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The trouble with China's 'modest' defence budget

Beijing is seeking to modernise the military and make it a cutting edge force.

The recently held annual session of the National People's Congress - China's parliament - placed a lot of emphasis on the relatively low increase in the country's defence budget despite the leadership's ambitious plans to modernise and reform the Peoples Liberation Army (PLA). Zhang Dejiang, chairman of the standing committee of the NPC, also took the opportunity to defend the recent counter-terrorism law, suggesting Beijing is increasingly driven by a sense of internal insecurity as opposed to external.
Zhang declared that China had "a solid legal foundation for accelerating the establishment of a national security system and taking a distinctly Chinese approach to national security."
This was seen by many in the West as a strong rebuttal of the criticism of China's counter-terrorism law and the draft laws on cyber security and management of NGOs. Zhang, who is also a member of the politburo standing committee and is the third ranked leader in the Chinese hierarchy, said that that China was facing a complex threat from terrorism and needed to intensify its counter-terrorism activities.
In his speech explaining the targets, President Xi Jinping noted that 6.5 per cent growth would be needed if the Chinese were to be able to double the 2010 GDP by 2020. The plan to double GDP by 2020 - linked to the goal of building "a moderately prosperous society" by then - is one of the "twin centenary" goals of the Communist Party of China.
The challenges of achieving this, Xi noted, were dealing with China's industrial over-capacity and the need to restructure the economy and shift it to a consumption and innovation-driven model.
The reportage of the NPC as coming from the official Chinese media is that everything is fine, all targets are being met and there will be no hard landing for the economy. External observers aren't so sure.
The fact is that despite rhetoric about the "decisive role" of market forces, supply-side reforms and restructuring of the SOEs, nothing has really happened. There are no indicators in Li Keqiang's speech that any new measures will be launched soon. But the temptation to spend its way out of its problem remains in China, as indicated by plans to build a second railway to Tibet and invest in 20 more airports.
Besides the problem of retiring and retrenching old industries and creating new jobs, are the demographic pressures. The ending of the one-child norm has not really taken off. Only 1.69 million people (15.4 per cent of those eligible) had applied to have a second child.
Getting more bang from less buck
In his work report to the NPC, Li Keqiang also referred to the need to build up the armed forces "through political work and reform and run them by law." China is seeking to modernise the military and make it a cutting edge force, even while maintaining the leadership of the party.
Besides all-round preparedness, the effort would be to reform the military leadership and command structures and restructure the size of the force and its institutions.
Chinese experts like Maj Gen Luo Yuan and Chen Zhou insist there are no hidden costs in the budget, which is meant to be spent for acquisitions, restructuring the military, and training. However, expenditures like the cost of building and maintaining facilities in the South China Sea may come through other heads.
Chinese commentary emphasised the modesty of the Chinese budget in comparison to the United States, noting that while China was the second largest economy in the world, its defence expenditures were not at the same level.
The budget must also be seen in the context of Chinese arms trade. Just how these are related to the annual budget spending is not clear. In the past five years, China's arms imports fell by 25 per cent, and exports, though mainly in light weapons, doubled. The quality of Chinese equipment has improved in recent years and its larger products are attracting markets elsewhere. The principal recipient of Chinese military sales is Pakistan, accounting for 35 per cent of its exports, followed by Bangladesh and Myanmar accounting for 20 and 16 per cent, respectively. All three are neighbours of India.
Clouds on the horizon
The draft 13th five year plan, released on March 5, contains an entire chapter on "building a national security system". In an article published by a Hong Kong-based digital media company, Ding Ding, a scholar specialising in politics, noted that for the first time the "concept of general national security" was discussed in detail. This, he said is a subject that has been a project with the National Security Commission chaired by Xi. Not surprisingly, the concept is all-inclusive and virtually limitless, covering every aspect of life from politics and the military to culture, society and the economy.
As the Chinese economy slows and it seeks to shift tracks, it is in a state of heightened tension. But the centre of gravity of that tension appears to be within China, not without. As a nuclear-armed state with a powerful military, China faces no existential threat from any foreign enemy. What it appears to fear is "subversion", "sabotage" and "the enemy within".
The writer is a Distinguished Fellow, Observer Research Foundation, New Delhi
The Wire