Thayer Consultancy

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Background Briefing: Chinas New Defence Budget Neither too hot nor too cold Carlyle A. Thayer March 6, 2012

[clientnamedeleted] 1. China says it plans to increase its defense budget by 11.2% to some 670 billion yuan ($106.4 billion) this year, following similar increases in previous years and a renewed strategic push by the United States in the region. Right after this announcement,ChinesePrimeMinisterWenJiabaostatedthat:Wewillenhance the armed forcess capability to accomplish a wide range of military tasks. Most important is to win local wars under informationage conditions. What does PremierWenJiabaoimplyaswhenhereferstolocalwars?Howdoyouassessthe timingofhisstatement? ANSWER: Chinas military preparations to win local wars under conditions of informatizationisaconceptthatisahalfdecadeold.ItreferstoconflictonChinas periphery, particularly Taiwan, involving a highly advanced military power such as theUnitedStates.Chinamustdevelopasymmetriccapabilitiesinordertodefeata strongeropponent.Thetimingofhisremarksisrelatedtotheannualmeetingofthe NationalPeoplesCongressandisnotdirectlyrelatedtotheObamaAdministrations newmilitarystrategy. 2.DoestheincreaseofChinasdefensebudgetcoupledwithPremierWenJiabaos statement lay out a new Chinese defense strategy orientation in the future? What aremeasuresthatChinawouldundertaketoimplementanewdefencestrategy? ANSWER:Chinasofficialnewdefencebudgetisneithertoohotnortoocold.The defencebudgetiswarmenoughtogaintheapprovalofthePeoplesLiberationArmy (PLA), it is not too cold in that it represents only a modest reduction in defence spending.Thebudgetincreased11.7%in2011andwillincreaseto11.2in2012.This if the first time the official defence budget will exceed U.S. $100 billion, however. This budget will permit the PLA to continue its modernization program without difficulty. The U.S. Defense Department and other observers, such as SIPRI, a Swedish think tank, believe that the real defence budget it between 50% and 60% larger. ChinaisdevelopingavarietyofweaponssystemstocountertheUnitedStates,such as cyber warfare, space warfare, antiaircraft carrier ballistic missiles, a large submarine fleet that will increasingly comprise nuclear powered submarines, and stealth fighters. China will employ mass firepower of antiship cruise missiles to

2 break through U.S. antimissile defences. Chinas aid is to keep U.S. naval and air forcesasfaraspossiblefromitscoastincludingTaiwan. 3.TheUSispushingitsinvolvementintheAsiaPacificRegion.Couldtheincreaseof Chinas defense budget and Premiers Wens statement be seen as a titfortat responsetheevolvingUSdefencestrategy? ANSWER:Defencebudgetstakesometimetodevelopandareusuallytheresultof prolongedbureaucraticconsideration.ItisunlikelythatChinasdefencebudgetwas drawnupindirectresponsetothenewU.S.defencestrategy.Itismorelikelythat officialdefencebudgetwasdrawnuptoassuageconcernsbyregionalstates. 4.HowthisnewadjustmentofChinasdefensestrategyimpactonthesituationas well as on the development strategy of countries in AsiaPacific Region, especially countriesintheSoutheastAsia? ANSWER: Chinas new defence budget will mean business as usual in the force modernisation programs of regional states. Most regional states will continue to improve their C4ISR (command, control, communications computing, intelligence, surveillance and reconnaissance). They will also continue to acquire longrange precision standoff weapons such as antiship cruise missiles and beyond visual range airtoair missiles. The proliferation of conventional submarines will also continue. Defence acquisition programs generally look out more than a decade. Australias 2009 Defence White Paper looked out to 2030, for example. The trajectory of Chinas military modernization program is clear and the current budget does not indicate any major changes. This means that Southeast Asian states can continue withoutmajoralterationstotheirownmodernizationprograms.