China’s 2016 Military Budget Up Only 7.6%

The biggest surprise to emerge from the highly scripted National People’s Congress annual meeting, which concluded last week in Beijing, was the announcement that the country’s military budget would increase a mere 7.6 percent this year. The figure is well below last year’s announced 10.1 percent jump and is the first single-digit rise since 2010, when the generals and admirals had to live with 7.5 percent.

Undoubtedly, the publicly announced budget does not include all military expenditures, but the percentage change is generally thought to indicate the spending trend line for the People’s Liberation Army.

Some analysts believe the relatively smaller increase for the world’s largest military means China’s newish leader is showing the flag officers who’s boss. “Military figures and analysts said the ‘surprisingly low’ budget increase indicated President Xi Jinping was not scared of offending senior military officials and was demonstrating his ability to control the army through economic means,” wrote Hong Kong’s South China Morning Post.

That analysis fits the narrative that Xi has full control of the military’s top brass—a view that took hold even before Xi’s September announcement of what appears to be the most sweeping top-to-bottom reorganization of the military of the People’s Republic.

Although there may be some truth to that analysis, the larger issue and reality cannot be overlooked: Xi has favored and will continue to favor the generals and admirals because he needs their political support and he needs them to execute his provocative foreign policies, especially in the peripheral seas. In my view, it’s unlikely that the decline in the budget’s rate of growth suggests tension or a rift between between Xi and his flag officers.

A more likely explanation is that the Chinese central government did not have the resources for more. Beijing’s ambitions have been expanding in all directions in the last decade, and Xi has made massive and multiple commitments in and outside China during his rule. And, he is considering extravagant new commitments like the trillion dollar “One Belt, One Road” initiative, which contemplates building infrastructure in two broad arcs—one over land and the other over sea—linking his country to Europe. At the same time, the Chinese people are demanding more from the communist party, from cleaner air to better schools to enhanced social services.

Today, the reality is that China’s economy is faltering and declining growth precludes the lavish spending that was possible when the economy was roaring ahead. In 2010, the economy reportedly grew 10.4 percent and probably expanded even faster. In the years since, military budget increases have far outstripped economic growth, something especially evident in 2014.

Last year, the National Bureau of Statistics reported that China’s growth rate slipped to 6.9 percent—a number that almost certainly overstates the real rate by a wide margin.

Now, there are choices to be made.

So why did Xi Jinping decide on only a 7.6 percent increase for his friends in the officer corps? Perhaps it is all he could afford.

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