Chinese Defense Spending Rises 7.2% to $225 Billion, but Data Gaps Indicate It’s Higher Than That

COMMENTARY China

Chinese Defense Spending Rises 7.2% to $225 Billion, but Data Gaps Indicate It’s Higher Than That

Mar 15, 2023 3 min read
COMMENTARY BY
Wilson Beaver

Policy Advisor, Allison Center for National Security

Wilson is a Policy Advisor for defense budgeting at The Heritage Foundation.
Members of the Chinese Military salute during a medal ceremony at the Beijing 2022 Winter Paralympics on March 12, 2022 in Yanqing, China. Alexander Hassenstein / Getty Images

Key Takeaways

As its annual National People’s Congress gets under way this week, China has announced a 7.2% increase in military spending for 2023.

The Department of Defense’s 2021 report...estimated that China’s actual military spending may be 1.1 to 2 times higher than stated in its official budget.

The past two defense budgets submitted by President Joe Biden failed to account for his historic levels of inflation, and they shortchanged military capabilities.

As its annual National People’s Congress gets under way this week, China has announced a 7.2% increase in military spending for 2023.

That comes amid rising tensions over Taiwan and as part of Chinese President Xi Jinping’s goal of achieving a world-class military that is fully “mechanized & informationized” by 2027.

China will be boosting its defense spending to a total of 1.55 trillion yuan ($225 billion), a number that is both higher than last year’s increase in defense spending and faster than the Chinese government’s annual economic growth forecast of about 5%.

China has consistently increased military spending for years with the goal, according to the U.S. Office of the Director of National Intelligence, of securing what Beijing considers sovereign Chinese territory, establishing preeminence in East Asian affairs, and projecting power globally while offsetting U.S. military superiority.

At first glance, Beijing’s spending figure would seem to be dwarfed by the United States’ 2023 total defense budget of $858 billion, but a direct comparison of overall spending between the two doesn’t tell the whole story.

Large buckets of spending are included in the U.S. defense budget, but excluded from the Chinese defense budget. The Chinese military’s entire research, development, test, and evaluation (RDT&E) spending, a category that accounted for a very substantial $130 billion of the U.S. defense budget in 2023, is dispersed to other spending categories instead of having its own budget estimate.

The structure of the Chinese government and its use of civilian research organizations to conduct defense research and work suggest that a large sum of Chinese military RDT&E is unaccounted for in the $225 billion figure. In addition, the Chinese government does not include foreign weapons procurement in its overall budget number.

More generally, the Chinese defense budget is only released to the public as a series of top lines. It is not broken down and subject to line-by-line scrutiny as the U.S. defense budget is.

The Department of Defense’s 2021 report to Congress on Chinese military developments estimated that China’s actual military spending may be 1.1 to 2 times higher than stated in its official budget, while acknowledging how difficult it is to accurately assess the Chinese military budget due to the Chinese Communist Party’s lack of transparency.

Labor and material costs in China deliver the same product or service at a much lower cost than in the United States. When researchers normalize the Chinese defense budget to that of the U.S., this phenomenon—called purchasing power parity—raises the overall number of the Chinese defense budget by at least $100 billion.

China pays its soldiers and civilian employees far less than the U.S. does and likewise offers them far fewer benefits. For example, a 2021 report by The Economist estimated that entry-level pay for military personnel is 16 times higher in America than it is in China.

A substantial percentage of the U.S. defense budget goes toward the quality of life of its service members and to salaries that are attractive enough to attract new recruits into the American military and compete with the private sector. 

Of course, the U.S. and Chinese militaries also have different requirements and force postures. The Chinese military operates mostly within its immediate neighborhood and has a regional security focus (although it is increasingly deploying worldwide), whereas the U.S. military is asked by the president and Congress to operate around the globe.

China is thus able to focus spending on capabilities and procurement relevant to the Indo-Pacific theater to a far greater extent than the U.S. 

The Biden administration is planning on releasing the president’s defense spending request for fiscal year 2024 on Thursday as part of his overall federal budget submission. The past two defense budgets submitted by President Joe Biden failed to account for his historic levels of inflation, and they shortchanged military capabilities such as shipbuilding and aircraft to the point that Congress had to intercede and raise the budget by tens of billions of dollars. 

Let’s hope this year’s budget breaks that mold and adequately provides for the nation’s defense.

This piece originally appeared in The Daily Signal

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