$100 Billion For China’s Railroads

With Beijing spending massive amounts of money on its rail network, corruption has seeped in. Could the PLA suffer the same fate?

Picture a vast Chinese state institution with around two million staff, comprising a baffling array of units and sub-departments all scattered across the country. Under the guise of a sweeping, rapid modernization plan this institution’s budget expands so quickly – to around $100 billion a year – that it is hard for anyone to keep track of how much is really being spent, or on what. All the while, the institution’s sprawling nature and its near-autonomy mean that it operates almost entirely without accountability or oversight: There is only the money, and the many pockets into which it disappears.

We are of course talking about China’s Ministry of Railways. But we might as well be talking about the People’s Liberation Army (PLA). The only difference is that the former is building a high-speed rail network, while the latter is building a high-performance military. Neither, perhaps, is doing a very good job of it.

If you haven’t read Evan Osnos’s lurid account of the rampant corruption within the Railways Ministry in the New Yorker, then you’re missing out. What is really striking for a PLA watcher, however, is how easily the military could be substituted for the railways ministry throughout Osnos’s portrayal. He describes the ministry as a “state-within-a-state” that was effectively given a blank check by the central government, and which, with nothing to curb its behavior, misappropriated a mind-boggling amount of its allocation. But if anything, the PLA is even more autonomous than the Ministry of Railways, in which senior staff routinely skimmed off millions of dollars in kickbacks even as they did a lousy job of building their new rail network.

Is corruption within the PLA as corrosive as it was within Liu Zhijun’s shaky railway empire? The first thing to note is that the headline budget of the PLA and the Ministry of Railways is very similar. This week the Center for Strategic & International Studies (CSIS) published its estimate of what China and other Asian countries spend on their militaries. In 2011 China spent somewhere between around $90 billion and $142 billion, the CSIS report calculates, and concludes the money was split fairly equally between personnel costs (34% of the total), operations and maintenance (33.7%), and defense investment (32.2%) in 2009, the latest year they did a breakdown of.

This breakdown suggests that 100% of the PLA’s budget was diverted towards real requirements. But the parable of the railways strongly suggests that this cannot be right. How much of the PLA’s budget has been spent on retirement homes for generals in Florida, or funneled into private business ventures, or used to buy promotions? How much has been wasted on bogus capabilities that the military doesn’t really need, but whose purchase helped to line influential pockets? And how much has been spent on genuine capabilities, but capabilities whose price tag was hugely inflated so that highly-placed officials could skim off the surplus?

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We can only guess how much of the PLA’s budget has been squandered; but what we do know is that the organization has a serious corruption problem. The situation has become so severe, as disclosed by John Garnaut in April, that one of the PLA’s top generals, Liu Yuan, openly warned his colleagues at the General Logistics Department that the Chinese military was facing a life-and-death struggle against corruption. In fact, the PLA faces nothing short of destruction unless it puts an end to the corrupt culture that has become embedded within the PLA system, Liu was reported as saying.

The top people at the Ministry of Railways wanted to get rich, while seeming to produce fast results. In the end, they were caught: Their high-speed trains did not work when really put to the test, and 40 people died as a result. China’s new military system remains largely untested. But if billions have been stolen by generals and contractors, instead of spent perfecting complex systems and operating procedures, then China’s military could in effect be a high-speed accident waiting to happen.

As for those budget estimates, the Pentagon and others who assume that China spends a lot more on defense than it claims should maybe think again. Adjusted for wastage and corruption, actual PLA spending could be much lower than anyone realizes.