China’s military budget outpaces economic growth in shift to security

China’s military spending will grow at its fastest pace in four years in 2023 and take up a larger share of the economy, underscoring Beijing’s reweighting towards security over development.

Defence expenditure will increase by 7.2 per cent in 2023, well ahead of the 5.7 per cent increase in general public expenditure, according to a draft budget presented to the National People’s Congress, the country’s rubber stamp legislature.

The defence budget points to a widening gap between China’s military and economic development, reversing a more than two-decade trend under which the expansion of defence capabilities took a back seat to economic growth.

It comes as the Communist party leadership frets over strained relations with the US, a lack of progress in bringing Taiwan under its control peacefully, and a host of international conflicts Beijing regards as threatening to its interests.

“If from Beijing’s perspective the threat environment increases or remains the same, we will see the defence budget and growth decouple for good,” said Meia Nouwens, an expert on the Chinese military at the International Institute for Strategic Studies in London. “I think we will see it decouple more in the future.”

China faces “high winds and choppy waters in the international environment”, outgoing premier Li Keqiang said in his work report to the NPC. NPC spokesman Wang Chao said the increased military spending was “appropriate and reasonable” and “needed for meeting the complex security challenges and to fulfil our responsibilities as a major power.”

Although China’s military spending is only one-third of the US level, it has grown fivefold over the past two decades according to the US think-tank CSIS, and now exceeds that of the 13 next-largest military spenders in the Indo-Pacific combined. Beijing has spooked its neighbours with increasingly assertive use of its military, holding unprecedented exercises last August to punish Taiwan for hosting Nancy Pelosi, the US House Speaker, and to assert its claims in the South China Sea against the Philippines and Vietnam.

China’s proposed rise in 2023 defence expenditure is 2.2 percentage points above the government’s 5 per cent growth target, a larger gap than in the draft budget a year ago, when Beijing first proposed a military spending increase higher than its growth target. Proposed defence spending also significantly outpaces development-related budget items such as education, social security and scientific research.

Budgeted defence expenditure for 2023 account for 5.7 per cent of total government expenditure, the third annual increase in that share after more than 20 years of continuous reductions.

Analysts said the commissioning of China’s third aircraft carrier, expected this summer, the rapid production of new destroyers and fighter aircraft, as well as investments in space technology and artificial intelligence for missile targeting systems were likely to be the main areas of spending this year.

China’s government provides little detail on its defence spending beyond a breakdown by personnel, training and maintenance, and equipment. “That lack of transparency makes it nearly impossible to trace certain procurements or shifts in military activity,” said Nan Tian, a researcher who tracks Chinese military spending at the Stockholm International Peace Research Institute.

“The increase in the People’s Liberation Army’s exercise and patrol activity, for example around Taiwan, is certain to generate additional costs, if even just for fuel, but the data China provides does not reveal how they account for that.”