China’s 2022 Defense Budget: Behind the Numbers

Introduction

At the fifth session of the 13^th National People’s Congress in early March, the Chinese government announced a defense budget of 1.45 trillion yuan (about $229 billion) for fiscal year 2022, which is a 7.1 percent year-on-year increase from 2021 (Xinhua, March 5). After years of double digit increases in the 2000s and early 2010s, this is the seventh consecutive year that China’s defense spending has grown by single digits. Nevertheless, China has moved up in the global defense spending rankings, and is now second only to the United States in expenditures. In the Indo-Pacific region, China’s military spending increasingly dwarfs that of its neighbors. For example, China now spends more on its military than Japan, South Korea, the Philippines, and India combined (Stockholm International Peace Research Institute [SIPRI], April 2021). For instance, at $229 billion, China’s military spending is three times that of India’s $70 billion figure for 2022 (The Economic Times, March 5).

An increase in Beijing’s defense budget raises red flags for China’s neighbors and the U.S. given the growing tensions over Taiwan, the South China Sea, the East China Sea, and the Sino-Indian border dispute in the Himalayas. However, in Chinese eyes, as Beijing-based military expert Wei Dongxu argues, the budget is “proper and reasonable” (Global Times, March 5).

Reading Between the Lines of the “Hike” in China’s 2022 Budget

While the increase in Beijing’s defense budget is not surprising, it is still alarming. At a time when every other nation is struggling to muster resources for defense due to the global economic slowdown precipitated by the COVID-19 pandemic, China has been the exception in sustaining high military expenditure increases. Consequently, the continued significant increase in China’s 2022 defense budget can be assessed from three perspectives: Beijing’s strategic intentions; the People’s Liberation Army’s (PLA) modernization goals, and China’s external security environment. Here, the first two parameters are relatively static, while the third is more dynamic.

I. Mapping China’s Strategic Intentions

Continued increases in military budgets are a direct outcome of Beijing’s objective to enhance the military training, advance the capabilities, and increase the combat readiness of the PLA as guided by the military strategy of “winning informationized local wars” (信息化条件下的局部战, Xinxi hua tiaojian xia de jubu zhan) (China Brief, July 2, 2015). In undertaking these efforts, China’s intentions are three-fold: 1) to build a strong military that is commensurate with both its growing international standing and its national security and development interests; 2) to close the gap between the PLA and the world’s leading militaries; and 3) to compensate for the deficiencies in its military’s capabilities to wage modern warfare (People’s Republic of China State Council, July 24, 2019). These guideposts are further underscored in President and Central Military Commission Chairman Xi Jinping’s 2022 “mobilization order.” In issuing this year’s mobilization directive, Xi called on the PLA to closely follow the evolution of technology, warfare, and rivals; redouble efforts to better combine training with combat operations; and strengthen systematic training and use of technologies to develop an elite force that is capable of fighting and winning wars (Xinhua, January 4).

The current roadmap for the PLA under the 14^th Five-Year Plan (2021-2025) is to make “significant strides in the modernization of national defense and armed forces.” The agenda includes intensifying efforts to modernize military logistics and asset management systems, build a modern weaponry and equipment management system, strengthen innovation in defense science and technology, train competent personnel in the new era, and promote the overall high-quality development of the military (PRC State Council, March 12). In terms of military equipment, China is likely to launch its third aircraft carrier, increase production of the J-20 stealth fighter jet, and continue to modernize its nuclear arsenal in 2022 (Global Times, March 5).

II. Eyes on the Twin Centenary Goals

Defense budget increases align with the fulfilment of the two centenary goals set by Xi for the military in order to achieve national rejuvenation. In his October 2017 address to the 19^th Party Congress, Xi set forth the objective that by 2035, the PLA’s modernization is to be “basically completed,” and that by mid-century, the PLA is to be “fully transformed into world-class forces” driven by the logic that “a military is built to fight” (China Daily, November 4, 2017). In addition, in 2020, the CCP added a new shorter-term benchmark to coincide with the PLA’s centennial in 2027, which is to ensure that the military is on track to achieve its modernization goals later in the century (Global Times, October 31, 2020; China Brief, March 26, 2021). Continued defense budget increases support China’s efforts to further develop its military capabilities and remain on track to meet Xi’s ambitious modernization goals for the PLA.

III. Gauging the “Trend” of the External Security Environment

In Xi’s view, China’s security environment is faced with “Three Trends” and “Three Major Dangers.” Here, the “Three Trends” exemplify the external environment, the constantly changing international situation, and continually emerging opportunities and challenges; while the “Three Major Dangers” are that of China being “invaded, toppled, and separated” by losing Taiwan, Tibet, and/or Xinjiang.

Beijing’s strategic calculus in pushing through another major defense budget increase in 2022 is predicated on the assessment that the nation is navigating an increasingly challenging external security environment. Given the timing, the budget increase coincides with three developments that challenge Beijing. First, the recently released U.S. Indo-Pacific Strategy categorically states that “the Indo-Pacific faces mounting challenges, particularly from the PRC,” and as a result, will remain Washington’s primary theater of strategic focus (The White House, February). Second, the Russia-Ukraine conflict has acted as a catalyst for China as well as many other countries such as Germany, Poland, Sweden, Romania, and Denmark to boost defense spending. Third, China’s increasing military strength enhances its ability to safeguard its territorial and maritime claims in regions of strategic importance, including the South China Sea, East China Sea, and along the Himalayan border with India, which has been a key priority for Xi. For example, last year, the NPC passed new legislation prescribing all necessary measures to protect the PRC’s “sacred and inviolable” sovereignty and territorial integrity (Xinhua, October 23, 2021).

Per state media, Beijing’s perception that it inhabits an increasingly challenging international security environment intensifies “demands for national defense capability enhancement”  that China “needs to continue to increase” its budget in order to achieve (People’s Daily Online, March 4). As a result, according to PRC military expert Song Zhongping, the 7.1 percent increase in 2022 should not be considered high relative to the large size of the PLA, the immense needs to upgrade its weapons and equipment, and China’s growing external security challenges (Global Times, March 5).

A “Reasonable and Transparent” Increase or Cause for Worry?

With no room for compromise on defense spending, China is likely to continue to steadily increase its military expenditures in the coming years. In Beijing’s view, the budget is “reasonable” and in line with the overall level of economic development. As Zhang Yesui notes: “Maintaining a proper and steady increase in defense spending is needed to safeguard our [China’s] sovereignty and development interests, fulfil China’s international responsibility and obligations, and promote the transformation of the Chinese military with Chinese characteristics” (Global Times, March 5, 2021).

Furthermore, China has pushed back against international skepticism over its defense spending figures claiming that expenditures are “open and transparent.” In its Defense White Papers, China’s defense expenditure is broken down by three categories: personnel expenses, training and sustainment, and equipment spending (PRC State Council, July 24, 2019). As noted above, China is the most transparent about the first category and the least transparent about armaments spending. Very little is known about the costs of weapons and equipment produced by the Chinese defense industry or the amount of money allocated to research and development. For instance, in 2020, for the first time, four Chinese companies—Aviation Industry Corporation of China (AVIC), China North Industries Group Corporation (NORINCO), China Electronics Technology Group Corporation (CETC), and China South Industries Group Corporation (CSGC)—had a combined arms sales of $54.1 billion, ranking in SIPRI’s Top 20 global arms sales list, which has previously been dominated by American, European, and Russian companies (SIPRI, January 27, 2020).

The lack of transparency on China’s defense spending raises concern over China’s strategic intentions. However, China negates the “hidden military spending” theory on the grounds that it has been submitting reports on its military expenditure to the United Nations every year since 2007. Zhang Yesui posits that “[f]rom where the money comes from to how the money is used, everything is accounted for” (Xinhua, May 21, 2020). However, it is also important to note that China submits the “Simplified Reporting Form” to the UN with no “breakdowns” as opposed to the “Standard Reporting Form.” [2] Lastly, Beijing maintains that it is committed to “peaceful development” and defends the “growing budget” by suggesting that “China does not export revolution, hunger or poverty and does not interfere in other countries internal affairs” (Reuters, March 5, 2019). However, what China calls “reasonable” may well be quite worrisome for others.

Dr. Amrita Jash is an Assistant Professor at the Department of Geopolitics and International Relations, Manipal Academy of Higher Education (MAHE), India. She was a Pavate Fellow at the Department of POLIS, University of Cambridge. Dr. Jash has authored the book on The Concept of Active Defence in China’s Military Strategy (2021).

Notes

[1] Sun Jianguo, “Upholding the Chinese Approach to National Security,” China Institute of International Studies, June 11, 2015, https://www.oriprobe.com/journals/caod_263/2015_2.html.

[2] Adam P. Liff and Andrew S. Erickson, “Demystifying China’s Defence Spending: Less Mysterious in the Aggregate,” The China Quarterly, vol. 216, 2013, p. 815.