The Military Rise of China: The Real Defence Budget Over Two Decades/ Peter E. Robertson

Despite growing tensions over China’s military build-up and modernization, there is little understanding of China’s defense budget. Published estimates vary implausibly from one quarter of the USA’s defense budget to near parity, and there are very few attempts to understand how its size or composition has changed over time. This paper uses index number techniques to quantify China’s real defense spending over time and relative to the USA. I construct price deflators and show that overall growth has been slower than thought, but also that there has been extremely rapid growth in real military equipment spending that has transformed China’s defense forces. China’s real defense purchasing power is also found to be 60% larger than commonly used market exchange rate estimates and equal to 59% of the USA’s defense budget in 2021. Notwithstanding the rapid growth in equipment, the high relative purchasing power mostly reflects China’s far larger number of active personnel.

MILITARY SPENDING, INTERNATIONAL SECURITY, CHINA, PURCHASING POWER, NEWARTICLS