China needs to ramp up defence spending amid overhaul of military, say Chinese analysts

Costs of reforms and increasing threats overseas justify higher spending, say Chinese observers, amid concerns among China’s neighbours over its military build-up

PUBLISHED : Monday, 27 February, 2017, 2:46pm
UPDATED : Monday, 27 February, 2017, 11:20pm

Chinese military experts say Beijing needs to resume double-digit increases in defence spending in the coming year to meet the increasing challenges facing the nation’s military at home and abroad.

The country’s top legislative body, the National People’s Congress, is due to announce this year’s budget for the People’s Liberation Army next week.

The congress announced defence expenditure of 954 billion yuan (US$138.6 billion) in 2016. That amounted to 7.6 per cent growth on the previous year, the first single-digit increase since 2010, surprising many ­Chinese military watchers.

Analysts said there was a need for much bigger budget growth this year to cover the extra costs incurred in a huge military overhaul launched by President Xi Jinping, aimed at transforming the world’s biggest army into a smaller, but more nimble, modern fighting force.

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The reforms includes upgrading equipment, greater emphasis on live-fire exercises and advanced technology, plus laying off 300,000 military personnel by the end of this year.

No breakdown is given of how China’s military budget is spent, but a policy document said it covers military personnel’s salaries and housing, plus the costs of training, exercises and arms and equipment.

Dr Rajeev Ranjan Chaturvedy, a research associate at the Institute of South Asian Studies at the National University of Singapore, said that in addition to advance weaponry, China also has to set aside funds for training in how to use it.

He added that the PLA would also concentrate more efforts in developing maritime, space and computer defence technology.

“Military modernisation is likely to get more attention as the Chinese leadership needs not only to build cutting-edge hardware, but also the software part of it,” he said.

China also has to pay one off compensation to the 300,000 military personnel to be laid off by the end of this year.

“This year’s military spending increase may need to return to double-digit growth if the retrenchment compensation for the 300,000 troops is counted in,” a Beijing-based retired senior colonel said.

Another military expert based in Hong Kong, Liang Guoliang, agreed that extra cash would probably be reflected in this year’s budget to cover the compensation costs as a one-time lump sum payment.

Beijing has attached great importance to settling the issue of military personnel redundancies to ensure social stability. Several demonstrations have been held by older military veterans in Beijing in recent months over benefits, with the latest just last week, although those involved in the recent layoffs were not involved in the protests.

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Another justification for increased defence spending is to ensure that China can keep up with the arms capability of Western powers, particularly the United States, according to a retired senior colonel, who asked not to be named.

“China’s military modernisation is trending upwards. It deserves to keep this upward momentum supported by a sustainable spending rate, otherwise, it will be definitely slow, widening the gap with Western counterparts,” he said. “China should maintain caution over President Trump’s pledge to build more warships and to increase the number of troops to boost the US’ military capability.”

China posted double-digit growth on defence spending for several years up to 2016, creating unease among neighbouring countries. Their concerns have also been intensified by China’s military build-up and increasingly assertive claims to territory in disputed areas of the East and South China seas.

Trump pledged during his election campaign to upgrade the US military’s hardware and manpower, including building 80 advanced warships at least 100 more combat aircraft.

The United States’ close Asian ally Japan approved a US$43.5 billion defence spending plan in December, an increase of 1.4 per cent on the previous year.

Japan’s cabinet has additionally approved a budget of US$1.8 billion for the country’s coastguard to boost maritime surveillance around the waters of the Japanese-controlled Senkaku islands, which are also claimed by China and are known as the Diaoyu Islands.

Vietnam and the Philippines have also increased their military spending dramatically in recent years amid a series of territorial disputes with China over the South China Sea.

Vietnam is likely to further increase its defence spending to US$5 billion this year and up to US$6.2 billion by 2020, according to analysts.

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The Philippines President Rodrigo Duterte agreed a national defence budget this year of US$2.76 billion, a rise of about 18 per cent, according to the defence publisher IHS Jane’s.

In face of the tension with the US and neighbouring countries in the South China Sea, the PLA is boosting the size of its navy aggressively to 351 ships by 2020, according to a report given to the US Congress by the US-China Economic and Security Review Commission.

A source close to the Chinese navy also confirmed to the South China Morning Post that China’s first home-built aircraft carrier and the country’s largest destroyer, the Type 055, will be launched this year

But even with a double digit growth in spending, some areas will not be included in this year’s defence budget. This includes the construction of the new carrier and warships, which will probably be counted as science and development projects, sources said.

The Hong Kong-based military expert Liang Guoliang said the building costs for a new class of carrier and destroyer under construction were budgeted several years ago and would not be included in 2017’s defence spending.

China’s current economic situation meant it was able to support spending each year of least US$80,000 for each member of the military , compared with the American military’s budget of US$430,000, according to Retired PLA Major General Xu Guangyu.

This meant China’s defence budget growth should be no less than 9 per cent, said Xu.