China’s Defense Budget Fiction

March 7, 2007 • Commentary
This article appeared in the South China Morning Post on March 7, 2007.

The People’s Republic of China continues to conduct a campaign of smoke and mirrors on its defense budget. Beijing has just announced that it plans to boost defense spending by 17.8 percent in the coming year — a fairly hefty increase, and the latest in a pattern of double‐​digit hikes over the past decade. Both the United States and China’s neighbors in East Asia express growing uneasiness about that trend, but far more troubling is Beijing’s continuing dishonesty about how much it really spends.

According to the Chinese government, the new defense budget will be $44.9 billion, a figure roughly comparable to the military budgets of Japan, Britain, France, and Russia. But anyone who believes that $44.9 billion is the actual extent of Beijing’s military outlays would be a prime candidate to buy a used bridge.

China’s official defense budget omits several pertinent categories, including weapons purchases, military research and development expenditures, and a variety of personnel and other costs. The Pentagon’s annual report to Congress last autumn concluded that Beijing’s real military spending was at least $70 billion — and could be as much as $105 billion. Most independent experts, including the prestigious International Institute for Strategic Studies, dispute the Pentagon’s high‐​end figure, but their estimates are usually close to the low‐​end one.

Why do Chinese leaders persist in presenting official budgets that are so obviously fictional? The explanation may be as simple as bureaucratic inertia. Communist regimes tend to lie as a matter of principle, and though China’s officially communist system has long since adopted economic policies more in line with Milton Friedman than Karl Marx, old habits die hard.

There may also be a matter of saving face. Having lied for years about the actual extent of its military spending, the Chinese government would find it awkward (at the very least) to suddenly offer accurate figures.

But there may also be a more worrisome explanation. The refusal to divulge the real amount of military spending could be a clumsy attempt to conceal the scope of the effort to modernize China’s military. The PRC’s forces are certainly no match for those of the United States, but China has come a long way in the past decade from the antiquated, personnel‐​intensive “people’s army” conceived by Mao Zedong.

Beijing is trying to create a smaller but much more capable force: a true 21st century military apparatus. Among other things, the PRC has deployed more than 900 missiles across the strait from Taiwan, and it is purchasing first‐​rate fighter planes from Russia.

China has also embarked on a campaign to expand and modernize its fleet of submarines. Most ominously, China is trying to strengthen its capability to strike at U.S. naval forces deployed in the western Pacific. Purchases of the sophisticated Sunburn anti‐​ship missiles from Russia clearly point to that objective, and the recent test of an anti‐​satellite capability is intended to neutralize the most prominent feature of America’s military superiority: its unparalleled ability to use satellites to see and manage a battlefield.

It’s unlikely that China would attempt to challenge America’s global military dominance. That would be an utterly unattainable objective for at least another generation. It is possible, though, that Beijing may have more limited but equally problematic goals. Is the PRC attempting to create a modern military force capable of intimidating Taiwan (as well as other neighbors in East Asia) and discourage the U.S. from honoring its security commitments in the region because the prospect of confronting China would be too costly and too dangerous?

There’s no easy answer to that question, but Beijing’s ongoing falsification of its defense budget breeds suspicions. If the PRC wants to allay such suspicions, it needs to come clean about its real level of military spending. The U.S. and the nations of East Asia are entitled to expect nothing less from a “responsible stakeholder” in the international community.

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