China's Defense Spending Thread

[weig2000]

So China is increasing military expenditure above the rate of GDP growth, breaking the long-standing connection between the two.

Does anyone have the exact year this trend began? Looking at SIPRI's figures for military expenditure as percentage of GDP would suggest that military expenditure growth has been in line with or below that of the overall economy since 2002.

As I said a couple of posts back, this rate of increase is BELOW the rate of GDP growth. Do you have a different way of comparing them?

if last year it was 1044 billion yuan and this year it is 1110 billion yuan, then that's a 6.4% increase. These should be absolute, nominal numbers, not adjusted for anything as there's no point in adjusting them.

GDP increases are always adjusted with various deflator modifiers, to account for inflation. So when GDP increases 6.9%, for example, that does not include inflation. it means that actual nominal yuan value increase is little over 8%, possibly close to 9%.

China's nominal GDP in 2016 was 74,412.7 billion yuan; nominal GDP in 2017 was 82,712.2 billion yuan. The nominal rate of increase in yuan is 11.15%, while the real growth rate is 6.9% officially, which implies a GDP deflator of 3.98%.

 

[Phead128]

The Chinese defense budget is "nominal budget", not "PPP budget". $1 USD can go a lot farther in China than in the US, due to significantly lower labor, material, logistics, and supply costs, as well as environmental regulations, etc...

If it's adjusted for the cost of manufacturing inside China or cost of employing/equipping a single Chinese soldiers, what is the "adjusted" Chinese defense budget look like?

 

[Franklin]

China changed the way it calculates GDP last year. R&D is no longer considered a cost of doing business but its now considered investments. More in line with international norms. That has helped to add 2% of GDP.

 

[weig2000]

China changed the way it calculates GDP last year. R&D is no longer considered a cost of doing business but its now considered investments. More in line with international norms. That has helped to add 2% of GDP.

Actually, China changed its GDP accounting method to take into account R&D spending in 2016, not last years, which resulted in a

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. This is a belated revision to be consistent with the UN-led international standard (2008 SNA), which has already been adopted by most major nations in the world including the US (the US revised up its GDP figure back in 2013 to account for the R&D spending).

China has not fully adopted the 2008 SNA standard yet - it appears to be phasing in the revisions gradually. When fully adopted, China's GDP will be further bumped up, probably anywhere between 5-10%. The item with the biggest impact would be the imputed rental cost of self-owned houses or apartments. Unlike a certain biggest democracy, China is not eager to raise the GDP numbers prematurely before they have collected sufficient and more accurate data.

 

[antiterror13]

Chinese Defense budget last year was US$151B and in 2018 will be $175B ... so in US$, it will increase by US$24B or 15.9% .. of course in Yuan will just increase 8.1%

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For comparison ... US$24B is equivalent to :
* Slightly more than half of total Indian/Japanese/UK defense budget
* About the same as Australian total defense budget
* 2x as Iran defense budget
* 2.5x Singapore/Taiwan/Pakistan defense budget
* 5x Vietnam defense budget

 

[SilentObserver]

Chinese Defense budget last year was US$151B and in 2018 will be $175B ... so in US$, it will increase by US$24B or 15.9% .. of course in Yuan will just increase 8.1%

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For comparison ... US$24B is equivalent to :
* Slightly more than half of total Indian/Japanese/UK defense budget
* About the same as Australian total defense budget
* 2x as Iran defense budget
* 2.5x Singapore/Taiwan/Pakistan defense budget
* 5x Vietnam defense budget

Major part of China's competitiveness and stability in many aspects comes from its ability to produce nearly everything domestically including the subsystems(and price it in yuan), including defence products. While some technologies are not yet at top tier levels (resulting in some imports), still they can produce nearly everything. If I recall they have the most complete industrial supply chain of any nation in the world. Once China masters some key areas like various advanced engine technologies, nominal budget won't really affect them as they won't need to import other than raw material.

Cheap labour is a multiplier for China's budget but I don't believe it is that significant. Defence related products are capital heavy compared to consumer products and other industrial products, the power of investment and technology far outweighs labour costs for high end systems. Though I still think China enjoys a military purchasing power multiplier similar (slightly lower) to the nominal and PPP difference of around 1.5x.

China is probably the only country outside the US that can potentially master all areas of high tech, even Russia has areas it just cannot catch up on due to a lack of a strong civilian sector to offload some of the capital expenditure and R&D. In areas like semi-conductors, China is the only other fully vertically integrated potential competitor to the US (though it would take some years before real competition begins). I think China is perusing Military-Civilian integration to do just that, build a strong defence industry on the backs of the civilian industries, vice-versa. I believe China's industrial policy and focus was fairly successful in building a strong foundation for China's future endeavours.

While Russia is the top dog in nuclear warheads and nuclear weaponry as recently revealed, it is severely lacking in many essential industrial areas. Luckily they will be able to trade oil and minerals for high precision machine tools and semiconductor fab machines with China, good synergy.

All in all China is the only real potential competitor to the US, it's going to be full spectrum, kinda exciting. I foresee great technological flourishing on all sides. Without a good competition, people loose sight of their goals, meaning, and get complacent.

 

[plawolf]

Further, because China makes the overwhelming majority of weapons domestically, when the Chinese government spend on defence, it’s largely having a similar effect as government stimulus spending, or even infrastructure spending.

The money stays in the Chinese economy, keeping companies producing and people employed. This is most evident in the naval field.

While warships and fighter jets do not yield direct economic returns, if you develop your industry to a sufficient level, you can win export orders that do generate an income. Just look at UCAVs as a prim example.

Not only is the Chinese defence budget larger than most others, it is also extremely efficient as a result of the self sufficiency. Such that there is less ‘leakage’ of defence yuan out of the home economy.

In that regard, Chinese defence is modelled firmly on America’s defence economy, although without anything like the corporate political power to have the tail starting to wag the dog, as is increasingly happening in the US.

 

[Jura The idiot]

now noticed the tweet

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There is nothing suspicious in China’s military budget rise.

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[antiterror13]

Basically twice of 2011 budget

 

[Lethe]

Thanks for posters clarifying nominal vs real GDP growth, was confused by unfamiliar "GDP deflator" term.