China recently made a surprise announcement that it would boost militaryspending this year by 17.7 percent — the biggest inflation adjustedincrease in two decades. The large increase, Finance Minister XiangHuaicheng stated, was needed to “meet the drastic changes in the militarysituation around the world.”
Critics understandably found both the size of the increase and thejustification cited for it alarming. Some China watchers even speculatedthat the PRC regime might be gearing up for a military confrontation withthe United States in a few years.
But another point also should have received attention. The new “official“defense budget figure of $17.2 billion is pure fiction. Virtually allexperts believe that China’s real level of military spending is somewherebetween $35 billion and $55 billion. Much of the spending (especially on theacquisition of weapons) is either concealed in other budget categories or isoff‐budget entirely.
Why does Beijing persist in presenting a military budget that is so phony?The most likely reason is that PRC leaders want to keep other nationsguessing about the actual extent of spending. After all, the range of evenexpert calculations is large. A $55‐billion budget (if wisely spent) canproduce considerably more military capability than a $35‐billion budget.Another reason for Beijing’s obfuscation may be that, having published falsespending figures for years, Chinese officials would now find it politicallyembarrassing to offer honest figures.
Whatever the motive, the Beijing government is making a serious mistake inperpetuating such fraudulent budgeting. It breeds suspicion. Not only theUnited States but China’s neighbors in Asia have reason to wonder what thePRC is hiding–and why.
Ironically, the actual level of military spending is not all thatterrifying. The lower end of the range would put the PRC’s outlays atvirtually the same level as such mid‐sized powers as Britain, France andGermany. Even the higher end of the range would mean that the PRC isspending only a little more than Japan’s $45 billion. And even the highestof the estimates is dwarfed by America’s $300 billion budget.
There is little doubt that China is modernizing its military and intends tohave a first‐class force someday. There is also some reason for concernabout Beijing’s strategic goals in East Asia–especially regarding Taiwan.But a military budget somewhere between $35 billion and $55 billion is notthe massive spending one would expect from a country determined to embark onan expansionist binge throughout the region.
The PRC would be wise to allay the suspicions and worries of its neighbors.An essential first step is to be honest about its military budget. Not onlyshould Beijing be forthright about the actual level of spending contemplatedin its new budget, but it should restate the figures in previous budgets forat least the past five years. That is what corporations seeking to regainthe public’s trust and confidence must do if they have misstated revenuesand earnings because of dubious accounting methods. We should expect no lessof a nation that says it desires the world’s trust and confidence.
Transparency about defense spending–and the country’s defensedoctrine–would be the most effective rebuttal to critics in the UnitedStates and elsewhere who argue that China harbors aggressive intentions.Beijing needs to come clean about its actual military outlays and do sowithout delay.