On 5 March, China opened its annual session of the National People’s Congress in Beijing and amidst tensions with both India and the US, announced a defence budget of USD 209.4 billion (CNY 1.355 trillion), an increase of 6.8 percent over FY2020 (USD 196.44 billion/ CNY 1.268 trillion).
The increase is consistent with the last five budgets.
This defence budget — over three times India’s (USD 65.7 billion including pensions) but a quarter of USA’s (USD 740.5 billion), is particularly significant. It has now breached the USD 200 billion mark, and is also the first within China’s new 14th Five Year Plan (2021-2025).
China’s Defence Budgets & ‘Doctrinal Guidance’
China’s defence budgets have close linkages to doctrinal guidance and geopolitical events:
- China had initially concentrated on building a large ground force capable of countering foreign invasions, with the People’s Liberation Army (PLA) relying on the ‘People’s War’ doctrine. The Korean War (June 1950-July 1953), Taiwan Straits Crisis (first in 1954-1955, second in 1958; during which the USA threatened use of nuclear weapons), and the breakdown of relations with erstwhile USSR led China to develop nuclear weapons as strategic deterrence. Then came the Pakistan-assisted rapprochement with the US in 1972. However, beset by internal turmoil under Mao and impoverished, China did not have the wherewithal to fully fund the PLA.
- After Mao died (1976), Deng Xiaoping commenced the ‘Reform & Economic Opening’ of China. Détente with the US, peace within and removal of threat from the USSR allowed China to prioritise national defence at last in the ‘Four Modernisations’ (after agriculture, industry and science & technology). Although budgetary allocations for defence remained low, China was able to obtain some Western technologies with the tacit approval of the US. Estimates by the US’s CIA indicate that between 1975 and 1986, the Chinese leadership had truly prioritised industrial growth over military modernisation – the former grew by 170 percent while the latter by just 15 percent.
How Did China’s Defence Budget Grow By 14 Times in 20 Years?
- The US-led information-centric wars in Iraq (1991) and Kosovo (1999), and the Third Taiwan Straits Crisis (1995-1996) with the US delivered a jolt to the Chinese leadership, and introspection made them see the ineffectualness of the PLA. In 1993, the PLA’s war fighting doctrine was revised to “local wars under conditions of high technology” — and plans for military modernisation were commenced. In 2003, the PLA was asked to prepare for “local wars under informationised conditions”. In 2004, President Hu Jintao outlined the ‘New Historic Missions for the New Century’. A three-phase modernisation plan was evolved, aimed at ensuring that by 2049 (Phase-III), the PLA acquired a capability to conduct high intensity, integrated, network-centric operations in the shortest time possible across a range of missions. Priority was allotted to the modernisation of the PLA Navy (PLAN), followed by the PLA Air Force (PLAAF), PLA Rocket Forces (PLARF) and the PLA Ground Forces (PLAGF). In 2006, the PLA’s mission was redefined as “winning local wars under informationised conditions”.
Thus, from 1999, China’s defence budget has witnessed double-digit annual growth, with the highest increase being 17.7 percent. From FY2016 however, the budget has been augmented in single-digit percentages.
But how did its defence budget grow 14 times in two decades — from USD14.6 bn in 2000 to USD209 bn in 2021 – considering that at no stage in the last two decades has the defence budget allocation exceeded 1.5 percent of its GDP?
The answer lies in China’s rapidly expanding economy – even at 1.5 percent, it translated into very large allocations for the PLA. With its annual GDP growth averaging 9.5 percent, between 1979 and 2019, and its economy doubling every eight years, the Chinese economy is now, on PPP basis, the same size as the US’s. The PLA’s modernisation however, hasn’t come from just the official defence budget.
Has Chinese Army’s Modernisation Just Come From Official Budget?
China’s official defence budget does not reflect its actual defence spending as many outlays are not found included in it, for example
- expenditure on arms imports
- income from arms sales
- on nuclear forces and space
- budget of the PLA's Second Department, the intelligence wing
- R&D expenditure
- capital construction projects
- pension costs
The Pentagon and many think tanks aver that China’s actual defence spending has been at least 3.5 to 1.2 times its official defence budget in various years. However, such exclusions are not unique to China — most countries including the US and India exclude some spending from their official defence budgets.
While China’s defence spending does inspire awe, it merits juxtaposing against its strategic and operating environment.
The Strategic Environment China’s Defence Budget Needs to Cater to
China has a landmass of 9.6 million square km, a population of 1.3 billion, land borders of 22,000 km and a coastline of more than 18,000 km; in addition are island coastlines of over 14,000 km. It faces numerous internal threats, including secessionist movements; has land borders with 14 nations, including with 4 nuclear weapons states (North Korea, Russia, India, Pakistan).
It has disputes with all its maritime neighbours; and unstable relations with the world’s sole superpower, the US.
It is also jousting with India in the Indian Ocean, and the US for control over South China Sea. China’s defence budget, and the PLA’s deployment have to cater to this strategic and operating environment.
Future Prospects
The most notable modernisations have been wrought in Chinese naval, air, missile, space, and C4ISR capabilities. But contemporary weapon systems have far higher costs as compared to legacy systems. For example, the US Navy spends over USD 7 million per day to operate a Carrier Strike Group.
A conservative estimate for China to build a new, US-type of aircraft carrier would be USD 11 billion. China is developing Ballistic Missile Defence (BMD) systems; the US has — between 1985 to 2019 — appropriated USD 200 billion for its BMD. Add to this mix the numerous other systems, platforms and support systems, as also new military bases, training facilities, etc. The PLA’s per-soldier-spending is also rising as it focuses on attracting better-educated personnel, providing better clothing, facilities, training and welfare measures, etc.
Hence, as the PLA modernises, and the numbers of modern systems increase, so will their sustenance cost. Thereafter, China, like the US, may be faced with demands for exponential defence budget increases.
The US has tried to address this dilemma by maintaining smaller standing armed forces, but ramping up defence spending and troop strengths at the onset of a crisis. Chinese plans to downsize the PLA therefore maybe a pointer.
China is Shifting Tack. Here’s How
But China is also shifting tack. The blueprint of the 14th Five Year Plan now outlines China’s objective as: “Make major strides in the modernisation of national defence and armed forces”, and accelerate the PLA’s transition from “mechanisation” towards “informationisation” and “intelligentisation”. This implies shifting from standard military platforms to networked information systems which integrate both autonomous and AI based ‘intelligent’ systems.
This shift will allow a lesser number of platforms and personnel to do a far better job.
Earlier, in 2017, China had introduced its ‘Next Generation Artificial Intelligence Development Plan’ to turn China an AI superpower by 2030. A US national security commission on AI recently outlined that China (and Russia “to a lesser extent”) could overtake the US in military AI and automation.
What Has Allowed China to Make Substantial Progress in its Military Modernisation?
China has issued doctrinal guidance every 15-20 years to direct the PLA’s focus on modernisation, equipment acquisition and war-fighting strategies. Since 1993, such guidance has been part of a long-term continuum, and never disruptive. Successive military chiefs are not allowed that “I have my vision”. And it is this long-term perspective, which is supported by well thought-out budgets, and persistence with that perspective, that has allowed China to make substantial progress in its military modernisation.
(The author is a retired Brigadier of the Indian Army. This is an opinion piece and the views expressed above are the author’s own. The Quint neither endorses nor is responsible for the same.)
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