Why India should be concerned about China's rising defence expenditure

The National People's Congress (NPC) - China's rubber stamp Parliament - has given the People's Liberation Army (PLA), the navy (PLAN) and the air force (PLAAF) something to cheer about. It has hiked the defence budget for 2015-16 by 10.10 per cent to US$ 145.68 billion (Yuan 888.69 billion).

On the other hand, despite the increasing threats and challenges, the annual increase in India's defence budget has barely kept pace with inflation and the steadily declining value of the Rupee. At Rs 2,46,727 crore for 2015-16 (US$ 39.80 billion), India's defence budget is about one-fourth of China's declared budget.

This is the fifth consecutive double-digit hike in China's allotment for defence despite steadily declining growth rates. It is a clear signal from the regime led by President Xi Jinping and premier Li Keqiang that China will continue its relentless march towards becoming the pre-eminent military power in Asia. It also signals an enduring commitment to the strategy of military assertiveness in dealing with territorial disputes.

 Last year, while presenting the budget, premier Li Keqiang had said, the government would "strengthen research on national defence and the development of new- and high-technology weapons and equipment" and "enhance border, coastal and air defences...We will comprehensively enhance the revolutionary nature of the Chinese armed forces, further modernise them and upgrade their performance, and continue to raise their deterrence and combat capabilities in the information age".

The marked emphasis on making China a maritime power is something that will set alarm bells ringing in Asian capitals. Li said, "China is a major maritime country. We need to draw up and implement a strategic maritime plan, develop marine economy, protect the marine environment, resolutely safeguard China's maritime rights and interests, properly handle maritime disputes, actively expand bilateral and multilateral maritime cooperation and move close to achieve the goal of building China into a maritime power".

China's neighbours and governments across the world remember the spectacular anti-satellite (ASAT) test successfully conducted by China in January 2007. They see pictures of the Liaoning aircraft carrier undergoing sea trials and are aware of plans to acquire more submarines. The acquisition of SU-30 long-range fighter-bombers with air-to-air refuelling capability, the development of anti-ship ballistic missiles and a growing footprint in the South China and East China Seas have not gone unnoticed. A 21st century arms race is clearly underway.

China's actual military expenditure is far higher than the officially published figure. In response to international calls for greater openness, one Chinese military official wrote: "Transparency is a tool of the strong to be used against the weak." It is this lack of transparency that has fuelled speculation about an arms race. Complete transparency in defence spending has seldom been a strong point even among countries that take pride in being liberal democracies. Totalitarian regimes like the one in China do not follow egalitarian accounting practices, neither do they have a real grip on all the details of what they actually spend.

Prof. David Shambaugh, a Washington-based China analyst, lists several items of expenditure that do not figure in China's official defence expenditure (ODE): "China's official defence budget does not appear to include all funds for (1) Chinese-made weapons and equipment production (as distinct from procurement); (2) some RDT&E (research development test and evaluation) costs; (3) the paramilitary People's Armed Police; (4) funds for weapons purchases from abroad; (5) funds directly allocated to military factories under the control of the GAD (General Armaments Department); and, (6) military aid." This year China proposes to spend US$ 25.15 billion (Yuan 152.19 billion) on internal security. The actual expenditure on this count has normally been much higher.

China's ODE overtook that of Japan (US$ 42 billion) and Germany (US$ 37.5 billion) in 2007, but at that time still lagged behind the United Kingdom (US$ 62.38 billion) and France (US$ 50.78 billion) whose economies are now much smaller than that of China. It is still a small fraction - less than one-fourth - of the United States' annual defence budget of approximately US$ 600.00 billion.

Ted Galen Carpenter and Justin Logan point out that greater transparency would be in China's interest: "China needs to recognize that it gains little from opacity in comparison to what it loses…"  Compared with China, India's budgetary transparency is indeed noteworthy.

China's military aims and modernisation strategy have been enunciated in its White Papers on National Defence: "... a three-step development strategy in modernising China's national defence and armed forces, in accordance with the state's overall plan to realise modernisation. The first step is to lay a solid foundation by 2010, the second is to make major progress around 2020, and the third is to basically reach the strategic goal of building informationised armed forces and being capable of winning informationised wars by the mid-21st century."

With the improved logistics infrastructure in Tibet, including the Gormo-Lhasa all-weather railway line, newly constructed road axes with good lateral roads linking them and many new air strips, the Chinese are now capable of inducting larger numbers of troops into Tibet in a shorter time frame and sustaining them over longer durations. India needs to invest more in improving the logistics infrastructure along the border with Tibet, in hi-tech intelligence, surveillance and reconnaissance (ISR) systems for early warning and in generating land- and air-based firepower asymmetries to counter China's numerical superiority. The Indian army is in the process of raising and suitably equipping a mountain strike corps to carry the fight into Chinese territory if it ever becomes necessary.

All of these capabilities will require a large infusion of fresh capital. The present defence budget - 1.78 per cent of the GDP - is too low to undertake the capacity building that is necessary to deter China from contemplating another border war. India's growing economy should be able to sustain a 1.0 per cent hike in the defence budget over a period of three to five years, especially if the government simultaneously shows the courage to reduce wasteful subsidies.