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2 China's balancing act: guns vs
rice By Michael S Chase
The true level of China's current defense
budget is difficult to calculate, but projecting
future trends in Beijing's military spending
entails struggling with even greater uncertainties
and complexities. Forecasts of Chinese military
spending over the next 10-20 years vary widely
depending on the methods employed, and underlying
assumptions about factors such as China's future
economic performance and the tradeoffs the
country's leaders will face as they decide how to
balance military
modernization against other
budgetary requirements [1].
In 2005, the
US Department of Defense predicted a possible
three-fold or greater increase in China's defense
spending over the next 20 years, which would place
its military budget at $210-$315 billion (in
constant 2005 US dollars) or more in 2025 [2]. In
contrast, a RAND Corporation report released at
about the same time concluded that slowing
economic growth and rising domestic pressures to
increase social welfare spending would probably
impose greater constraints on China's future
defense expenditures. The RAND study projected
that in 2025 Chinese defense spending would reach
about $185 billion (in constant 2005 US dollars),
still an impressive sum, but one that is
considerably lower than the Department of Defense
forecast [3].
These divergent estimates
reflect considerable uncertainty not only about
future Chinese economic performance, but also
about how China's leaders will choose to allocate
budgetary resources when faced with competing
priorities. Military modernization is certainly a
very high priority, as reflected by about a decade
of double-digit budget increases for the People's
Liberation Army (PLA) since the late 1990s.
Moreover, the importance that Beijing attaches to
military modernization has also been underscored
by the statements of senior Chinese Communist
Party (CCP) leaders. For example, addressing
members of the PLA delegation to the March 2006
National People's Congress (NPC) meeting,
President Hu said, "We should strive to improve
the capability of the armed forces to deal with
crisis, maintain peace, contain wars and win
victory in possible wars" (PLA Daily, March 12,
2006). Hu urged the PLA to intensify its efforts
to equip itself with information technology,
improve its combat readiness, push forward
organizational and administrative reforms and
stressed the importance of developing a capability
for rapid and effective national defense
mobilization.
How much defense spending
is enough? Interestingly, despite the
increased priority accorded to military
modernization since the late 1990s, some PLA
officers and Chinese scholars assert that Beijing
is still not devoting enough resources to national
defense. The comments of PLA deputies to the 2006
sessions of the NPC and Chinese People's Political
Consultative Conference (CPPCC) perhaps suggested
some dissatisfaction with the level of resources
devoted to the military. According to a report in
the PLA's official newspaper, one PLA officer
commented: "The sustainable development of
national defense and military modernization must
draw on and cash in on the results of national
economic development and must ensure a coordinated
development between the army building and the
national development" (Liberation Army Daily,
March 13, 2006).
Several think tank
analysts and scholars have also called for even
greater increases in military spending. Hu Angang,
an economist at Tsinghua University, argued that
China is not spending enough on defense,
especially considering the country's rapid
economic development and recent trends in
cross-Strait relations. Hu stated: "China's
military build-up has greatly lagged behind the
development of the economy, so that national
defense construction has not been in accord with
the economy's development" (Reuters, June 6,
2006). Similarly, Shen Dingli, Executive Deputy
Director of the Institute of International Studies
at Fudan University in Shanghai, has argued that
China needs to devote even greater resources to
military modernization to increase its ability to
compete with the United States. In particular,
Shen argues, China needs a larger military budget
"to avoid being bullied" (Shanghai Dongfang
Zaobao, February 7, 2006).
Costs of
China's domestic problems The calls for
still greater defense spending are likely to be
counterbalanced by growing demands for government
spending to cope with a wide range of social
problems that have arisen as collateral
consequences of Beijing's economic reform strategy
during the Deng Xiaoping and Jiang Zemin eras.
Indeed, defense spending eventually may have to
compete with domestic spending on problems such as
a growing income gap, the glaring inadequacies of
the Chinese healthcare system, worsening
environmental degradation and the rising social
unrest fueled by these other problems, especially
if economic growth eventually slows down.
Many of these issues resulted from the
CCP's strategy of economic reform accompanied by
only limited political reform, which produced
impressive growth rates and kept the CCP in power,
but at the expense of creating a host of social
and political problems and eroding the capability
of the Leninist party-state to cope with these
unintended consequences of reform. In particular,
the CCP pursued a strategy that emphasized
achieving the fastest possible overall growth
rates without much regard to the uneven
distribution of the benefits of economic reform
and opening. The uneven development that resulted
risks social unrest and political instability [4].
Dealing with the income inequality problem, which
many Chinese social scientists view as potentially
destabilizing, is likely to prove very
challenging, especially since revised economic
estimates suggest that the income gap may be even
worse than many economists previously assumed
(International Herald Tribune, December 26, 2005).
China's deepening healthcare crisis
represents another serious domestic challenge that
will likely begin to compete for a larger share of
government spending. The collapse of the socialist
healthcare system has left the vast majority of
rural residents and even a considerable proportion
of the urban population without access to adequate
healthcare services due to lack of insurance and
the rising cost of medical care, which many people
in poorer areas simply cannot afford. The reforms
China has implemented thus far have been unable to
effectively deal with these problems.
China also faces serious environmental
challenges such as deforestation, air and water
pollution, desertification and flooding.
Pollution, in particular, is causing serious
health problems, contributing to rising social
unrest and imposing enormous economic costs [5].
The World Bank has estimated that China's
environmental problems are already so severe that
they cost about 5.8% of China's GDP every year
[6]. This is in large part the result of the
healthcare problems that are caused by worsening
air and water pollution. Considering that 16 of
the world's 20 most polluted cities are located in
China, this is a particularly daunting challenge
for leaders in Beijing [7].
The Chinese
government recognizes the problem, but seems to
have had limited success enforcing environmental
laws at the local level, where many officials
subvert the regulations. Consequently, according
to a recent report by the PRC's State
Environmental Protection Administration (SEPA),
the environmental situation is continuing to
worsen. As the report laments, "The conflict
between environment and development is becoming
ever more prominent. Relative shortage of
resources, a fragile ecological environment and
insufficient environmental capacity are becoming
critical problems hindering China's development"
[8].
Another closely related problem that
is drawing the attention of Chinese leaders is
social unrest, which has been sparked in many
cases by the side effects of China's economic
growth strategy. Drawing on public security
sources that detail internal debates over unrest,
political scientist Murray Scot Tanner finds that
dramatic increases in mass unrest over the past
decade have turned social protest into a "daily
phenomenon” in China [9]. Ministry of Public
Security data indicate that the number of "mass
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