March 06, 2012

The rising sun: China's defence budget eclipses Indian expenditure


Contributor: Andrew Elwell
Posted: 03/05/2012 12:00:00 AM EST | 0

China announced that its annual military expenditure will exceed $100 billion for the first time in 2012 as tensions in the Asia-Pacific region continue to intensify amid mounting budgets and escalating military might.

At 670.274 billion yuan ($106.39 billion), the 2012 budget is up 11.2% on last year’s $92 billion. It represents another year of double digit growth for China’s military spending, which accelerated 12.7% in 2011 on 2010.

It dwarfs India’s 2012 spend, reported to be around $36 billion and has led some commentators to suggest it could heighten friction in the region. Of further concern is the allegation that this figure only represents about half of China’s true spend on defence.

“Since the Chinese budget does not include modernisation, dual-use technologies, R&D aspects and export-import numbers, the figure that we saw on Sunday is not the ultimate truth,” Srikanth Kondapalli, a Chinese military expert at Jawaharlal Nehru University told The Hindu. “Western estimates say the actual figure should be at least double, although Indian estimates place the budget at $150 billion rather than the Pentagon's $220 billion figure.”
However, Li Zhaoxing, a spokesperson for the National People’s Congress, asserted that China’s interests were purely defensive and in no way indicated an escalation of the nation’s military might in the region.

"You see China has 1.3 billion people. We have a large and long coast line but our defence spending is relatively low compared with other countries," Zhaoxing said.

Further, compared with the UK and US, who spend roughly 2% of Gross Domestic Product (GDP) on defence, China’s is significantly less.

"China's defence spending as share of GDP in 2011 was only 1.28%,” he asserted.

But that’s 2011. What will it be in 2012? Closer to 2%? Also, when considering that the $106 billion figure only represents about half of the actual expenditure, this argument over GDP quickly dissolves.

Furthermore, Manish Thakur of defence private equity firm Hudson Fairfax Group noted that “China is not just buying more defence equipment, it is also in the process of creating an entire defence industrial base.” He concluded, “over the longer term, this will challenge the West both in terms of innovation and exports.”

Robert Knapp outlined China’s increasing naval power in his Review of 2011 article in December: “China, India, Japan, Australia and virtually all of the middle ranking regional powers are all currently engaged in dramatically expanding or modernising their navies. China has spearheaded this naval arms race, feeling that it should have naval capabilities to match its economic might. During the past year the most significant development has been the commissioning of China’s first aircraft carrier – the ex-Russian Varyag. While the limitations of this vessel have been much discussed it serves much more as a symbol of China’s ambitions; by the end of the decade there is the intention to have three carrier battle groups in service. The arrival of the Varyag has overshadowed the continuing expansion of both the large (and increasingly capable) surface fleet and what is expected to soon be the largest submarine fleet in the world.”

Moses Ekpolomo also argues in his article, ‘South China Sea: New Persian Gulf?’, that “as China’s economic and strategic influence grows … the fear of a new hegemony in the region is ever more evident in the international and territorial waters of South China Sea.”

There can be no doubt China is accelerating its military spend and, along with it, the influence it has over the Asia-Pacific region as well as its reach beyond it. But remember, on a balancing note, the U.S.’s budget is five orders of magnitude larger than China’s. If it were a nation state the U.S. defence budget would be the world’s 19th largest economy, ahead of Switzerland and Poland. In comparison, China’s would be 57th, just behind Kuwait. That said, we should equally be aware that Kuwait's entire population only just about outnumbers China's 2.3 million strong Army, which is the largest in the world.

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