China Plans Lowest Increase in Defense Spending in a Decade

March 4 (Bloomberg) -- China plans to boost defense spending by 7.5 percent, the slowest pace of expansion in a decade, as the government seeks to allay concerns about the country’s growing military might.

The increase to 532.1 billion yuan ($78 billion) compares with a 14.9 percent rise in 2009. China’s defense budget had been expanding by at least 10 percent a year for the past 10 years.

“The Chinese government has always paid attention to controlling the size of our defense spending,” National People’s Congress spokesman Li Zhaoxing, a former foreign minister, told reporters in Beijing today. “China is committed to a policy of peaceful development.”

China’s military spending is second only to the U.S., which aims to spend $636.3 billion this year, and is more than double India’s budget of $32.1 billion.

“While this year’s increase is down a bit, we are still talking about an increase that is much bigger than Western nations and one that allows for a significant military build-up to continue,” Andrew Davies, director of Operation and Capability at Canberra-based Australian Strategic Policy Institute, said in a telephone interview.

The country’s sustained military buildup comes as other governments in the region have either cut or held expenditure steady, raising concerns that a power imbalance was building. China has territorial disputes with neighbors including Japan, India and Vietnam, and regards Taiwan as a renegade province that will be reunited by force if necessary.

Relative Growth

“Their capability is increasing relative to others, and countries in the region are worried about that,” Phillip C. Saunders, a distinguished research fellow at the National Defense University’s Institute for National Strategic Studies in Washington, said by telephone. “A lot of people think China wants to be a dominant military power in the region.”

China’s military is starting to have a presence far from its shores. Last year Chinese navy ships protected sea lanes from Somali pirates in the Middle East.

“This was unprecedented strategically,” David Finkelstein, the director of China Studies at the Center for Naval Analyses in Alexandria, Virginia, said in a telephone interview. “This is the first time Chinese navy vessels operated outside of Asia.”

The country is also considering sending combat troops abroad for United Nations peacekeeping efforts, retired Chinese Navy Rear Admiral Yin Zhuo told reporters on March 3.

Taiwan Tension

China’s defense budget comes amid tensions with the U.S. over its plans to sell $6.4 billion of missiles, helicopters and ships to Taiwan. After the sale was announced in January, China said it was suspending military-to-military contacts and would sanction U.S. companies whose weapons were sold to Taiwan.

Saunders said this year’s actual spending could be as much as two and a half times the official budget, which does not include items including purchases of foreign weapon systems and pensions.

The U.S. says that China’s actual military spending may be more than twice the published budgets because it omits many items. In 2008 actual spending may have exceeded $140 billion compared with the stated budget of $58.8 billion, according to the Pentagon’s annual report to Congress on China’s Military Power, published last March.

“Although academic experts and outside analysts may disagree about the exact amount of military expenditure in China, almost all arrive at the same conclusion: Beijing significantly under-reports its military expenditures,” the Pentagon said in the report.

Economic Expansion

Chinese defense experts say the rise in spending is only natural given the country’s expanding economy and isn’t meant to threaten its neighbors.

“China does not seek to be a military superpower,” Yin said. China only wants a military “commensurate with our national interests and strength.”

That strength includes development of a new generation of long-range nuclear Intercontinental Ballistic Missiles capable of reaching the U.S., Saunders said.

The next big development for military watchers is whether China will build its own aircraft carrier, he said.

--Michael Forsythe. Frederik Balfour. With reporting by Chua Kong Ho in Beijing. Editors: Ben Richardson.