China now third largest importer of defense equipment; Asia Pacific to solidify role as driver of defense industry growth

China’s defense budget is expected to almost double by the close of this decade, according to new analysis released today by global insights firm IHS.

In 2010, China spent an estimated $134 billion on defense. By 2020, that figure is forecast to almost double to $260 billion. Across this decade, China is expected to spend almost $2 trillion on defense.

“We’re expecting annual growth in the Chinese defense budget to gradually slow over the coming years, but we should see increases average around 7% a year,” said Craig Caffrey, principal analyst, IHS Jane’s Defense Budgets. “The defense budget is expected to remain at around 1.7% of Gross Domestic Product, which is relatively conservative.”

Chinese J-11 fighters
Chinese J-11 fighters

In 2015, China’s defense budget was $190 billion, accounting for around 11% of global defense spending. Chinese defense spending is second only to that of the US. According to the federal budget, the US will spend $598.5 billion on its military in fiscal 2015.

“By 2020, the centre of gravity of the global defense spending landscape is expected to have continued its gradual shift away from the developed economies of Western Europe and North America and towards emerging markets, particularly in Asia,” Caffrey said. “In terms of overall growth in each region between 2015 and 2020, Asia Pacific is expected to solidify its role as the key driver of growth in the defense sector.”

China is now the third largest importer of defense equipment. “In 2014, China rose from fifth to third place, overtaking the UAE and Taiwan, in the global list of top defense spenders,” said Ben Moores, senior analyst at IHS Jane’s.

The IHS Global Defense Trade Report places Chinese imports at roughly $2.6 billion for 2014 or 4% of the world’s total defense imports. By way of comparison, in 2010, China imported $1.4 billion worth of defense equipment.

“China continues to require military aerospace assistance from Russia and its total defense procurement budget will continue to rise very quickly,” said Paul Burton, director of defense industry and budgets at IHS Jane’s.

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