China Set to Increase Military Budget by 7.2 Percent – Defense Security Monitor

China will raise its defense budget topline by 7.2 percent for 2024 as per a government announcement on March 5 during the second annual session of the 14^th National People’s Congress.

The latest spending uptick comes as the Chinese economy is continuing to experience headwinds and the government plans for tighter fiscal policy. Rather than a major stimulus push, the official planned expenditure target for fiscal year 2024 reflects spending growth of 3.8 percent year-on-year, or just over half the planned increase for defense.

The year-on-year rise in China’s military budget represents a consistent three-year stretch in which the budget has achieved growth of 7 percent annually, faster than the rate of economic expansion.

For 2022, year-on-year budgetary growth reached 7.4 percent, while economic growth lagged at 3 percent growth due to waves of COVID outbreaks and subsequent mitigation efforts. The 2023 defense budget targeted a similar 7.2 percent rise to 2024, with GDP growing faster for the year, but still come in just above 5 percent – well below the 7 percent-plus expansions of the pre-COVID years.

While the latest increase will bring China’s official military spending topline to CNY1.67 trillion ($232 billion), the country’s actual defense expenditure is estimated far higher, possibly up to – and over – $300 billion.

Elements such as military technological research and development and even some major weapons purchases are believed to be kept off-budget, thus raising actual defense investment figures to well above the official topline figure published by the Chinese state.

For instance, state-owned defense enterprises channel loans provided by Chinese banks back into research and development and industrial facility upgrades, all with the intent of arming and rearming the military. This use of state-owned investment via recyclable funding coupled with civil-military fusion allows China’s spending to go further than the topline figures provided by the party or estimated by external sources.

Further, when factoring purchasing power parity (PPP) into an examination of China’s defense spending, the “bang for the buck” Beijing wrings from its spending is significantly higher than a sheer dollar figure, as internal costs of production and purchasing are not tied to currency exchange rates and the salaried cost of maintaining a large standing military is less for China than it is for the U.S., Britain, France, etc.

The current trend of investing in defense at a greater rate than economic growth tracks the tenure of President Xi Jinping, who assumed office on March 14, 2013, but who continues to hold onto two roles conferred to him earlier on November 15, 2012, which are general secretary of the Communist Party and chairman of the Central Military Commission – the latter being the most powerful military body in the country.

This trend is expected to continue in order to meet Xi’s stated goal of “military development” by 2027, which marks the 100^th anniversary of the founding of the People’s Liberation Army, even as growth no longer occurs at breakneck speeds as in the first decade of the 2000s. The Chinese government’s longer-term goal is military modernization by 2035, indicating that Beijing has no intention to pull back on defense investment, regardless of economic hiccups.

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