Red flag to a
bull defense market

Last year at about this time, DID noted the Chinese military budget’s double-digit growth. UPI Editor Martin Walker discusses the official Chinese military budget, and where it fits with recent events and defense budget plans in India and the USA. The official budget for the coming year will rise by 14.7% to $35 billion, marking the 18th consecutive year of double-digit growth in China’s defense budget.

As in the Soviet Union, however, the official budget and the real budget are not the same thing. While RAND’s Project Air Force, which has also studed China’s arms industry modernization, estimates the 2004 Chinese military budget at $65-79 billion in FY 2001 dollars, but note that at 2% inflation, this would equal $76-86 billion in FY 2006 dollars. Walker’s sources are closer to $100 billion, which is about right since increases of 12% and then 14.7% give a range of $96-110 billion. Officials from the Pentagon and from India’s RAW (Research and Analysis Wing) intelligence service agree the Chinese defense budget is now the second largest in the world.