China’s Defence Spending Lower Than Previously Estimated

A recent research by the U.S. think-tank RAND Corporation shows that China's defence spending is between 2.3% and 2.8% of the nation's Gross Domestic Product. This is 40%~70% percent higher than official Chinese government figures — but substantially lower than many previous outside estimates of the share of GDP that China devotes to defence.

The study estimates that the purchasing power of current Chinese military spending runs between $69 billion and $78 billion in 2001 dollars, and could reach $185 billion in 2001 dollars in 2025. This amounts to more than 40 percent of current U.S. defence spending. By comparison, U.S. defence spending was 3.9% of its GDP in 2004, amounting to nearly $430 billion.

According a senior RAND researcher, China's defence spending has more than doubled over the past six years, almost catching up with Great Britain and Japan. Although the rate of increase has slowed, by 2025 China will be spending more on defence than any of the U.S. allies.

The study says that already the second largest economy in the world by some measures, China has the economic resources available to fund a robust military modernisation program. Although researchers project that growth in China's economy will slow from recent rates of more than 9% to as little as 3% by 2025, they still forecast China's economy will more than triple in size by 2025.

To address some weaknesses in its defence industries, the Chinese government adopted a number of major reforms in military procurement processes and the operations of defence enterprises. State-run defence firms are now given incentives for improving quality and efficiency, and the government is fostering competition among them. Defence enterprises are also increasingly partnering with civilian enterprises. In addition, China's defence enterprises have benefited from a decade of access to foreign military systems and related equipment, materials and technologies.

Researchers point out that these strategies have been successful in improving the sophistication and quality of the military equipment produced domestically in sectors such as information technology, shipbuilding and defence electronics.

22 May 05