C HINA

Figure 2.1. Total and Per-Soldier Defense Spending, China (2000–2010)

Sources: Chinese MoD White Papers, China’s National Defense, 2002, 2004, 2006, 2008, 2010; U.S. Department of Defense 2010 Annual Report to Congress on Military and Security Developments Involving the People’s Republic of China; IISS Military Balance; SIPRI Military Expenditure Database; analysis by CSIS Defense-Industrial Initiatives Group.

Total defense (left-side y-axis) and per-soldier spending (right-side y-axis) as reported by China are significantly lower than the third-party estimates by the Stockholm International Peace Research

3 The Methodology section provides a detailed explanation for the definitions and compositions of the individual defense spending categories. It should be noted that not all countries provide sufficient details in their budget documents to allow for a breakdown into each of the categories assessed in this report. For instance, the analysis of R&D spending only covers India, Japan, and South Korea. For China, detailed budget breakdowns are not available for all years between 2000 and 2011, and 2009 is the most recent year for which a detailed budget breakdown is available.

0

Per soldier spending (constant 2011, in US thousands)

Spending (constant 2011, in US billions)

SIPRI Defense Spending

SIPRI Spending per Soldier

Institute (SIPRI) (see Figure 2.1).⁴ As a result of this large discrepancy, CSIS analyzed total and per-soldier spending according to both sources to depict the possible range of China’s total defense expenditure.

Data provided by China indicate spending in 2000 of roughly $22.5 billion in constant 2011 U.S.

dollars. Increasing at an 11-year CAGR of 13.4 percent, defense spending peaked at $89.9 billion in 2011.

SIPRI values China’s total defense spending at around $34.2 billion in 2000, increasing annually until its highest total of $142.2 billion in 2011 (11-year CAGR of 13.8 percent). The gap between official Chinese data and SIPRI estimates ranges from $11.7 billion (2000) to $52.3 billion (2011). However, official Chinese and SIPRI estimates of total defense spending differ only slightly with regard to growth trajectories, as indicated by their 11-year CAGRs, which vary by less than 0.5 percent.

According to both SIPRI and Chinese data, per-soldier spending also increased at near identical 11-year CAGRs of 13.6 percent (SIPRI) and 13.2 percent (official Chinese data). However, as was the case with total defense expenditures, there was a gap in absolute terms between SIPRI estimates and official Chinese data, which ranged from $5,500 per soldier (2000) to $23,100 per soldier (2011).

Figure 2.2 Total Defense Spending by Category, China (2000–2010)

Note: 2008 breakdown data were provided by China to the United Nations and republished in the U.S. Department of Defense 2010 Annual Report to Congress on Military and Security Developments Involving the People’s Republic of China.

Sources: Chinese MoD White Papers, China’s National Defense, 2002, 2004, 2006, 2008, 2010; U.S. Department of Defense 2010 Annual Report to Congress on Military and Security Developments Involving the People’s Republic of China; SIPRI Military Expenditure Database; analysis by CSIS Defense-Industrial Initiatives Group.

Figure 2.2 above reflects the breakdown of official defense spending data provided by China (see Figure 2.1). Although topline data are available for all years, a category breakdown is not available for years 2004, 2006, 2010, and 2011. The spending categories include Personnel, O&M, and Defense Investment, which combines procurement, military construction, and R&D.

4 SIPRI only provides total defense spending estimates. SIPRI per-soldier spending is calculated based on SIPRI total defense spending estimates.

7.6 8.4 9.8 11.0 13.4 18.6 22.1 27.2

7.7 8.9 10.6 11.4 13.0 18.8 21.9 27.0

7.3 9.0 10.4 11.5 13.5 17.8 21.9 25.8

20 40 60 80 100 120 140 160

Spending (in billions of constant 2011 US$)

Personnel O&M Defense Investment PRC SIPRI

Instantly noticeable is the near equal share (in absolute terms) of total dollars spent across all three categories. During the early years especially (2000 to 2005), spending per category varied, relative to each other, by less than $800 million. Ultimately, Chinese values for Personnel, O&M, and Defense Investment all increased from a $7.3–$7.7 billion range in 2000 to a $25.8–$27.2 billion range in 2009, at 15.3, 14.9, and 15.1 percent CAGRS, respectively.

Due to the similar growth patterns of Chinese and SIPRI data, CSIS utilized the official percentage breakdowns of the defense categories as provided by China to generate approximate values using SIPRI topline estimates. As a result, 9-year CAGRs are identical to official Chinese breakdowns, but differences arose in absolute terms. Specifically, values derived from SIPRI topline estimates indicated spending levels with an $11.0–$11.7 billion range per category in 2000. By 2009, this range was between $18.3 and $19.3 billion (see Figure 2.1).

Figure 2.3. Distribution of Total Defense Spending by Category, China (2000–2010)

Note: 2008 breakdown data were provided by China to the United Nations and republished in the U.S. Department of Defense 2010 Annual Report to Congress on Military and Security Developments Involving the People’s Republic of China.

Sources: Chinese MoD White Papers, China’s National Defense, 2002, 2004, 2006, 2008, 2010; U.S. Department of Defense 2010 Annual Report to Congress on Military and Security Developments Involving the People’s Republic of China; SIPRI Military Expenditure Database; analysis by CSIS Defense-Industrial Initiatives Group.

The symmetry of Chinese allocations to individual defense spending categories is particularly noticeable when broken down by each category’s share of total defense spending. As reflected in Figure 2.3, each category claimed approximately one-third of total spending, with only slight annual variations.

Despite a minor dip from 2001 to 2003, Personnel hovered at around 33 percent before rising slightly to 34.0 percent in 2009. O&M’s share also fluctuated between 33 and 34 percent for all years except in 2005, when it fell slightly to 32.6 percent, and Defense Investment spending varied between 32 and nearly 34 percent, with zero percentage change between 2000 and 2009.

33.6 32.0 31.9 32.5 33.6 33.8 33.5 34.0

34.2 33.7 34.3 33.6 32.6 34.0 33.2 33.7

32.2 34.3 33.8 33.9 33.8 32.2 33.3 32.2

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Personnel O&M Defense Investment

Figure 2.4. Per-Soldier Defense Spending by Category, China (2000–2010)

Note: 2008 breakdown data were provided by China to the United Nations and republished in the U.S. Department of Defense 2010 Annual Report to Congress on Military and Security Developments Involving the People’s Republic of China.

Sources: Chinese MoD White Papers, China’s National Defense, 2002, 2004, 2006, 2008, 2010; U.S. Department of Defense 2010 Annual Report to Congress on Military and Security Developments Involving the People’s Republic of China; IISS Military Balance; SIPRI Military Expenditure Database; analysis by CSIS Defense-Industrial Initiatives Group.

In absolute terms, per-soldier spending for each category increased from roughly $3,500 in 2000 to just below $5,000 in 2003. Beginning in 2005, however, annual growth accelerated, increasing from between $5,800 and $6,000 in 2005 to between $11,900 and $12,500 in 2009. Overall, Personnel, O&M, and Defense Investment per-soldier spending increased at 15.0, 14.9, and 14.6 percent CAGRs

respectively between 2000 and 2009.

SIPRI per-soldier spending per category again reflects relatively higher estimates. Specifically, in 2000, SIPRI estimates per category hovered at just over $5,000 and increased to $18,000 and $19,000 by 2009.

Summary

China’s total defense spending and per-soldier spending increased considerably in the years 2000 to 2010. Official Chinese data estimated total defense spending to have increased from $22.5 to $89.9 billion between 2000 and 2011; however, SIPRI estimates ranged from $34.2 to $142.2 billion. While official Chinese sources reflect a total growth of almost 300 percent between 2000 and 2011, SIPRI reflects a slightly higher growth estimate of approximately 315 percent. 11-year CAGRs for official Chinese estimates and SIPRI are 13.4 and 13.8 percent, respectively. Similarly, per-soldier spending derived from SIPRI topline estimates was approximately $5,500 higher in 2000 than the value provided by official Chinese sources. This gap gradually widened to a difference of $23,100 in 2011. In other terms, Chinese total defense spending and per-soldier spending accounted for between 63.2 and 65.9 percent of SIPRI estimates for all years. Broken down by defense spending categories using official Chinese data, total and per-soldier spending on Personnel, O&M, and Defense Investment each claimed roughly one-third of total defense spending for the entire time period.

3.6 3.7 4.3 4.7 5.9 8.3 10.5 12.5

3.6 3.9 4.7 4.8 5.8 8.3 10.4 12.4

3.4 4.0 4.6 4.9 6.0 7.9 10.4 11.9

10 20 30 40 50 60 70

Per-soldier spending (in thousands of constant 2011 US$)

Personnel O&M Defense Investment PRC SIPRI