Defense Budget Up 12.2%; Domestic Security’s Unclear

At its ongoing National People’s Congress on Wednesday, Michael Martina and Greg Torode report at Reuters, China announced a 12.2% rise in its defense budget to 808 billion yuan ($132 billion) for 2014:

The 2014 defense budget is the first for Xi, the ‘princeling’ son of a late Communist Party elder, and the increase in spending appears to reflect his desire to build what he calls a strong, rejuvenated China.

[…] Within hours of the announcement, officials in Japan and Taiwan expressed disquiet over the absence of any details on how Beijing will spend the money – concerns long echoed in Washington with China’s defense budgets.

[…] Speaking at the opening of China’s annual session of parliament, Premier Li Keqiang said the government would “strengthen research on national defense and the development of new- and high-technology weapons and equipment” and “enhance border, coastal and air defenses”.

“We will comprehensively enhance the revolutionary nature of the Chinese armed forces, further modernize them and upgrade their performance, and continue to raise their deterrence and combat capabilities in the information age,” Li told the largely rubber-stamp National People’s Congress. [Source]

China’s spending remains low relative to the size of its economy, as a Xinhua commentary pointed out while responding to the “unfounded and misplaced” concerns expressed in Reuters’ report:

Japan’s Chief Cabinet Secretary Yoshihide Suga, whose country has been a recidivous troublemaker in the region, picked up the musty tone of accusing China of lacking transparency on defense expenditures.

[…] For China, the size of the country and its roles as a key cornerstone of regional and global peace, as well as the largest personnel contributor to UN peace-keeping missions demand that its defense outlays be relatively high.

As a matter of fact, China’s military expenses are still much lower than those of major foreign powers both in proportion to GDP and in per capita terms. Thus the latest uptick is nothing unusual.

[…] To portray China as a threat because of its relatively big military budget is as nonsensical as to depict it as a pillar of peace if it spends nothing at all on defense.

[…] The real menaces to regional security are, among others, the mounting assertiveness of some South China Sea claimants emboldened by the United States’ so-called re-balancing to the Asia-Pacific and the resurgence of Japanese radical nationalism. [Source]

Foreign Ministry spokesman Qin Gang took another rhetorical tack:

“The Chinese People’s Liberation Army are not Boy Scouts with spears. Some foreigners always expect China to be a baby Scout. In that way, how can we safeguard national security and world peace? How can we ensure stability in the country, region and the world?” said Chinese Foreign Ministry spokesman Qin Gang.

“Even as a Scout grows up, his former dress and shoes will not fit anymore and thus he will have to change into bigger ones,” the spokesman told a routine press briefing. [Source]

The announcement coincides with the release of the Pentagon’s latest Quadrennial Defense Review, which expressed a measured wariness of China’s military development. From Yochi Dreazen and Dan Lamothe at Foreign Policy:

“As nations in the region continue to develop their military and security capabilities, there is greater risk that tensions over long-standing sovereignty disputes or claims to natural resources will spur disruptive competition or erupt into conflict, reversing the trends of rising regional peace, stability, and prosperity,” the new QDR said. “In particular, the rapid pace and comprehensive scope of China’s military modernization continues, combined with a relative lack of transparency and openness from China’s leaders regarding both military capabilities and intentions.” The Pentagon’s response, then, is to “manage the competitive aspects of the relationship in ways that improve regional peace and stability consistent with international norms and principles.”

If anything, the 2010 report was more pessimistic about Chinese intentions. The study concluded that the Pentagon welcomed a strong, prosperous China, and advocated keeping communication open with Beijing. But it also ominously ticked off a long list of weapons the Chinese were building. “China is developing and fielding large numbers of advanced medium-range ballistic and cruise missiles, new attack submarines equipped with advanced weapons, and increasingly capable long-range air defense systems, electronic warfare and computer network attack capabilities, advanced fighter aircraft, and counter-space systems,” the 2010 QDR said. “China has shared only limited information about the pace, scope, and ultimate aims of its military modernization programs, raising a number of legitimate questions regarding its long-term intentions.” [Source]

Suspicion is only heightened by the exclusion of considerable military outlays from the official budget. The International Institute for Strategic Studies suggests that real defense spending has been around 40% higher than stated in recent years, according to Andrew Erickson and Adam Liff’s 2013 paper Demystifying China’s Defence Spending: Less Mysterious in the Aggregate (PDF), which extensively examines the issue.

At The New York Times, Edward Wong explored other outlays aside from weapons procurement:

Dennis J. Blasko, a former military attaché at the American Embassy in Beijing and a retired Army officer, said the 2014 Chinese military budget “won’t break the bank, but it says to the troops, ‘Thank you for your service, you are important to us, we support you.’”

“A significant portion likely will be used for more pay raises,” he added. “You may recall hearing some talk about how P.L.A. officers should be paid more than civil servants.”

A major portion of the increase will go to “better, more realistic training,” Mr. Blasko added. “The navy will also continue to train more at greater distances from China, which is more expensive than training in local waters.” [Source]

Improved training will help address inexperience, one of two major factors undermining the budget increases according to Michael Forsythe at the Times last month. The other, corruption, is the target of an ongoing general crackdown that has hung heavily over the NPC and its companion, the Chinese People’s Political Consultative Conference this week.

As Dreazen and Lamothe explain, the U.S. military budget looks set to sustain further cuts next year as it declines from its War on Terror peak, though it remains several times greater than China’s. This decline leads a global trend, Erickson and Liff write at China Real Time, adding that China’s continued double-digit increases may not be sustainable for much longer:

As it steams ahead, China’s large defense budget increases stand in stark contrast to trends in the U.S. and among U.S. allies, and indeed much of the rest of the world. The U.S.—together with its European allies—has accounted for the majority of global defense spending reductions in recent years. It is no coincidence that Chapter 5 of the U.S. Quadrennial Defense Review, released by the U.S. Department of Defense the same day as China’s budget report (pdf), is devoted to “Implications and Risks of Sequestration-Level Cuts.” China also vastly outspends its neighbors in East Asia, particularly those with whom it has territorial and maritime disputes.

Despite Beijing crying foul over Japan’s recently-announced plans to raise its own defense budget over a five-year period—a direct response to China’s own increased defense spending and destabilizing behavior in the East China Sea—Tokyo’s actual planned increases to defense spending for 2014 and 2013 are a mere 2.2% and 0.8%–a minor reversal after ten straight years of annual decreases (pdf).

[…] Bottom line: China’s double-digit increases to defense spending are without peer among the major powers.

China’s remarkable increases in defense spending have significantly strengthened its military capabilities, particularly vis-à-vis potential conflicts on its immediate periphery. But it won’t always be this easy or simple. Not only is economic growth slowing, but domestic and social headwinds are worsening. PLA personnel and equipment costs are surging. […] [Source]

The downward trend in defense spending is not reflected in China’s immediate vicinity, as IHS Janes’ Craig Caffrey reported last month. “Asia Pacific is the only region where from 2009 onwards we have seen a steady rise in defence expenditure [….] If we step back and look at Asia Pacific without China, we see the region overtaking Western Europe in 2015. Australia, India and South Korea are all increasing their defence budgets.” These rises are widely viewed as responses, in large part, to China’s own increases, however.

After three consecutive years in which declared spending on domestic security outstripped that on external defense, Beijing declined to release a comprehensive figure for the former this year. From Michael Martina at Reuters:

Domestic security spending covers everything from monitoring dissidents online and eavesdropping on journalists to trying to stop attacks like the one at the weekend in Kunming in which 29 people were killed by knife-wielding assailants.

The government last year announced at the annual session of the National People’s Congress, the largely rubber-stamp parliament, that the domestic security budget would rise 8.7 percent to 769.1 billion yuan ($130 billion), the third year in a row it outstripped defence spending.

But this year, the budget only included spending on domestic security which comes directly from the central government – 205 billion yuan – rather than the full figure which includes spending by provincial and regional governments.

[…] “My guess is that it could be because this is a bit sensitive,” said Xie Yue, a professor of political science at Tongji University in Shanghai, speaking about the unannounced spending.

“The domestic security budget is a sensitive issue because it’s been growing every year and it’s used exclusively to maintain domestic order, which has raised suspicions this is a police state.” [Source]

That China appears to spend more on controlling its own people than on guarding against foreign threats only underscored this impression. But the comparison is potentially misleading. China’s enormous population naturally incurs high policing costs, but does not automatically increase the range or severity of external dangers. Moreover, estimated understatement of China’s defense spending is around ten times larger than the gap between the two security budgets: domestic security spending was a mere 3.8% higher last year. Perhaps the biggest “missing” item from the defense budget according to Erickson and Liff is the roughly 100 billion yuan spent on the People’s Armed Police (see pages 811 and 820), which is counted instead under domestic security. Reallocating even a small portion of this to external defense in recognition of the PAP’s multiple roles would shift the balance on its own.

See also recommended reading from Andrew Erickson at his blog, and more on China’s military spending via CDT.