20 May 05. JIM WOLF of REUTERS reports that the Defense Department may have overestimated China’s total military spending by more than two-thirds, according to a report for the Air Force released on May 19.

The Rand Corp., a research group that studies many issues for the Pentagon, estimated China’s military spending totaled $31 billion to $38 billion in 2003, which it said was the most recent year for which full data was available. By contrast, the Defense Department has put the 2003 figure as high as $65 billion, 71 percent greater than the high end of Rand’s estimate.

The communist state itself has used a figure of about $25 billion, but U.S. experts say that does not include research and development, pensions and some other costs normally included by western militaries.

Rand’s figure could raise questions about some of the arguments used by U.S. decision makers to justify continued spending on big-ticket weapons systems.
The Defense Department, asked to comment on the findings, said it was standing by the numbers it used in its fiscal 2003 annual report to Congress on Chinese military power. The Pentagon “asks for greater transparency in China’s People’s Liberation Army military budget reporting,” said Navy Lt. Cmdr. Gregory Hicks, a Pentagon spokesman.

“It is well-known that the PLA is embarked on an ambitious, long-term military modernization effort to develop capabilities to fight and win short-duration, high-intensity conflicts along its periphery,” Hicks said.

The Defense Department monitors China’s military modernization closely, “particularly those aspects that are directed at Taiwan,” he said. The United States is committed to helping Taiwan’s self-defense but without provoking China, which deems Taiwan a rogue province.

In its fiscal 2004 annual report to Congress on China’s military power, released on May 28 last year, the Pentagon put China’s military outlays at $50 billion to $70 billion. China’s military has denounced the Pentagon figures as wildly exaggerated. In a commentary on June 15, the People’s Liberation Army said the true sum was about $25 billion, which it equated to 1/19th of U.S. national defense spending. China, the PLA said, is “one of the countries with the lowest per capita national defense expenditure.” Rand estimated China’s defense spending at 2.3 percent to 2.8 percent of gross domestic product in 2003. Using what it called newly available Chinese-language primary sources, it said this was 1.4 to 1.7 times the official Chinese number.

By comparison, U.S. defense spending was 3.8 percent of GDP in 2003, or about $417.5 billion. “China’s defense spending has more than doubled over the past six years,” almost catching up with Britain and Japan, said Kent Crane, the Rand study’s lead author. “Although the rate of increase has slowed, by 2025 China will be spending more on defense than any of our allies.”

James Mulvenon, an analyst who contributed to the report before leaving Rand to join another consulting group, said the U.S. government had been using a lot of “wild-assed guesses” about Chinese military spending rather than digging into original source material.

“Basically, we’re correcting a lot of U.S. government estimates that weren’t based on empirical fact,” said Mulvenon, now at the Center for Intelligence Research and Analysis, a Washington-based group that consults for U.S. intelligence agencies.