China’s military spending has risen at the fastest pace in four years. Beijing claims that this has been necessitated by “escalating” threats from abroad. The National People’s Congress (NPC), which handed Xi Jinping his third term as President was recently informed that the increase was only 0.1 per cent more than last year, but is still significant as defence expenditure in the last four years has outpaced other categories of expenditure, clearly showing that China has prioritised security over development. China’s planned budgets for the year put defence spending at US$225 billion, a 7.2 per cent rise and the quickest rate of increase since 2019. It officially rose 7.1 per cent last year. The increase in the world’s second-largest defence budget comes as China announced an economic growth goal of around five per cent for this year, one of its lowest in decades.
The economic goals announced at the NPC followed China posting just three per cent growth last year, widely missing its 5.5 per cent target as the economy strained under the impact of strict Covid-19 containment policies and a property crisis. This growth target came in at the low end of the market expectation and clearly, will be the floor of growth the government is willing to tolerate. The sustained growth in defence spending despite sagging economic expectations, demonstrates that under Xi Jinping “security is now much more important for the national leadership” than before. This year’s defence budget points to a widening gap between China’s military and economic development, a trend which shows that economic growth has taken a back seat to expansion of the nation’s defence capabilities.
According to the draft budget presented to the NPC, defence expenditure will increase by 7.2 per cent in 2023, much higher than the 5.7 per cent increase in public expenditure and 2.2 percentage points above the government’s 5 per cent economic growth target, a larger gap than in the draft budget a year ago, when China first proposed a military spending increase higher than its growth target. It, therefore, significantly outpaces development-related budget items such as education, social security, and scientific research.
Outgoing Premier Li Keqiang was chosen by the CPC to provide the explanation for the increase in the defence budget. He informed the NPC that “external attempts to suppress and contain China are escalating”. He added, while presenting the Government’s Annual Work Report that “The armed forces should intensify military training and preparedness across the board”. The military must “devote greater energy to training under combat conditions, and… strengthen military work in all directions and domains”, he added. The carefully choreographed NPC meeting saw thousands of politicians coming from across China who voted on laws and personnel changes pre-approved by the ruling Communist Party of China (CPC). Thus, the work report presented to the NPC’s opening session could be safely devoted to speaking about the armed forces’ achievements. Premier Li said, “They (PLA) carried out operations in a firm and flexible way, and they effectively conducted major missions relating to border defence, maritime rights protection, counterterrorism and stability maintenance, disaster rescue and relief, Covid-19 response, peacekeeping, and merchant ship escorting.” Reference to “major missions relating to border defence” is regarded as significant in the context of offensive actions by the PLA in Eastern Ladakh in May 2020 along the Line of Actual Control with India.
Significantly, China’s military spending has grown fivefold over the past two decades and, today exceeds that of the 13 next-largest military spenders in the Indo-Pacific combined. The Chinese government provides little detail on its defence spending beyond a breakdown by personnel, training and maintenance and equipment. Official figures do not account for a number of military-related outlays, including military research and development, China’s space and cyber programmes, defence mobilization funds, authorized sales of land, recruitment bonuses for college students, and provincial military base operating costs. Official figures also exclude spending on public security, which includes the People’s Armed Police (PAP), and Coast Guard. The PAP is a paramilitary police component of China’s armed forces that is charged with internal security, law enforcement, and maritime rights protection. The official budget also does not reveal the provincial military bases’ operating costs. Finally, China also does not reveal the accurate cost of all its military goods and services, thus, increasing the inconsistencies and ambiguities about its defence spending.
An article published (October 2022) in the official journal of the State Administration of Science, Technology and Industry for National Defence, recommended an increase in the military budget given surges in defence spending by NATO member-states, besides the US. There are some fundamental characteristics that differentiate the PLA’s budget from most other nations’ defence budgets. These include, the unquantifiable costs of maintaining instruments of CPC repression within the military, the lack of transparency on military expenditure, and more importantly, lack of reliability on the little amount of data that is officially released. The challenge is that the CPC has a history of altering data to fit its narrative, which makes their data difficult to rely on. Estimates of China’s defence budget by international think tanks are often significantly higher than the official numbers. The Stockholm International Peace Research Institute (SIPRI) estimates the overall 2021 figure to be US$293.4 billion and the International Institute for Strategic Studies (IISS) puts the number at US$270 billion, as against budgeted US$210 billion. The US Department of Defence reported that China’s actual defence spending may be upwards of four times larger than its officially announced budget.
The reason for this high expenditure on defence is because China has for long wanted to close the gap with the United States in terms of its defence capability. The Ukraine war has prompted some elements in China’s military-industrial complex to call for an increase in the defence budget. This year’s increase in defence spending is therefore, significant for the obvious reasons in terms of using the external environment to justify enhanced expenditure, as also prioritising security over development. The consequences of this action will become apparent in the next five years for China.