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China Defense Budget to Double Over 5 Years: IHS

Feb. 14, 2012 - 03:08PM   |  
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SINGAPORE — China’s defense budget will double between 2011 and 2015 and outstrip the combined spending of all other key defense markets in the Asia-Pacific region, global research group IHS said Feb. 14.

China’s defense budget stood at $119.8 billion last year and will rise to $238.2 billion in 2015, marking a combined annual growth rate of 18.75 percent during the period, the U.S.-based IHS said in a forecast.

The 2015 figure exceeds the combined total of the next 12 biggest defense budgets in the region, forecast to hit $232.5 billion, and will be almost four times second-placer Japan’s defense spending that year, it added.

“Beijing has been able to devote an increasingly large portion of its overall budget towards defense and has been steadily building up its military capabilities for more than two decades,” said Rajiv Biswas, Asia-Pacific chief economist for IHS Global Insight.

“This will continue unless there is an economic catastrophe.”

The growth in China’s defense budget — which averaged 12 percent annually from 2000-2009 — will benefit from the projected surge in the gross domestic product of Asia’s largest economy in the next three years.

China will use the additional cash to modernize its equipment while reducing its manpower, resulting in a higher amount of funding per member of its armed forces, IHS said in its report.

Aside from China and Japan, the report also tracks the military spending of India, South Korea, Australia, Taiwan, Singapore, Indonesia, Pakistan, Thailand, Malaysia, Vietnam and New Zealand.

The U.S. government’s “renewed Asia-Pacific focus” is helping fuel China’s expansion of its defense budget, according IHS Global Insight’s Asia-Pacific head Sarah McDowall.

“China’s expanding defense budget has intensified concern among various governments. Perhaps most importantly, it has prompted Washington to undertake a diplomatic campaign to reassert its profile in the Pacific,” she said.

“Washington is also keen to ensure freedom of navigation through important sea lanes in the region and to maintain a situational awareness of China’s military development,” McDowall added.

President Barack Obama, while seeking to trim military spending in response to budget pressures, has vowed to boost U.S. power in Asia where a number of nations have voiced concern at what they see as a more assertive China.

This concern will also drive other Asia-Pacific countries to shore up their budgets but it will not be their sole impetus, said Paul Burton, senior principal analyst of IHS Jane’s Defense Budgets.

“China’s rise is not the only motivator. There are a number of lingering security issues, driven by competition for untapped natural resources, that are prompting many states to increase their defense to GDP ratio,” he said.

Vietnam and Indonesia in particular are expected to increase defense spending at a rate that exceeds their GDP growth, Burton added.

But the two countries’ defense budgets will not be able to match up to the resources of their smaller but wealthier Southeast Asian neighbor Singapore, which will spend $12.3 billion on defense in 2015, IHS predicted.

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