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Pondering China's Military Budget

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A bit of wind has been taken from the sails of American Sinophobes. On 4 March 2010, Beijing announced China's declared defense budget will only increase by 7.5% this year -- the slowest rate in 20 years. The announcement came as a surprise to Western analysts who had predicted the People's Liberation Army (PLA) would likely receive a 14.5% pay raise in 2010. They should have known better. Beijing has a history of appropriately diminishing military expenditures when more pressing issues arise. In this case, fostering sustainable economic development while avoiding inflation abetted by government spending.

China's military budget has historically been a "riddle wrapped in an enigma." While Beijing's biannual white papers on national defense purportedly seek to address this mystery with a new air of transparency, the published figures do not include such large expenditures as strategic forces expenses, foreign acquisitions, state subsidies for the defense-industrial complex, and some military-related research and development. The result is wide-ranging estimates that vary from Beijing's self-proclaimed $78 billion for 2010 to U.S. Defense Department assessments of between $100 and $150 billion.

That said, since 1978 the published Chinese defense budget has grown more than 20-fold. Beijing, however, is quick to place this increase in defense expenditures in a broader domestic political perspective. In the 2006 white paper on National Defense, Chinese officials argue:

In the 1980s, China began to shift the focus of its work to economic development. At that time, it was decided that national defense should be both subordinate to and serve the country's overall economic development. As a result, national defense received a low input, and was in a state of self-preservation. From 1979 to 1989, the average annual increase of defense expenditure was 1.23 percent. However, the defense expenditure actually averaged registered an average annual decrease of 5.83 percent, given the 7.49 percent average annual increase in the consumer price index in the same period.

The Chinese Communist Party is significantly less apologetic or conciliatory about what happened to defense spending between 1989 and 1997. In China's National Defense 2008, Beijing states that "to make up for the inadequacy of defense development and to maintain national security and unity, China gradually increased its defense expenditure on the basis of its sustained economic growth." According to the Chinese military, during this time period annual defense spending rose by 14.5%. And from 1998-2009? Beijing unapologetically observes that "to maintain national security and development and meet requirement of the revolution in military affairs...China continued to increase its defense expenditure"--at an average annual rate of approximately 15%.

Since 2002, Beijing has claimed the increase can be directly attributed to five factors:

• Increasing salaries and allowances for military personnel
• Increasing investment in equipment, infrastructure, and weapons
• Training costs
• Compensating for rising consumer costs
• Increasing expenses for international cooperation in nontraditional security fields

In addition to these "traditional" explanations, Western scholars point to two other causes for increased Chinese defense appropriations. The first explanation is political -- having been forced to almost completely divest from their commercial interests in the late 1990s, PLA officials are demanding an increasingly larger share of the national budget to meet taskings resident in the military strategic guidelines. The second, and related, explanation is that China's economic growth has compelled the military to compete for qualified manpower and pay higher prices for raw and finished material -- Beijing is now confronting the cost of an economy expanding at record rates.

Given this situation, Chinese defense expenditures will continue to climb -- at rates which out-strip inflation--particularly as the PLA seeks to realize Beijing's desire to serve as a responsible member of the international community. As the 2010 defense budget illustrates, however, the PLA will not be allowed to follow the Soviet model and spend the nation into fiscal insolvency. Instead, Chinese defense expenditures will be tailored to fund a military capable of meeting regional power projection requirements and will to ensure that a PLA commander has the equipment, personnel, and weapons required to counter and potentially defeat a modern adversary.

Rather than worrying this development, we should understand that Beijing's maintenance of a large, modern military is driven by history, an anarchic international system, and the Chinese Communist Party's desire to remain atop the nation's political hierarchy. None of these observations are novel or particularly difficult to understand. And yet many of China's harshest critics appear willing to ignore all three considerations when casting doubt on the intentions of Beijing's military expenditures. China's leaders have no intention of ever repeating the "century of humiliation," no desire of being left defenseless in our Westphalian world, and will not brook any obvious challenge to their single-party rule of the Middle Kingdom--a modern People's Liberation Army is critical to realizing these objectives, and will be funded in a manner Beijing deems in keeping with other national objectives.