Mystery Shrouds Chinese Defense Spending

October 26, 2021 4:55 PM
China’s Type-001A Carrier following its launching ceremony on April 26, 2017. Ministry of National Defense Photo

While China’s known military spending has remained consistent as a percentage of its gross domestic product for decades, but this provides only a rough measure of what Beijing has actually committed to a broad range of obscured or classified expenditures, two experts on defense spending said Tuesday.

Peter Robinson, dean of the University of Western Australia’s Business School, said using that percentage did show with the Soviet Union in the Cold War “what strain [military spending] was putting on the country.” The measure was valuable “in looking for trends … that something’s up” with a nation’s military intent.

In China’s case, those strains include the future of Taiwan, its need for oil to keep its manufacturing moving and ambitions in the South China Sea.

But “what does [that military spending] actually buy” in a particular country is a factor that must be considered as well. “Your dollar goes a lot farther in China, Mexico [and other countries] where wages are low,” he said.

Speaking during the Heritage Foundation’s online forum, Lucie Beraud-Sudreau, director of the military and arms production program at the Stockholm International Peace Research Institute, said the question now is “will [the Chinese] increase their military spending next year.” As a result of the pandemic, she said Beijing’s economic growth has slowed from above 6 percent per year to about 5 percent now.

The United States spends 3.7 of its GDP on defense and security; China is estimated to spend about 1.7 percent of its GDP in those areas. Beraud-Sudreau said the percentage has been “relatively constant” for 26 years.

More importantly, “spending does not … measure military effectiveness,” she said.

Beraud-Sudreau said the Chinese annual security budget statement that Beijing releases publicly “is just a headline figure.” The number “doesn’t break down what the money is spent on.” Beijing’s announced defense spending for this year is $252 billion; the U.S. budget forecast is for $752.9 billion, including nuclear programs under the Department of Energy.

From what is known from a 2019 white paper on defense and from diving deep into specialized Chinese-language publications, Beraud-Sudreau said Beijing is spending about 31 percent of its military budget on personnel and 41 percent on equipment and research and development.

Even the personnel spending figure, however, can be questioned, since it is not clear how much of that goes to China’s military/police security forces, she added.

Beraud-Sudreau said what China is spending on science and technology is far murkier and not just because of classification. The estimates from western sources are not likely fully accounting for the mixing of dual-use technologies and public-private venture expenditures.

The same holds true for weapons China is buying from other nations. Beijing is Russia’s second-largest arms customer – buying the Kremlin’s fighter aircraft, missiles, destroyers and submarines. Factors here include the differences in wages and also possible discounts in the sales agreement.

Without a specially developed military spending exchange index – differing from market exchange rates, or the value of one currency against another – Robertson said U.S. military-related spending doesn’t exceed the next 10 countries, as former President Barack Obama claimed in 2012. It “is actually about the same as Russia and China combined,” he said.

To get to that number, Robertson used an index on purchasing power but warned cross-country comparisons can be a “source of great error.”

Because wages are lower in China, Beijing gets a lot more labor in the armed forces and workers available in its defense industrial base. During the question-and-answer session, he noted Chinese labor costs are rising in its military, as it professionalizes to attract quality recruits and officers, and in the private sector.

John Grady

John Grady

John Grady, a former managing editor of Navy Times, retired as director of communications for the Association of the United States Army. His reporting on national defense and national security has appeared on Breaking Defense,,,, Government Executive and USNI News.

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