China Unveils 2017 Defense Budget Target

by Dan Darling, International Military Markets Analyst, Forecast International.


China has announced its latest military spending earmark for fiscal year 2017 with a topline figure of CNY1.044 trillion ($151 billion). This amounts to about 9.4 percent more in nominal spending than in 2016, when the official defense target budget was set at CNY954.4 billion ($144 billion).

This latest increase comes as China’s economic growth continues to slow, marking a departure from the normal parallel track between defense investment and GDP expansion. It also marks the second consecutive year that the defense budget has failed to show double-digit growth, following five years of such an expansion.

The 2017 defense budget is expected to amount to around 1.3 percent of GDP, or about 5 percent of total planned state expenditure.

Overall, China’s official defense spending represents just about a quarter of what the United States invests in its military. However, China’s official defense budget has long been thought to be lower than what it actually allocates towards defense annually.

Notwithstanding additional government funding from other military-related areas not included under the defense headline, the official defense budget – already the world’s second-largest by a considerable amount – enables China to continue building its air and naval assets as its seeks to project power throughout the South China Sea, the western Indian Ocean, and into the Red Sea.

The ongoing reform and modernization of the People’s Liberation Army (PLA) – an effort prioritized by President Xi Jinping – is part of a strategic calculus aimed at edging the U.S. out of East Asia and firmly establishing China as the region’s hegemonic power.

Unlike the U.S. military, the PLA is tasked with a relatively narrow area of concentration. This emphasis on conventional weapons platforms (submarines, air-defense systems, combat aircraft, destroyers, etc.) combined with asymmetric tools (long-range and anti-ship missiles, cyberwarfare) and the use of supplementary forces (the re-flagged Coast Guard operating far from China’s home shores, fisherman) not marked for direct military duty, enables it to concentrate significant strength in a smaller window than the globally-stretched U.S. military.

Though still playing “catch-up” in a military technological sense, China is narrowing its qualitative gap with the U.S. military. Reforms aimed at trimming the 2.3 million-strong military by 300,000 troops and improving training and cross-service operational “joint-ness” represent an effort to bring the PLA up to more modern standards and slowly move away from its static, territorial-based orientation and Soviet-modeled command architecture. The “new” PLA is being adapted to project power farther afield from the Chinese homeland.

Forecast International projects China’s official topline defense budget will grow to CNY1.525 trillion ($221 billion) by 2022.

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