Sunday, March 23, 2014

China's military expenditure

China's annual announcement of its military expenditure is often met with a lot of alarm. The question has often been why China needs to be constantly increasing its military expenditure so much. Here is a chart showing China's military expenditure vs treasury income vs GDP from 1999 to 2013.

Over this period, the military expenditure has generally been between 1.2% to 1.5% of the GDP and 9.5% to 5.5% of the treasury income. so in real RMB terms, military expenditure has not gone up as a percentage of GDP. In comparison to the treasury income, military expenditure has decreased a lot due to improved tax collection in China. The question is why the military expenditure has remained steady when the reported year to year increased is greater than GDP growth. The answer seems to be that GDP is inflation adjusted whereas military expenditure is not. There are 3 other charts similar to this which shows military expenditures going back to 1950. Seems like China maintained higher military expenditure % (4.5% to 9%) up until when Deng Xiaoping took over in 1978. After which, PLA saw its spending vs GDP drop all the way to 1% in the mid 90s. Now, China's definition of military expenditure can be different from that of the west, so there is no reason to compare China to Japan or US here. The important take away here is that China is not in any kind of expansion mode when it comes to military expenditure.

1 comment:

Meng-yuan said...

1.6% of GDP is quite peace-loving, especially when compared with the 4% number of the US.

Still, the Chinese military spends its money far more efficiently than its American counterpart. For example, the Type 052D ship costs a frugal 3.5 billion yuans, or $550m. This is lower than what the US taxpayers have to cough up for their LCS!