China’s philosophy: “Prosperous Nation, Strong Military”

Tuesday 19 March 2013, Amsterdam

A fast growing economy combined with the objective of becoming a superpower nation, fuelled China’s defense expenditure during the review period (2009-13). Border and territory disputes, as well as military modernization are expected to drive the country’s future military spending, which is anticipated to grow at a CAGR of 11.89% over the forecast period. China’s philosophy, “Prosperous nation, strong military”, drives its efforts in building a large military force to rival the best armies in the world, which in turn drives the country’s defense budget.

Driven by the objective of being a superpower nation, the Chinese defense budget grew at a CAGR of 13.21% over the review period, to US$115.6 billion in 2013. A rapid growth in the economy supported the country’s defense expenditure during the review period, making Chinese defense expenditure the highest in the Asia-Pacific region, over countries such as Japan and India. However, the pace of China’s defense spending growth is expected to reduce slightly due to the sluggish global economy and slowdown in the country’s growth. The country’s defense spending is expected to grow at a CAGR of 11.89% over the forecast period (2014-18), against the 13.21% it recorded during the review period. A focus on military modernization and building technical capability to defend its territories will drive the Chinese defense budget over the forecast period and the country will continue to be the second largest military spender after the US.

Figure 1: Chinese Defense Expenditure, 2009-2013

 

China’s restricted access to foreign defense technology due to an arms embargo imposed by the US and European countries propelled the country to build a self-reliant defense industrial complex. The country is adapting non-defense technology with relative use in the military for its defense industrial complex, which will integrate China’s civil and military industries. These reforms have revived the once ailing Chinese defense industry, and the country is now capable of manufacturing fighters, missiles, aircraft carriers, diesel electric submarine, and other defense equipment.