China Sees Slowest Defense Budget Growth Since at Least 1991

(Bloomberg) --

China projected defense spending growth of 6.6% this year, the slowest increase since at least 1991, in a sign of the trade-offs the country’s leaders face in confronting unprecedented economic slowdown in the wake of the coronavirus.

Defense spending was expected to increase to 1.268 trillion yuan ($178 billion) in the coming year, the Chinese Ministry of Finance said Friday. The figure, which was released at the start of the annual National People’s Congress session in Beijing, compares with a 7.5% increase last year.

China Sees Slowest Defense Budget Growth Since at Least 1991

Overall central government expenditures were projected to decline 0.2%, down from a targeted increase of 6.5% the previous year.

“China seems to have come out of the pandemic rather quickly and with far smaller consequences than others, but its economy will definitely take a hit,” said Nan Tian, a researcher in the Arms and Military Expenditure Program at the Stockholm International Peace Research Institute. “Some form of scaling back is inevitable.”

The military spending figure is closely watched by U.S. and regional policymakers as it represents one of the few pieces of official data available to gauge the development of the People’s Liberation Army. China was the second-largest military spender in the world in 2019, accounting for 14% of global military spending compared with 38% for the U.S., according to SIPRI.

“China pursues a defensive national defense policy,” NPC spokesman Zhang Yesui told a news briefing Thursday ahead of the budget announcement. “China’s defense spending is appropriate and restrained in terms of its proportion of the total and per capita GDP.”

Even as Beijing’s leaders face fiscal constraints on military spending, they also confront pressures to maintain spending from simmering regional tensions. China’s relationship with the U.S. has declined to its worst state in decades as the two countries engage in an information war over the origins of the virus, which has swept around the world since first being discovered in the Chinese city of Wuhan in December.

China reaffirmed is opposition to any moves toward independence in Taiwan following Tsai Ing-wen’s inauguration to a second four-year term as the president. Beijing considers the democratically ruled island as part of its territory.

The government is also bound by President Xi Jinping’s promise to make China a great military power in the coming decades. Xi 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. His success will determine China’s ability to mount a serious challenge to U.S. strategic interests in Asia over the coming decades.

Chinese Premier Li Keqiang pledged to continue to press ahead with those goals in a report delivered to the opening session of parliament Friday.

“We will deepen reforms in national defense and the military, increase our logistic and equipment support capacity, and promote innovative development of defense-related science and technology,” Li said. “We will improve the system of national defense mobilization and ensure that the unity between the military and the government and between the military and the people remains rock solid.”

While China’s official defense budget is closely scrutinized, most outside analysts agree that the country spends significantly more on defense than the official figures reveal. SIPRI estimated that China spent the equivalent of 1.9% of its gross domestic product on defense last year.

“The Chinese government has mentioned in their defense white paper that they want to compete with other top military forces,” said Nan Tian, of SIPRI. “Of course, this increased spending and modernization is subject to constraints.”

©2020 Bloomberg L.P.

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