China's Defense Budget Hits Record $91.5B

TAIPEI - China has announced a 12.7 percent increase in its annual defense budget to a new high of $91.5 billion, up from $78.6 billion in 2010 and a return to the double-digit growth recorded through most of the 2000s. Last year's increase was 7.5 percent. China's defense budget rose from $27.9 billion in 2000 to $60.1 billion in 2008.

China says part of the reason for its increasing military budget is to improve living standards for “grass-root units.” Above, People’s Liberation Army soldiers patrol the streets of Urumqi, Xinjiang province, in July 2009. (File photo / Agence France-Presse)

China overtook Japan in 2007 and the United Kingdom in 2008 in defense spending and is now second only to the U.S.

U.S. defense analysts have accused China of hiding its actual budget, which over the past few years could be well over $100 billion annually.
"There is no such thing as a so-called hidden military expenditure in China," Li Zhaoxing, spokesman for the Fourth Session of the 11th National People's Congress, said at a March 4 news conference announcing the budget.
Li said the bulk of this year's spending would go toward moderate improvements in armament, training, human resource development, infrastructure and living standard improvements for "grass-root units." The new defense budget accounts for only 6 percent of China's total budget, he said.
"I think Li is right on the explanation of the rise of the new military budget," said Zhuang Jianzhong, vice director of the Center for National Strategy Studies at Shanghai Jiao Tong University. Commodity prices have been rising rapidly, and wages and subsidies are comparatively low compared with Western military personnel, he said.
Maj. Gen. Zhu Chenghu, director-general, Strategic Studies Department, National Defense University, echoed the explanation. Military salaries are trying to keep pace with rising inflation as the Chinese economy continues to expand, he said.
China's military also has to meet the demands of educating and training personnel as the military takes on more international responsibilities, such as piracy patrols in the Gulf of Aden and continued involvement in U.N. peacekeeping operations.
As an example, Zhuang cited Chinese military involvement in the evacuation of Chinese citizens from Libya and downplayed critics who suggest China's military is planning foreign expeditions. China has no "intention to expand or invade or station military overseas," he said.
There is also an argument that the military wants more respect from the Chinese Communist Party (CCP). Richard Fisher, vice president of the Washington-based International Assessment and Strategy Center, said the CCP lives in fear of the People's Liberation Army (PLA). The party leadership needs to increase the pay of its officers, "lest the current galloping inflation and resulting social discontent wash over to the PLA."
Party power would "collapse if the PLA were to wake up some day and 'vote' against it," which "reflects power, but also fear."
Not everyone is buying the "inflation" and "salary increases" argument for a nearly 13 percent increase in the defense budget.
"Given an inflation rate of about 4 percent, that is an 8 percent real increase," said Richard Bitzinger, a former U.S. intelligence analyst, now a senior fellow with the S. Rajaratnam School of International Studies, Singapore.
"While it may be a bit less than the average annual growth rate of the past 15 years, it is still up from last year and seems consistent with China's continued emphasis on putting considerable resources into building up its military," he said.
"If we applied a purchasing power parity deflator to the yuan, it would be at the very least double the size of the Chinese defense budget."
Transparency remains an issue not only in China's defense spending, but also with China's stated capabilities and intentions, said Andrew Erickson, a China defense specialist at the U.S. Naval War College.
"Even the most basic data on service budgets remain unavailable to foreign researchers," he said. "China's military capabilities are clearly growing, but its intentions - at least beyond asserting control over its territorial and maritime claims, to include Taiwan - remain somewhat unclear."
Erickson pointed to expensive efforts by China's military for force modernization, including the recent unveiling of the stealthy J-20 fighter, the outfitting of the former Varyag aircraft carrier and development of the Dong Feng 21D anti-ship ballistic missile.
Also, Beijing's strategic goals "simply do not necessitate the military resources that Washington requires to fight two wars and maintain a global presence," he said.
Although China is expanding its global presence and is now conducting its first military operations in the Mediterranean evacuating Chinese citizens from Libya, it is still far behind the U.S. in global reach and responsibilities.
One explanation for China's return to double digit military spending increases is that the CCP leadership "needs to increase spending because many programs, like aircraft carriers and nuclear missile submarines, are entering their expensive procurement phases," Fisher said.