China’s new defense budget: money and manpower

There is an old saying that liberals solve problems by throwing lots of money at it. There is another saying (that I just made up) that governments solve problems by throwing lots of people at it.

When it comes to modernizing their military, the Chinese are fortunate in that they can do both. The People’s Liberation Army (PLA) has just been given a plus-up of 8.1% in its budget. This means that Chinese military expenditures will total around RMB1.1 trillion (US$173 billion) for the next year.

Significant defense spending

This makes China again the world’s second-largest military spender, continuing a 20-year run of double-digit or near-double-digit increases in its defense budget. In 1997, Chinese military expenditures were only US$10 billion, roughly on par with Taiwan and significantly less than Japan or South Korea. Today, the PLA’s budget outstrips all other Asian and all European militaries, including Russia. What’s more, China’s largesse to the PLA has been remarkably affordable: the country still spends less than 2% of its GDP on the military.

This fortuitous situation has been mostly due to the massive growth in the Chinese economy over the past 20-odd years. Between 1998 and 2007, China’s GDP grew at an average annual rate of 12.5%. Even in recent years of relatively slow growth, the GDP has still expanded by 6-7%. So sizable defense spending increases have not placed an undue burden on the Chinese economy.

Nevertheless, Chinese military spending has long exceeded GDP growth. Yes, China’s economy grew by 12.5 percent per annum from 1998 to 2007, but the defense budget expanded by nearly 16 percent every year. This trend has continued in recent years, and so the disconnect between economic performance and defense spending has become more and more pronounced.

Off the books?

Of course, every year it is argued that China’s declared budget does not include many categories of actual spending. These are thought to include funding for things like arms imports, strategic and nuclear forces, paramilitary organizations (such as the People’s Armed Police, or PAP), and military aspects of the country’s space program.

This exercise in guesstimating the “real” Chinese defense budget was relevant back when China spent barely US$10 billion a year on its military, which felt ridiculously low. Today it seems, in my opinion, to be increasingly immaterial: If Beijing is prepared to openly acknowledge military expenditures approaching US$175 billion and significant growth in its defense spending, why go through all the effort of hiding what are probably insignificant amounts (a billion here, a billion there)?

The one possible exception is the budget for internal security, which includes the PAP; this has been announced at 1.24 trillion yuan (US$196 billion) is actually larger than the PLA’s budget. But the Chinese are hardly hiding this fact.

What does it all mean?

So what does China’s defense budget tell us? In the first place, it means that China’s military modernization efforts are not about to abate or even slow much. There is no constituency inside China’s political and military elites in favor of reining in the buildup of the PLA. Just the opposite, in fact: The Communist Party and the PLA have an unwavering and unified commitment to turning the military into a 21st-century fighting force.

This is evident in the amount of funds likely being dedicated to procurement and military research and development (R&D). China is remarkably opaque about the particulars of its defense budget. It only releases a top-line figure every year; details are startlingly lacking. However, according to old defense white papers, the PLA is roughly divided into thirds between personnel, procurement and R&D, and operations (i.e., the costs of running the military, including such things as training, food, medical care, housing, etc.).

This means that China could be devoting as much as US$60 billion to procurement and military R&D. This sum is greater than the entire defense budgets of Japan, India, the United Kingdom, and France, and almost as much as Russia. In other words, Beijing has a lot of money that it can throw at the problem of military modernization.

This is not just buying new weaponry; China has been able to significantly beef up its R&D base, meaning more funds – and more people – to underwrite military innovation and the acquisition of new technologies (including foreign technologies, by all means fair or foul). This increase in monies and manpower has had a decidedly positive effect on the growth and modernization of China’s military-industrial complex, which is evident in such products as the fifth-generation J20 fighter jet, or the country’s first indigenous aircraft carrier.

Why we should worry

Some perspective on Chinese defense spending is necessary. In the first place, China has a crying need to recapitalize its military. It still has a number of aging or obsolete fighter jets, warships, and the like that need replacement. The PLA is still quite deficient when it comes to helicopters, large cargo aircraft, air-to-air refueling, reconnaissance systems, and modern logistics (although it is moving forward in all these areas).

And keep in mind that the United States is hardly standing still when it comes to its own military budgets. The Trump administration has called for spending a whopping US$716 billion on defense in the FY2019 budget, a 7.2% increase over this year.

Nevertheless, for anyone worried about a China that is engaged in serious military modernization while also being increasingly assertive about its place in the world, China’s defense budget – and its growth – is cause for concern. Solving a problem with money and manpower is having an obvious effect.