China’s Defense Budget Climbs 6.8% as Economy Recovers
Pedestrians and cyclists stand in front of a screen showing an advertisement for the People’s Liberation Army in Beijing. (Photographer: Qilai Shen/Bloomberg)

China’s Defense Budget Climbs 6.8% as Economy Recovers

China projected defense spending growth of 6.8% this year, the largest gain since 2019, amid tensions with the U.S. and key neighbors.

Military expenditure is expected to climb to 1.35 trillion yuan ($208 billion) in the coming year, the Ministry of Finance said Friday. The figure, released at the start of the annual National People’s Congress meeting in Beijing, compares with a projected rise of 1.8% in budgeted fiscal spending.

“We will provide stronger financial guarantees to vigorously support the modernization of national defense and the armed forces, and help China’s defense capabilities rise in step with its economic strength,” the Ministry of Finance said in a report. A Bloomberg calculation of the latest defense budget number shows spending for this year will actually rise 6.9%.

China’s Defense Budget Climbs 6.8% as Economy Recovers

The defense spending boost comes after China sparred with India on its border and as the nation seeks to modernize its military to make it more competitive with the U.S. China, the only major economy in the world to expand last year, also announced on Friday an economic growth target of above 6% for the year, well below what economists had forecast.

“We will boost military training and preparedness across the board, make overall plans for responding to security risks in all areas and for all situations, and enhance the military’s strategic capacity to protect the sovereignty, security and development interests of our country,” Chinese Premier Li Keqiang said in an annual report to the national legislature.

China engaged in a tense standoff with India over border issues that turned violent in June last year, when 20 Indian soldiers and at least four Chinese troops were killed in hand-to-hand fighting. The deaths marked the first time casualties were reported along the disputed frontier since 1975. The U.S. has tested the country’s red lines on Taiwan with official visits and arms sales, and tensions with several countries have also heated up in both the East and the South China Sea.

Recent diplomatic assertiveness by Beijing has come as China rebounded much better than other major economies. Chinese President Xi Jinping has vowed to make the nation a great military power in the coming decades. He pledged to complete the modernization of China’s armed forces by 2035 and to build a world-class military capable of winning wars across all theaters by 2050.

“Considering Beijing’s threat perceptions and goal of achieving military modernization by 2035, I’d expect defense spending to continue to be a priority,” said Meia Nouwens, senior fellow for Chinese defense policy and military modernization at the International Institute for Strategic Studies.

China’s Defense Budget Climbs 6.8% as Economy Recovers

China plans to boost pay for some personnel by 40% this year to lure and retain talent as it pursues these goals, the South China Morning Post reported in January.

“China continues to invest in more sophisticated technologies and weaponry in the knowledge it needs to deter and possibly fight a far more sophisticated set of adversaries — the United States and its allies — in the future,” said Bates Gill, a professor of Asia-Pacific security studies at Australia’s Macquarie University.

The figure on China’s military spending is closely watched by U.S. and policy makers around Asia because it is one of the few pieces of official data available that helps gauge the development of the People’s Liberation Army. China said last year that defense spending was projected to rise 6.6%, the slowest since at least 1991.

Analysts outside China say actual military spending far exceeds the official figure presented every year at the legislative meeting, partly because R&D expenditures are not included. In January, researchers at Stockholm International Peace Research Institute updated the way it calculates China’s defense spending for 2019, estimating the Asian nation’s outlay at 1.66 trillion yuan, or 38% more than the official figure.

That works out to 1.7% of the country’s gross domestic product for the year, according to the institute, while the U.S. spent 3.4% of GDP on defense in 2019. The figure for India, the world’s third largest military spender, was 2.4%.

©2021 Bloomberg L.P.

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