CHINA WATCHChina’s Defense Spending Growth Continues Apace

By David Uren

China, India and Japan are leading a surge in military spending in the Asian region with geopolitical tensions pushing South Korea, Australia and Taiwan, among others, to follow suit.

China’s military spending now exceeds the combined outlays of the next 25 biggest nations in the region, for which there are reliable estimates, according to the Stockholm International Peace Research Institute’s (SIPRI) annual survey. It does not make estimates for Vietnam or North Korea.

The survey shows China lifted military spending by 4.2% (after allowing for inflation) last year to the equivalent of US$298 billion. With a fast-growing economy, China has been able to lift spending each year for almost three decades while the military outlays recorded by SIPRI have been trending lower as a share of GDP, currently standing at 1.6%.

China’s spending growth has outstripped that of other nations in the region, rising by 75% over the last 10 years. The average across the rest of the region has been 33%. Ten years ago, China’s military spending was the same as the combined outlays of the next five biggest nations: India, Japan, South Korea, Australia, and Taiwan. In 2022, China’s spending exceeded that of the next five nations by US$70 billion.

SIPRI records that Australia’s spending has been trending lower, dropping from 2.1% of GDP in 2016 to 1.9% last year. The 2020 defense strategic update noted that the defense budget had been ‘decoupled’ from measures of GDP so that it did not have to be adjusted for every shift in the economy, however it remains a useful benchmark for comparison. Defense minister Richard Marles has confirmed plans to lift spending to 2.2% of GDP and raised the possibility it may have to rise further.

The new defense did not quantify the cost of its recommendations but noted that managing the defense budget would be difficult given severe pressures on maintaining the defense workforce and funding both existing capabilities and those it has recommended. It noted that ‘defense spending must be a reflection of the strategic circumstances our nation faces’.

The SIPRI database shows that India lifted its military spending last year by 6% (after allowing for inflation) while Japan increased its spending by 5.9%. India is managing tensions with both China and Pakistan and spends the equivalent of 2.43% of GDP on its military. India’s spending is seven times greater than Pakistan’s although it also devotes 2.63% of GDP to its military.