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The military budget of the People's Republic of China (PRC) is the portion of the overall budget of the People's Republic of China that is allocated for the funding of the Department of Defense. This military budget finances employee salaries and training costs, the maintenance of equipment and facilities, support of new or ongoing operations, and development and procurement of new equipment.

Various studies

While the People's Republic of China claims to have a lower defense budget than other world powers, unofficial estimates place the total amount of spending higher than what the government claims. However, unofficial calculations about the military spending of the People's Republic of China tend to differ between organizations.

A recent RAND Corporation study states that Chinese defense spending is higher than the official number but lower than United States Department of Defense estimates. The defense spending of the People's Republic of China is estimated to be between 2.3-2.8% of China's GDP. This is 40-70% higher than official figures, but substantially lower than previous outside estimates. Chinese military spending nevertheless doubled between 1997 and 2003, nearly reaching the level of the United Kingdom and Japan, and it continued to grow with an annual rate of 10% during 2003-2005. If the RAND study is correct, the People's Republic of China could very well be the second highest spender by percentage of GDP, among the countries in the below tables; as well, it would surpass Japan and Russia in absolute terms.

A SIPRI study also comes to the conclusion that the military spending of the People's Republic of China is higher than the official budget, but its estimate is lower than that of the RAND study. Of the major powers, the People's Republic of China surpasses only Japan relatively and only Russia absolutely.

A comparison

Tabel 1. Absolute expenditures (in USD).

Country	Official budget	SIPRI	RAND	DoD
People's Republic of China (PRC)	$29.9 billion	$35.4 billion	$42.0-51.0 billion	$90.0 billion
United States	$419.3 billion	$455.3 billion	/	$419.3 billion
United Kingdom	$58.6 billion	$47.4 billion	/	/
Japan	$45.8 billion	$42.4 billion	/	/
Russia	$14.5 Billion	$19.4 billion	/	$70.0 billion
Republic of China (ROC, often referred as Taiwan)	$7.6 billion	/	/	/

Tabel 2. Relative expenditures (as % of GDP).

Country	Official budget	SIPRI	RAND	DoD
People's Republic of China (PRC)	1.4%	1.8%	1.9-2.4%	4.2%
United States	3.7%	3.9%	/	3.7%
United Kingdom	2.7%	2.2%	/	/
Japan	1.0%	1.0%	/	/
Russia	2.8%	4.3%	/	12%
Republic of China (ROC, often referred as Taiwan)	2.6%	/	/	/

Data: Official: 2005; SIPRI: 2004; RAND: 2004; DoD: 2005, except the data for the U.S. which is a 2006 estimate.

Note that this data have been adapted to the revision of China's 2004 GDP. This revision increased China's GDP number with 16.8% (or 283 billion USD). These figures were issued by the Chinese National Bureau of Statistics following a survey that aimed to gather more accurate data. Service industries accounted for 93% of the revision.

Note also that many observers claim that the yuan, the Chinese currency unit, is undervalued. Other observers also note that the revised number of China's GDP is still inaccurate. These uncertainties should be taken into account, especially becauses this increases the already existing uncertainty about China's military expenditures.

Hurdle in Sino-American relations

The People's Liberation Army's official budget for 2005 is $30 billion, but this does not include money used for foreign weapons purchases, military-related research and development, or the paramilitary People's Armed Police. Critics thus have labeled it a deliberately misleading low estimate. It is widely assumed and estimated that China's military budget exceeds this estimate.

In June 2005, the US published estimates that showed China's military spending exceeding 90 billion USD. This is a point of contention between the US-China relations. US United States Secretary of Defense Donald Rumsfeld has accused China several times of hiding its real military spending. He has also expressed concern over why China would increase its military expenditure with no apparent external threats, saying that it fuels suspicions about China's motives.

Extensive investment by the PRC in its navy is also very troubling to the United States. Many believe that China has a long term plan to transform the Chinese Navy (PLAN) into a blue-water navy capable of power projection, and of challenging China's neighbors, as well as the United States.

See also: Sino-American relations.

Hurdle in Sino-Japanese relations

Because of the discrepancy, the US is not the only country to have expressed alarm about Chinese military spending. In December 2005, Japan's Foreign Minister Taro Aso has said China was "a neighbour has expanded its military outlays by double digits for 17 years in a row, and it is unclear as to what this is being used for". Aso also commented that, "t is beginning to be a considerable threat." He said this in response to a question in a news conference about a comment made by the head of the Democratic Party of Japan (the main opposition party), Seiji Maehara, who had said he felt China was a threat.

See also: Sino-Japanese relations.

China's reaction

China justified its annual increase in 2005 by referring on one hand to the movement to establish independence for Taiwan, and on the other hand stressed that much of it was needed to boost soldiers' pay and cover the social costs of cutting 200,000 personnel. China also states that its defense spending is far lower than that of other major powers, in relative and absolute terms.

China's leaders have been trying to alleviate more generalized concerns abroad, particularly in the US and Japan, about Chinese nationalism and increased global competition for resources, in their speeches in 2005. This effort is believed to be echoed in the country's 2005 policy paper on the country's development strategy, called "China's Peaceful Development Road". This paper describes how soaring economic development in China would not pose a threat to other nations, but was instead creating opportunities and bigger markets for the rest of the world.

In March, 2006 China said that it further will increase its military spending by 14.7% in 2006 to 283.8 billion yuan (around 35.3 billion USD). China also added that much of the rise would be to cover fuel and salaries and that China was a "peace-loving nation". Jiang Enzhu, in line with Chinese statements of the past, added that the US spent a greater proportion of its economy on defense than did China and that China had "no intention of vigorously developing armaments".

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