Asia Pacific

Chinese defense spending slows but still tops GDP growth rate

Bloomberg, Reuters

China’s central government will increase defense spending at a slower pace than last year as President Xi Jinping overhauls the military and seeks to stamp out the corruption that hinders the country’s combat readiness.

The defense budget will rise about 10 percent this year, in line with the increase in the general budget, National People’s Congress spokeswoman Fu Ying said at a briefing on the NPC meetings that will kick off Thursday. Last year military spending rose 12.2 percent to 808.2 billion yuan ($128.9 billion).

China’s leaders have routinely sought to justify the country’s military modernization by linking defense spending to rapid GDP growth. But growth of 7.4 percent last year was the slowest in 24 years, and a further slowdown to around 7 percent is expected in 2015.

The military expansion has fueled tensions as it asserts its territorial claims in surrounding waters, testing U.S. allies such as Japan in the process. Defense spending has more than doubled since 2006, though widespread corruption and a lack of military engagement have undermined efforts at modernization.

While Beijing keeps the details of its military spending secret, experts have said additional funding would likely go toward beefing up the navy with anti-submarine ships and developing more aircraft carriers beyond the sole vessel in operation.

“It seems that all the action is happening in the maritime area,” said Sam Perlo-Freeman, director of the military expenditure and arms production program at the Stockholm International Peace Research Institute, citing recent increases in spending on navy and air force equipment. “The importance of the sea in the current territorial disputes, the importance of air in joint operations is a lot higher.”

Much of China’s spending has been focused on expanding its navy as it seeks to enforce its claims to more than 90 percent of the South China Sea and build a “maritime Silk Road,” a trade route linking a network of ports through the Indian Ocean with Europe via the Suez Canal.

“Carriers have definitely got to be on the list,” said John Blaxland, Senior Fellow at the Strategic and Defence Studies Centre at the Australian National University in Canberra. “But also we’ve seen a massive surge in the number of submarines, and of course everybody loves submarines. The intimidatory effect of a submarine is hard to be beat.”

China’s military expenditure as a share of its economy was 2 percent in 2013, less than the 3.8 percent in the U.S. and 4.1 percent for Russia.

This year’s 10 percent increase in spending is the slowest since 2010, when it climbed 7.5 percent.

“Our history has taught us that you get beaten up if you’re backward,” Fu said. “Our country will need to achieve modernizations, and one of them is military modernization, which will need sufficient financial support.”

The country’s armed forces suffer from “potentially serious weaknesses” that could limit fighting ability, according to a Rand Corp. report published last month, which cited corruption as a reason.

“The PLA leadership are worried that corruption within the PLA is likely degrading or inhibiting readiness and war-fighting capabilities,” said Andrew Scobell, a senior political scientist at Rand in Arlington, Virginia. “The PLA hasn’t fought an actual war since 1979, so there is some question as to its level of military readiness and state of combat effectiveness.”

China has been upgrading its military since the early 1990s, when its economy started to take off and as the technological prowess displayed by the U.S. forces in the first Gulf War exposed the PLA’s shortcomings.

“They realized there was a significant gap between what the PLA could do and what its potential adversary, the armed forces of the United States, were able to do on the battlefield,” Scobell said.

In the 20 years to 2013, China’s defense expenditure rose by an average of 15 percent a year, according to Sipri data, which are unadjusted for inflation. The economy grew an average of 9.8 percent over the same period, with an average inflation rate of 4.1 percent. The PLA doesn’t provide a breakdown of spending between the army, navy, air force or strategic services.

Sipri estimates China’s actual spending is about 55 percent above the officially stated figure to take into account items including military research and development, arms imports, military construction and PLA pension costs.

China’s defense spending has propelled it into the No. 2 position behind the U.S. worldwide, though its outlays are dwarfed by its bigger rival. The U.S. Defense Department has requested $534.3 billion for the year starting Oct. 1.

“China’s still a long, long way from the U.S. and will remain so for the foreseeable future,” Sipri’s Freeman said. Still, “when that’s combined with assertive behavior in relation to certain territorial disputes, that is cause for concern.”

China’s assertiveness in the South China Sea was on display when it deployed an oil rig in disputed waters off Vietnam last May, as well as a fleet of civilian and military vessels to protect it. It is also embroiled in a spat with Tokyo over the Japanese-controlled Senkaku Islands in the East China Sea. Military aircraft from both nations regularly tail each other around the area.

China’s stepped-up spending is contributing to neighbors boosting their defense outlays.

Japan will increase spending for a third year in 2015, reversing 11 years of declines. India last month raised its defense budget for the coming year by 11 percent to 2.47 trillion rupees ($40 billion) and commissioned six new nuclear powered submarines and six new frigates. Vietnam, Singapore, Indonesia and Taiwan are all buying, or have plans to buy, submarines.

China’s military is also increasing its participation in international exercises, taking part for the first time in the U.S.-led RIMPAC drills last year, with four of its ships joining.