China Eases Foot Off Gas on Military Spending

By Jeremy Page and Chun Han WongPoliticsDow Jones Newswires

China's defense budget will expand by about 7% this year, the slowest pace this decade, but a senior Chinese official said it was still enough for Beijing to prevent "outside forces" from interfering in its territorial disputes.

Continue Reading Below

Chinese military spending for 2017 would be equivalent to about 1.3% of the country's economic output, roughly the same proportion as in recent years, said Fu Ying, a spokeswoman for the national legislature, at a news conference Saturday.

Ms. Fu didn't provide other details on this year's defense expenditure, expected to be included in an overall budget report Sunday, the opening day of an annual meeting of the legislature, known as the National People's Congress.

The increase in spending still gives China the world's second biggest defense budget after the U.S. It continues a robust modernization program that over the past quarter-century has transformed the Chinese military into a formidable regional power and burgeoning global one, with outlays going to build naval, air force and other capabilities that allow Beijing to project power far from the Chinese mainland.

By lowering the rate of growth, however, President Xi Jinping is keeping military spending roughly in step with the overall economy and avoiding a costly arms race with the U.S. following President Donald Trump's proposal last month to do away with previous spending limits and increase the Pentagon budget by about 2% from current levels.

Ms. Fu, speaking to reporters, dismissed concerns voiced by the U.S. and other foreign governments about China's military spending and operations, saying Beijing isn't responsible for recent conflicts in the world and wants a peaceful settlement of its territorial disputes in the region.

"At the same time, we need the ability to safeguard our sovereignty, and our rights and interests," Ms. Fu said. "In particular, we need to guard against outside forces intervening in these disputes."

While she didn't name the outsiders, Beijing often accuses the U.S. of interfering in the maritime disputes China has in the East China Sea with Japan and in the South China Sea with Vietnam, the Philippines and others.

Tensions in the South China Sea have been particularly acute in the past three years, as China has built seven artificial islands the U.S. and its allies fear could be used to enforce Beijing's extensive maritime claims in the area.

Ms. Fu said recent talks with China's neighbors had eased those tensions, a position Beijing has repeated often in recent weeks as Mr. Trump has suggested he will take a tougher approach toward Beijing on trade and territorial issues.

An American aircraft carrier, the USS Carl Vinson, has been patrolling in the South China Sea for much of the past two weeks. Some U.S. officials are pushing for the Navy to send ships and aircraft to conduct regular "freedom of navigation" operations near China's artificial islands.

"As to how the situation develops in the future, that depends on U.S. intentions," Ms. Fu said. "American actions in the South China Sea have a definite significance as an indicator of how the wind is blowing."

She stopped short of criticizing Mr. Trump's proposal for raising U.S. military spending, saying only that the Pentagon budget was already huge. She noted North Atlantic Treaty Organization members were being urged to spend 2% of GDP on defense--a higher level than China.

After increasing military spending at double-digit rates for most of the past 25 years, the Chinese government began slowing the pace in recent years as the economy began downshifting. In 2016, its defense expenditure was projected to expand by 7.6 % to about $146.6 billion.

Still, the growth in spending is faster than the overall economy, reflecting Mr. Xi's determination to continue the military modernization program, according to experts.

Many experts estimate China's actual military spending is significantly higher than the published budgeted figures, which aren't thought to include big ticket items such as weapons purchases.

China's real military spending will almost double between 2010 and 2020, reaching $233 billion a year by the end of the decade, according to a report in December by IHS Jane's, a provider of defense information and analysis.

The official defense budget includes significant items such as salaries and the cost of a plan unveiled by Mr. Xi in 2015 to cut the armed forces by 300,000 troops and overhaul its Soviet-modeled command structures, experts said.

With troop numbers declining, the 7% increase suggested "funding is still being channeled towards investment in new equipment and the wider process of modernizing" the Chinese military, said Craig Caffrey, an expert on defense budgets at IHS Jane's.

Mr. Caffrey said the increase was likely to more than match growth in military spending in all other Asia Pacific countries combined in 2017.

"China continues the consistent multidecade investment that has already given it what is undisputedly the second-largest defense budget in the world," said Andrew Erickson, an expert on China's military at the U.S. Naval War College.