Asien — China’s National Defense in 2008

XII. Defense Expenditure

Guid­ed by the prin­ci­ple that defense expen­di­ture should grow in line with the demands of nation­al defense and eco­nom­ic devel­op­ment, the Chi­nese gov­ern­ment decides on the size of defense expen­di­ture in an appro­pri­ate way, and takes a road of nation­al defense and armed forces mod­ern­iza­tion fea­tur­ing low­er cost and high­er efficiency. 

In the past three decades of reform and open­ing up, Chi­na has insist­ed that defense devel­op­ment should be both sub­or­di­nat­ed to and in the ser­vice of the country’s over­all eco­nom­ic devel­op­ment, and that the for­mer should be coor­di­nat­ed with the lat­ter. As a result, defense expen­di­ture has always been kept at a rea­son­able and appro­pri­ate lev­el. From 1978 to 1987, as the nation shift­ed its focus to eco­nom­ic devel­op­ment, nation­al defense received a low input and was in a state of bare sus­te­nance. Dur­ing this peri­od the aver­age annu­al increase of defense expen­di­ture was 3.5 per­cent, while that of GDP was 14.1 per­cent and that of the state finan­cial expen­di­ture was 10.4 per­cent. The shares of China’s annu­al defense expen­di­ture in its GDP and in the state finan­cial expen­di­ture dropped respec­tive­ly from 4.6 per­cent and 14.96 per­cent in 1978 to 1.74 per­cent and 9.27 per­cent in 1987. From 1988 to 1997, to make up for the inad­e­qua­cy of defense devel­op­ment and main­tain nation­al secu­ri­ty and uni­ty, Chi­na grad­u­al­ly increased its defense expen­di­ture on the basis of its sus­tained eco­nom­ic growth. Dur­ing this peri­od the aver­age annu­al increase of defense expen­di­ture was 14.5 per­cent while that of GDP was 20.7 per­cent and that of the state finan­cial expen­di­ture was 15.1 per­cent. The shares of China’s annu­al defense expen­di­ture in its GDP and in the state finan­cial expen­di­ture con­tin­ued to drop. From 1998 to 2007, to main­tain nation­al secu­ri­ty and devel­op­ment and meet the require­ments of the RMA with Chi­nese char­ac­ter­is­tics, Chi­na con­tin­ued to increase its defense expen­di­ture steadi­ly on the basis of its rapid eco­nom­ic growth. Dur­ing this peri­od, the aver­age annu­al increase of defense expen­di­ture was 15.9 per­cent, while that of GDP was 12.5 per­cent and that of the state finan­cial expen­di­ture was 18.4 per­cent. Although the share of China’s defense expen­di­ture in its GDP increased, that in the state finan­cial expen­di­ture con­tin­ued to drop on the whole. 

China’s GDP was RMB21,192.3 bil­lion in 2006 and RMB25,730.6 bil­lion in 2007. The state finan­cial expen­di­ture was RMB4,042.273 bil­lion in 2006 and RMB4,978.135 bil­lion in 2007, up 19.1 per­cent and 23.2 per­cent respec­tive­ly over the pre­vi­ous year. China’s defense expen­di­ture was RMB297.938 bil­lion in 2006 and RMB355.491 bil­lion in 2007, up 20.4 per­cent and 19.3 per­cent respec­tive­ly over the pre­vi­ous year. The shares of China’s annu­al defense expen­di­ture in its GDP and in the state finan­cial expen­di­ture in 2006 were rough­ly the same as those in 2007, being 1.41 per­cent and 7.37 per­cent in 2006 and 1.38 per­cent and 7.14 per­cent in 2007. China’s defense expen­di­ture main­ly com­pris­es expens­es for per­son­nel, train­ing and main­te­nance, and equip­ment. Expens­es for per­son­nel and train­ing and main­te­nance account for two thirds of the defense expen­di­ture. In 2007, the defense expen­di­ture was used to cov­er the expens­es of the active force (RMB343.439 bil­lion), the reserve force (RMB3.693 bil­lion) and the mili­tia (RMB8.359 bil­lion). China’s defense bud­get for 2008 is RMB417.769 billion. 

Chart 1: China’s Defense Expen­di­ture in 2007 (unit: RMB billion)

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Note: Per­son­nel expens­es main­ly cov­er the salaries, allowances, food, bed­ding and cloth­ing, insur­ance and wel­fare ben­e­fits for offi­cers, NCOs, enlist­ed men and con­tract­ed civil­ians, as well as pen­sion for the dis­abled or the fam­i­ly of the deceased. Train­ing and main­te­nance expens­es cov­er troop train­ing, insti­tu­tion­al edu­ca­tion, con­struc­tion and main­te­nance of var­i­ous under­tak­ings. Equip­ment expens­es main­ly cov­er R&D, exper­i­men­ta­tion, pro­cure­ment, main­te­nance, trans­porta­tion and stor­age of weapon­ry and equipment. 

In the past two years, the increased part of China’s defense expen­di­ture has pri­mar­i­ly been used for the fol­low­ing pur­pos­es: (1) Increas­ing the salaries and ben­e­fits of ser­vice­men. Along with the rise of the income of civ­il ser­vants and the liv­ing stan­dards of both urban and rur­al res­i­dents, Chi­na has increased the rel­e­vant allowances and sub­si­dies of ser­vice­men to ensure the par­al­lel improve­ment of their liv­ing stan­dards. (2) Com­pen­sat­ing for price ris­es. With the rise of the prices of food, build­ing mate­ri­als, fuel, etc., Chi­na has accord­ing­ly increased the board­ing sub­si­dies and oth­er funds close­ly relat­ed to servicemen’s life as well as the expens­es on edu­ca­tion, train­ing, petro­le­um, oils and lubri­cants for the armed forces, and improved the work­ing and liv­ing con­di­tions of bor­der and coastal defense forces, units in remote and tough areas, and grass-roots units. (3) Push­ing for­ward the RMA. Chi­na has aug­ment­ed the input into mil­i­tary infor­ma­tion­iza­tion and mod­er­ate­ly increased the funds for equip­ment and sup­port­ing facil­i­ties, so as to raise the defense capa­bil­i­ties in con­di­tions of informationization. 

Both the total amount and per-ser­vice-per­son share of China’s defense expen­di­ture remain low­er than those of some major pow­ers. In 2007 China’s defense expen­di­ture equaled 7.51 per­cent of that of the Unit­ed States, 62.43 per­cent of that of the Unit­ed King­dom. China’s defense expens­es per ser­vice per­son amount­ed to 4.49 per­cent of that of the Unit­ed States, 11.3 per­cent of that of Japan, 5.31 per­cent of that of the Unit­ed King­dom, 15.76 per­cent of that of France and 14.33 per­cent of that of Ger­many. As for the share of defense expen­di­ture in GDP, that of Chi­na was mere­ly 1.38 per­cent, while that of the Unit­ed States was 4.5 per­cent, that of the Unit­ed King­dom 2.7 per­cent, and that of France 1.92 percent. 

Chart 2: Com­par­i­son of Defense Expen­di­tures of Some Coun­tries in 2007 (unit: US$ bil­lion)

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Chart 3: Com­par­i­son of Per­cent­ages of Defense Expen­di­tures in the GDP of Some Coun­tries in 2007 (%)

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Chart 4: Com­par­i­son of Per-Ser­vice-Per­son Share of Defense Expen­di­ture of Some Coun­tries in 2007 (unit: US$ 1,000)

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The Chi­nese gov­ern­ment has estab­lished defense expen­di­ture report­ing and pub­lish­ing mech­a­nisms. Since 1978 the Chi­nese gov­ern­ment has sub­mit­ted a finan­cial bud­get report to the NPC and pub­lished the total amount of the defense bud­get each year. The rel­e­vant data of China’s defense expen­di­ture has been made pub­lic in the Chi­na Econ­o­my Year­book since 1981, and in the Chi­na Finance Year­book since 1992. And since 1995 the com­po­si­tion and main pur­pos­es of China’s defense expen­di­ture have been pub­lished in the form of gov­ern­ment white papers. 

Source:
Infor­ma­tion Office of the State Coun­cil of the People’s Repub­lic of China 

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