Coronavirus economic crisis squeezes China’s plans to expand its navy as it marks 71st anniversary
- China has built the world’s largest deployable fleet of vessels, recently pursuing an aggressive naval strategy. Given the high cost of maintaining the fleet, however, the blow to the country’s economy from Covid-19 means expansion will be stymied
Soon after he assumed office as Communist Party general secretary in 2012, Xi convened a collective study by members of the politburo to set forth a vision for the expansion of China’s sea power. This vision has since manifested itself in the commissioning of new types of vessels, the militarisation of the South China Sea and a new focus on far seas operations.
But this expansion has not been cheap. China’s defence budget has risen from US$106 billion in 2012 to US$177 billion in 2019. The earmarked money is largely spent under three different heads: personnel expenditure, training and sustainment, and capital expenditure.
Among these, capital expenditure has steadily expanded since 2012, accounting for over 40 per cent of the total defence expenditure by 2015, which is where it has remained since. Most of this, as our recent research highlights, has been utilised on air force and navy modernisation.
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All of this was, of course, possible because of the phenomenal expansion of the Chinese economy, which allowed for greater defence spending. China’s rapid growth over the past four decades expanded the overall economic base.
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Even if China continues to aim to keep its defence budget at around 2 per cent of GDP, there’s likely to be a reassessment and rationalisation in terms of development of new equipment.
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The navy, which is a highly capital-intensive service and requires large funds for procuring technologically advanced weaponry, is likely to be worse off compared with other forces. Naval acquisition programmes, in the near term, will face severe disruptions, with greater allocation being made to the maintenance of commissioned vessels.
As Dr Sarah Kirchberger has documented, a naval vessel’s average lifespan is around 40 years, with procurement costs accounting for only 23 per cent of its life cost. Operations, maintenance and update costs account for a massive 71 per cent of life cost, with the remaining being fuel and development expenses.
Given the size of the Chinese navy’s existing fleet, vessels currently under development and the threat of a prolonged economic slowdown, delays can be expected in new equipment development, and an expansion of maintenance costs as part of the training and sustainment component of the defence budget in the future. In other words, expansion is likely to slow as maintaining the existing fleet will be given priority.
There is likely to be much more consternation than celebration as China’s naval leaders and strategists mark the 71st anniversary. How all this shapes the security dynamics of the broader Indo-Pacific in a post-Covid world remains to be seen.
Manoj Kewalramani heads the China Studies Programme at The Takshashila Institution, a Bangalore-based think tank and school of public policy. Suyash Desai is a research analyst for the China Studies Programme at The Takshashila Institution