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Estimating China's Defence Expenditure: Some Evidence From Chinese Sources*

Published online by Cambridge University Press:  12 February 2009

Shaoguang Wang
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Extract

Much attention has recently been paid to the difficult subject of estimating China's military expenditure (ME). This study seeks to contribute to this dialogue and research. Admittedly, this is not an easy task. A major problem with any analysis of China's ME is the veil of secrecy shrouding military allocations. Of course, the difficulty of gathering statistical data of sufficient reliability in this area is not peculiar to China. But Chinese leaders' traditional preoccupation with secrecy makes them extremely reluctant to publish details of the country's ME even in the crudest aggregated form. Until China published its first defence White Paper in November 1995, the annual state budget had contained only a single-line entry for defence. Even the White Paper did not reveal much about what was included in the official military budget. More important, a considerable amount of Chinese defence spending is not reflected in the official military budget. It is widely accepted by Western defence analysts, and occasionally admitted by their Chinese counterparts, that China's total defence spending includes three major components:

Type
Research Notes
Information
The China Quarterly , Volume 147 , September 1996 , pp. 889 - 911
Copyright
Copyright © The China Quarterly 1996

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References

1 Richard A. Bitzinger and Chong-Pin Lin, The Defence Budget of the People's Republic of China(Washington, D.C.: Defence Budget Project, 1994); David Shambaugh, "Wealth in search of power: the Chinese military budget and revenue base," paper presented to the conference on "Chinese Economic Reform and Defense Policy," Hong Kong, 8–10 July 1994; Arthur Ding, "Military production and defense budget in the People's Republic of China," a paper presented at the 5th Annual AEI Conference on the People's Liberation Army, Staunton Hill, 17–19 June 1994.

2 Remy Herrera, Statistics on Military Expenditure in Developing Countries: Concepts, Methodological Problems and Sources(Paris: OECD, 1994), p. 23

3 State Council News Office, "Zhongguo di junbei kongzhi yu caijun ("China's arms control and disarmament"), Renmin ribao {People's Daily),17 November 1995.

4 Examples are Zhongguo jungong bao {Chinese Defence Industry Tribune), Zhongguo junzhuanmin bao {Chinese Defence Conversion Tribune), Junshi jingji yanjiu {Research in Defence Economics), Jundui caiwu {Military Finance),and dozens of books on defence economics published since 1985.

5 Since these publications are intended for internal Chinese consumption, they may be considered largely credible.

6 Cited from Gavin Kennedy, Defense Economics(New York: St Martin's Press, 1983), p. 50.

7 Fan Gonggao, Guofangjingjixue (Defence Economics)(Fuzhou: Fujian People's Press, 1988), pp. 296–98; Liu Dajun, Zhonggup shehuizhuyi guofangjingjixue (Chinese Socialist Defence Economics)(Beijing: PLA Press, 1987), pp. 118–137; Sun Bolin, "Guofangfei zhiding de xin celiie" ("A new strategy in drawing defence budget"), in Beijing Society of Defence Economics (ed.), Guofang jingji fazhan zhanlue lunwenji (A Collection of Essays on the Development of Defence Economy)(Beijing: PLA Press, 1987), pp. 350–52; Yang Yongliang, Zhongguojunshijingjixue gailun (An Introduction to Chinese Defence Economy) (Beijing: Chinese Economic Press, 1987), pp. 110–120.

8 State Council News Office, "China's arms control." Also see the PLA's "Wenzhi ganbu zanxing tiaoli" ("Provisional regulations on civilian employees") cited in Luo Dejun et al., Da guofang lun (On Comprehensive National Defence)(Changsha: Hunan People's Press, 1988), pp. 287–292.

9 See the PLA's "Xianyi shibing fuyi tiaoli" ("Regulation on service persons") and "Wenzhi ganbu zanxing tiaoli" cited in Luo Dejun, On Comprehensive National Defence, pp. 287–297; and Yang Yongliang, An Introduction to Chinese Defence Economy,p. 119

10 Hong Xuezhi, the former deputy secretary-general of the Central Military Commission, once complained that those expenses constituted a heavy burden on the official defence budget. See Hong Xuezhi's speech at the Symposium of Defence Economics, in the Preparatory Group of the Chinese Society of Defence Economics (ed.), Guofang jingjixue lunwenji (A Collection of Research Papers on Defence Economics)(Beijing: PLA Press, 1986), p. 417.

11 James Harris et al.,"Interpreting trends in Chinese defense spending," in the Joint Economic Committee, Congress of the United States (ed.), China's Economic Dilemmas in the 1990s: The Problems of Reforms, Modernization, and Interdependence(Armonk, NY: M.E. Sharpe, 1992), p. 678; Stockholm International Peace Research Institute, SIPRI Yearbook 1993: World Armaments and Disarmament(Oxford: Oxford University Press, 1993), p. 447

12 State Statistical Bureau, Zhongguo tongji nianjian, 1994 (Statistical Yearbook of China, 1994)(Beijing: China Statistical Publishing House, 1994), pp. 217–19.

13 State Council News Office, "China's arms control and disarmament."

14 You Qianzhi et al., Zhongguo guofang jingji yunxingfenxi (A Functional Analysis of the Chinese Defence Economy)(Beijing: Chinese Financial Economic Press, 1991), p. 170

15 United Nations, "Reduction of military budget," Document A/40/421 (New York: United Nations, 1986).

16 Fan Gonggao, Defence Economics,pp. 199–201.

17 Editorial Broad of the "Contemporary China" Series (ed.), Dangdai Zhongguo jundui de junshi gongzuo (The Military Works of the Chinese Armed Forces),2nd vol. (Beijing: Chinese Social Science Press, 1989), pp. 89–100; Liu Dajun, Chinese Socialist Defence Economics,pp. 123–136

18 Wang Dong et ah,"Guofang jingfei yu guofang zhanliie" ("Defence expenditure and defence strategy"), in Beijing Society of Defence Economics, A Collection of Essays,p. 109.

19 Chen Binfu, "Jinshinian Zhongguo junfei zhichu bianhua de jingji fenxi," ("An economic analysis of China's defence expenditure in the last decade or so"), Jingji yanjiu (Economic Research Journal),No. 6 (1990), p. 81; Liu Yichang and Xiao Jinsheng, "Zhongguo guofang jingji fazhan zhanliie xin moshi" ("New models of the development of China's defence economy"), in Beijing Society of Defence Economics, A Collection of Essays,p. 146.

20 You Qianzhi, A Functional Analysis,pp. 273–74

21 Liu Yichang and Xiao Jinsheng, "New models of the development."

22 Luo Dejun, On Comprehensive National Defence,pp. 163; Yang Yongliang, An Introduction to Chinese Defence Economy,pp. 117–127

23 State Council News Office, "China's arms control."

24 You Qianzhi A Functional Analysis,p. 7; Eric Hyer, "China's army merchants: profits in command," The China Quarterly,No. 132 (1992), p. 1 111.

25 Renmin ribao,13 March 1995.

26 Shaoguang Wang and Angang Hu, Zhongguo guojia nengli baogao (A Study of the Chinese Government's Capacity)(Hong Kong: Oxford University Press, 1994). For its English translation, see Chinese Economic Studies,Vol. 28, No. 3 (May-June 1995

27 Fan Gonggao, Defence Economics,pp. 296–98; Luo Dejun, On Comprehensive National Defence,p. 142; Sun Bolin, "A new strategy," pp. 350–52.

28 Liu Dajun, Chinese Socialist Defence Economics,pp. 118–127; Yang Yongliang, An Introduction to Chinese Defence Economy,p. 112; Sun Bolin, "A new strategy," pp. 350–52; Wang Dong "Defence expenditure and defence strategy," p. 104. In addition, there is a small outlay of "national defence education," which is partially covered by "educational expenditure" in the state budget. Lei Qingshan, Guofang houbeijun gailun (An Introduction to Reserve Forces of National Defence)(Beijing: National Defence University Press, 1989), pp. 223–25.

29 Wang Dong "Defence expenditure and defence strategy," p. 104.

30 Jonathan D. Pollack, "Structure and process in the Chinese military system," in Kenneth G. Lieberthal and David M. Lampton (eds.), Bureaucracy, Politics, and Decision Making in Post-Mao China(Berkeley: University of California Press, 1992), pp. 172–73.

31 Yang Yongliang, An Introduction to Chinese Defence Economy, p.112; Benjamin C. Ostrov, Conquering Resources: The Growth and Decline of the PLA's Science and Technology Commission forNational Defence(Armonk, NY: M.E. Sharpe, 1991), pp. 68–70

32 Fan Gonggao, Defence Economics,p. 16.

33 Luo Dejun, On Comprehensive National Defence, p.14

34 Liu Dajun, Chinese Socialist Defence Economics,pp. 138–142, 386; Tang Dade, "Woguo guofang jingji fazhan de huanjing tiaqjian he zhanliie juece" ("The preconditions for the development of our country's defence economy and strategic decision-making"), in Beijing Society of Defence Economics, A Collection of Essays,pp. 284–85

35 Dai Shizheng, "Guanyu zhiding guofang jianshe de jingji zhengche wenti" ("Issues in making defence construction policy"), in the Preparatory Group of the Chinese Society of Defence Economics, A Collection of Research Papers,p. 234.

36 Fan Gonggao, Defence Economics,p. 162.

37 You Qianzhi, A Functional Analysis, p.138.

38 Statistical Yearbook of China, 1994,p. 594.

39 Dai Shizheng, "Issues in making defence construction policy," p. 234.

40 Bitzinger and Lin, The Defence Budget of the People's Republic of China,p. 6.

41 Ethan B. Kapstein, "America's arms-trade monopoly: lagging sales will starve lesser suppliers," Foreign Affairs,May/June 1994, p. 15.

42 There is no information about whether civil defence expenditures have stopped altogether.

43 Policy Research Office, Heilongjiang Provincial Committee of the CCP, Heilongjiang shengqing {Conditions of Heilongjiang)(Harbin: Heilongjiang People's Press, 1986), pp. 657–674; Policy Research Office, Yunnan Provincial Committee of the CCP, Yunnan shengqing (Conditions of Yunnan)(Kunming: Yunnan People's Press, 1986), pp. 927–945

44 Editorial Board of Hunan Local History, Hunan nianjian, 1987 (Hunan Yearbook, 1987)(Changsha: Hunan People's Press, 1987), pp. 248–49.

45 Shanxi Provincial Statistical Bureau, Shanxi tongji nianjian 1989 (Shanxi Statistical Yearbook, 1989)(Beijing: China Statistical Publishing House, 1989), p. 685

46 Editorial Board of Wuhan Statistical Data, Wuhan tongji ziliao, 1949–1988 (Wuhan Statistical Data, 1949–1988)(Wuhan: Wuhan Municipal Statistical Bureau, 1989), pp. 678–79, 692–93; Editorial Board, Ha'erbin nianjian 1989 (Harbin Yearbook, 1989) (Harbin: Heilongjiang People's Press, 1989), pp. 388–89.

47 Hainan province was established in 1987.

48 The total local budgetary expenditure was 333 billion yuanin 1993. See Statistical Yearbook of China, 1994,p. 220.

49 Lei Qingshan, An Introduction to Reserve Forces,p. 55.

50 Harris, "Interpreting trends in Chinese defense spending," p. 678.

51 Lei Qingshan, An Introduction to Reserve Forces,ch. 7

52 For example, Wuhan Statistical Data, 1949–1988,and Shanxi Statistical Yearbook, 1989.

53 Ministry of Finance, Zhongguo caizheng tongji, 1950–1991 (China Finance Statistics, 1950–1991)(Beijing, Science Press, 1992), p. 115.

54 Statistical Yearbook of China, 1994,p. 217

56 This inference is based on the assumption that the PAP expenditure increased annually by 25% from 1991 to 1993.

57 Jin Zhude and Guo Tiejun, "Shilun zhenzhixin guofang" ("On profit-making defence"), in Beijing Society of Defence Economics, A Collection of Essays,p. 46; Academy of Military Science, Weilai de guofang jianshe (Future Defence Construction),Vol. 1 (Beijing: Military Science Press, 1990), p. 177.

58 Some of top leaders in relevant ministries and corporations hold military ranks, though. Yang Yongliang, An Introduction to Chinese Defence Economy,p. 248

59 Shambaugh, "Wealth in search of power," p. 27.

60 Fan Gonggao, Defence Economics,pp. 163–64.

61 Joseph P. Gallagher, "China's military industrial complex: its approach to the acquisition of modern military technology," Asian Survey,Vol. XXVII, No. 9 (1987), pp. 992–95.

62 The SIPRI once praised China as "the first country in the world which made 'sword into ploughshares' an operational and effective concept." See SIPRI Yearbook 1992,p. 249.

63 Shen Gang, "Zhongguo jungong shengchan zhuanxiang minyong shuping" ("Review of China's military conversion"), Renmin ribao,overseas edition, 10 March 1994, p. 4.

64 Mel Gurtov, "Swords into market shares: China's conversion of military industry to civilian production," The China Quarterly,No. 134 (1993), p. 214. Also see Paul Humes Folta, From Swords to Plowshares ? Defense Industry Reform in the PRC(Boulder: Wesrview, 1992).

65 Jane's Defense Weekly,19 February 1994, p. 31. Also see Nicole Ball, "Adjusting to reductions in military expenditure and defense procurement," in Geoffrey Lamb and Valeriana Kallab (eds.), Military Expenditure and Economic Development: A Symposium on Research Issues(Washington, D.C.: The World Bank, 1992), p. 72.

66 It is not clear how easily converted production lines can be switched over to military production when necessary. However, some top PLA leaders have been worried about the speed with which these could be reconverted to military production.

67 You Qianzhi, A Functional Analysis,pp. 98–108.

68 Ibid. pp. 102–111.

69 Tai Ming Cheung, "Elusive ploughshares: Chinese defense plants turn to civilian production," Far Eastern Economic Review,14 October 1993, pp. 70–71

70 China News Agency, 1 December 1994.

71 Zhang Yanzhong, "Guofang gongye zouxiang shichang jingji ruogan wenti de sikao" ("Thoughts on issues concerning how to integrate defence industries into market economy"), Zhongguo jungong bao {Chinese Defence Industry Tribune),5 July 1994, p. 3

72 Gurtov, "Swords into market shares," p. 230.

73 China spent a total of 14 billion yuanon military conversion between 1981 and 1995. See State Council News Office, "China's arms control." It needs to be noted that such subsidies usually do not come as budgetary allocations but take the form of bank loans at interest. See Shen Gang, "Review of China's military conversion," p. 4.

74 Statistical Yearbook of China, 1994,p. 214

75 In fact, "market value" is a very problematic concept when applied to the defence sector. See Kennedy, Defense Economics,ch. 7.

76 Liu Dajun, Chinese Socialist Defence Economics,pp. 143–209; You Qianzhi, A Functional Analysis,pp. 34–68, 147–173; Shi Shiyin, "Dangqian guofang keji gongye lilun yanjiu zhong de redian nandian" ("Hot issues and difficulties in the studies of defence R&D and production"), Zhongguo junzhuanmin bao (Chinese Defence Conversion Tribune), 28 April 1992, p. 3. Also see Gurtov, "Swords into market shares;" and John Frankenstein, "The People's Republic of China: arms production, industrial strategy and problems of history," in Herbert Wulf (ed.). Arms Industry Limited(Oxford: Oxford University Press, 1993), pp. 299–300.

77 Ellis Joffe, "The PLA and the economy: the effects of involvement," paper presented at IISS/CAPS conference "Chinese Economic Reform: The Impact on Security Policy," Hong Kong, 8–10 July 1994, p. 12.

78 Hyer, "China's army merchants," p. 1111.

79 Thomas J. Bickford, "The Chinese military and its business operations: the PLA as entrepreneur," Asian Survey,Vol. XXXTV, No. 5 (1994), p. 462.

80 Fan Gonggao, Defence Economics,pp. 296–98; Sun Bolin, "A new strategy," pp. 350–52.

81 Lin Jiajie, Jundui shengchanjingying guanlixue (The Management of PLA Production) Beijing: Navy Press, 1989), pp. 483–504.

82 Xinhua News Agency, domestic service, Beijing, 16 March 1994.

83 Arthur Ding, "Military production and defense budget in the People's Republic of China," paper presented at the 5th Annual AEI Conference on the People's Liberation Army, Staunton Hill, 17–19 June 1994, p. 6.

84 This was the latest year for which we have data in this regard.

85 Xu Guangyi (ed.), Dangdai Zhongguo jundui de houqin gongzuo (Contemporary Logistics Work of the Chinese Armed Forces)(Beijing: China Social Science Press, 1990), pp. 592–601; Gallagher, "China's military industrial complex," p. 993.

86 Xu Guangyi, Contemporary Logistics Work,pp. 601–606

87 Ibid. pp. 606–613.

88 Ibid. pp. 606–613

89 Hyer, "China's army merchants," p. 1108.

90 Many more military enterprises were engaged in foreign trade, e.g. the Navy's Songhai Corporation, the PAP's Anhua Corporation, the GSD's Huitong Corporation, the GPD's Tiancheng Corporation. Some group armies also had foreign trading companies (e.g. the 42nd Army's Great Wall Company in Huizhou, Guangdong), as did some military regions (e.g. the Nanfang Industrial and Trading Corporation of the Guangzhou Military Region). But these companies were generally not allowed to handle arms sales.

91 Interview with a well-informed former employee of NORINCO, March 1995.

92 John W. Lewis, Hua Di and Xue Litai, "Beijing defense establishment: solving the arms-export enigma," International Security,Vol. 15, No. 4 (1991), p. 87.

93 SIPRI Yearbook 1994,p. 484

94 Frankenstein, "The People's Republic of China: arms production, industrial strategy and problems of history," p. 311.

95 Kennedy, Defense Economics,chs. 1–2.

96 Ding, "Military production and defense budget," pp. 21–22; Hyer, "China's army merchants," p. 1111; Bickford, "The Chinese military and its business operations," p. 469.

97 Patrick E. Tyler, "Chinese military's business empire puts profits into commerce, not arms," New York Times,24 May 1994, p. A-6.

98 Interview with a high-level official, Beijing, 10 June 1994.

99 Bickford, "The Chinese military and its business operations"; Robert J. Skebo et at, "Chinese military capabilities: problems and prospects," and Shirley Kan, "China's arms sales: overview and outlook for the 1990s," both in the Joint Economic Committee, China's Economic Dilemmas;David Goodman, "Corruption in the People's Liberation Army," paper presented at IISS/CAPS conference "Chinese Economic Reform: The Impact on Security Policy," Hong Kong, 8–10 July 1994; Joffe, "The PLA and the economy"; Tai Ming Cheung, "Serve the people," Far Eastern Economic Review,14 October 1993; Ding, "Military production and defense budget."

100 Xin bao (Economic Journal),24 March 1995, p. 21; Reuter, Beijing, 28 March 1995.