China's military spending increase to be smallest in 6 years

BEIJING -- China said Friday it will boost defence spending by about 7 to 8 per cent in 2016, the smallest increase in six years, reflecting slowing growth in the world's second-largest economy and a drawdown of 300,000 troops as Beijing seeks to build a more streamlined, modern military.

The People's Liberation Army, being trimmed to 2 million troops from 2.3 million, will still be the world's largest standing military. A robust armed forces remains a major priority for China's leaders, who have pushed an increasingly aggressive campaign to assert territorial claims in the South China Sea and East China Sea, raising tensions with its neighbours.

Spending at all levels of China's government is being curbed because of a drop in the economic growth rate, which fell to a 25-year low of 6.9 per cent in 2015 and is expected to decline further this year. For most years since 2000, China posted double-digit increases in military spending, and this will be only the third time in that period with a single-digit increase, including 2010's increase of 7.5 per cent.

The lower increase is a reflection of the "new normal" of more moderate economic growth that President Xi Jinping has been touting for the past two years, said Alexander Neill, a senior fellow for Asia-Pacific security for the International Institute for Strategic Studies based in Singapore.

Still, such spending is "nothing to be sniffed at" in comparison with much smaller defence budgets and anemic growth in military spending in most developed countries, Neill said.

"It's reflective of China's determination to maintain a robust and modern fighting force," he said.

In announcing the approximate rate of increase, Fu Ying, spokeswoman for China's ceremonial legislature, the National People's Congress, told reporters that China needs to consider its defence needs, economic development and the country's fiscal position in drafting the defence budget.

With last year's budget standing at $144 billion, an increase of 7 to 8 per cent would take defence spending for this year to between $154 and $155 billion -- still less than one-third of what the U.S. is proposing to spend this year. The exact figure will be revealed as part of the overall proposed national spending plan for 2016 to be presented at Saturday's opening of the NPC's annual two-week session.

The defence budget increased 10.1 per cent last year, despite falling growth, which raised concerns about whether such spending was sustainable.

China says its military is strictly for defensive purposes, but takes a broad view of what constitutes threats to its core interests -- including protecting maritime territory that is in dispute with neighbouring countries.

Its program of building islands on reefs and atolls in the South China Sea as part of its campaign to claim virtually the entire region has unnerved China's neighbours. Meanwhile, China continues a low-level program of confronting Japanese ships and aircraft near a set of contested East China Sea islands.

The modest size of the increase appeared to surprise many observers who had been expecting another double-digit increase in line with the military's higher profile.

"I expected growth would be between 12 and 15 per cent," said Ni Lexiong, a military expert at Shanghai's University of Political Science and Law, adding that any figure below 10 per cent would likely be "not enough" to meet the PLA's modernization goals.

Ni said the lower figure was likely due to both China's current economic realities and a desire to be seen as working for peace and stability in its immediate environment, despite ongoing feuds with its Southeast Asian neighbours, the U.S. and Japan.

The smaller increase comes as China is shifting more resources away from its massive land army and toward the navy and air force, along with cyber warfare and the missile corps.

Along with its structural changes, the PLA says pay raises are constantly needed to compete with the private sector to attract and retain educated personnel qualified to operate high-tech weaponry and computer systems.

China provides no breakdown of its defence budget and Pentagon and global arms bodies estimate actual military spending may be anywhere from 40 to 50 per cent more because the official budget doesn't include the costs of high-tech weapons imports, research and development, and other programs.

"The official numbers ... on the Chinese defence budget are pure fiction. They are meant to give a false sense of certainty where there is none," said Ian Easton, research fellow at The Project 2049 Institute, an Arlington, Virginia-based Asian security think-tank .

With inflation running at under 3 per cent this year, the spending jump may actually be bigger in real terms than during the last decade, when budget increases rose as high as 17.7 per cent, but inflation also topped 8 per cent at times.

The PLA's traditional mandate had been to guard China's borders and prepare for contingencies involving Taiwan, the self-governing island that Beijing has pledged to take control of, by force if necessary.

Newer missions, including U.N. peacekeeping operations, are now taking China's military much further afield, possibly even overseas on anti-terrorism missions as mandated by a new law.

Meanwhile, China's Asia-Pacific neighbours are responding with their own increased military spending.

Japan has already passed a record-high defence budget for 2016 of $41.4 billion, its second annual increase following 11 years of declines prior to hawkish Prime Minister Shinzo Abe's rise to power in 2012. Planes and naval vessels to counter China's growing capabilities top the Japanese military's shopping list.

India is spending big. New Delhi has expressed concern not only about its disputed land border with China high in the Himalayas, but also about the Chinese navy's growing presence in the Indian Ocean.

Vietnam, which almost alone among the South China Sea disputants has confronted China openly, has roughly tripled its defence spending since 2009, adding advanced new equipment such as Kilo-class submarines from Russia. Fellow claimant the Philippines is also seeking to fortify its largely ineffectual maritime defences, allocating at least $531 million this year to acquire patrol ships, air force planes and equipment for maritime security, officials said.

At $598.5 billion last year, U.S. defence spending far outstrips all other nations, although it comes against a background of anticipated flat or falling defence budgets in coming years. The omnibus appropriations measure passed by Congress in December calls for $573 billion for defence operations in 2016 and another $163 billion for Veterans Affairs Department programs.

Regarding the U.S., China should be in an excellent position to capitalize politically on its slower growth in defence spending, Neill said, especially when the U.S. raises its usual complaints about a lack of transparency in the Chinese system.

"China can come back and say, 'we've significantly cut spending,"' he said. "It's quite a shrewd move, really."