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OPINION

Updated December 19th, 2023 at 10:41 IST

Beyond the smoke and mirrors: Unveiling the elusive reality of China's defence spending

The lack of transparency, civil-military fusion, and hidden expenditures complicate the assessment.

Senior WriterYuvraj Tyagi
Chinese military
The lack of transparency, civil-military fusion, and hidden expenditures complicate the assessment. | Image:AP
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China's defense budget has long been shrouded in secrecy and speculation, prompting questions about the authenticity of the figures provided by the Chinese government. As the world grapples with the implications of China's rising military power, the disparity between the officially declared budget and the suspected actual expenditure raises concerns and demands a closer examination. 

The Chinese government announced a 7.2% increase in its defense budget for 2023, reaching USD 224.59 billion, marking the largest percentage rise in the past four years. However, the question that looms large is whether this figure reflects the true extent of China's military spending. The skepticism surrounding the credibility of Chinese data is not unfounded, given the one-party state's control over information and the lack of independent verification. 

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Senator Dan Sullivan's revelation in a classified briefing to the US Senate adds a new layer to this skepticism. According to Sullivan, the actual Chinese military budget could be as high as USD 700 billion, nearly three times the officially declared amount. This staggering claim not only challenges China's narrative of modest defense spending but also raises profound questions about the global implications of such an undisclosed military budget. 

Navigating the defense budget maze: Discrepancies and doubts 

China's officially declared defense budget lacks transparency, leaving room for doubt and speculation. The Pentagon's report suggests that the actual military-related spending for 2022 might be significantly higher than the announced budget. Estimates range from 30% to 40% above the officially declared figure, highlighting the challenge in assessing the accuracy of China's defense budget. 

The lack of clarity in China's disclosures extends beyond the headline figures. Whole categories of spending are absent from the official budget, making it challenging to ascertain the true extent of China's military expenditures. This opacity raises concerns about the reliability of information provided by the Chinese government and underscores the difficulties in estimating the actual defense budget. 

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Beyond the official budget: Unraveling China's hidden expenditures 

China's defense spending extends beyond the confines of the officially declared budget, encompassing various undisclosed categories. The People's Armed Police (PAP) and China Coast Guard (CCG), significant military forces, operate outside the official defense budget. Additionally, internal security forces, such as the PAP, are excluded from the announced figures, further complicating the assessment of China's true military spending. 

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The lack of transparency in categorizing spending raises questions about the motives behind such non-disclosure. China's space program, civilian/dual-use research and development, facility construction, and supplemental funding, including military pensions and benefits, all fall outside the official defense budget. This hidden spending complicates the global understanding of China's military capabilities and intentions.

Credit- AP

China's policy of civil-military fusion adds another layer of complexity to the assessment of defense spending. The integration of commercial entities into dual-use research and development blurs the lines between civilian and military applications. The lack of clear distinctions makes it challenging to discern genuine defense spending from broader national development initiatives. 

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The concept of civil-military fusion involves commercial entities participating in dual-use research, investment, and production with both civil and military applications. This integration muddies the waters, making it difficult to separate military spending from broader economic activities. As China advances its military capabilities through this fusion, the world is left grappling with the uncertainty of China's true military intentions. 

Purchasing Power Parity (PPP): Redefining cost and comparisons 

China's non-market economy and lower production costs allow it to stretch its defense budget further than comparable budgets in competitive markets. Purchasing power parity (PPP) calculations alter the cost-effectiveness of military spending, revealing a different economic reality. When using PPP, China's economy surpasses that of the United States, impacting the comparative assessment of defense budgets.

Credit- AP

Bill Greenwalt's assessment, factoring in PPP and hidden non-defense spending, suggests that China outspends the United States in real terms. The economic nuances brought about by PPP challenge traditional comparisons and underscore the need for a more nuanced understanding of the economic foundations of China's military power. 

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The revelation of a potentially much higher defense budget than officially declared raises global concerns about China's military intentions. A well-funded and rapidly modernizing People's Liberation Army (PLA) poses challenges to neighboring nations and threatens regional stability. The lack of transparency in China's disclosures underscores the urgency of a more accurate understanding of its military capabilities and intentions. 

Conclusion: Deciphering the enigma 

If Senator Sullivan's assessment of a USD 700 billion military budget is even remotely accurate, the global implications are profound. China's military build-up goes beyond what the world perceives, and the consequences extend far beyond the Asia-Pacific region. The lack of transparency in China's defense budget disclosures necessitates a reevaluation of global security dynamics and prompts a critical examination of China's role on the world stage.

China's defense budget remains an enigma, wrapped in layers of opacity and complexity. The discrepancy between officially declared figures and suspected actual expenditures raises more questions than answers. The global community must grapple with the challenge of deciphering China's true military capabilities and intentions, recognizing the profound implications for global security. 

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As China asserts itself as a major player on the world stage, transparency in defense spending becomes imperative for fostering trust and stability. The global community, including international organizations and peer nations, must collectively advocate for greater transparency in China's military disclosures. Only through open dialogue and accurate information can the world navigate the complexities of China's rising military power and work towards a more secure and stable future. 

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Published December 19th, 2023 at 10:00 IST

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