China's military spending amid the pandemic: Will it go up or down this year?

Will China's military spending go up or down, in this year of the coronavirus? The upcoming annual "Two Sessions" - plenary sessions of the Chinese People's Political Consultative Conference (CPPCC) and the National People's Congress (NPC) to be held on 21 May and 22 May respectively - will yield the answer.

According to official figures, China's 2019 defence budget was about 1.19 trillion RMB (S$238 billion, US$177.6 billion). This was up by 7.5% from 2018, but significantly lower than the 8.1% growth in military spending that year.

China has taken a huge hit from the coronavirus, and its economy is expected to show a significant drop from last year's 6.1% growth. China's GDP slipped by 6.8% year-on-year in the first quarter of this year, and the general sentiment is that even if work and production are fully restored in China in the next three quarters, it will be difficult for full-year GDP growth to be more than 5%.

In this context, will China's military spending grow more than it did last year, or hit a 20-year low? That will be a hot topic for observers at the Two Sessions.

Looking at the external pressure that China is facing, it seems necessary to increase military spending.

After the global pandemic spun out of control, especially in the US, American politicians have called for accountability from China, with some calling for compensation. China-US relations have worsened, with continuing friction over Taiwan, the South China Sea, Xinjiang, and Tibet. Cross-strait relations with Taiwan are also deteriorating, and there are increasing calls from within mainland China to end Taiwan's march towards independence with non-peaceable methods. Over the next two and a half months, the People's Liberation Army (PLA) will be holding military exercises in the Bohai Gulf.

China needs to step up the pace of modernising its military against unexpected challenges, and there is a need to demonstrate progressive results for its military reform within the year - all these are reasons for China to increase its military spending.

On the other hand, China's economy has been hit hard by the pandemic. Overseas trade orders have dropped sharply, and earnings are down while deficits are up. The job situation is tough. Financial support and funding are required to maintain people's basic needs, to keep businesses going, and to run the key units of the state. If China keeps pushing up its need for military spending, that will monopolise its finite budget and affect the "six guarantees" (六保) that the top leadership keeps emphasising - job security, basic livelihoods, market order, food and energy security, stability of supply chains, and operation of local governmental functions.

So, whether China's military spending this year goes up or down, there will be some basis to it. Which direction it goes would depend on the judgement and inclination of China's policymakers.

Global Times editor Hu Xijin published an article past midnight on 19 May, giving three reasons why China should maintain a positive increase in military expenditure.

First, China's economy will see positive growth for the full year, and a positive increase in China's military spending this year has an economic basis. Second, China needs to have a stronger military as a deterrent, to ensure that the US does not dare to act on its impulses to suppress China, because it cannot afford the huge cost. Third, China's military spending was at 1.2% of its GDP for 2019, far lower than 3.4% in the US and lower than the 2% of GDP that the US requires for NATO member states.

Hu's suggestion and reasoning is not surprising. In fact, since the 1990s, China's military spending has never shown negative growth, nor will that be an issue this year. The question is, is there a need for that increase to be more than last year's 7.5%?

Faced with a rare plunge in GDP growth rate, if this year's increase in China's military spending exceeds last year's, that will affect the mission of safeguarding the "six guarantees", and give the impression that China is prioritising combat preparations, reviving the "China threat". That would not be good for China's efforts in reviving the economy and building a "moderately affluent society" (小康社会).

At the same time, with China's ongoing military reform, China's troops have been reduced from 2.3 million in 2015 to about 2 million, which means a proportionately higher utilisation of military funds. Even with a significantly lower growth in military spending as compared to the two-digit increases in recent years, there will not be much impact on the PLA's upgrading of equipment and benefits for soldiers.

In summary, China's military spending will definitely see a positive increase, but possibly less than some people expect.

Note (updated 22 May 2020):

In a report put up to the National People's Congress (NPC) on 22 May 2020, it was announced that China's defence spending this year will increase by 6.6% from 2019. This is lower than last year's 7.5%. The defence spending budget, set at 1.268 trillion RMB (US$178.16 billion), will be channelled into deepening reforms concerning national defence and the military, increasing logistic and equipment support capacity, and promoting innovative development of defence-related science and technology.

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