2 page paper

China's Double-Digit Defense Growth What It Means for a Peaceful Rise by Richard A. Bitzinger

F O R E I G N A F F A I R S , M A R C H 1 9 , 2 0 1 5

China  has  done  it  again.  In  early  March,  it  released  its  defense  budget  for  2015,  and  as  in   almost  every  year  for  over  almost  two  decades,  it  increased  its  military  expenditure  by   double-­‐digit   percentages.   This   year,   the   Chinese   defense   budget   will   rise   by   10.1  percent,  to  roughly  $145  billion.  And  it  seems  likely  that  the  trend  will  continue,   much  to  the  concern  of  Washington  and  regional  capitals.   Already,  China  is  the  second-­‐biggest  military  spender  in  the  world,  having  surpassed   the   United   Kingdom   in   2008.   China’s   new   budget   for   the   People’s   Liberation   Army   (PLA)  is  more  than  three  times  those  of  other  big  spenders  such  as  France,  Japan,  and   the  United  Kingdom,  and  nearly  four  times  that  of  its  rising  Asian  rival,  India.  It  is  also   the   only   country   besides   the   United   States   to   have   a   triple-­‐digit   defense   budget   (in   billions  of  U.S.  dollars).     This  level  of  spending  is  all  the  more  remarkable  given  where  China  started.  In  1997,   Chinese   military   expenditures   totaled   only   about   $10   billion,   roughly   on   par   with   Taiwan  and  significantly  less  than  that  of  Japan  and  South  Korea.  Beginning  that  year,   however,  China’s  defense  budget  began  to  rise.  There  were  two  economic  factors  that   made   this   growth   possible.   First,   the   country’s   economy   soared;   in   1997,   defense   spending  made  up  less  than  two  percent  of  GDP,  which  remains  roughly  the  same  share   today,   at   least   according   to   Beijing.   Second,   low   inflation   rates   over   the   past   two   decades  have  meant  that  real  growth  in  defense  spending  has  nearly  matched  nominal   growth;   even   the   most   conservative   estimate   of   actual   growth   rates   (accounting   for   inflation)  reveal  a  five-­‐fold  real  increase  in  military  expenditures  since  1997.     What   is  particularly  striking  about  the  growth  in  defense  spending  over  the  last  two   decades  is  that   it  has  almost  always  outpaced  GDP  growth.  Between  1998  and  2007,   China’s   economy   grew   at   an   average   annual   rate   of   12.5   percent,   while   its   defense   spending  increased  at  an  average  of  15.9  percent  per  annum.  Given  that  the  economy  is   likely  to  grow  by  only  seven  percent  in  2015,  and  its  defense  spending  is  growing  at   double  digits,  the  disconnect  between  economic  performance  and  defense  spending  is   becoming  more  pronounced.  

Comparing  China's  Military  Spending  and  GDP  Growth  Rates  (Foreign  Affairs)  

Further,  it  is  commonly  assumed  by  many  in  the  West  that  the  official  defense  budget   does   not   provide   a   full   picture   of   Chinese   military   spending   and   that   the   central   government  hides  expenses  for  certain  items—for  example  research  and  development,   arms  imports,  and  subsidies  to  defense  industries—in  other  parts  of  its  overall  budget.   Estimates  of  additional,  off-­‐the-­‐books  spending  range  from  35  percent  to  50  percent  of   total   defense   expenditures,   based   on   estimates   by   IHS   Janes   and   the   Stockholm   International  Peace  Research  Institute,  respectively.  A  few  years  ago,  the  U.S.  Defense   Department  asserted  that  China’s  true  defense  budget  could  be  as  much  as  double  the   official  figure;  in  fact,  it  has  since  stopped  trying  to  figure  out  off-­‐the-­‐books  spending.   Indeed,   the   exercise   in   guesstimating   “actual”   Chinese   military   expenditures   has   become   increasingly   irrelevant.   With   an   official   military   budget   approaching   $150  billion,   the   PLA   has   all   the   on-­‐the-­‐books   money   it   needs   to   underwrite   a   very   aggressive   military   modernization   program,   and   if   the   military   wants   more,   Beijing   appears  more  than  ready  to  provide  it.  There  is,  quite  simply,  no  reason  for  Beijing  to   conceal  actual  military  spending,  at  least  the  overall  figure.       China  is  still  opaque,  with  some  reason,  about  how  it  allocates  its  defense  budget.  The   country  has  never  released  separate   figures   for   its  ground   forces,  navy,  or  air   force.   Chinese  defense  white  papers  (released  every  two  years,  starting  in  1998)  once  broke   down   spending   by   personnel,   operations   and   support,   and   “equipment”   (which   presumably   includes  weapons  procurement  and  defense  research  and  development).   But  that  stopped  in  2009.     Still,   a   few   predictions   can   be   made   about   the   breakdown   of   this   year’s   defense   spending.  The  white  papers  consistently  revealed  a  near-­‐even  one-­‐third  split  of  funding   between  personnel,  operations  and  support,  and  “equipment.”  Since  these  ratios  have   remained  more  or  less  constant  since  the  late  1990s,  it  is  reasonable  to  say  the  same   breakdown  applies  today.  That  means  any  increases  in  spending  are  still   likely  to  be   broken  down  equally  among  these  three  categories.       As  a  result  of  this  equal  division  in  spending,  China’s  expenditures  on  equipment  are   particularly  large.  In  1997,  for  example,  spending  on  equipment  totaled  about  $3  billion,   or   roughly  32  percent  of   the  overall  Chinese  defense  budget.   In  2009  (the   last  year   Beijing   provided   categorizations   of   its   spending   data),   equipment   still   hovered   near   32  percent   of   the   total   military   budget   of   $58.8   billion.   If   this   roughly   one-­‐third   percentage  rate  holds  for  the  2015  budget,  then  PLA  expenditures  for  equipment  this   year   could   be   somewhere   in   the   neighborhood   of   $48   billion.   In   comparison,   Japan   spends   about   $8.3   billion   on   equipment   and   research   and   development;   the   United   Kingdom,  roughly  $10  billion;  and  France,  $12  billion.  China’s  spending  on  equipment   would  likely  include  as  much  as  $10  billion  in  military  research  and  development      

spending,  which  is  more  than  double  the  amount  that  all  of  Western  Europe  spends,   combined.       In  fact,  China’s  budget  for  equipment  alone  is  greater  than  the  total  defense  budgets  of   Japan,   India,  or  any  other  Asia–Pacific   rival.  Not  surprisingly,   from  roughly   the  mid-­‐ 1990s   to   the   mid-­‐2000s,   China   became   one   of   the   world’s   largest   arms   importers:   buying  advanced  fighter  jets,  submarines,  destroyers,  and  transport  planes  from  Russia,   missiles  from  Ukraine,  and  drones  from  Israel.  Since  the  early  2000s,  China  has  begun  to   phase  out  arms   imports   in   favor  of  homegrown  weapons.  Fueled  by  an  explosion   in   research  and  development  spending  and  the  injection  of  new  funds  to  modernize  arms   factories,  China’s  domestic  defense  industry  has  begun  turning  out  scores  of  new,  very   advanced  weapons  systems.  Over  the  past  decade,  the  PLA  has  produced  hundreds  of   locally  built  J-­‐10  and  J-­‐11  fighters  (copied  from  the  Russian  Su-­‐27);  dozens  of  modern   destroyers,  frigates,  and  submarines;  several  types  of  new  missile  systems  (including  a   unique   anti-­‐ship   ballistic   missile);   and,   of   course,   an   aircraft   carrier   (acquired   from   Ukraine  but  rebuilt  almost  entirely  in  China).     Meanwhile,  the  PLA  has  still  had  plenty  of  money  left  over  to  increase  soldiers’  salaries,   construct  new  barracks  and  other  facilities,  and  improve  the  rigor  of  military  training,   such  as  preparing  for  modern,  integrated  joint  operations.     Because  of  this  significant  expansion  in  its  military  power,  it  is  perhaps  not  surprising   that  Beijing  has  grown  more  secretive  and  more  defensive  in  recent  years  in  revealing   its  spending  breakdowns.  On  the  one  hand,  the  Chinese  government  is  presumably  loath   to   disclose   the   details   of   its   military   expenditures   because   foreign   intelligence   organizations   could   exploit   that   information.   Or,   more   likely,   it   simply   finds   it   too   uncomfortable   to   reveal   its   gargantuan   procurement   and   defense   research   and   development  budget—second  only   to   that  of   the  United  States—especially  given   the   lengths  that  Beijing  has  gone  to  advance  its  “peaceful  development”  policies.     Beijing’s  refusal  to  reveal   information  is  matched  by  an  increasingly  stiff-­‐necked  and   uncompromising  defense  of  its  military  spending.  In  a  spate  of  editorials,  the  Chinese   government   has   stood   by   the   recent   increase,   arguing   that   it   is   “moderate   and   reasonable,”   and   part   of   the   “new   normal”   in   the   PLA’s   ongoing   modernization.   An   article   by   the   state   controlled  Xinhua  news   agency   asserted   that   Western   countries   want  to  keep  China  a  “military  dwarf,”  and  that  “through  tinted  glasses,  some  Western   countries  and  media  could  see  nothing  but  threat  regarding  China’s  military  budget.”  In   the  east,  China  claimed  that  its  security  was  being  increasingly  challenged  by  Japan,  a   “recidivist  trouble  maker”  with  “surging  military  ambition.”    

In   almost   the   same   breath,   Beijing   argues   that   its   military   expenditures   are   still   relatively   meager.   The   latest   rise   in   defense   spending   is   the   lowest   increase   in   five   years,  officials  claim,  and  military  spending  still  accounts  for  less  than  1.5  percent  of  the   country’s  GDP.  They  also  assert  that  in  terms  of  per  capita  military  spending,  China’s   defense  budget  is  still  only  one-­‐fifth  of  Japan’s,  one-­‐ninth  of  the  United  Kingdom’s,  and   less  than  one-­‐twentieth  of  the  United  States’.  “Current  Chinese  military  spending  is  by   no   means   a   big   one,”  Xinhua  declares,   “for   a   country   that   has   the   world’s   largest   population  and  a  territory  of  over  9  million  square  kilometers  to  defend.”     Much  of  what  China  says  is  true  but  misleading.  For  instance,  this  year’s  10.1  percent   rise,  although  on  the  low  side,   is  otherwise  more  or  less  in  line  with  China’s  defense   spending  increases  over  the  past  two  decades.  That  could  mean  that  China  is  trying  to   use  a  small  dip   in   its   spending  growth   to  downplay   its  military  spending  overall,   in   order   to   head   off   criticism   that   it   has   issued   the   largest   defense   budget   in   China’s   history,  and  to  bolster  Beijing’s  “peaceful  development”  approach.     The   simple   fact   is   that   Beijing   is   committed,   at   least   publically,   to   sizable   defense   spending  increases  because  China’s  leadership,  from  the  hardliner  to  the  reformer,  is   united   around   the   central   idea   that   the   PLA   must   become   a   modern,   twenty-­‐first   century  fighting  force.     Moreover,  this  view  appears  to  be  widely  shared  among  the  general  populace.  A  recent   poll   undertaken   by   the   Australian   think   tank   Perth   USAsia   Center   found   that   the   Chinese,  by  a  solid  majority,  backed  Beijing’s  claims  over  the  disputed   islands   in  the   East   and   South   China   Seas.   In   addition,   a   sizable   number   (greater   than   70   percent)   believed  that  the  PLA  could  prevail  in  any  conflict  in  those  regions,  even  if  the  United   States   were   to   intervene   (although   most   felt   it   would   not   be   in   China’s   interest   to   pursue  a  military  solution.)     This  support  is  driven  by  two  factors:  growing  nationalism  and  the  government’s  active   promotion  of  historical  victimization  and  ongoing  vulnerability—particularly  through   its   20-­‐year-­‐long   “patriotic   education”   campaign,   which   downplays   the   faults   of   the   country’s   leaders   and   emphasizes   the   brutality   committed   against   China   by   “evil”   foreign  powers.  As  one  Chinese  official,  when  defending  the  most  recent  defense  budget   increase,  put  it,  “our  lesson  from  history—those  who  fall  behind  will  get  bullied—this  is   something  we  will  never  forget.”  In  this  regard,  too,  a  modernized  PLA  dovetails  well   with   Chinese   leader   Xi   Jinping’s   “China   dream,”   a   vision   of   a   “rejuvenated”   and   “revitalized”  China.  If  China  wants  to  be  a  great  power,  it  requires  a  powerful  military.   Consequently,   the   “rich   nation,   strong   army”   ideal   resonates   with   much   of   China’s   population.    

Military  Expenditures  in  Billions  of  U.S.  Dollars  (Foreign  Affairs)  

  What  does  a  rising  Chinese  defense  budget  mean  for  the  United  States?  Certainly  the   United  States  continues  to  be  the  bigger  spender,  outpacing  China  on  defense  by  a  factor   of   four  to  one.  Moreover,  by  nearly  every  metric—quantity  and  quality  of  weaponry,   soldierly  prowess,  training,  and  leadership—the  U.S.  military  outclasses  the  PLA.  Still,  a   progressively   modernizing   Chinese   military   constitutes   a   growing   challenge   to   U.S.   supremacy   in   Asia.   Along   with   its   assertive   and   unapologetic   stance   on   raising   its  

military  expenditures,  China  is  increasingly  aggressive  in  contested  areas  around  China,   particularly   the   East   and   South   China   Seas.   Moreover,   China   is   committed   to   modernizing   its   military   to   a   point   where   it   can   be   supreme   in   the   region.   There   likewise  exists  a  strong  national  will  to  spend  the  money  to  make  this  happen.     This   trajectory   may   not   necessarily   put   China   on   a   collision   course   with   the   United   States,  but  it  doesn’t  bode  well  for  regional  security  over  the  long  run.  It  does  not  help   that  Washington’s  emerging  war  strategies  for  dealing  with  China—AirSea  Battle  (now   known  as   the   Joint  Concept   for  Access  and  Maneuver   in   the  Global  Commons)—are   equally   potentially   confrontational.   As   China—powered   by   hubris   and   backed   by   an   increasingly  capable  military—becomes  increasingly  aggressive  in  the  region,  it  could   possibly  provoke  a  U.S.  pushback.  If  the  arms  race  escalates,  security  and  stability  in  the   Asia–Pacific  can  only  grow  more  fragile.