China’s 2019 defense white paper, for instance, provides military spending figures that are slightly higher (between $2-3 billion each year) than the announced defense budgets. The Chinese government has in the past been inconsistent in its reporting on defense spending. The official Chinese military budget only tells part of the story. (Constant 2010 values are calculated based on GDP projections.) When using constant 2010 dollars to account for inflation, China’s expected defense spending appears to dip from $143.8 billion in 2019 to $140.5 in 2020. dollars, the official 2020 budget amounts to around $178.6 billion (conversion rate of 7.1) compared to a budget of $177.5 billion (conversion rate of 6.7) in 2019. One noteworthy caveat is that inflation does play a role when looking at overall trends in defense spending. Given the economic consequences of Covid-19, China’s recent increase in defense spending sends a clear signal that President Xi Jinping remains committed to completing the modernization of the People’s Liberation Army (PLA) by 2035 and transforming the PLA into a “ world-class” military by 2049. Spending on the military as a percent of overall national government spending will rise slightly from 5.06 percent in 2019 to 5.12 percent in 2020, and spending as a percent of the central government budget will rise from 33.6 percent to 36.2 percent. While the central government budget is slated to fall by 0.2 percent, total national government spending (which includes the central government spending) will increase by 3.8 percent as leaders work to stimulate the economy. Looking at expected government expenditure provides additional clarity. By comparison, China’s GDP grew by 6.1 percent in 2019 and the military budget grew by 7.5 percent. The IMF estimates that China’s GDP will grow by only 1.2 percent in 2020. For the first time since China began publishing GDP targets in 1990, Chinese leaders did not set economic growth rates for the economy this year, as a very low rate of growth is expected due to Covid-19. While the announcement of a 6.6 percent increase in defense spending in 2020 marks a significant downtick, it must be understood in light of the recent slowing of the Chinese economy. Since 2016, year-over-year growth in China’s defense budget has ranged between 7.2 percent and 8.1 percent. Chinese officials revealed on Friday morning that spending on national defense in 2020 would rise to 1.268 trillion yuan, an increase of 6.6 percent-the lowest in decades. The first day of the NPC session featured the widely anticipated announcement of China’s new defense budget. China kicked off the annual meeting of its legislature, the National People’s Congress (NPC), in Beijing on Friday, May 22.
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