Why China's Growing Defense Budget Matters

Why China's Growing Defense Budget Matters
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The Chinese government announced on Wednesday that it would increase military spending by about 10% this year. At first glance, this may not seem particularly remarkable. China’s spending on the People’s Liberation Army (PLA) has grown by almost 10% annually for the last decade and grew by comparable amounts in the preceding one. Of course, this in and of itself is significant and, for Americans and their allies, sobering. China has already put together a military that can begin to contest American military predominance in the Western Pacific.

But what is particularly concerning about this year’s announcement is what it portends for the future. Over the last two decades, China has undertaken a massive military modernization program, but its spending on its armed forces has increased at roughly the same rate as the pace of growth as China’s overall economy. During this same period, a spirited debate has taken place among strategists and China watchers about what this military buildup signified, how enduring it would be, and ultimately how dangerous it would be for the United States and its allies and partners.  

For some, Beijing’s military buildup was not just formidable in and of itself, but also revealed something about what the PRC intended to do with its growing wealth and power. China, in this view, might talk about strategic restraint and the narrowness and modesty of its interests, but its ballooning spending on its military indicated a hungrier and wider ambition, a desire to translate its newfound capacity into strength it could wield on the regional and perhaps even eventually the world stage. Renminbi spent on the military thus reflected not simply organizational inertia and an expanding budgetary pie to be doled out but some kind of a decision to increase China’s military power in order to give the country a greater ability to pursue its growing ambitions.

Accordingly, this school surmised that China’s military buildup might be interrupted or retarded by the decline in the PRC’s economic growth that most economists had foreseen, but that Beijing was not likely to allow an economic slowdown to get in the way of continuing to build up the PLA.

Others retorted, though, that it was simply natural for a developing country emerging onto the world scene to increase its expenditures on its defense at a rate comparable to its overall economic growth. In this more generous interpretation, China’s military buildup was basically something carried along by China’s growing economy (and spurred by the increased potency of the American military). It therefore did not offer serious reason to see expanding ambition and a desire to wield its power more assertively on the part of Beijing. This school therefore suggested or at least implied that a decline in China’s economic growth would be likely to lead to a correlative drop in its level of military investment.

This year’s announcement offers a crucial piece of evidence in figuring out which school has been more right about China’s intentions and aspirations. That is because, if the school more sanguine about China’s military buildup and strategic ambitions were right, we should have seen a decline in China’s military spending, roughly in line with Beijing’s target of  "around 7%" for national economic growth for 2015. Yet we have not. To the contrary, Beijing’s own announcement is that China’s defense investment will increase by 10% - well above the overall level of national economic growth. Indeed, the divide is almost certainly even larger than that reflected in these numbers, since most observers judge that China understates its level of defense investment (although not necessarily growth) and overstates its level of overall economic growth.


So what does this tell us? Obviously nothing definitive, given that such an inherently indeterminate question as the nature and contours of China’s future behavior cannot be resolved in any meaningful or lasting way. Overall levels of defense spending are at best a highly imperfect and refracted method for ascertaining a nation’s intent. And even if we can divine from this announcement what Beijing means to do now the PRC might, after all, change its mind next year. And it does not mean that China’s intentions are necessarily malign or untoward. China claims, after all, to view its buildup as defensive and necessary to maintain existing correlations of forces between itself and its potential rivals. Furthermore, it is also possible that a good deal of previous increases in defense spending have been eaten up by inflation, and that Beijing simply seeks to stay ahead of rising prices and costs for goods and services.

There is undoubtedly truth to varying degrees in all these caveats. But this announcement is also not mere noise. Countries, including the savvy Chinese government, are well aware that overall defense spending levels and trajectories receive a great deal of attention and are seen as manifestations of intent. Witness the fervent debates about the defense top line budget in the United States or Japan’s highly-publicized slight increase in its defense budget after years of decline – and note in particular China’s loud drawing of attention to this latter fact. Indeed, it might be fair to say that there is no single more prominent indicator of a nation’s focus on and interest in its military than its overall defense expenditures and their growth (or decline) trajectory. It is thus reasonable to infer that China understood that continuing its levels of year-on-year growth even in light of the slowdown in the nation’s economic progress would be seen as significant and indeed menacing – and proceeded nonetheless. This surely tells us something about China’s intent.

Beyond symbolism, though, China on Wednesday showed its resolve to keep building up its military even as it has become more costly and painful to do so. Beijing’s announcement is therefore at the very least suggestive and quite probably real, hard evidence that China intends to keep building up its military even if and as it weathers economic headwinds.  This, coupled with China’s expressions of intent to develop a more sophisticated and potent military, the power of the PLA in Chinese politics, nationalist/patriotic support for more spending on the armed forces, and a range of other factors one could enumerate provide solid reason to assume that, even as China’s economy slows down from its formerly rocketing rates of growth, we should still expect the PLA to continue to become even more and more formidable in the coming years, with correlatively significant consequences for the interests of the United States and its allies and partners in the region. Some may have hoped that an economic slowdown in China would solve the problem of grappling with China’s growing military and strategic might for Washington and its confreres. But what this announcement portends is that a slowdown is not, after all, likely to be a strategic panacea for the United States and others concerned by China’s growing military power.

Thus, whatever the inherent justifiability of China’s intentions, the brass tacks reality appears to be that Beijing will continue to move towards fielding a military increasingly capable of contesting America’s primacy in the Asia-Pacific. This is an uncomfortable and unpleasant truth for the United States and its allies and partners, which had become accustomed to an enduring American hegemony in maritime Asia. But it is a reality nonetheless and one that demands that these like-minded nations take steps to balance China’s growing military power if they wish to have the surest and most responsible guarantee that the region’s – and the world’s – premier emerging great power pays due respect to their interests.

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