Two decades of an expanding defense budget coupled with a multi-dimensional modernization effort have enabled China to field one of the world’s most capable militaries. While it should come as no surprise that a modernizing power with a global economy invests significantly in its national defense, curiosity and suspicion are often directed toward China - particularly when its military is involved. In some regards, there is little China can do to abate this suspicion. In an international system dominated by Western democratic states, China is the perennial outsider. China’s lack of transparency with regard to its military spending only adds fuel to the flame.
In a region where military spending is trending upwards – expenditures for East Asia surpassed those of Western Europe in 2014 - China now boasts the second largest defense budget in the world and spends more on defense than Japan, South Korea, the Philippines, and Vietnam combined. Among China’s neighbors, countries with overlapping territorial claims have, in recent years, represented some of the largest increases in year-on-year military spending. Given the prevailing uncertainty that is in part responsible for driving these growing defense budgets, all parties have a vested interest in identifying mechanisms for improving stability.
In many cases, transparency in military spending can serve to mitigate tensions by holding governments accountable to their citizens and neighbors. However, the suspicion that surrounds China and its rising defense budget could cause such transparency to alarm, rather than assure its neighbors.
Each year, China’s announced defense spending figures are heavily scrutinized by outside observers. Much of this attention is a product of China’s reluctance to provide details about its military spending. Such was the case when Vice Foreign Minister Fu Ying announced a 2017 defense budget increase of “about 7 percent” at this year’s National People’s Congress.
While some countries provide breakdowns of their defense expenditures, China reports only the topline figure. Yet this year, even this minimum expectation was shrouded in confusion. In a shift from past years, the 2017 Congress announced only the year-on-year percent increase in the budget, without providing the new top-line figure. Two days later a Ministry of Finance official told Xinhua that the 2017 defense budget would total 1.044 trillion yuan, with China’s information officer Song Kai later noting, “We didn’t remain private deliberately.” However, it remains unclear how this percent increase is calculated. Given the official 2016 budget of 954.4 billion yuan, a 7 percent increase would total 1.021 trillion yuan, a 23 billion yuan difference from the figure that was revealed by the Ministry of Finance. Whether intentional or not, Beijing’s lack of clarity in this year’s reporting only further contributes to an air of suspicion that plagues China.
With the unknowns surrounding China’s budget, outsiders are left to speculate over China’s military priorities in the region. Chinese defense white papers and statements from officials offer little clarity—noting only that the budget is split into roughly equal thirds for personnel, training and military exercises, and equipment acquisitions. Even this overly simplistic breakdown is riddled with problems, as there is limited information regarding domestic purchasing power and no pricing structure for military acquisitions.
While comparatively inadequate, China’s provision of information about its defense spending has in some ways improved over the last two decades. Regional calls for greater transparency prompted China to provide more details regarding its defense budget gradually from 1998 to 2008. Nevertheless, China still found itself among countries with “low transparency” in its defense budget, reporting in the 2011 SIPRI report –a category primarily dominated by less developed countries. Since that time, there has been little improvement in terms of transparency. Such opaqueness leaves those in the region to speculate as to how China seeks to leverage its massive budget.
Beijing’s lack of transparency is further complicated by the fact that China underreports its total defense expenditures. Outlays for paramilitary organizations, military-related aspects of Beijing’s space program, and defense mobilization funds are commonly not believed to be included in the topline budgetary figure provided by Chinese authorities. Estimates provided by organizations that study the Chinese military peg its actual spending at approximately 1.2 to 1.5 times greater than the announced figures.
These inconsistencies are not altogether uncommon. Reporting on military spending varies across countries and typically involves some degree of ambiguity. The United Nations outlines recommendations of line-items to be included—which range from arms purchases, to disaster aid, to research and development—but countries are not bound to follow these guidelines. For instance, the United States does not include expenditures for nuclear weapons, which are funded through the Department of Energy, in its defense budget. The U.S. government, however, maintains a high-level of budgetary transparency overall, which makes accounting for these discrepancies a relatively straightforward process.
As President Xi Jinping undertakes a new phase in China’s long-term commitment to military modernization, Beijing’s hesitancy to disclose more information about its defense budget is likely to fuel further suspicion over its strategic intentions. While modernization efforts have been ongoing since late 1970, Xi announced plans in late 2015 to accelerate reform of the PLA and reorganize China’s military to achieve a “breakthrough” by 2020. Among other goals, Beijing aims to centralize the Central Military Commission’s leadership and enhance the PLA’s capabilities to perform joint operations. Beijing has made a deliberate effort to publicize these reforms - and the military parades that come with them. While this demonstration of military strength may inspire domestic audiences, it heightens tensions among its neighbors.
If Beijing seeks to leverage its growing capabilities to play a more active global role, as it has with its increased participation with UN peacekeeping operations and other international institutions, it must find a means to build trust with others in the region, and it should move in the direction of accepting international standards - such as those on military reporting. This is not to say that transparency alone will assuage fears over China’s military aspirations. Nevertheless, Xi’s ongoing military reforms provide an opportunity to lay the groundwork for greater transparency about not only China’s defense budget, but its broader military intentions in the future. Such a move could alleviate some of the suspicions that hang on Beijing, and help elevate China to become the “great power” it considers itself to be.
