Estimating China's defense expenditure

Almost all great powers dedicate a considerable proportion of their finances on defence and China is no exception. However, while the defence budget of other nations are relatively more transparent, China's remains a mystery. Though China has been declaring its official defence budget for a long time, it is dismissed as a sham and a cover-up. There have been several attempts to estimate China's actual defence expenditure, but a unanimous conclusion is yet to be reached.

In this context, the publication of a recent RAND study (Modernising China's Military: Opportunities and Constraints, 2005) is worthy of note. Using new methodological tools and based on disaggregated sources in Chinese language, the study projects the actual Chinese defence expenditure as anywhere between 1.4 to 1.7 times the official defence budget. It accepts the official defence budget as 'one' of the sources of cumulative defence expenditure; and deconstructs the discreet sources of funding. These include central funding under other heads, subsidies to various defence installations, separate provisions for foreign weapons procurement, and extra-budgetary revenues for the People's Liberation Army (PLA). Apparently, a substantial funding also comes from local governments under the 'three-thirds' principle. There are separate provisions for paramilitaries, coastal defence, and nuclear and strategic forces.

While the RAND study is serious research, its conclusions are debatable. In many ways it is a conservative and sympathetic defence of the Chinese claim that they do not spend much. In the US alone, the CIA, the Pentagon and the Arms Control and Disarmament Agency (ACDA) come out with different estimates. Internationally, except for the SIPRI, all other estimates are way ahead than what RAND tells us. The Chinese defence expenditure, in these estimates, varies from twice to thrice the official figure. Then there are Japanese and Taiwanese estimates, giving us fanciful figures.

Originally posted by Srirangan:

"I doubt China exceeds America. USA I think spends more then the next 9 of the Top 10 combined."

Actually the US spends more than the next 23 highest defense budgets of other nations combined. If you add in the defense supplemental for combat operations in Afghanistan and Iraq the US Defense expenditures are greater that the "Rest of the World" combined defense spending...

U.S. Military Budget is the World's Largest, and Still Growing
FY 2005

Rank	Selected Countries	$ (Billions)	Cumlative
1	United States	420.7	0
2	China*	51.0	51.0
3	Russia*	50.8	101.8
4	Japan	41.4	143.2
5	United Kingdom	41.3	184.5
6	France	34.9	219.4
7	Germany	27.4	246.8
8	Italy	22.3	269.1
9	Saudi Arabia*	22.2	291.3
10	India	16.2	307.5
11	South Korea	14.8	322.3
12	Israel*	9.9	332.2
13	Australia	9.9	342.1
14	Brazil	9.7	351.8
15	Turkey*	9.2	361.0
16	Canada	9.1	370.1
17	Spain	8.5	378.6
18	Netherlands	7.2	385.8
19	Taiwan	6.6	392.4
20	Greece*	6.5	398.9
21	Mexico*	5.6	404.5
22	Sweden	5.2	409.7
23	Iran*	5.1	414.8
24	North Korea*	5.0	419.8
25	Ukraine*	5.0	424.8
26	Singapore	4.7	429.5
27	Norway	4.2	433.7
28	Poland	3.9	437.6
29	Kuwait	3.5	441.1
30	Egypt*	3.3	444.4
31	Portugal*	3.1	447.5
32	Belgium	3.0	450.5
33	Colombia*	3.0	453.5
34	United Arab Emirates*	2.8	456.3
35	Pakistan	2.8	459.1
36	Denmark	2.6	461.7
37	Vietnam	2.3	464.0
38	Czech Republic	1.9	465.9
39	Syria*	1.9	467.8
40	Argentina	1.6	469.4
41	Philippines*	1.6	471.0
42	Hungary	1.4	472.4
43	Cuba*	1.1	473.5
44	Sudan*	0.7	474.2
45	Libya*	0.6	474.8
46	Yugoslavia	0.6	475.4
47	Luxembourg	0.2	475.6
48	Iraq	N/A


	US Defense Spending	420.7
	Rest of World Spending	475.6

Source: CDI - Military Spending FY2005 US vs World

Hope this helps,

dvwjr

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