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

    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 prompted an increase or decrease in defense allocations. No matter how much a country spends on its military, it still must translate its potential capability for power into desired outcomes.

    Understanding the connection between Chinese military spending and Chinese 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 2018 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 2019, China’s Ministry of Finance announced a yearly budget of 1.19 trillion yuan ($177.5 billion),1 marking a 7.5 percent2 increase from the 2018 budget of 1.11 trillion yuan ($167.4 billion).3 This follows a recent trend that has seen yearly percent 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 2018 figure at $250 billion and the International Institute for Strategic Studies (IISS) puts the number at $209 billion in 2017. The US Department of Defense (DoD) concludes that China’s 2018 defense budget likely exceeded $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 2018 estimate from SIPRI pegs China’s nominal defense spending at $250 billion, 1.4 times larger than the official figure.

    Low levels of transparency from Beijing compound outside efforts to estimate China’s defense budget. The publication of 10 defense white papers since 1995 has provided some insight into the nature of Chinese military spending, but with varying levels of specificity. White papers published between 1998 and 2008 included comparative budget breakdowns between China and countries like Japan and Russia; but when China began to outspend its neighbors, these comparisons disappeared.

    Defense white papers published between 1998 and 2010 also outline three spending categories — personnel, training and maintenance, and equipment — but these breakdowns do not appear in the 2013 and 2015 white papers.4 China has sporadically reported spending details to the UN in one-page breakdowns provided for fiscal years 2006, 2007, 2008, and 2017.5 The reports from the mid-2000s show the same even distribution of spending as that of earlier white papers. In the 2017 report, spending on equipment increased to 41.1 percent of China’s overall expenditure, while personnel and training dropped to 30.8 percent and maintenance fell to 28.1 percent.

    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

    China’s lack of transparency leads to discrepancies between official figures and outside estimates due to differences in what expenditures are included in the budget. Official figures do not account for a number of military-related outlays, including aspects of China’s space program, extra-budgetary revenues from military-owned commercial enterprises, 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

    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. The official budget for the PAP was 140 billion RMB ($20.7 billion) in 2017.7

    It’s hard sometimes to be able to get too much out of the overall budget because the Chinese aren’t very transparent. Basically, they only give us a top line figure.

    – Richard Bitzinger

    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 budget are further complicated by the reporting of costs not typically included in many Western defense budgets. Historically, expenses incurred by military infrastructure construction were assumed to be included in the official figures, although many of these projects are designed to be dual use and use funding from local and national nondefense budgets. Disaster relief is likewise funded through the defense budget and is to be reimbursed by nondefense agencies, but the mechanism and effectiveness of this reimbursement remains unclear.

    A Conversation With Richard Bitzinger

    Perquisites for retired senior officers — including offices, assistants, and special access to hospital facilities — are all funded through China’s defense budget. Many of these functions and associated costs are typically incurred in Western countries by nonmilitary organizations, a discrepancy that further complicates estimates of China’s military budget. It remains unclear what percentage these expenditures constitute of China’s total defense budget.

    The inconsistencies in estimates are further complicated 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 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.8

    China’s defense spending has seen a nearly eight-fold increase over the past two decades, jumping from $31.2 billion in 1998 to $239.2 billion in 2018. 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 around 2 percent. In comparison, Japan’s military spending remains set at approximately 1 percent of its GDP, but this could change in the future as Prime Minister Abe has pushed for a spending increase.

    China’s rising defense spending follows from 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 during this period 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 welcomed 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

    China’s naval expansion allows it to play a greater role in international security issues. As of 2018, the Chinese Navy consists of over 300 ships, making it larger than the US Navy’s 287 deployable vessels. Learn more.

    Despite considerable increases over the past fifteen years, China’s military budget pales in comparison to that of the US. The US spent 3.1 percent of its GDP on defense in 2018, and its nominal expenditure was more than two and a half times higher than that of China. Even when accounting for reporting discrepancies, China would have to raise its spending considerably to match the US defense budget. However, it is worth noting that the United States 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 12.0 percent in 2001 to 5.5 percent in 2018. After a marked increase from 2002 to 2011, US spending has likewise decreased and returned to pre-September 11 levels (9 percent in 2001 and 9 percent in 2018). Although Russia’s spending remains high, it declined from 14.8 percent in 2016 to 11.4 percent in 2018. For the most part, spending elsewhere in the region either dipped in 2018 or remained steady.9

    Looking at broader regional trends, East Asia spends close to the same amount as Western and Eastern Europe combined. East Asian spending has increased from $89.4 billion in 1990 to $336.3 billion in 2018. Much of this growth in expenditure has been driven by China. In 1990, China constituted 23.4 percent of total East Asian expenditure. As of 2018, this number stands at 71.1 percent. In terms of the broader regional context, the Chinese military budget constitutes 48.4 percent of the total cumulative spending across all of Asia (including those in the Middle East). ChinaPower

    1. Calculated based on an average exchange rate of 6.703 RMB per USD on March 5, 2019, the day of the announcement.
    2. China’s Ministry of Finance announced growth of 7.5 percent, which is based on nominal growth in RMB. In nominal US dollars, the growth rate was 6.0 percent.
    3. Calculated based on an average exchange rate for 2018 of 6.614 RMB per USD.
    4. White papers published between 1998 and 2010 included an even-numbered year in their title. After 2010, the naming of the white papers changed, and they are now commonly known by odd-numbered years, 2013 and 2015.
    5. China’s report in 2017 was not submitted through the UN’s online tool, so it is listed separately.
    6. Rumors suggest that the cost of China’s aircraft carriers may also be excluded from official expenditure.
    7. Calculated based on an average exchange rate for 2017 of 6.757 RMB per USD.
    8. Figures are in 2017 USD (constant)
    9. It is worth noting that Pakistan spent 18.5 percent of its government expenditure on defense in 2018, a modest but noticeable increase from 17.7 percent in 2017.