China pushes on defense. Here is the military budget for 2021

With a concise statement full of references to the United States, the Chinese Ministry of Defense announced the budget for 2021: 209 billion dollars, + 6.8% compared to last year. The Dragon is keen to highlight the budgetary differences on the US, but if we consider the purchasing power, the data takes another turn

“Only” 209 billion dollars, + 6.8% compared to last year. It is the Chinese military budget for 2021, released today by a statement in English from the Ministry of Defense of Beijing. Concise statement full of references to the United States, in relation to which the Dragon is keen to highlight the budget differences.


“China’s annual defense budget will maintain single-digit growth for the sixth consecutive year, increasing by 6.8% in 2021.” It will therefore be equal to 1.35 billion yuan, about 209 billion dollars, “a quarter of that of the United States, equal to 740.5 billion for 2021”, the Beijing Defense is keen to specify. Another specification: “As the second largest bursar in the world and a populous country, the per capita spending plans for Defense will be less than a thousand yuan”. More: “China applies strict fiscal allocation mechanisms and defense budget management, mainly assigned to personnel, training and exercise, and equipment”. Another reassurance: “China has voluntarily cut its Armed Forces by about 4 million units since 1978”.


The comparative logic with the United States stands out, a symptom of how Beijing perceives itself as a strategic competitor of the Americans. Indeed, the dry budget is a quarter of the American one (so no growth is expected this year), which remains the largest in the world. However, what the press release does not explain is that these data should be evaluated in the light of purchasing power parity (ppp), i.e. calibrated on the actual spending capacity with respect to labor costs, prices of materials, products and services, all information. which is not always easy to find in the case of China. To overcome the difficulties, last year Defense One he made a conversion of the Chinese budget from yuan to dollars, but applying a market exchange rate, and thus noting that in 2017 the military budget of Beijing actually covered 87% of the purchasing power of the American one.


In any case, even the latest report by the Swedish Sipri institute places China in second place among the countries that spend the most on defense in the world, just behind the United States, ahead of India, Saudi Arabia and Russia. In 2019, the Dragon would have spent 261 billion dollars, + 5.1% compared to 2018, + 85% in ten years. In the report two years ago, the + 5% recorded by Sipri had represented the smallest increase since 1995 on an annual basis due to the link that the Dragon maintains between economic growth and military spending. The military budget goes all to national companies, not surprisingly that has been growing for years. Only in 2020 the authoritative Sipri was able to report for the first time the data of the major companies of the Dragon in the Defense sector, until then excluded from the rankings due to the lack of data on which to make reasonable estimates. Digging deep into “credible financial information”, Sipri reconstructed the sales of four giants a year ago: Avic, Cetc, Norinco and Csgs. In December, the data merged into the traditional report on the world’s top arms sellers, placing the top three companies in the global Top 10, with an overall growth of 4.8% between 2018 and 2019.


The strategic reference of Beijing (at least public) remains the document released in July 2019, entitled “The National Defense of China in the new era”. About fifty pages in English, just to raise ambitions and claim interests to competitors, dispelling all doubts. The goal, clearly written, is to “fully advance in the modernization” of all segments of the Armed Forces by 2035, so as to have a “world-class” military instrument by 2050. The same document is quoted today by the Chinese defense statement, to highlight that the objectives have not been changed by the pandemic.


Indeed, the Covid effect had not already been felt in last year’s budget. For 2020, Beijing confirmed 1.268 billion yuan in May, an increase of 6.6% compared to 2019. In April of last year, in full pandemic, the Chinese Navy welcomed, among other things, the launch of the second amphibious assault unit Type 075, confirming after the first (launched in September less than a year after cutting the keel) more than rapid construction times and returning to Washington to feed concerns about an increase in deterrence in the Pacific.


It is no coincidence that the latest budget approved by the US Congress (for 2021) has included 7 billion for a new “Pacific deterrence iniative”, to be used in two years. Their use will also depend on the work of the China Task Force announced by Joe Biden on his first visit to the Pentagon. Guided by the expert Ely Ratner, will have to elaborate strategic suggestions on the action of the American Defense in the all-round competition with China, with a specific focus on new technologies. In addition to the missile race (for which the developments in Beijing have worried Washington for years), the focus is on innovation in the military field, with artificial intelligence in the lead among the “emerging and disruptive technologies”.


In July 2017, the State Council of the People’s Republic of China released the Development Plan for a new generation of artificial intelligence (Aidp), identifying a clear goal: to become the main innovation center in the field of artificial intelligence by 2030. This is what prompted Congress to provide for an ad hoc Commission to boost AI in the military field, including its training in the authorization of the military budget for 2019. Just a few days ago, the fifteen independent experts of the “National security commission on Artificial intelligence ”presented the report with suggestions for a Pentagon ready for artificial intelligence by 2025. The result of two years of work, the report is worth 756 pages.


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