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The 'military budget of the People's Republic of China' (PRC) is the portion of the overall budget of China that is allocated for the funding of the military of the People's Republic of China. This military budget finances employee salaries and training costs, the maintenance of equipment and facilities, support of new or ongoing operations, and development and procurement of new weapons, equipment, and vehicles.
Some dispute exists about the method that China uses to account for its military spending. Some categories of spending are not included in the official military budget, and as such, international bodies often attempt to estimate the Chinese military budget in terms that are comparable with other countries. These estimates are typically higher than published Chinese figures.
The last year that many international institutes provided estimates of Chinese military spending, in comparable terms, was 2003. In terms of the prevailing exchange rate, SIPRI, RAND, the CIA and the DIA estimated the budget at between US$30 and US$65 billion. In terms of purchasing power parity, or the relative purchasing strength of the expenditure, the SIPRI estimate is as high as US$140 billion.^[1] The Chinese government's published budget was less than US$25 billion.
The 2007 US Department of Defense annual report to Congress on China's military strength offered several estimates of actual 2007 Chinese military spending. In terms of the prevailing exchange rate, DIA estimates fall between US$85 and US$125 billion.^[2] The Chinese government's published budget was US$45 billion.

Contents

Various studies

A comparison

Hurdle in Sino-American relations

Hurdle in Sino-Japanese relations

China's reaction

References

See also

External links

Various studies

While the People's Republic of China officially states to have a lower defense budget than the other world powers, unofficial estimates place the total amount of spending higher than the government claims. However, unofficial calculations about the military spending of the People's Republic of China tends to differ between organizations.
A recent RAND Corporation study states that People's Republic of China's defense spending is higher than the official number but lower than United States Department of Defense estimates. The defense spending of the People's Republic of China is estimated to be between 2.3-2.8% of China's GDP. This is 40-70% higher than official figures, but substantially lower than previous outside estimates. Chinese military spending nevertheless doubled between 1997 and 2003, nearly reaching the level of the United Kingdom and Japan, and it continued to grow with an annual rate of greater than 10% during 2003-2005. [1] If the RAND study is correct, China could be the second highest spender by percentage of GDP, among the countries in the below tables; as well, it would surpass Japan and Russia in absolute terms.
A SIPRI study also comes to the conclusion that the military spending of the People's Republic of China is higher than the official budget, but its estimate is lower than that of the RAND study. Of the major powers, the military spending of the People's Republic of China surpasses only that of Japan in relative terms and Russia in absolute terms. [2]

A comparison

★ The official military budget which China and Russia announced does not include spending on nuclear weapons, cruise missile development, and fighter development. These are categorized under the Science/Space development budget. Spending on training are categorized under the Education budget, and veteran pensions are categorized under the Welfare budget. As the result China and Russia's actual military expenditure may be more than 3 times as much as the official military budget. This has been criticized by Western countries as having less transparency.
:'Table 1. Absolute expenditures (in USD).(2004-2005)
:

'Country'	'Official budget'	'SIPRI'	'RAND'	'DoD'
'United States'	$419.3 billion	$455.3 billion	/	$419.3 billion
'United Kingdom'	$58.6 billion	$47.4 billion	/	/
'People's Republic of China (PRC)'	$29.9 billion	$41 billion	$42.0-51.0 billion	$90.0 billion
'Japan'	$45.8 billion	$42.4 billion	/	/
'Russia'	$14.5 billion	$19.4 billion	/	$70.0 billion
'Republic of China (ROC)'	$7.6 billion	/	/	/

:'Table 2. Relative expenditures (as percentage of GDP).
:

'Country'	'Official budget'	'SIPRI'	'RAND'	'DoD'
'People's Republic of China (PRC)'	1.4%	1.8%	1.9-2.4%	4.2%
'United States'	3.7%	3.9%	/	3.7%
'United Kingdom'	2.7%	2.2%	/	/
'Japan'	1.0%	1.0%	/	/
'Russia'	2.8%	4.3%	/	12%
'Republic of China (ROC)'	2.6%	/	/	/

★ Data: Official: 2005; SIPRI: 2005 (overall) 2004 (% of GDP); RAND: 2004; DoD: 2005, except the data for the U.S. which is a 2006 estimate.

★ Note that this data have been adapted to the revision of China's 2004 GDP. This revision increased China's GDP number with 16.8% (or 283 billion USD). These figures were issued by the Chinese National Bureau of Statistics following a survey that aimed to gather more accurate data. Service industries accounted for 93% of the revision. [3]

★ Note also that many observers claim that the yuan, the Chinese currency unit, is undervalued. Other observers also note that the revised number of China's GDP is still inaccurate. These uncertainties should be taken into account, especially becauses this increases the already existing uncertainty about China's military expenditures.

★ Note 2007 military budget is 350.92bn yuan, an increase of 52.99bn yuan
'Real Volume Comparison'

★ The following table exposes the effects of Purchasing Power Parity by comparing the forniture each country can afford with its budget. The data, except for the "troops" category, shows only relatively modern and on use material each military owns, it excludes stocks and obsolete hardware.

Type	PRC	Russia	Japan	US	ROC	N. Korea
Fighter aircraft	2400	2200	260-300	4500	400
Tanks	7100	21000	600-900	7000	400-900
Submarines	60	60	16	72		24+24 ★
Tank/Transportation	225	200	30	900	N.A.
Troops (in millions)	1.6	0.35	0.15	0.65		0.9 ★

★ 'GDP (PPP) (2006)'

★
★ 'US' - $12,980 bn

★
★ 'EU' - $12,820 bn

★
★ 'China' - $10,000 bn

★
★ 'Japan' - $4,220 bn

★
★ 'India' - $4,042 bn
CIA FACT BOOK

★ 'GDP Exchange Base (2045)'

★
★ 'US' - $32 tn

★
★ 'China' - $35 tn

★
★ 'Japan' - $7 tn

★
★ 'India' - $20 tn

★
★ 'Russia' - $6 tn
Goldmansachs Longterm Economic Forecast Pls see Page19

Hurdle in Sino-American relations

Main articles: Sino-American relations

The People's Liberation Army's official military budget for 2005 is $30 billion, but this does not include money used for foreign weapons purchases, military-related research and development, and the paramilitary People's Armed Police. Critics thus have labeled it a deliberately misleading low estimate. It is widely assumed and estimated that China's military budget exceeds this estimate.
In June 2005, the US published estimates that showed China's military spending exceeding 90 billion USD. This is a point of contention between the US-China relations. Former United States Secretary of Defense Donald Rumsfeld has accused China several times of hiding its real military spending. He has also expressed concern over why China would increase its military expenditure with no apparent external threats, saying that it fuels suspicions about China's motives. [4]
Extensive investment by the PRC in its navy is also very troubling to the United States. [5] Many believe that China has a long term plan to transform the People's Liberation Army Navy (PLAN) into a blue-water navy capable of power projection, and of challenging other countries including the United States. [6] [7]

Hurdle in Sino-Japanese relations

Main articles: Foreign relations between China and Japan

Because of the discrepancy, the US is not the only country to have expressed alarm about Chinese military spending. In December 2005, Japan's Foreign Minister Taro Aso has said China was "a neighbor [...] [that] has expanded its military outlays by double digits for 17 years in a row, and it is unclear as to what this is being used for". Aso also commented that, "[i]t is beginning to be a considerable threat." He said this in response to a question in a news conference about a comment made by the head of the Democratic Party of Japan (the main opposition party), Seiji Maehara, who had said he felt China was a threat. [8] In 1998, Chinese military spending had only just measured up to the Japanese budget. [9]

China's reaction

China justified its annual increase in 2005 by referring on one hand to the movement to establish independence for Taiwan, and on the other hand stressed that much of it was needed to boost soldiers' pay and cover the social costs of cutting 200,000 personnel. China also states that its defense spending is far lower than that of other major powers, in relative and absolute terms. [10]
China's leaders have been trying to alleviate more generalized concerns abroad, particularly in the US and Japan, about Chinese nationalism and increased global competition for resources, in their speeches in 2005. This effort is believed to be echoed in the country's 2005 policy paper on the country's development strategy, called "China's Peaceful Development Road". This paper describes how soaring economic development in China would not pose a threat to other nations, but was instead creating opportunities and bigger markets for the rest of the world. [11]
In March 2006, China said that it further will increase its military spending by 14.7% in 2006 to 283.8 billion yuan (around 35.3 billion USD). China also added that much of the rise would be to cover fuel and salaries and that China was a "peace-loving nation". Jiang Enzhu, in line with Chinese statements of the past, added that the US spent a greater proportion of its economy on defense than did China and that China had "no intention of vigorously developing armaments". [12]

References

1. http://www.defenselink.mil/pubs/pdfs/070523-China-Military-Power-final.pdf pg 26
2. http://www.defenselink.mil/pubs/pdfs/070523-China-Military-Power-final.pdf pg 27

See also

★ China as an emerging superpower

★ People's Liberation Army

★ People's Liberation Army Navy

★ Chinese Century

★ China's peaceful rise

★ BRIC

★ Sino-American relations

★ Military budget in the United States

★ Sino-Japanese relations

★ Defense budget of Japan

★ List of countries by military expenditures

External links

;General
#War Resisters League - ''Where your income tax money really goes'' - 2005
#Rand Corporation, China
#The SIPRI Military Expenditure Database
;News
#BBC NEWS Article - ''China to boost military spending'' - March 4, 2005
#BBC NEWS Article - ''Rumsfeld questions China spending'' - October 18, 2005
#BBC NEWS Article - ''China climbs world economic table''- December 20, 2005
#BBC NEWS Article - ''Japan alarmed by Chinese "threat"'' - December 22, 2005