China Boosts Defense Budget by 12%, Adding a Quarter of Japan’s in a Single Year

For more on this and other stories, please consider purchasing a membership.
If you are already a subscriber, login to your account.
* As China’s “parliament” convenes for the 2nd session of the 12th NPC, the country is announcing another year of double-digit defense spending growth, with a budget up 12.2% to 802.2B yuan (about $131B). This growth rate is notable not just for its high level, but more importantly for its decorrelation from GDP growth. Up until recently, China could claim it was playing catch up with its military spending, thanks to a booming economy emerging from the medieval levels of poverty previously inflicted by Mao. But as of early 2014 GDP has officially been growing at about 7.7% for 7 quarters in a row, slightly below the 2012 growth level (7.8%) when the defense budget had increased by 10.7%. * In other words, while its economic growth rate continues to cool down, China is increasing the relative growth rate of its defense budget, and it is doing so from a higher base, compounding the year/year growth in absolute terms. China is adding about $14B to its defense budget, or about a quarter of Japan’s total. China downplays this by pointing out dubious ratios such as defense spending/GDP, spending/capita, or even making land mass comparisons as if having strategic depth was […]

* As China’s “parliament” convenes for the 2nd session of the 12th NPC, the country is announcing another year of double-digit defense spending growth, with a budget up 12.2% to 802.2B yuan (about $131B). This growth rate is notable not just for its high level, but more importantly for its decorrelation from GDP growth. Up until recently, China could claim it was playing catch up with its military spending, thanks to a booming economy emerging from the medieval levels of poverty previously inflicted by Mao. But as of early 2014 GDP has officially been growing at about 7.7% for 7 quarters in a row, slightly below the 2012 growth level (7.8%) when the defense budget had increased by 10.7%.

* In other words, while its economic growth rate continues to cool down, China is increasing the relative growth rate of its defense budget, and it is doing so from a higher base, compounding the year/year growth in absolute terms. China is adding about $14B to its defense budget, or about a quarter of Japan’s total. China downplays this by pointing out dubious ratios such as defense spending/GDP, spending/capita, or even making land mass comparisons as if having strategic depth was a liability! Isn’t it convenient to be the world’s most populated country?

* Meanwhile China’s ministry of defense brags about being “the largest personnel contributor to UN peace-keeping missions among the five permanent members of the UN Security Council”, which is technically true [PDF], though if data cherry-picking is allowed, it’s also true that this puts China’s contribution at the level of Uruguay’s (population: 0.2% of China) or at a quarter of Bangladesh’s (GDP: 1.4% of China). “Lies, damned lies, and statistics”: it cuts both ways.

* Now, an important caveat: these growth rates are expressed in nominal terms, not real terms discounting the effect of inflation. But with consumer inflation in the 2.5%-3% range, this would still mean a real growth rate above 9%, unless the military faces a significantly higher inflation rate, say because of wage pressures, or the acquisition of expensive new technologies. Still, these are questions worth asking to properly qualify headline numbers. Add to that considerations of value for money and purchasing parity comparisons, an especially relevant question for China given its massaging of the renminbi’s exchange rate, further complicated by the US Federal Reserve’s policy which more than ever can be summarized by “the dollar is our currency, your problem.”

* However, China’s kindergarten-level official documents do not help clarify what is the real extent of their budget growth. For all the flaws of the FY15 US budget, China has its work cut out if it ever wants its institutional communications to be taken for more than blatant, vapid propaganda. To make sense of China’s numbers, here’s what serious work looks like: Demystifying China’s Defence Spending: Less Mysterious in the Aggregate [PDF].

* Taiwan’s Democratic Progressive Party (DPP), in opposition since 2008, got the memo of China’s spending and released a whitepaper [PDF, English translation starting p39] backing their call to increase spending and counter China’s military threat against the island. They advocate a defense budget back to 3% of GDP to fund advanced fighters, UCAVs, indigenous submarines, and strong cyber-warfare capabilities.

US Budget Hearings

* The congressional hearing marathon has begun, to grill officials from DoD and the services about the FY15 budget. The opening salvo from Senator Inhofe [R-OK, SASC ranking member] challenges tying a $26B wishlist to additional non-defense spending. China and Russia have been working overtime lately to help American defense hawks make the case that decreasing spending should be revisited. Senator McCain [R-AZ] then reveled in Pentagon officials having lapses of candor about the Administration’s pivot to Asia being choked for lack of appropriate sources. Senator Ayotte [R-NH] later focused on her favorite pet issue: the A-10.

Rift in the GCC

* UAE, Saudi Arabia and Bahrain recalled their ambassadors from Qatar, as these 3 countries resent Qatar’s support for the Muslim Brotherhood in Egypt and elsewhere: Gulf News | Al Jazeera video.

US Ship Sailing to Black Sea

* A US warship was given permission by Turkey to traverse Bosphorus, en route to the Black Sea. It’s not known which ship, though it’s not a carrier.

* Meanwhile diplomats are spinning their wheels in Paris, and the EU is promising 11 billion euros to help Ukraine, or about the amount promised by Russia in its now moot bailout. With strong trade and energy ties with Russia, expect Europeans to heavily favor a negotiated outcome. Somehow, the situation in Ukraine has become President Obama’s problem.

US-Australia

* The US Department of State recently updated Australia’s end-use list [PDF] within its defence trade cooperation with the US. Lots going on, beyond biggies such as C-17s and Super Hornets.

Afghan Training

* Today’s video shows British soldiers training Afghans on the art of artillery, between camels and curious motorcyclists passing by the range, oblivious to the risk they’re facing:

One Source: Hundreds of programs; Thousands of links, photos, and analyses

DII brings a complete collection of articles with original reporting and research, and expert analyses of events to your desktop – no need for multiple modules, or complex subscriptions. All supporting documents, links, & appendices accompany each article.

Benefits

  • Save time
  • Eliminate your blind spots
  • Get the big picture, quickly
  • Keep up with the important facts
  • Stay on top of your projects or your competitors

Features

  • Coverage of procurement and doctrine issues
  • Timeline of past and future program events
  • Comprehensive links to other useful resources