prosperity”. The government routinely calls for social stability and patriotism. Prosperity is deemed important, for if the populace is growing in wealth, it is less likely to foment trouble. China has felt threatened by the recent civil disturbances in the Arab world, and it has taken strict measures to prevent any similar grass-roots “jasmine revolution” in China.

Unnerved by the neutrality or even the active support of soldiers in the revolutions in Egypt and Libya, the government has been stressing the ideological imperative for the PLA to submit to government mandates. In a speech to PLA deputies during a panel session of the NPC, President Hu Jintao stated the PLA should make “complete obedience to the party” one of its priorities as the military modernises. No less than three times, he mentioned “loyalty to the party” in his speech. “[The army] should unswervingly obey the party’s command – which is the basic principle – and keep fostering the core values of contemporary soldiers.”

“[We] must persevere with socialism with Chinese characteristics in our armed forces, which make the whole army maintain a clear and solid ideology,” declared Hu. The message is clear – instead of contributing to social unrest, the PLA must prevent it. Such statements suggest the CCP leadership harbours traces of fear about the power base of the PLA. With pay hikes and a bigger budget, the government is trying to keep the military happy in the face of social discontent and an inflation rate of about 4%.

Country Defence budget (USD billion) Percentage increase over previous decade
Australia 21.3 +84%
China 78.6 +358%
India 32.3 +151%
Indonesia 5.3 +51%
Japan 57 +3%
Singapore 9 +46%
South Korea 26.5 +116%
Vietnam 2.7 N/A



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