China Power

China’s Growing Defense Budget: Not As Scary As You Think

The rapid growth in China’s defense budget is a natural outcome of its economic rise.

China’s Growing Defense Budget: Not As Scary As You Think
Credit: Wikimedia Commons/ U.S. Marine Corps photo by Lance Corporal J.J. Harper

IHS Jane’s recently estimated that China will raise its military budget by nearly $10 billion this year (going from $139.2 billion to $148 billion). The news fits in well with catchy headlines about China’s growing military might, but as with all figures, the meaning can be distorted when taken out of context.

One fact that is well-known among defense thinkers (but often over-looked by the media) is that China’s military spending is increasing in overall terms, but not as a percent of China’s GDP. In fact, when measured a percent of GDP, China’s defense budget has actually declined slightly over the past four years, from 2.2 percent in 2009 to 2 percent in 2012, according to the World Bank. For the last 10 years, China’s military budget as percent of GDP has hovered at or close to the 2 percent line. To add some context, the United States’ defense budget as percent of GDP has climbed during the same period, growing from 3.6 percent in 2003 to 4.2 percent in 2012. The U.S. Central Intelligence Agency’s “World Factbook” gives very similar figures, as does the Stockholm International Peace Research Institute.

In other words, China’s military budget increase is solely a function of its overall economic growth. With an average annual GDP growth of nearly 10 percent since 2000, government budgets in China have naturally increased across the board. From a strategic standpoint, it would make no sense for the Chinese government to keep military spending static while all other areas of spending increase. If China had frozen its military spending at 2009 levels, for example, that budget (reported at $70 billion) would be a paltry 0.7 percent of China’s GDP today ($9.4 trillion in 2013, according to China’s official GDP figures), putting China on a level with Madagascar and Sierra Leone.

With that background, it’s interesting to note that, if both the projected military budget increase and China’s projected GDP growth for 2014 are proven accurate, China’s military spending as a percent of GDP will actually decrease this year. The new $148 billion budget represents a 6.3 percent increase in defense spending; China’s GDP is projected to grow by 7.7 percent. China’s defense budget is important to the government, obviously, but it’s not the leadership’s top priority. For instance, for the past three years, China has spent more on its domestic security apparatus than on its defense budget.

This is not to say, however, that China’s military build-up has no potential to destabilize the East Asia region. The growth in military expenses (and thus military capabilities) may be an entirely natural and expected result of China’s rapid economic rise, but it is still causing changes in the regional security environment. It will take some time for the Asia-Pacific to reach a new equilibrium that takes China’s military into account. With this in mind, it’s also helpful to look at a different sort of data: opinion polls attempting to discern what China’s neighbors, who are most likely to be directly affected in the event of the military conflict, think of such increases.

In the spring of 2013, the Pew Research Center asked people in a number of Asian countries if they thought “China’s growing military power is a good thing or a bad thing for [their] country.” The results were showed a huge schism within the region. Japan and South Korea had the largest majorities responding that China’s growing military was bad for their country, coming in at 96 percent and 91 percent respectively. Australia and the Philippines were next, at 71 percent and 68 percent. After that, however, there is a marked drop-off in concern over China’s military. Indonesia had 39 percent say China’s military power was a bad thing, Malaysia 20 percent, and Pakistan (a longtime friend of China’s) a mere 5 percent.

This specific poll reveals an interesting and predictable trend: the countries most concerned with China’s rapid military rise are all U.S. allies. Japan, South Korea, Australia, and the Philippines have all been allied with the Asia-Pacific’s major military power since the early days of the Cold War. Now that the status quo is shifting with China’s military advances, those countries that benefited from U.S. dominance have the most to lose. Meanwhile, countries like Pakistan who had close historical relations with China are more likely to view Beijing’s military might as a net positive (Pakistan is also officially an ally of the U.S., but the relationship is fraught with tension).

Of course, for many in the region there’s an added complication. Three of the U.S. allied nations (Japan, South Korea, and the Philippines) also have territorial disputes with China, as do other neighbors not represented in the Pew data (most notably India and Vietnam). There’s even more reason for their concern over a more powerful Chinese military. But as with all concerns, worries about China’s military rise shouldn’t be blown out of proportion by ignoring the surrounding context. Yes, China’s defense spending increase by billions each year, and that change in the balance of power can be dangerous. But the military build-up is also simply a natural part of China’s economic growth.