What Does China Really Spend on its Military?

What Does China Really Spend on its Military?
What Does China Really Spend on its Military?
What Does China Really Spend on its Military? Top
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    Defense spending is one of the most direct ways of measuring a country’s potential military capability. Comparing defense spending between countries — whether nominally or as a percent of government expenditure — is a useful gauge of relative military strength. Spending patterns can also reveal key political events that have implications for defense and national security.

    Understanding the connection between China’s military spending and its military power is complicated by a lack of transparency. Although Beijing provides figures for its defense spending each year, outside estimates of China’s defense budget are often significantly higher than the official numbers. China provides limited information on the distribution of its military spending, which further obscures spending patterns.

    Defense Spending Giants

    This interactive compares China’s defense spending from 2000 to 2020 with other key countries. Use the filtering options to select other measures of spending or to look at another country grouping. Data provided by the SIPRI Military Expenditure Database.

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    Tracking Chinese Military Spending

    There is no universally accepted standard for reporting military spending. While international mechanisms exist, such as the UN Report on Military Expenditures, participation is voluntary. This allows governments to report their expenditure with varying degrees of detail. China joined the UN instrument in 2007, but it remains less transparent than many countries.

    The Chinese government reports expenditure information annually. In March 2021, China announced a yearly defense budget of RMB 1.36 trillion ($209.2 billion),1 marking a 6.8 percent increase from the RMB 1.27 trillion ($183.5 billion) spent in 2020.2 This continues a recent trend that has seen yearly percentage increases in spending fall to single digits.

    Yet how much China actually spends on its military is widely debated. The Stockholm International Peace Research Institute (SIPRI) estimates the overall 2019 figure to be $240.3 billion and the International Institute for Strategic Studies (IISS) puts the number at $234 billion. The US Department of Defense (DoD) does not publicly provide a specific estimate, but concludes that China’s 2019 military spending “could be higher than $200 billion.”

    Notwithstanding these differences, Beijing’s official figures may now more accurately represent defense expenditures than in the past. In 2002, the DoD reported that China’s actual defense spending may have been upwards of four times larger than its officially announced budget. In comparison, the 2020 estimate from SIPRI pegs China’s nominal defense spending at $252.3 billion – less than 1.4 times larger than the official figure.

    Varying levels of transparency from Beijing compound outside efforts to estimate China’s defense budget. The publication of 11 defense white papers since 1995 has provided some insight into the nature of Chinese military spending, but with varying degrees of specificity. White papers published between 1998 and 2008 included comparative budget breakdowns between China and countries like Japan and Russia. These comparisons were removed from white papers after 2008, but reappeared in the most recent white paper that was released in July 2019.

    Chinese Defense Expenditure Breakdown
    Billions of Dollars (2017)
    Total
    Amount Percentage (%)
    Personnel 47.51 30.8
    Training & Maintenance 43.41 28.1
    Equipment 63.47 41.1
    Total 154.39 100
    Source:United Nations

    Most defense white papers – except those released in 2013 and 2015 – also outline three spending categories: personnel, training and maintenance, and equipment.3 Beijing states that it annually reports categorized military spending information to the UN; however, this information is only available from the UN in one-page reports for fiscal years 2006, 20072008, and 2017. 4 The reports from the mid-2000s show roughly equal spending between each of these three categories. The 2019 white paper, which includes spending breakdowns between 2010 and 2017, reveals a noticeable shift away from this even distribution. Spending on equipment now accounts for the largest share of the defense budget, accounting for just over 41 percent of total spending in 2017.  

    Please note that the figures in the graph above are based on spending figures provided in the 2019 defense white paper and do not match with figures provided by the Ministry of Finance.

    Official military spending is further complicated by the Chinese government’s inconsistent reporting of figures. The figures provided by the Ministry of Finance, for instance, differ from expenditure reported in the 2019 defense white paper.5 This discrepancy may be the result of the Ministry of Finance excluding the costs associated with militia forces in its defense figures. In 2017, this inconsistency resulted in a difference of $2.9 billion.

    China’s lack of transparency leads to discrepancies between official figures and outside estimates. Official figures do not account for a number of military-related outlays, including some military research and development, aspects of China’s space program, defense mobilization funds, authorized sales of land or excess food produced by some units, recruitment bonuses for college students, and provincial military base operating costs.6

    Comparison of Official Military Spending Figures
    Billions of RMB (Billions of USD)
    Year Ministry of Finance 2019 Defense White Paper
    2017 ¥1023.7 ($151.5) ¥1043.2 ($154.4)
    2016 ¥954.6 ($143.7) ¥976.6 ($147.0)
    2015 ¥886.9 ($142.4) ¥908.8 ($145.9)
    2014 ¥805.5 ($131.1) ¥829.0 ($134.9)
    2013 ¥720.2 ($116.3) ¥741.1 ($119.6)
    2012 ¥650.6 ($103.1) ¥669.2 ($106.0)
    2011 ¥583.0 ($90.2) ¥602.8 ($93.3)
    2010 ¥518.2 ($76.5) ¥533.3 ($78.8)
    Source: Ministry of Finance and Ministry of Defense.
    USD values are based on average annual RMB-USD conversions using data provided by the IMF.

    Official military spending also excludes spending on public security, which includes the People’s Armed Police (PAP). The PAP is a paramilitary police component of China’s armed forces that is charged with internal security, law enforcement, and maritime rights protection. The Central Military Commission maintains direct control of the PAP. Official expenditure at the central level for the PAP stood at RMB 123.2 billion ($17.8 billion) in 2020, though this figure is widely believed to significantly undercount total spending on the PAP.

    China is not alone in excluding elements of defense-related spending from its official defense budget. India’s paramilitary forces, which make up the Central Armed Police Forces, fall under the Ministry of Home Affairs, not the Ministry of Defense. India is also not forthcoming about space and nuclear weapons expenditures. The United States funds its nuclear weapons through the Department of Energy and does not include these details in its defense budget. However, the US government maintains a high level of budgetary transparency, which enables analysts to readily account for discrepancies.

    Estimates of China’s military spending are further complicated by the reporting of costs not typically included in the defense budgets of many other countries. For instance, disaster relief in China is funded through the defense budget and is to be reimbursed by non-defense agencies. Likewise, perquisites for retired senior officers — including offices, assistants, and special access to hospital facilities — are all funded through China’s defense budget. In many other countries, these functions and associated costs are typically incurred by nonmilitary organizations.

    A Conversation With Richard Bitzinger

    The inconsistencies in estimates are further complexified by a lack of pricing information. Beijing does not release accurate cost data for military goods and services, making it difficult to make calculations based on purchasing power parity (PPP). Some of the chief challenges are uncertainty over which goods to place in China’s defense spending basket, and which goods to compare between China and other countries. Independent organizations, such as the IISS, caveat their PPP estimates, noting that no specific PPP rate applies to the Chinese military sector and that there is no definitive means through which elements of military spending can be calculated using PPP rates.

    Comparing Chinese Military Spending

    Calculations in this section are derived from the SIPRI Military Expenditure Database and are in constant 2019 US dollars.

    China’s defense spending has seen a nearly six-fold increase over the past two decades, jumping from $41.2 billion in 2000 to $244.9 billion in 2020. China currently spends more on defense than Japan, South Korea, the Philippines, and Vietnam combined, and China’s military spending is second only to the United States.

    This growth in military spending is tied to China’s rising gross domestic product (GDP). Since 2000, China’s defense expenditures as a share of its GDP has hovered at or below 2 percent. In comparison, US military spending averaged about 3.9 percent of GDP from 2000 to 2020. Japan’s military spending has remained set at approximately 1 percent of its GDP, but this could change in the coming years. Japanese Defense Minister Nobuo Kishi signaled in May 2021 that Tokyo may push to increase defense spending above 1 percent of GDP in the face of China’s growing military power.

    China’s rising defense spending corresponds with over two decades of modernization efforts. China began military modernization in earnest after the 1995–1996 Taiwan Strait crisis, which exposed fundamental weaknesses in China’s ability to deter foreign intervention in sovereignty disputes. The increase in China’s defense spending in recent decades was, in part, also a response to domestic policies that left China’s defense budget relatively stagnant prior to the 2000s.

    Aggregate spending increases have corresponded with several high-profile procurement programs, military reforms, and doctrinal and strategic shifts within the People’s Liberation Army. These shifts have facilitated China playing a larger role in regional and international security. Some of these efforts, such as China’s participation in UN peacekeeping operations, antipiracy efforts, and humanitarian assistance and disaster relief are welcome contributions to global governance. On the other hand, defending China’s growing security interests in the East and South China Seas has strained relations with other regional actors.

    FDI

    Heavy defense spending in recent decades has allowed China to make significant strides toward modernizing the People’s Liberation Army Navy. Learn more about how China’s naval capabilities are evolving.

    Despite considerable increases over the past fifteen years, China’s military spending pales in comparison to that of the US, which spent more than three times as much as China in 2020, at $766.6 billion. Even when accounting for reporting discrepancies, China would have to raise its spending considerably to match the US. However, it is worth noting that the US maintains a global military presence while China remains primarily focused on security issues within the Indo-Pacific.

    When considering military spending as a percent of total government expenditure, Chinese military spending has dropped noticeably — from 11.3 percent in 2000 to 4.7 percent in 2020. For the US, after a marked increase from 2002 to 2011, its military spending has likewise decreased and returned to pre-September 11 levels (9.6 percent in 2001 and 7.9 percent in 2020). Although Russia’s spending as a share of government expenditure remains high, it declined from 14.8 percent in 2016 to 11.4 percent in 2020.

    Looking at broader regional trends, defense spending in East Asia increased from $91.7 billion in 1990 to $351 billion in 2020. Much of this growth in expenditure has been driven by China. In 1990, China constituted 23.2 percent of total East Asian expenditure. As of 2020, this number stood at 69.8 percent. In terms of the broader regional context, the Chinese military budget constitutes 39.5 percent of the total cumulative spending across the Asian continent (including the Middle East). ChinaPower