Sat, Mar 08, 2014 - Page 9 News List

China’s defense spending threatens to ignite an arms race

By boosting its weapons budget amid increased maritime aggression, China may force its neighbors into a spending spree that benefits US arms dealers

By William Pesek  /  Bloomberg

Let us congratulate the real winners from China’s latest economic disclosures: Lockheed Martin, BAE Systems, Northrop Grumman and European Aeronautics Defense and Space.

Forget the Potemkin growth target Chinese Premier Li Keqiang (李克強) served up on Wednesday at the opening of China’s rubber-stamp parliament, the National People’s Congress.

It is always hard to take Chinese numbers seriously. Who among economists really believe Chinese leaders can simultaneously “declare war” on the pollution choking Beijing and Shanghai, reduce debt, rein in shadow banks, reverse-engineer the nation away from exports and still grow 7.5 percent this year?

No doubt China will come awfully close to meeting that number by the end of the year — even if it does not. The risks of having Warren Buffett, George Soros, executives at Wal-Mart Stores Inc and, of course, 1.3 billion Chinese citizens publicly fretting about a China crisis are too great for Beijing to allow GDP to fall to 6 percent or less.

The number coming out of Beijing that really matters is 12.2 percent. That is how much the central Chinese government is upping its defense spending this year as Li’s boss, Chinese President Xi Jinping (習近平), works on building the strongest military Asia has ever seen, equipped with an expanding navy as China extends its reach into waters around the region. What better way to flex China’s muscles than spending an amount — about US$132 billion — greater than the annual GDP of Hungary.

The trouble is, Chinese spending will reverberate around the region, much to the delight of the above-mentioned giants of the global defense business.

It hardly matters that the US military-industrial complex has largely been barred from selling its wares to China since the Tiananmen Square crackdown in 1989. Western defense contractors will get rich selling to all those in China’s orbit — Taiwan, Japan, Philippines, Singapore, South Korea and others.

At last month’s Singapore airshow, regional rivalries, territorial spats and worries about keeping shipping lanes open had suppliers salivating. North Korea’s provocations have since given an additional boost to demand.

On Tuesday, a North Korean rocket missed a China Southern Airlines airplane carrying 220 passengers by all of seven minutes. Suddenly, declining US budgets, and the drawdown of conflicts in Iraq and Afghanistan must seem a lot less problematic for weapons makers.

The bump in spending, while higher than last year’s, is generally in line with China’s recent expansion of its defense budgets.

National People’s Congress spokeswoman Fu Ying (傅瑩) insisted that the added billions have not altered China’s path toward “peaceful development.” She went on to say China needs military might to ensure peace in Asia, as a few regional rivals are promoting the idea that China is a threat.

Dr. Strangelove would be proud of the logic.

In fact, China’s arms buying is feeding a very dangerous dynamic in Asia. Its military expansion only gives nationalist Japanese Prime Minister Shinzo Abe more political ammunition in his fight to boost Japan’s own capabilities and perhaps even rewrite its pacifist constitution.

Abe’s new favorite buzz phrase is “collective self-defense,” which is his way of creatively interpreting a document imposed on the country after World War II. The concept would allow Japan to engage in military operations to defend its allies.

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