Will China's defence spending ever slow down?

No other defence budget is watched with a mixture of awe and trepidation as China’s.

Last week was no different.

As expected Beijing announced a modest (by its own standards) 11.2 per cent increase in defence spending to peg it at 670 billion RMB or over 110 billion dollars.

For long-time China watchers this figure has not come as a surprise.

It is in fact in keeping with recent trends which have forecast doubling of China’s defence budget to approximately 238 billion dollars by 2015. A leading defence consultancy firm IHS Jane’s had said in a projection more than a fortnight ago that China’s defence budget in 2015 is likely to soar to $238 billion – more than the next 12 leading Asia-Pacific countries combined. Many commentators see this as China’s sustained attempts to emerge as a major military challenge to the US by the end of the decade.

In comparison India’s defence budget is likely to be in the range of 33 to 36 billion dollars—far less than its northern neighbour. 

And given the economic uncertainty faced by India, the budget may not even meet expectations.

These figures are a reality check for those who see India and China locked in an arms race.

Far from it.

For over two decades, China has maintained an extraordinary pace in its defence modernisation, with a clear-eyed road map and prioritization. It has indigenised many of its critical weapons system and war platforms. 

By contrast India has allocated money for its three armed forces in fits and starts. Many of its mega purchase plans are stuck because of allegations of bribery and underhand dealings.

Given the stark difference in the systems of governance between India and China, these delays in India can certainly be expected.

But over the past half a decade the Indian Ministry of Defence headed by an extra-cautious minister, has shown very little urgency in clearing critical arms purchases, his public pronouncements notwithstanding.

The gap between the two Asian nations is likely to only increase in coming years although China, which has for the first time in the last decade pegged its GDP growth to below eight per cent, will also now look to prioritise its defence spending.

Of course neither China nor India comes anywhere close to US defence spending!

Currently the US spends four per cent of its GDP on defence. Despite its rapid growth, China’s is still pegged at 1.2 percent of its own GDP while India spending hovers around 1.6 to 1.8 per cent of its GDP.

What should however be worth watching is how much of this budget can China spend on capital acquisition.

With the induction of modern equipment and rapid expansion in its personnel strength, the People’s Liberation Army (PLA) will be forced to allocate more and more money for recurring expenditure—maintenance of equipment and retention of skilled personnel.

In India for instance, the MoD spends for than half of its budget in what it calls revenue expenditure—salaries, pension, training personnel and servicing of hardware.

This reality must therefore be kept in kind while analysing China's publicly declared defence spending.

Number crunching apart, China watchers have pointed to a crucial reality that might impinge upon its defence planning: the increasing internal turmoil that it faces.

In the second year of its 12^th five year plan (2011-2016), China is faced with rise in internal instability, fuelled by increasing restlessness in Tibet and Xinjiang—two of its most troubled provinces. Elsewhere too, discontent, brought about by widening economic disparity, is spreading.

No wonder, third year running China’s budget on internal security is likely to outpace its defence spending.

Reuters reported earlier this month that the internal security budget is set to climb 11.5% to 701.8 billion yuan ($111.4 billion). 

“The numbers show how vigilant China’s ruling Communist Party is against unrest, despite robust economic growth and years of budget rise for law-and-order agencies, which pushed outlays on them past military outlays for the first time in 2010. The rise in China’s budget for police, state security, armed militia, courts and jails and other items of “public security” was unveiled in the Ministry of Finance’s report issued at the start of the annual parliamentary session,” the Reuters report said.

Last year, an internal study said there were over 200,000 social protests across China. 

In 2012, the unrest has increased not just in restive Tibet or Xinjiang even in mainland China as witnessed in Wukan.

While the protests in Tibet and Xinjiang, with its long history of ‘separatism,” are on expected lines, events like those which took place in Wukan are sure to worry the incoming Chinese leadership.

The impact of reforms, migration of millions of labourers from rural to urban areas, the rising Consumer Price Index, corruption and worker discontent are among the factors contributing to growing popular discontent.

How China deals with them in coming years will determine Beijing’s own response to the events around the world. In any event, China will continue to remain a country worth keeping a close eye on.


(Originally written for the Purple Beret magazine)