China's defence budget grows, but not just to deter rivals

Updated: Sep 15, 2021

by Nicolò Rizzo

1. Introduction: China’s defence budget increases in 2021

The plenary sessions of the National People’s Assembly and of the Chinese People’s Political Consultative Conference took place from 4 to 11 March in Beijing. They are collectively called the “two sessions” and are China’s most important political event. During them, the leadership reviewed the government's work in the previous year and set goals for 2021 and beyond.

One of the most important decision was the amount of the military spending in 2021, which regularly attracts the attention of the diplomatic and military circles. According to the provisional budget presented by the Ministry of Finance, the amount of military outlays will increase by 6.8% in 2021, totalling approximately RMB 1,267,992 ($ 209 billion), or 1.3% of China's nominal GDP. The People's Republic remains the second state by military spending, behind the United States. According to the spokesman of the National Assembly of the People Zhang Yesui, this “increase in defence spending is needed to safeguard our sovereignty and development interests, fulfil China's international responsibility and obligations, and promote the transformation of the Chinese military with Chinese characteristics.”

Given the sensitivity of the subject, it is interesting to examine what are the factors leading to the constant growth of the defence budget.This growth is not necessarily due exclusively to external factors,since internal politics plays a key role as well.

2. China’s defence budget

The 2021 budget shows an overall figure of defence spending, but does not detail the individual items.These are disclosed only occasionally and at the discretion of the Ministry of Defence in publications such as white papers. For example, the 2019 white paper reported the amount of expenses for personnel; for training and maintenance and for equipment in the period 2010-2017.

It is noteworthy that the defence budget does not include all military outlays. In particular, three types of expenses are excluded: commercial and industrial ones; those dedicated to research and development of cutting-hedge military technologies; those dedicated to programs managed directly by the Central Military Commission. Examples of the first group are government subsidies to the defence industry; mobilisation funds; revenues from sales of land owned by the armed forces or from surplus crops produced by certain units; bonuses for the enlistment of university students; operating costs of the provincial military bases.

Figure 1 - China’s defence budget: official figure (continuous line) and SIPRI estimate (dashed line) in billions of Yuan at current prices. Source: SIPRI

The second category includes funds for the research and development of advanced military technologies, such as the space program, anti-satellite systems and quantum information research. These are key items, probably amounting to as much as between 14 and 31 billion dollars. Their importance is reiterated by the 14th five-year plan, which provides an innovation-based strategy for the People's Liberation Army (PLA). The third category includes military spending for programs which fall directly under the responsibility of the Central Military Commission of the