China’s military budget will still rise despite coronavirus, experts predict

China’s upcoming defence budget will be only slightly hit by the economic downturn that followed the coronavirus outbreak, and a modest increase is still expected as it continues to develop its military capability, analysts said.

The government’s military budget is expected to be revealed, as is the norm, at this year’s session of the National People’s Congress (NPC), China’s legislative body. Delayed by over two months because of the pandemic, it will finally be convened on May 22.

Last year the defence expenditure announced at the NPC session was 1.18 trillion yuan (US$176 billion), up 7.5 per cent from the previous year.

China has said its military expenditure has always been kept below 2 per cent of its GDP over the past 30 years, although its official figures have long been described by Western observers as opaque, with significant omissions of important items.

In a report earlier this week, the Stockholm International Peace Research Institute estimated that China’s actual military spending in 2019 was US$261 billion, the world’s second highest, after the United States’ US$732 billion.

John Lee, adjunct professor at the University of Sydney and senior fellow at the Hudson Institute in Washington, estimated that this year the Chinese defence budget would remain roughly the same or increase modestly, in line with growth levels of recent years.

“In the current environment, Beijing is keen to emphasise that China has recovered substantially from Covid-19 and that its power trajectory is unaffected by recent events,” Lee said. “At the same time, it would be aware of the anger towards the Communist Party for allowing the virus to become a pandemic.

“Regardless of what the reality might be, I would be surprised if there were a dramatic increase or a significant cut.”

China’s GDP suffered a 6.8 per cent decline in the first quarter, the first contraction since quarterly records began in 1992, after an extensive shutdown while it contained its coronavirus outbreak. However, the official increases in the military budget have since 2011 always exceeded overall GDP growth.

The Chinese government may focus more on job creation, social welfare and poverty alleviation, but not at the expense of military investment, according to Collin Koh, research fellow from the S Rajaratnam School of International Studies at Singapore's Nanyang Technological University in Singapore.

“I tend to think it will be more or less the same,” Koh said. “To reduce [the budget] may send the wrong signal to would-be adversaries, both domestic and external: that Beijing has lost the will to keep up its military modernisation to assert core national interests.”

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The People’s Liberation Army (PLA) began a massive – and costly – reform in 2015, with a personnel reshuffle, change in structure, upgraded equipment and enhanced training to better resemble battle scenarios. That was supposed to be complete this year.

Given the deteriorating relationship with the United States and rising tensions in the Taiwan Strait and South China Sea, the PLA faces challenges requiring a steady increase in investment, according to Hong Kong-based military commentator Song Zhongping.

Macau-based military expert Antony Wong Dong predicted there would still be about 6-7 per cent growth in the budget “no matter what”.

“The PLA played an important role in the fight against the contagion, so a decrease in spending would not be accepted,” Wong said.

That role included the deployment of more than 4,000 military medics to help treat Covid-19 patients, and helping to transport medical supplies.

Wong said it would be a crucial year for the PLA in completing its preparation for potential military action against Taiwan, which would be so strategically important that “[President] Xi Jinping himself would never allow it to be affected by a shortage of funding”.

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But a slight increase in budget would be sufficient to meet defence needs and maintain a deterrence against potential threats, including preventing self-ruled Taiwan taking the opportunity to declare independence, naval expert Li Jie said.

Beijing views Taiwan as a breakaway province to be reunified with the mainland, by force if necessary. Its relationship with Taipei has been strained, and dialogue halted, since Tsai Ing-wen, of the pro-independence Democratic Progressive Party, was elected the island’s president in 2016. Tsai was re-elected for a second term in January.

Li estimated that the budget would probably be kept at the same level or show a “slight” increase from last year.

“It would feed the ‘China threat’ theory and raise international concerns if the Chinese government expands military spending too much,” he said.

Additional reporting by Minnie Chan