Tiểu luận tài chính công PUBLIC FINANCE CHINA’S DEFENSE BUDGET FROM 2010 TO 2017

DIPLOMATIC ACADEMY OF VIETNAM FACULTY OF INTERNATIONAL ECONOMICS ****** PUBLIC FINANCE CHINA’S DEFENSE BUDGET FROM 2010 TO 2017 GROUP MEMBER: Phung Khanh Chi Vu Thanh Dat Nguyen Thi Phuong Thao CLASS: KT41C Hanoi, 2017 !2 TABLE OF CONTENT I China’s defense budget in the 2010 - 2017 period Overall of China’s armed forces and defense budget 1.1 Definition of defense budget 1.2 China’s armed forces .2 China’s defense budget in the 2010 - 2017 period 2.1 Official defense budget announced by the Chinese government 2.2 Unofficial estimates of China’s defense budget 2.2.1 The US Deparment of Defense 2.2.2 The International Institute for Strategic Studies 2.2.3 The Stockholm International Peace Research Institute .9 2.3 China’s defense budget distribution 10 II Purposes and Reasons for the recent changes in China’s defense budget from 2010 to 2017 11 Estimates and Purposes of China’s defense budget 11 1.1 2010 Defense White Paper .11 1.2 2013 official statements 12 1.3 2015 Defense White Paper and official statements 12 Reasons for the changes in China’s defense budget from 2010 to 2017 13 2.1 An economic-related reason 13 2.2 Sea dependence and maritime power development 14 III Evaluation 15 Benefits and drawbacks 15 1.1 Benefits 15 1.1.1 Keeping the country’s military in good shape 15 1.1.2 Ensuring the country’s defensive ability from threats 16 1.1.3 Strengthening maritime initiatives 16 1.2 Drawbacks .17 1.2.1 Taking a huge chunk off the country’s budget 17 1.2.2 The likelihood of being used irresponsibly 17 The lack of transparency 18 Future prospect 19 REFERENCES .20 !1 I China’s defense budget in the 2010 - 2017 period Overall of China’s armed forces and defense budget 1.1 Definition of defense budget China does not specify the difference between “military budget” and “defense budget” In the country’s official documents involving military or defense expenditure such as the White Paper, the two terms of “military” and “defense” budget are often used interchangeably In general, the defense, or military, budget is the portion of the overall budget of China that is allocated for the funding of the armed forces of China This budget includes the expenditures to finance for employee salaries and training costs, the maintenance of equipment and facilities, support of new or ongoing operations, and development and procurement of new weapons, equipment, and vehicles Every March, as part of its annual state budget, China releases a single overall figure for national military expenditures 1.2 China’s armed forces The Chinese People's Liberation Army (PLA) is the armed forces of the People's Republic of China (PRC) and Communist Party of China (CPC) The PLA consists of five professional service branches: the Ground Force, Navy, Air Force, Rocket Force, and the Strategic Support Force The PLA is the world's largest military force, with a strength of approximately 2,233,000 personnel, 0.18% of the country's population, including 1,300,000 personnel in the Army, 235,000 personnel in the Navy and 398,000 personnel in the Air Force It is the fastest growing and modernising military power in the world, with significant defence and global power projection capabilities Recently, it has been rapidly developing and commissioning new arsenals, with numerous technological advancements and breakthroughs It boasts the second largest defence budget in the world, although many authorities – including SIPRI and the U.S Department of Defense – argue that China does not report its real level of military spending, which is allegedly much higher than the official budget In September 2015, Xi Jinping, the General Secretary of the Communist Party of China and the commander-in-chief of the PLA, announced a reduction of the number of military personnel by 300,000 as a part of the armed forces restructural plan !2 The defense budget is allocated to finance the operations of these forces and to buy, maintain and develop weapons and equipments used by the military The People’s Armed Polices is only considered as a part of the military forces in the wartime, therefore, this force is not financed by the national defense budget in the peace time However, many international institutions, including the International Institute for Strategic Studies and the Stockholm International Peace Research Institute, still take account of it when calculating the real military budget of China China’s defense budget in the 2010 - 2017 period 2.1 Official defense budget announced by the Chinese government Since 1988, the defense budget of China has risen significantly Within 29 years, the official defense budget has increased by 49 times, from approximately 21.5 billion yuan in 1988 to 1,044 billion yuan in 2017 In which, from 2008 so far, the defense spending has risen by times within just 10 years (Figure 1) Figure China’s official defense budget from 1988 to 2017 ! Source: Japanese Ministry of Defense1 The growth rate had always been over 10%/year during the 1989 - 2009 period, before dropping remarkably to around 9% in 2010 and recovered the fast Japanese Ministry of Defense (2017), China’s defense budget, http://www.mod.go.jp/j/approach/surround/ pdf/ch_d-budget_20170406e.pdf !3 space (higher than 10%/year) in the following years, from 2011 to 2015 After half of a decade of increasing with two-digit rate, the defense budget growth declined considerably in the next period, at less than 8% in 2016, and dropping to 7% in 2017, as the Chinese economy has shown signals of slowing down recently Despite this downward trend, during years from 2010 to 2017, the average growth rate of China’s defense budget has still been maintain at the level of over 10% The 2016’s budgeted hike of 7.6% had been the lowest in six years and the first single-digit rise since 2010, following a nearly unbroken two-decade run of double-digit increases The defense budget for 2017 will increase by percent, to 1.044 trillion yuan (equivalent to 151.43 billion USD), accounting for about 1.3% of the country's projected GDP in 2017 This spending is 4-time lower than that of the US for the same year Currently, China is ranked second right after the US among top budget spending countries in the world Figure China’s official defense budget as in USD and as percentage of GDP ! Source: PRC Ministry of Finance2, World Bank China’s defense spending has always been maintained at the level of about 1.3% From 2010 so far, the defense budget-to-GDP ratio only decreased to the lower levels during three years from 2011 to 2013 with the rates of over 1.2% This PRC Ministry of Finance, 2010 - 2017年中央本级⽀出预算表, http://yss.mof.gov.cn !4 rate has been kept steadily for many years, and it never exceeded the rate of 1.4% as well as dropped to 1.2% Compared to others in the top military spending countries, the rate of China’s defense budget as percentage of GDP is much lower (in 2015: this rate reached 4.5% in Russia, 3.3% in the US and over 2% in other NATO members and South Korea) 2.2 Unofficial estimates of China’s defense budget It is difficult to estimate the actual amount of China’s defense budget due to the lack of transparency in China’s budget system Although China provides official estimates of defense spending each year, outside estimates of China’s defense budget are often significantly higher than Beijing’s official numbers Furthermore, China provides limited information on the distribution of its military spending, which obscures spending patterns that may indicate the relative importance of a particular branch of the Chinese military, how China might be responding to perceived external threats, and where China is investing in new technologies Nevertheless, even modest estimates reveal that Chinese defense spending is on the rise China now spends more on its military than any other country in the world save the United States This question explores both the issues in calculating Chinese defense spending and China’s spending relative to other regional actors Figure China’s official defense budget compared to defense expenditure estimated by the US Department of Defense, the International Institution for Strategic Studies and the Stockholm International Peace Research Institute ! Source: DoD, IISS, SIPRI !5 The chart show the great disparity between numbers announced by the Chinese government and those calculated by outside institutions including the US Department of Defense (DoD), the International Institution for Strategic Studies (IISS) and the Stockholm International Peace Research Institute (SIPRI) In some particular years such as 2010 and 2016, the discrepancy is even higher or nearly equal to the amount estimated by China itself For example, in 2010, the amount infomed by DoD was more than twice as high as that announed by the Chinese governmen, and the figure calculated by SIPRI in 2016 was about 1.5 times higher than that given by China’s authorities Part of the discrepancy between official figures and other estimates results from differences in what expenditures are included in the defense budget Chinese official figures not account for a number of military-related outlays that are often included in the budgets of other countries Expenditures may include foreign military procurement, government subsidies for military production, funds for strategic and nuclear forces, and paramilitary organizations Military-related aspects of Beijing’s space program, extra-budgetary revenues from military-owned commercial enterprises, defense mobilization funds, authorized sales of land or excess food produced by some units, recruitment bonuses for college students, and provincial military base operating costs are absent from China’s officially announced numbers Estimates by DOD, IISS, and SIPRI account for many of these expenditures Both IISS and SIPRI estimates explicitly include the cost of foreign military procurement, military research and development, and paramilitary funding, while DOD estimates mention these categories but not confirm the inclusion of these items in their estimates of Chinese defense spending 2.2.1 The US Deparment of Defense The DoD announces the defense expenditure of China every year through its annual Report to Congress “Military and Security Developments involving the People’s Republic of China” !6 Figure China’s official defense budget compared to defense expenditure estimated by the US Department of Defense ! Source: DoD Since 2011, the DoD has stopped announcing the specific figures for Chinese defense expenditure by year, but only giving the amount which is estimated in a range “due to China’s poor accounting transparency and incomplete transition to a market economy” For example, the spending for 2011 ranged between 120 billion USD and 180 billion USD while that for 2012 fell between 135 billion USD and 215 billion USD and that for 2015 exceeded 180 billion USD Figures used in this chart for the 2011 - 2015 period are the lowest estimated numbers in these ranges According to the 2016 Report, Chinese defense spending in 2015 exceeded 180 billion USD This is 1.25 times higher than the announced budget of Chinese government which is equivalent to 144.2 billion USD If using the lowest figures in the ranges of China’s defense expenditure estimated by the DoD, the defense spending-to-GDP ratio of China varies between 1.5% and 1.6% year by year, which is higher than that announced by the Chinese government (around 1.3%) According to the DoD, China’s published military budget omits several major categories of expenditure, such as R&D and the procurement of foreign weapons and equipment US Deparment of Defense, “Military and Security Developments involving the People’s Republic of China” Report 2010 - 2016, https://www.defense.gov !7 2.2.2 The International Institute for Strategic Studies The International Institute for Strategic Studies (IISS) is a global think tank researching political & military conflict The IISS announced its estimated amount of China’s defense expenditure through its “Military Balance” - an annual assessment of global military capabilities and defense economics Figure China’s official defense budget compared to defense expenditure estimated by the International Institute for Strategic Studies ! Source: DoD 4, IISS5 As noted each year in The Military Balance, official Chinese defence budget figures probably underestimate true defence spending According to the IISS, although official figures include personnel, operations and equipment expenditure, it is widely held that other military-related expenditures are omitted, such as R&D and overseas weapons purchases Using data publicized by the IISS, China’s defense spending for 2015 was 193 billion USD, about 1.35 times higher than that informed by the Chinese government The rate of defense expenditure to GDP, which ranges from 1.7% to US Department of Defense, “Military and Security Developments involving the People’s Republic of China” Report 2010 - 2015, https://www.defense.gov IISS Military Balance 2012 - 2017 !8 1.9%, is also much higher than the official defense budget-to-GDP of Chinese authorities, which stands at around 1.3% 2.2.3 The Stockholm International Peace Research Institute The Stockholm International Peace Research Institute (SIPRI) is an international institute dedicated to research into conflict, armaments, arms control and disarmament It announced its estimated figures of China’s defense expenditure through its “Yearbook” about armaments, disarmaments and international security Figure China’s official defense budget compared to defense expenditure estimated by the Stockholm International Peace Research Institute ! Source: DoD6 , SIPRI7 SIPRI has consistently estimated that China actually far outspends its declared budget The spending for 2016 estimated by the SIPRI was 225.7 billion USD, which is more than 1.5 times higher than the budget announced by the Chinese government According to the SIPRI, the defense spending of China has risen times over the last 10 years, from 2006 to 2016, with the average annual growth rate of about 13% The defense expenditure-to-GDO ratios announced by SIPRI, which ranges from 1.8% to 1.9%, are also much higher than the percentage of defense US Department of Defense, “Military and Security Developments involving the People’s Republic of China” Report 2010 - 2016, https://www.defense.gov SIPRI, Military Expenditure Data 1988-2015, https://www.sipri.org/databases/milex !9 budget to GDP (around 1.3%) Besides the spending categories used in estimates of the DoD and the IISS, the data used in SIPRI’s calculation also includes such expenditures as Research Development Test & Evaluation (RDT&E) funding or arm imports,… 2.3 China’s defense budget distribution China’s defense spending divided into about three equal parts made up of personnel expenses, activity expenses to pay for training and military exercises and expenses to purchase and repair weapons and other military equipment Since 2010, the Chinese Ministry of Defense has stopped publicizing the figures of defense budget structure, but in every White Paper, it is claimed that the distribution of budget for each category are quite equal In the latest budget defense report by the MOD (which was published in 2010), the contribution of personnel, activity and weapon - equipment expenses to the total spending was 34.04%, 33.73% and 32.23%, respectively Figure China’s defense budget distribution in 2009 ! Source: PRC Ministry of Defense Although the MOD always claims that the distribution among these three main parts is equal, the international media has reasons to believe that the spending for weapons and equipments has increased significantly lately They estimate that the PRC Ministry of Defense, 2010年中国的国防, http://www.mod.gov.cn/affair/2011-03/31/ content_4249942.htm !10 expenditure for weapons and equipments has risen from 32% to 40% recently9 This increase is largely offseted by the decline in personnel expenses, as in late 2015, President Xi Jin Ping had announced that about 300,000 troops will be laid off in the coming years as a part of the military restructuring plan of China Using this rate, spending for weapons and equipments in 2017 will rise to about 400 billion yuan, equivalent to 58 billion USD II Purposes and Reasons for the recent changes in China’s defense budget from 2010 to 2017 Estimates and Purposes of China’s defense budget 1.1 2010 Defense White Paper China's defense expenditure mainly comprises expenses for personnel, training and maintenance, and equipment, with each accounting for roughly one third of the total Personnel expenses mainly cover salaries, allowances, housing, insurance, food, bedding and clothing for officers, non-ranking officers, enlisted men and contracted civilians Training and maintenance expenses mainly cover troop training, institutional education, construction and maintenance of installations and facilities, and other expenses on routine consumables Equipment expenses mainly cover R&D, experimentation, procurement, maintenance, transportation and storage of weaponry and equipment Defense expenditure covers costs to support the active forces, reserve forces, and militia It also covers part of the costs to support retired servicemen, servicemen's spouses, and education of servicemen's children, as well as national and local economic development and other social expenses In the past two years, the increase in China's defense expenditure has primarily been used for the following purposes: (1) Improving support conditions for the troops: Along with the economic and social development and the improvement of people's living standards, the PLA has adjusted servicemen's salaries and allowances, increased funding for education and training, water and electricity supplies and heating, upgraded logistics support for grass-roots units in a comprehensive and coordinated way, and improved the onduty, training and living conditions of border and coastal defense forces and units in remote areas and harsh environments http://mil.news.sina.com.cn/jssd/2017-03-10/doc-ifychhus0425914.shtml !11 (2) Accomplishing diversified military tasks: China has increased investment in improving MOOTW capabilities, in supporting earthquake rescue and disaster relief operations, in flood control and emergency rescue operations, and in international rescue operations (3) Pushing forward the Revolution in Military Affairs (RMA) with Chinese characteristics In view of the upward trend in purchasing prices and maintenance costs, China has moderately increased the funds for high-tech weaponry and equipment and their supporting facilities 1.2 2013 official statements The Chinese Ministry of Finance did announce in 2013 that there had been a 11.2% increase in the 2012 military budget that had been “used to improve living and training conditions for our troops, support the military in promoting IT application, strengthen development of new- and high-technology weapons and equipment, and enhance the country’s modern military capabilities.”4 According to the Twelfth National People’s Congress, the 2013 budget was to “be used to support efforts to improve the working and living conditions of officers and enlisted personnel, make the armed forces more mechanized and informationbased, and safeguard national security.”5 In early March 2013, China released its 2013 national budget, forecasting a military expenditure of 720.2 billion Yuan ($114.3 billion), a 10.7% increase Official military spending in 2012 was approximately $106 billion, an 11.2% rise over 2011 1.3 2015 Defense White Paper and official statements A spokeswoman for China’s National People’s Congress announced that the defense appropriation for 2015 increase 10.1% from the previous year, roughly placing spending at $141.5 billion and making China the second largest military spender in the world.7 Shortly after this announcement, the Premier of the State Council Li Keqiang delivered the “Report on the Work of the Government” at the Third Session of the 12th National People’s Congress on March 5, 2015 Among a cautious tone that targeted sustained economic growth rate of 7%, he briefly mentioned the national defense priorities from the National Committee of the Chinese People’s Political Consultative Conference: !12 - Building a solid national and strong armed forces is fundamental to safeguarding China’s sovereignty, security, and developmental interests - Keep to the Party’s goal of strengthening the armed forces under the new conditions, uphold the fundamental principle of the Party’s absolute leadership over the armed forces, strengthen our efforts in all areas in a coordinated way to maintain military preparedness, and ensure border, coastal, and air defense security and stability - Comprehensively strengthen modern logistics, step up national defense research and development of new- and high-technology weapons and equipment, and develop defense-related science and technology industries - Deepen the reform of national defense and the armed forces, and increase the level of rule of law in their development - Strengthen efforts to modernize the armed police forces - Improve mobilization for national defense and the building of reserve forces - Coordinate national defense development and economic development and deepen the integration of the military and civil sectors Reasons for the changes in China’s defense budget from 2010 to 2017 2.1 An economic-related reason China now has the world’s second largest economy and is recognized as a global power China’s rapidly growing military spending—and the parallel military modernization—is thus just a reflection of its equally rapid economic growth Indeed, China’s official policy is that its military modernization depends on and is subordinate to national economic development Chinese military spending has grown roughly at the rate of economic growth over the past decade or so—sometimes a bit faster, sometimes a bit slower The share of gross domestic product (GDP) of military spending has thus remained fairly constant for some time For 2014, China has set an inflation target of 3.5 per cent, which means that the 12.2 per cent nominal increase in the defense budget would translate to an 8.4 per cent real-terms increase This is slightly higher than the targeted economic growth rate of 7.5 per cent, but the difference is not so large as to suggest a break in the general trend !13 China’s defense budget for 2014 represents 5.3 per cent of the total central government budget This is also a slight increase from 5.1 per cent in 2013, but again this is not a major change At any rate, the relative priority given to the military is certainly not decreasing and may be slightly increasing despite the numerous major challenges China is seeking to tackle, such as economic inequality and environmental destruction 2.2 Sea dependence and maritime power development Today’s the second largest economy is far more dependent on the seas than it ever was Without trade, China could not sustain its economy Seaborne commerce is an essential part of Chinese trade According to recent Chinese statistics published in the 2010 China’s Ocean Development Report, ocean commerce in 2008 alone represented 9.87 percent of China’s gross domestic product, with a valuation of nearly trillion RMB (approximately $456 billion) Moreover, some 85 percent of its international trade moves by the sea lanes Given this growing reliance on the sea, the Chinese have concluded that they must develop a strategy to govern their maritime development According to Chinese analysts, any such strategy must address three considerations: • The broad maritime interests of the People’s Republic of China (PRC), which include its growing reliance on the global sea lanes for its trade; • The national security interests of the PRC including access to ocean resources, countering “hegemonic” interference in Chinese affairs, security of the sea lanes, potential for military conflict arising from conflicting claims over maritime frontiers or islands, and the Taiwan issue; and • The need to build a “harmonious society” at sea that recognizes the inevitability of increased global competition for the sea’s resources Key maritime mission areas for future Chinese development include: • Protecting China’s maritime authority over "relevant waters;" • Developing China’s maritime economy; • Strengthening ocean use and island management; • Sustaining the ocean environment; !14 • Developing maritime industries and oceanographic sciences; and • Improving China’s contributions to global oceanography To help fulfill these missions and support these interests, China has steadily expanded all of its instruments of maritime power, including its maritime and naval forces III Evaluation Benefits and drawbacks 1.1 Benefits 1.1.1 Keeping the country’s military in good shape Military spending ensures that soldiers receive decent salaries and excellent benefits This, in turn, helps retain existing military personnel; since they know that their income is enough to provide for themselves and their family, they can focus on their work and won’t be tempted to look for another job It also helps in attracting recruits and convincing them to become loyal soldiers Of course, military spending helps ensure that soldiers are provided with warm shelters, nutritious food, and comfortable clothing This way, they can stay healthy and fit to defend the country and maintain national security The budget also makes sure that there are enough supplies of high-quality weapons, tankers, ships, planes, and other kinds of equipment and vehicle and that these are regularly and properly maintained and always ready for battle “Through the cut of troops’ number, China’s military will further adjust and optimize its scale and structure, make its troops more capable and its structure more scientific, and construct a modern military force system with Chinese characteristics,” Yang Yujun, spokesperson for China’s Ministry of National Defense explained He further noted that the troops to be cut will be “troops equipped with outdated armaments, office staff, and personnel of non-combat organizations.” The transfer of resources from the army to the navy, missile forces and strategic support forces will help Beijing cope better with new security challenges, including maritime and cyberspace !15 1.1.2 Ensuring the country’s defensive ability from threats Military spending provides enough funds to train and arm soldiers and purchase modern vehicles, equipment, and weapons These, in turn, enable the country to have enough manpower and firepower to protect itself from anyone who threatens the nation’s safety and security Particularly in China, those threats are believed to include the conflict in Senkaku island with Japan, in South China Sea with Philippines and Vietnam, and last but not least, the recent confrontation with India, associated with disputed territory with Bhutan 1.1.3 Strengthening maritime initiatives One of the major elements of the One Belt, One Road initiative launched by China in 2013 is the concept of the 21st Century Maritime Silk Road The aim of this mega project is to revolutionize deep-sea trade from Southeast Asia through Africa to Europe, and to put the participating countries on the track of economic development with the help of the infrastructural developments along the coastline It has long been a topic of hot debate among Sinologists and pundits alike whether the “One Belt, One Road” (OBOR) $140 billion plan is in fact an elaborate cloak under which Beijing can disguise its military ambitions The final aim would be to provide the PLA-N access to a series of ports stretching from the South China Sea to Africa’s East Coast This view has been known as the “string of pearls” model, a dicey term coined by defense contractor Booz Allen Hamilton in a 2005 study While the list is disputed, the proverbial pearls on the string include the ports of Colombo in Sri Lanka, Gwadar in Pakistan, Chittagong in Bangladesh, Maday Island in Myanmar, and Port Victoria in the Seychelles Of course, given China’s propensity to continuously downplay and conceal its global ambitions, no official acknowledgement of such aspirations has ever been aired, Beijing insisting that all investments were economically motivated and part of the Maritime Silk Road But putting Djibouti on the same list lays to rest this debate and casts a long shadow over Chinese claims that the OBOR is a purely mercantile project However, even if the conspiracy theory might me true or not, placing more emphasis on navy force will eventually secure the implementation of the initiative In addition, it may create a virtuous circle in which the Maritime Silk Road benefits !16 the navy and vice versa as the initiative includes a number of perfect deep water ports for naval vessels 1.2 Drawbacks 1.2.1 Taking a huge chunk off the country’s budget Modern weapons, tankers, aircraft, and ships can be costly, with price tags that can reach millions of dollars The maintenance of these equipment can also be expensive since they require special materials and fully trained people to keep them in good shape Because of these, military spending takes up a large amount of the national budget and can skyrocket to billions of dollars every year These prompt many people to point out that the military consumes resources that could otherwise be used on other projects Unsurprisingly, opponents of military spending support any reductions that would be made to it; according to them, these cuts would release more funds that could be spent on healthcare, education, food, housing, and other public and social services 1.2.2 The likelihood of being used irresponsibly Ideally, the military budget should be spent on worthwhile products and services that would strengthen the military and make good use of taxpayers’ dollars However, this isn’t always the case in the real world Because of human error, poor judgment, and lack of proper supervision, military spending can be invested in lowquality projects and ultimately become wasted Corrupt officials in the military may also help themselves to the funds and use it for their personal gain, reducing the amount that’s available for salaries, uniforms, weapons, tankers, and other important projects And China is, undoubtedly no stranger to military corruption The anticorruption purges have been extensive In January 2015, Chinese authorities announced that over 4000 senior officers at the rank of Lieutenant Colonel or higher – including 82 generals- had been investigated, of whom 242 faced either reprimand or imprisonment Amidst all the corruption arrests and prosecutions, one tiger that hasn’t growled, perhaps surprisingly, is arms imports The lack of detail in public annoucements of corruption charges levelled against officers means that there have !17 not been reports of corruption relating to specific arms deals So far, not a single “grand corruption” associated with major arms acquisition deals was reported, which possible stems from the fear of being embarrassed of the Party leadership The problem of carrers for sale in the military sector also indirectly worsened the case as officers have to take back the bribes paid for promotions from other sources, either from the government’s pocket or other officers who want to be promoted Recently, a former member of the elite Central Military Commision, general Zhang Yang has commited suicide while under investigation, during President Xi Jinping’s five year-old anti-grant campaign to conceal the secrets associated with Xu Caihou and raise difficulties for the investigation So, generally, there has been a number of individuals claimed that it is not really beneficial to increase military spending while corruption is not yet completely under control The lack of transparency “Let me be very clear, there is no such thing as opacity in China’s military spending,” China’s finance minister Xiao Jie said at a March press conference in Beijing on the sidelines of the annual meeting of the National People’s Congress, the national legislature Speaking at a press conference on March 4, Chairman of the Foreign Affairs Committee of the Chinese National Assembly said that the defense budget this year would increase by 7%, equivalent to 1.3% of Gross Domestic Product (GDP) GDP) But the fact remains that no specific figure appears in the 2017 defense budget report at the inaugural session of the Fifth Annual Congress of the National People's Congress Course 12, which is considered to be very different from previous years In the report on the budget this year, the Chinese government only emphasized: "We will support efforts to accelerate the reform of defense operations as well as the armed forces, with the aim of building a force a strong defense and armed force, commensurate with China's international status and meeting the requirements of protecting the security and development of the nation " !18 The 2016 Department of Defense report on China notes: “However, it is difficult to estimate actual military expenses due to China’s poor accounting transparency and incomplete transition to a market economy China’s published military budget omits several major categories of expenditure, such as R&D and the procurement of foreign weapons and equipment.” The problems include PPP models, the difficulty of defining “defense spending”; conversion of China’s RMB-denominated budget into US dollars, especially because of problems with the official exchange rates, application of PPP rates, and inflation and strengthening of the RMB since 2005 – meaning that conversions based on current exchange rates make recent budget increases look larger than they really are; and the lack of transparency regarding the actual costs of individual items and which specific spending categories are already included in the official budget further complicates estimates of actual PLA military expenditures, and a failure to take into account the fact that military pay can differ sharply from country to country, and that conscript forces are far cheaper than an all-volunteer forces Future prospect From 1949 until now, China has engaged in 23 conflicts, of which turned to wars in different scale In 17 over 23 conflicts, China showed signs of concessions Accordingly, it can be said that China has proven itself to be less aggressive than other countries with the same conditions Especially, led by President Xi Jinping, China is pursuing grand initiatives and social-economics goals including “Made in China 2025”, “One belt one road”, “China dream 2050” Therefore, significantly increasing military spending or engaging in a war would eventually slow down the planned process to become a great power of Beijing However, considering all the “threats” from either internal or foreign affairs and the unspoken arms race between the most powerful nations around the globe, it is reasonable and beneficial for China to keep its military spending fluctuate from 7% to 10% in the next coming years to catch up with the forerunners as well as to be in accordance with its economics potential Additionally, Xi’s decision to cut down 300000 troops would help decrease the spending, create such a favorable condition to optimize the whole system.
 !19 REFERENCES Japanese Ministry of Defense (2017), China’s defense budget, http:// www.mod.go.jp/j/approach/surround/pdf/ch_d-budget_20170406e.pdf PRC Ministry of Finance, 2010 - 2017年中央本级⽀出预算表, http:// yss.mof.gov.cn US Deparment of Defense, “Military and Security Developments involving the People’s Republic of China” Report 2010 - 2016, https://www.defense.gov IISS Military Balance 2012 - 2017 SIPRI, Military Expenditure Data 1988-2015, https://www.sipri.org/databases/ milex PRC Ministry of Defense, 2010年中国的国防, http://www.mod.gov.cn/affair/ 2011-03/31/content_4249942.htm http://mil.news.sina.com.cn/jssd/2017-03-10/doc-ifychhus0425914.shtml https://flowpsychology.com/7-pros-and-cons-of-military-spending/ https://cpianalysis.org/2017/06/22/2017-defense-department-report-on-chinesemilitary-power https://chinapower.csis.org/military-spending/ https://thediplomat.com/2015/12/is-chinas-maritime-silk-road-a-military-strategy/ http://www.geopolitika.hu/en/2017/03/16/china-and-the-21st-century-newmaritime-silk-road/ https://csis-prod.s3.amazonaws.com/s3fs-public/publication/ 160928_AHC_Estimates_Chinese_Military_Spending.pdf http://nationalinterest.org/feature/hy-chinas-military-budget-larger-it-appears-19716 https://sites.tufts.edu/corruptarmsdeals/2017/05/05/chinas-crackdown-on-militarycorruption/ http://www.mod.go.jp/j/approach/surround/pdf/ch_d-budget_20170406e.pdf https://chinapower.csis.org/military-spending/ http://eng.mod.gov.cn/Database/WhitePapers/index.htm !20 http://archive.defense.gov/pubs/2013_China_Report_FINAL.pdf http://news.xinhuanet.com/english/2017-03/06/c_136106834.htm https://cpianalysis.org/2017/06/22/2017-defense-department-report-on-chinesemilitary-power/https://www.reuters.com/article/us-china-parliament-defence/ china-confirms-7-percent-increase-in-2017-defense-budget-idUSKBN16D0FF http://english.chinamil.com.cn/2017special/2017-03/06/content_7515829.htm https://www.globalsecurity.org/military/world/china/budget.htm https://ourworldindata.org/military-spending/ https://www.globalsecurity.org/military/world/china/budget.htm http://www.heritage.org/asia/report/sea-power-and-the-chinese-state-chinasmaritime-ambitions http://www.indiandefencereview.com/spotlights/chinas-military-reforms/ !21 ... China’s defense budget in the 2010 - 2017 period Overall of China’s armed forces and defense budget 1.1 Definition of defense budget 1.2 China’s armed forces .2 China’s. .. Reasons for the recent changes in China’s defense budget from 2010 to 2017 11 Estimates and Purposes of China’s defense budget 11 1.1 2010 Defense White Paper .11 1.2... I China’s defense budget in the 2010 - 2017 period Overall of China’s armed forces and defense budget 1.1 Definition of defense budget China does not specify the difference between “military budget