Lucie Béraud-Sudreau
As China lags behind many countries with regards to transparency in defence spending, Lucie Béraud-Sudreau explains that the next step towards greater transparency from Beijing could be to use the UN’s recommended template for reporting military expenditures.
Taken at face value the spending figure in China’s latest Defence White Paper, published in July 2019, ought to provide a modicum of reassurance to the international community. After all, it shows just over 1% of national income spent on the armed forces. The problem is that, while there is a welcome increased transparency in the document, it does not go very far. IISS figures, and others, place Beijing’s sustained defence spending closer to 2% of gross domestic product.
It remains a widely held view that the official Chinese defence budget is an underestimate of the country’s actual military expenditure. The IISS and the Stockholm International Peace Research Institute have developed their own estimates of total military spending in China to try to overcome Beijing’s opacity in this field.
Actual defence spending over a third larger than officially claimed
The IISS estimates China’s total military outlays to have amounted to RMB1.41 trillion (US$209 billion) in 2017. This includes the central and local defence budget, foreign weapon purchases, estimates of defence research and development (R&D), and the central People’s Armed Police budget. Taking these additional budget items into account, Chinese defence spending over the past decade appears to be around 1.7–1.8% of GDP rather than the official 1.2–1.3%. This represents an additional 35% of military outlays on top of the official number.
The white paper proclaims that China’s level of transparency in defence spending is sufficient and comparable to that of other countries. But, although the document does contain new figures, it leaves much room for improvement.
New defence budget information: a category for ‘militias and others’
Among the new information that was not available until now is the breakdown of China’s defence expenditure between 2013 and 2017.
As in previous white papers, the categories of spending include ‘personnel’, ‘training and sustainment’ (formerly called ‘operations’) and equipment. The latter category includes R&D, testing, procurement, repairs, maintenance, transport and the storage of weaponry and equipment. Appendices attached to the white paper include a detailed table and show the growth of the equipment category in particular, from 31.9% of the budget in 2010 to 41.1% in 2017. This is consistent with the observed pace of the People’s Liberation Army’s (PLA’s) equipment-modernisation programme over the past decade. The proportion allocated to equipment and R&D is now similar to Russia’s spending levels for similar categories of expenses.
Table 1. China’s defence expenditure, 2010–17 (US$bn)
Year Personnel Expense Training and Sustainment Expense Equipment Expense Total
Amount (US$bn) Percentage Amount (US$bn) Percentage Amount (US$bn) Percentage
2010 27.5 34.9 25.1 31.9 26.2 33.2 78.8
2011 32.0 34.3 29.4 31.5 31.9 34.2 93.3
2012 31.0 29.2 36.9 34.8 38.1 36 106.0
2013 32.3 27 43.6 36.4 43.7 36.6 119.6
2014 38.6 28.6 43.6 32.3 52.7 39.1 134.9
2015 45.3 31 42.0 28.8 58.7 40.2 145.9
2016 46.1 31.3 40.2 27.4 60.7 41.3 147.0
2017 47.5 30.8 43.4 28.1 63.4 41.1 154.4
Source: China's 2019 Defence White Paper
These category totals differ slightly from the Ministry of Finance’s budget reports, which account for central government expenditure, but do match the government’s statistical yearbook figures (Section 7.3) for the total of central and local government funding. This discrepancy is explained by taking into account China’s latest submission to the United Nations military-expenditure reporting tool, for the year 2017. This reveals that the difference between the total of RMB1043trn (US$154bn) reported in the white paper and statistical yearbook, and the RMB1023trn (US$151bn) figure from the Ministry of Finance budget reports is due to the inclusion of the ‘militia and others’ category.
Table 2. People’s Republic of China military expenditure: submission to the United Nations, 2017 (US$bn)
Category Active forces Reserve forces Militia and others Total
Amount (US$bn) Percentage
Personnel 47.0 0.5 0.0 47.5 30.8
Training and maintenance 39.7 0.7 3.0 43.4 28.1
Equipment 62.8 0.6 0.0 63.4 41.1
Total 149.5 1.8 3.0 154.4 100
Source: China's 2017 submission to the United Nations military expenditure reporting tool
In addition, other observers have reported that the official budget also excludes the costs of building indigenous aircraft carriers and the PLA’s 70th anniversary military parade. If true, this information would push total defence expenditure even further up.
Suggested steps for increased transparency
While the 2019 Defence White Paper did make available some new data, which has allowed a revision of existing assessments of China’s official defence budget, China still lags behind many countries with regards to transparency. By way of comparison, the United States and Russia publish large numbers of budgetary line items, including on military-related spending. China’s latest submission to the UN military-expenditure reporting instrument is a step in the right direction, but which could be improved upon.
The UN supplies three possible reporting formats: a ‘single figure’, ‘simplified’ and ‘standardised’ templates. The latter is the one recommended by the UN, and used by most Western states. It is similar to the Organization for Security and Co-Operation in Europe’s reporting tool on defence spending. Until now, China has used the simplified form rather than the standardised one. A next step towards greater transparency could be to use the UN’s recommended template.
Beyond that, China should be encouraged to explain in greater detail how it spends and allocates its defence outlays, not only for the sake of international comparisons, but also for accountability towards its own population on how the government spends public money.
This analysis originally featured on the IISS Military Balance+, the online database that provides indispensable information and analysis for users in government, the armed forces, the private sector, academia, the media and more. Customise, view, compare and download data instantly, anywhere, anytime. The Military Balance+ includes data on China’s armed forces, equipment, defence economics, defence procurements, military exercises and deployments.
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