India Intelligence Report



   Massive Increase in China Defense Budget

  Ahead of the National People's Congress (NPC), China revealed a new defense budget that was 17.8 per cent or USD 45 billion higher that last year raising fears in Western and neighboring capitals on its motivations.


Ahead of the National People's Congress (NPC), China revealed a new defense budget that was 17.8 per cent or USD 45 billion higher that last year raising fears in Western and neighboring capitals on its motivations. Beijing sought to minimize criticisms of increased defense spending saying that although the defense budget was 7.5 per cent of its fiscal expenditure, it was "national security" and was oriented for boosting living allowances for the armed forces, training and upgrading military armaments.

China has consistently spent 7 percent or higher in the last several years (7.7 per cent in 2004, 7.3 per cent in 2005, and 7.4 per cent in 2006). Although the year on year percentage increase was only marginal, in dollar terms, the allocation is USD 6.79. Neighbors and Western states are worried that the actual money that China spends could be more than thrice the publicized figure. US Vice President Dick Cheney had pointedly accused Beijing of inconsistency between its stated goal of peaceful rise and its recent actions such as anti-satellite missile tests, increased defense spending, and belligerent attitude towards Taiwan.

Beijing has rejected these criticisms. Firstly, it argues that its anti-satellite missile technology has been developed only because the U.S. had refused an international treaty that would ban weapons in space. Secondly, it says that its defense budget is only one-tenth of the U.S. military spend and such expenditure is required to upgrade its arms as Western states refuse to sell it military equipment or technology. Thirdly, it continues to maintain that Taiwan is a renegade province that will be incorporated into the motherland in the future. Reacting to a recent speech by President Chen Shui-bian who made unusually strong pro-independence remarks, Beijing has been demanding that Washington cancel a Taipei order for 218 AMRAAM medium range air-to-air missiles and another 235 Maverick missiles valued at USD 421 million.

According to U.S. Congressional data, Washington has spent anywhere from USD 300 billion to 600 billion since 1949. Therefore, as a rising power Beijing spending even USD 150 billion should not be construed as exaggerated.

However, the issue of Chinese defense spend is more concerned with the lack of transparency than the money involved. With the rapid expansion of the Chinese economy, Beijing continues with its percentage game and allocates more money for defense but does not include cost of arms and materials in this figure. Also, while the U.S. spent as much during a period of global instability with the Korean and Cold War in progress, current high spends on defense-whether by the U.S. or China, in relative periods of stability and peace should be deemed exaggerated.

In the recently announced budget, New Delhi allocated 7.8 per cent or Rs. 96,000 crore (USD 21.8 billion) this year for defense which obviously pale in comparison with Washington's and Beijing's defense spends.


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