China’s defense budget: Spending what’s necessary to beat the Americans

It’s that time of year when China announces its defense budget. This year, defense spending is set to increase 7.1 percent (1.45 trillion yuan or $230 billion) after last year’s 6.8 percent rise, and a 6.6 percent increase the year before that.

But these figures are almost meaningless. Perhaps Beijing only issues them as a favor to the Pentagon and U.S. think tanks.

How’s that?

In the United States, a defense budget works as follows: Congress authorizes a certain amount of money to be spent on “defense,” say, $728.5 billion. The Department of Defense and the military services then have to live within that amount. If they overspend, they’re “Out of Schlitz,” to borrow an old beer commercial jingle. And they’ll have to wait until next year, or else beg for something extra.

It’s not so different from our personal budgets and how we manage our income and expenses.

So it sounds familiar to us when China announces that it is spending a certain amount on defense. Analysts will argue over the “true” figure and whether there are “defense-related” expenditures that don’t go into the official figure. And they’ll try to adjust for the fact that things don’t cost the same in China as in the United States.

But it’s basically the same idea: The People’s Liberation Army (PLA) gets a certain amount of money and has to live within its means. Just like the U.S. military.

Or, so, one might think. But it’s in fact different with China. Here’s how:

In America, the secretary of defense goes to the Senate Armed Services Committee and asks: “How big is our budget this year?” The answer: “$728.5 billion.”

In China, the top dog in the PLA goes to the Central Military Commission (atop which sits Chinese leader Xi Jinping) and asks: “How big is our budget this year?” The answer: “As big as you want it to be.”

In other words, the Chinese regime will spend whatever amount it takes, over as many years as needed, to build a military that can defeat the United States. And Beijing has been clear about its desire to vanquish the Americans for many years, even if too many American experts—civilian and military—have refused to believe them.

One Western observer with several decades of experience in China describes how to consider China’s defense spending. He wrote the following in a recent email:

“Think of the Chinese Communist Party [CCP] as the national central account holder for all of its departments: agriculture, power, coal, education, PLA. The Party funds what needs to be funded—on an ongoing basis allocating funds to where party policy priorities are during any given period. It is a continuous process, not an annual budget that you spend until next year’s budget kicks in.

“Remember, all expenditures in China are in non-convertible yuan. There are 12 regional printing centers that provide whatever funding is needed this week, this month, this year.

“Funding the PLA’s domestic expenditures is easy—print yuan when and in the amount needed:

• Salaries—print yuan;
• Equipment from Chinese equipment suppliers—print yuan;
• Bombs, guns, bullets from Chinese suppliers—print yuan;
• Uniforms, boots, helmets, belts, caps, underwear (South China Sea island forces were just issued a new fabric tropical underwear) made in China—print yuan;
• Pensions and payments to retirees—print yuan;
• Whatever the PLA needs that is supplied domestically—print yuan.”

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