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China to boost military budget

17.7% increase justified to 'close technology gap'

BEIJING — China announced plans Tuesday to raise defense spending by 17.7 percent this year, in part to fuel its drive to catch up with Western militaries' high technology, citing "drastic" changes in the world military situation.

Finance Minister Xiang Huaicheng said a large share of the $17.1 billion military budget — which analysts say represents only a portion of total defense spending — would go to higher salaries and to improving weapons technology.

Xiang told delegates to the national legislature in its annual session that the increase, one of China's largest over the past decade, was needed "to adapt to drastic changes in the military situation of the world and prepare for defense and combat given the conditions of modern technology, especially high technology."

China has announced double-digit increases in military spending each year for 12 straight years as it seeks to modernize its poorly trained and equipped People's Liberation Army, the world's largest with 2.5 million troops. Last year, the military budget grew 12.7 percent. It increased by 21 percent 1995 and 18 percent in 1994.

The May 1999 bombing by NATO of China's embassy in Yugoslavia and the 1991 Gulf War added urgency to that drive. More recently, China has grown increasingly worried over U.S. efforts to build a missile defense system, which it warns would start a costly and dangerous arms race. China fears the technology could be given to Taiwan, allowing the island — viewed by Beijing as a renegade province — to defend itself against Chinese missiles.

Robert Karniol, Asia-Pacific editor at Jane's Defense Weekly in Bangkok, said China's actual defense spending was thought to be up to five times the official budget. "In the last white paper, the government denied that. Basically, we don't believe them," he said.

Lagging far behind the West, China is believed to be spending more than $1 billion a year to buy foreign military technology, much of it from Russia.

Among the weaponry it has bought from Russia are destroyers carrying supersonic anti-ship missiles considered a serious threat to U.S. warships based in Okinawa and to any U.S. navy attempt to aid Taiwan in the event of Chinese attack.

"It's bad news for the U.S. Navy," Erich Shi, senior editor at the Taiwan monthly magazine Defense International, said of the new budget.

Karniol said another reason for the big spending boost was that Beijing had to compensate the army for the divestiture of its vast commercial empire, in the past a large source of military income.

Foreign Minister Tang Jiaxuan said at a press conference Tuesday that the United States' proposed $310 billion defense budget dwarfed Beijing's.

"Although you could draw the conclusion from a couple of figures that China's defense spending has increased significantly, the defense budget is the smallest among major nations," Tang said.

Overall, China plans to increase government spending by 9.3 percent to $210.1 billion, raising the national deficit to a record $31.5 billion.

Xiang said the new budget would also continue heavy construction spending — used in recent years to stimulate domestic demand and keep annual economic growth at 7 percent or higher.

State-financed construction helped compensate for lower foreign investment and exports during the Asian financial crisis, which began in 1997, and now is likely intended to help make up for lower demand for Chinese goods due to the U.S. economic slowdown.

"There is some instability in world economic growth this year and this will affect China's exports," Xiang noted.

Planning minister Zeng Peiyan told the National People's Congress, which began its 11-day annual session Monday, that economic growth was expected to drop to about 7 percent this year from 8 percent in 2000.

In speeches to the Communist Party-controlled legislature, Premier Zhu Rongji and other top officials have outlined an ambitious program of boosting lagging rural incomes, ceding state ownership in favor of private enterprise and of revamping inefficient industries to compete in the global economy.

At the same time, they are promising help to the millions of workers and farmers who could lose their livelihoods as long-protected markets open to foreign imports with China's entry into the free-trading World Trade Organization, expected this year.