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Beijing's military spending less than many experts think

China's military spending far exceeds what it acknowledges but is far less than many experts believe -- less than one-fifth of what the US spends and on a par with other nuclear powers, a report funded by the US Air Force said.

Yesterday's report, by the think tank Rand Corp, said that in terms of purchasing power, China's People's Liberation Army (PLA) -- which includes the country's naval and air forces -- spends between US$69 billion and US$78 billion a year, estimated in 2001 US dollars, which is well below some estimates by the US government and outside experts.

Actual spending ranges between 2.3 and 2.8 percent of China's GDP, the study found.

That compares with US$430 billion spent by the US on defense last year, or 3.9 percent of the US' GDP.

The 2.5 million-strong PLA has received double-digit increases to its official budget in most recent years as China steps up efforts to upgrade outdated weapons technology and improve training.

By 2025, the purchasing power of the Chinese military could reach US$185 billion, estimated in 2001 dollars, the report said.

"China's defense spending has more than doubled over the past six years, almost catching up with Great Britain and Japan," Keith Crane, a senior economist at Rand and lead author of the study, said in a statement that accompanied the report's release.

"Although the rate of increase has slowed, by 2025 China will be spending more on defense than any of our allies," Crane said.

The authors of the report said their estimates included, in addition to the official military budget, items such as foreign-weapons purchases, spending on paramilitary forces such as the People's Armed Police, nuclear weapons, subsidies to defense industries, defense-related research and revenue channeled to the military from outside the official budget.

The study estimates that the most China could spend on defense by 2025 would be US$197 billion, or 5 percent of its GDP.

Independent calculations of China's defense spending usually put it at several times the official figure -- rough estimates range as high as 13 times the official figure, the report noted.

If China's economy continues to boom -- annual growth for the last two years has been 9.5 percent -- increases in military spending are likely to continue, the report said.

However, it noted that China faces significant challenges -- including a huge, aging population, a fragile financial system and a backward agricultural sector -- that could consume resources that otherwise might be spent on defense, especially if the economy stagnates.

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