China’s Military Spending on Sharp Upward Trajectory
By Richard Sammon
Kiplinger Business Forecasts
Vol. 2007, No. 0518
Published: 14 May 2007

A growing worry for Washington: China’s sharply rising military budget. Beijing’s spending on military programs and forces will jump 15% to 20% a year for the next several years as production begins in costly programs that have been in the development and testing stage for the past several years. An increase at that level is consistent with China’s economic growth and its military ambitions and prowess in East Asia and the Pacific. While long classified, China’s military budget is thought by Western intelligence analysts to be about $150 billion in U.S. dollars this year, fully three times what recent official Chinese statements declare. That’s still far below the $650-billion U.S. defense spending plan on tap for 2008, but China’s projected increase – a doubling in six years – is a cause for concern.

China’s procurement goals cover several areas: Enhanced air defenses and air radar, a proposed mobile intercontinental ballistic missile launch system, new submarines, destroyers and aircraft carriers, more combat jets, military transportation equipment, covert defense communications and replacement satellites. China is thought to currently possess an arsenal of 20 to 30 nuclear missiles in stationary silos.

China’s large appetite for military expansion will prompt the U.S. and the European Union (EU) to beef up enforcement of military export controls on sensitive technologies, namely hardware and software with potential military applications. That could have the effect of delaying approval of export licenses for some U.S. companies, such as for sophisticated electronics and aerospace products, for instance. It will also lead to even more pressure from the U.S. on the EU not to lift its ban on military sales to China, but France and Germany want to explore the possibility of limited sales. It remains unknown what and how much Russia sells to China.

The fast rise in defense spending also will add weight to arguments for more U.S. military exports and support, such as joint training exercises, to benefit Taiwan, South Korea and Japan, especially Navy- and Air Force-related sales. Annual government-to-government foreign military sales in the region will probably double as a result, from about $2 billion to $4 billion, in a few years.