Bloomberg News – 2012-03-04 00:53:46

http://www.bloomberg.com/news/2012-03-04/china-says-defense-spending-will-increase-11-2-to-106-4-billion-in-2012.html

China Says Defense Spending Will
Increase 11.2% to $106.4 Billion in 2012
Bloomberg News

BEIJING (March 3, 2012) — China plans to increase defense spending 11.2 percent this year to $106.4 billion, as the country’s economic growth gives the military more money to spend on warships, missiles and fighter planes.

China’s defense spending is reasonable and appropriate, Li Li Zhaoxing, spokesman for China’s National People’s Congress, said ahead of a speech tomorrow by Premier Wen Jiabao to open the annual 10-day session of the country’s legislature, the National People’s Congress. “Our defense spending is relatively low compared to other major countries,” Li said.

Members of China’s People’s Liberation Army (PLA) Guard of Honor perform drills during a media tour in Beijing in 2011. Photographer: Sim Chi Yin/Bloomberg

Defense spending has more than doubled since 2006, tracking a rise in nominal gross domestic product from 20.9 trillion yuan to 47.2 trillion yuan in that time. The growing defense budget has stoked concerns among China’s neighbors and the US, which has announced a strategic shift toward Asia including deploying forces to a base in Australia.

The country will spend 670 billion yuan in 2012, Li told reporters today in Beijing. That follows an announced 601 billion yuan budget for 2011.

China now spends more on defense than any country in the world aside from the US, whose military spending is almost six times as much. Chinese defense spending as a percentage of GDP was about 1.3 percent in 2011, falling from about 1.4 percent in 2006. The US Central Intelligence Agency estimates military spending is actually much higher than the public figure, at 4.3 percent of GDP in 2006.

Frontier Tension
China faces tensions on its many frontiers. The country has competing claims with Vietnam, the Philippines and Japan over oil- and gas-rich waters. Its neighbor North Korea is under United Nations sanctions over its nuclear weapons program, and China has lingering territorial disputes with India stemming from a 1962 border war.

“China’s got a lot of things that require a state to have military hardware for,” Geoff Raby, who was Australia’s ambassador to China until last year, said in a telephone interview. “China lives in a neighborhood where it doesn’t have any natural allies or friends.”

Raby said the growth of China’s military spending has inevitably changed “strategic calculations” in the region and the world.

In the past year, China began sea trials of its first aircraft carrier, a refurbished Soviet-era vessel acquired from Ukraine more than a decade ago. The US is concerned that China is about to deploy a missile that will pose a threat to its own aircraft carriers.

Economic Interests
Increasing economic interests around the world, including 812,000 workers abroad at the end of 2011, mean China’s military is increasingly expected to deploy across the globe. China set a frigate to Libya last year to help evacuate thousands of Chinese nationals during the revolt that saw the overthrow of Muammar Qaddafi.

Ships have been deployed to protect sea lanes from Somali pirates in the Middle East, and peacekeepers now patrol as part of a United Nations mission in Sudan.

Beijing is also continuing a military buildup across the Taiwan Strait. The US is obligated by a 1979 law to provide defensive weapons to Taiwan, which China claims as a province. A Pentagon report published last August said that as of December, 2010, China’s People’s Liberation Army had deployed between 1,000 and 1,200 short-range ballistic missiles to units opposite Taiwan even as cross-Strait ties have improved.

Jane’s Forecast
IHS Jane’s, a defense research company, forecast last month that China’s defense spending will double again by 2015, reaching $238.2 billion. IHS Jane’s assumes 2011 spending of $119.8 billion and estimates annual growth from 2011-2015 of 18.75 percent. Vietnam, Indonesia and Taiwan are also boosting defense spending, IHS Jane’s said in a report.

IHS Jane’s estimates Taiwan, for example, will boost defense spending by 10 percent a year through 2015. Last year the US announced it would sell Taiwan $5.3 billion in upgrades for its 145 Lockheed Martin Corp. F-16 fighters.

Last year the administration of US President Barack Obama announced a pivot toward Asia, entailing a strategic focus on the Asia-Pacific area and away from other areas such as the Mideast.

“China’s expanding defense budget has intensified concern among various governments,” Sarah McDowall, Asia Pacific desk head for IHT Global Insight said in a statement accompanying the Jane’s budget estimate. “Perhaps most importantly, it has prompted Washington to undertake a diplomatic campaign to reassert its profile in the Pacific.”

US Defense Budget
The US, with an economy less than three times the size of China’s, has a military budget about six times as big. The Pentagon is asking for $613.9 billion next year, which also includes $88.5 billion in supplemental spending for wars. Unlike China’s, the US defense budget is shrinking. The Pentagon’s request is $31.8 billion less than the amount enacted by Congress for 2012.

China’s defense spending increased an average of 16.2 percent a year from 1999 to 2008, according to figures from a defense white paper published in 2009. While building up spending, China has also proclaimed that it takes a nonconfrontational approach in the region.

“We hope the US side will adopt an objective attitude to China’s development and work toward peaceful coexistence,” Foreign Ministry spokesman Hong Lei said last month. “The Pacific Ocean has enough space for both the US and China.”

To contact Bloomberg News staff for this story: Michael Forsythe in Beijing at mforsythe@bloomberg.net; Yidi Zhao in Beijing at yzhao7@bloomberg.net

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