http://www.bloomberg.com/news/articles/2016-03-04/china-defense-spending-to-slow-as-xi-focuses-on-military-revamp
March 4, 2016
PBOC Pulls $129 Billion in Biggest Weekly Withdrawal Since 2013
The pace of China’s defense spending growth will slow to between 7 and 8 percent this year as President Xi Jinping carries out the most sweeping military overhaul in decades in an effort to improve the ability of the nation’s armed forces to fight and win wars.
The spending increase, announced before Saturday’s start of the annual National People’s Congress in Beijing, will be the smallest since at least 2010, when outlays climbed 7.7 percent, according to data from China’s National Bureau of Statistics. That 2016 projected increase in defense spending by the central and local governments compared with a 10 percent rise last year. The pace of growth in the military budget is still higher than the expected 6.5 percent to 7 percent expansion of China’s economy.
Xi’s revamp is aimed at unifying the People’s Liberation Army, Navy, Air Force and a new Rocket Force under a U.S.-style joint command system, enabling the armed forces to better defend China’s sovereignty at home and its growing interests abroad. The transformation of the large, mostly land-based army that hasn’t fought a conflict since 1979 has implications for militaries in the Asia-Pacific that is rife with territorial disputes, and for the U.S., which is beefing up its engagement in Asia.
International Audience
“One reason for the slowdown is the slowing Chinese economy,” said Collin Koh Swee Lean, an associate research fellow at the S. Rajaratnam School of International Studies in Singapore. China’s economy last year expanded 6.9 percent, the slowest pace in a quarter century. “It isn’t a drastic cut. They don’t want to send the wrong signal to the domestic and international audiences about the military modernization program.”
Though China’s defense budget has more than doubled over the past decade, it is still dwarfed by U.S. defense spending. The Pentagon’s $585 billion budget for 2016, partly shaped by a need to counter China’s advancing military capability, is more than four times what China intends to spend. China’s military outlays as a share of its economy will likely be about 1.3 percent in 2016, similar to that of recent years and less than 3.1 percent for the U.S.
China may be spending much more than official budget numbers, the Stockholm International Peace Research Institute estimates. China’s actual military spending is about 55 percent above the official figure if you take into account items including military research and development, arms imports, military construction and PLA pension costs. Sipri put China’s defense spending at 2.1 percent of gross domestic product in 2014, higher than the 1.3 percent based on the official estimate.
Territorial Disputes
Tensions between with the U.S. have been rising over China’s efforts to assert its claims to 80 percent of the South China Sea by building military facilities on islands it controls in one of the world’s busiest waterways. The U.S. has begun sailing Navy ships near some of the islands in so-called freedom of navigation operations to challenge the claims.
In presenting the spending numbers, NPC spokeswoman Fu Ying called the U.S. deployment of additional naval forces in the region under the Obama administration’s rebalance to Asia a form of militarization and said China’s deployment of missiles and radars on its islands were for defensive purposes.
Regional Spending
“Defense capability is not the same as militarization,” Fu said. “If the U.S. is indeed interested in upholding peace and stability in the region, it should support China’s effort to settle issues through negotiations.”
China’s military growth combined with heightened territorial tensions will propel the Asia-Pacific region to the top rank of global military spending by the end of the decade, accounting for one in every three dollars spent on defense by the end of 2020, up from one in five in 2010, IHS Jane’s forecast last month.
The Philippines and Vietnam -- spooked by China’s island-reclamation program in the disputed South China Sea -- are both increasing defense spending. India plans to spend at least $61 billion to expand its navy, eyeing Chinese submarine patrols in the Indian Ocean. Australia will boost defense spending by more than 81 percent over the next decade to A$58.7 billion ($42.9 billion) in 2025-26. Japan will increase its defense budget this year by 1.5 percent to a record 5.1 trillion yen ($47 billion).
Xi’s Plan
“The growth of China’s national power, including its military modernization, means China’s policies and actions will have a major impact on the stability of the Indo-Pacific,” an Australian White Paper on defense released by Prime Minister Malcolm Turnbull last month concluded.
The first details of China’s military reorganization were announced by Xi at a Sept. 3military parade -- a reduction in the PLA’s headcount by 300,000 to 2 million to be completed by the end of 2017. The reorganization will reduce the dominance of the army, which now accounts for more than 70 percent of the total troops, followed by the Navy with 10 percent and 17 percent for the Air Force, according to the Washington-based Jamestown Foundation.
“The size of the PLA in terms of manpower, coupled with increases in the average wage in China, had increasingly become a major driver behind defense budget growth, rather than actual military requirements, and this is a move to check that trend,” said Craig Caffrey, principal analyst for defense budgets at London-based military publisher IHS Jane’s.
China is also improving its hardware. A second aircraft carrier is under construction, the country is developing new planes including the J-20 stealth fighter, as well as weapons such as the submarine-launched anti-ship missile known as the YJ-18, which accelerates to supersonic speed just before hitting its target.
Xi’s overhaul could limit future spending, Caffrey said. The plan to downsize the PLA is motivated by a requirement to support more spending on training and operations as well as modernization.
“It’s definitely a move that will reduce pressure on the defense budget in the longer term.”
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