[Correspondent Diary] China's Defense Budget Growth Rate Decreases Annually, Amount Increases Annually

Peaked at 12.2% in 2014 and declined annually... Amount has increased every year since 2017
China's Defense Budget Aligned with This Year's Economic Growth Target, Considering Base Effects?

[Asia Economy Beijing=Special Correspondent Jo Young-shin] The Chinese leadership has decided to increase this year's defense budget by 6.8% compared to last year.

Chinese Premier Li Keqiang announced at the National People's Congress (NPC) work report held on the 5th that this year's defense budget was set at 1.3553 trillion yuan. This is only 0.2 percentage points higher than last year's 6.6%. Regarding the defense budget, Chinese media have analyzed that the defense spending was aligned with this year's Chinese economic growth target (6.0% or more compared to the previous year).

[Image source=Yonhap News]

The growth rate of China's defense budget has been on a downward trend every year since peaking at 12.2% in 2014: 10.1% in 2015, 7.6% in 2016, 7.0% in 2017, 8.1% in 2018, 7.5% in 2019, and 6.6% in 2020.

However, in terms of amount, the trend is quite the opposite. China's defense budget exceeded 1 trillion yuan (1.044 trillion yuan) for the first time in 2017, then increased annually to 1.106 trillion yuan in 2018, 1.189 trillion yuan in 2019, and 1.2686 trillion yuan in 2020. During this period, China's economic growth rate declined annually from 8.8% in 2017 to 6.6% in 2018, 6.0% in 2019, and 2.3% in 2020.

The economic growth target for China this year, announced by the Chinese leadership at the Two Sessions (National People's Congress and Chinese People's Political Consultative Conference), is 6.0% or higher. Last year's economic growth rate was 2.3%. Considering the base effect and other factors, this year's economic growth rate is estimated to be around 3 to 4% compared to the previous year. Therefore, it is difficult to say that this year's increase in China's defense budget is only slight.

Nevertheless, Chinese media lamented that the defense budget was set in line with the economic growth target and argued that defense spending should be increased further. They claim that the defense budget is too low compared to the size of China's economy.

The state-run Global Times evaluated this year's 6.8% increase in the defense budget as a "limited" increase. Citing military experts, the media emphasized that China's defense budget as a percentage of GDP was only in the 1.2% range in 2019, which is about half of the world average of 2.6%. The media argued that the defense budget should be increased further, pointing out that a large budget is needed for military modernization such as the construction of the third aircraft carrier and mass production of the next-generation stealth fighter J-20.

Xu Guangyu, senior advisor at the China Arms Control Association, said, "The United States views China as a competitor and reflects this in the military field," adding, "Last year, the U.S. repeatedly conducted military provocations in the South China Sea and the Taiwan Strait." He emphasized, "More defense budget is needed to fight against U.S. pressure."

Chinese military expert Song Zhongping said, "Over the past year, the U.S. has militarily pressured China by conducting military exercises near China's coastal areas and selling advanced weapons to Taiwan, and there were also clashes in the border area with India," adding, "Since China faces external threats, investment in the People's Liberation Army should be increased to further enhance combat capabilities."

[Image source=Yonhap News]

Numerically, this year's Chinese defense budget increased by only 0.2 percentage points compared to the previous year. However, considering that this year's Chinese economic growth rate is estimated at 3 to 4% due to the base effect, the 6.8% increase is not a low figure.

The Chinese leadership presented a new vision at last year's 19th Central Committee of the Communist Party of China’s 5th Plenary Session (19th CPC Central Committee 5th Plenary Session) to achieve the goal of "military modernization" by 2027. The year 2027 marks the 100th anniversary of the founding of the Chinese People's Liberation Army.