Defence spending reduction provides smallest growth rate in decades

10:00 GMT, March 5, 2010 defpro.com | While China’s Premier Wen Jiabao announced that the government is targeting an economic growth rate of 9 per cent in 2010, despite a still fragile recovery process in response to the global financial crisis, China recently issued its draft defence budget for 2010. As only few details of the budget have been released, the growth rate is considered the most important and meaningful number. With a planned 7.5 per cent rate, 2010 will be the first year in almost two decades not to see a double-digit increase in the defence budget.

According to the draft, the 2010 defence budget will reach CNY532.1 billion ($77.9 billion, €57.28 billion), increasing by CNY37.12 billion compared to 2009, according to NPC spokesman Li Zhaoxing. Defence expenditures account for 6.3 percent of China's total budget, Li said at the annual parliamentary session.

The draft, which was submitted to the National People's Congress (NPC) on Thursday, states that these funds will be used mainly to modernise the People's Liberation Army (PLA). While Li claims an increase in transparency on the budget issue and assures that the new budget will help “face multi-faceted military threats and improve capabilities for diverse military tasks,” according to RIA Novosti, experts believe that the official data considerably understates the real expenditure.

Tai Ming Cheung, an associate research scientist at the University of California Institute on Global Conflict and Cooperation in San Diego, provides an interesting insight into the possible signals of this draft budget, as well as an outlook on future budget developments in a commentary for the Wall Street Journal’s “China Real Time Report” at http://tinyurl.com/yh3kakm. Further, Tai Ming Cheung identifies different factors that may entail a budget increase beyond the 10% mark as early as next year.

“Chinese officials have often explained in the past that the high rates of defense budget growth were due to strong inflationary pressures. But the past year’s inflation rate has been near zero. If inflation picks up again this year, this would make a return to a double-digit defense budget increase much more likely next year,” Tai explains.

According to official Chinese data, the PLA currently numbers 2.3 million active personnel deployed in seven military regions and more than 20 military districts, with over 800,000 reserve forces. This makes the PLA the world's largest standing military force. Nevertheless, China repeatedly emphasises the defensive nature of its armed forces and the adequate level of military spending in relation to its GDP (1.4 per cent according to official figures). On the occasion of the draft budget submission, Li Zhaoxing said that China spends less money for its armed forces than other countries, such as the US, and explains: “The only purpose of China's limited military strength is to safeguard China's sovereignty and territorial integrity.”


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By Nicolas von Kospoth, Managing Editor