Friday, November 20, 2015

China Secret Military Spending

It is becoming increasingly apparent that China is becoming a "player" when it comes to the world's superpowers.  With their recent moves in the South China Sea and their displays of game-changing weapons, the United States could find itself sharing top spot as the world's number one "cop".  A recent study by Transparency International provides us with a glimpse of the secretive nation, showing us that the People's Republic of China may be spending far more "off-the-books"  on defense than either we or its citizens are aware of, leading to both corruption within the PRC and mistrust and instability in the region.

Transparency International defines secretive military spending as "military expenditures where no meaningful details are released either to the public or to parliament.".  To give us a sense of the size of China's spending on its military, in early 2014, the nation announced that its defense budget would rise by 12.2 percent to $132 billion dollars after increasing by 10.7 percent in 2013.  This high growth rate has caused concern among outside nations, particularly since China's spending on defense is growing at a far faster rate than its economy.  While there is no doubt that $132 billion is a lot to spend on defense, as you can see on this graphic, China's spending on defense still pales compared to that of the United States:

Let's start by looking at how the rankings work, followed by a look at Transparency International's 2015 Government Defense Anti-Corruption Index rankings for the Asia-Pacific Region as a whole, keeping in mind that Asia is home to some of the world's emerging military powers and fastest growing populations.  The Government Defence Anti-Corruption index measures levels of corruption risk within each nation's defense system and scores each nation on a scale of A (the best) to F (the worst).  The bands are based on an assessment which consists of 77 questions which each receive a score of between 0 and 4 as follows:

Countries are scored in five key areas:

1.) Political Risk
2.) Financial Risk
3.) Personnel Risk
4.) Operations Risk
5.) Procurement Risk

Once the assessment is complete, each nation has the right to conduct a review of their own assessment and provide further information that may clarify the issues involved.  Transparency International considers nations that have a lack of transparency in their defense structure to be ones that have a higher risk of corruption since there are a lack of public and parliamentary checks and balances.

Here is a graphic showing the 2015 Government Defense Anti-Corruption Index ratings for the Asia-Pacific Region as a whole:

There are only two nations that received a poorer score than China; the very secretive Myanmar and Cambodia.  As well, only six out of the seventeen nations in the region publish enough details about their defense budgets that public oversight could stop potential corruption from taking place.

Now, let's focus on China.  As I noted above, China has seen substantial growth in its military budget with very consistent double-digit annual increases in spending since 1995.  In fact, China now accounts for 12 percent of the world's total military spending. 

Here are China's scores for the five key areas as noted above, keeping in mind that the lower the score, the lower the level of transparency:

1.) Political Risk: 32 percent
2.) Financial Risk - 23 percent
3.) Personnel Risk - 50 percent
4.) Operational Risk - 15 percent
5.) Procurement Risk - 29 percent

China's score in Band E puts it in the category of "very high risk" of corruption in the defense sector.  

Most of China's military spending problems lie in five areas:

1.) Only broad details on acquisitions and acquisition planning are released to the public.

2.) Only highly aggregated data on defense spending is available with spending on research and development, the military component of space exploration and strategic forces being completely hidden from public view.

3.) The extent to which spending on the aforementioned items are kept outside of the official budget is unknown with estimates of off-book spending ranging from 35 to 50 percent of total defense expenditures.

4.) The expenses for China's paramilitary forces are undefined.

5.) The revenue created by corporations that are owned by the People's Liberation Army are undefined.  These corporations are involved in telecommunications, hotels, transportation services and light industry.  Earlier in 2015, China cracked down on PLA personnel that received income from sources other than their government salaries.

The study shows that China is now responsible for nearly 30 percent of the world's total secretive military spending.  Off-the-book spending could be as high as 50 percent of China's total official defense expenditures, totalling as much as $65 billion.  Interestingly, although China's defense policies are supervised by the National People's Congress, it appears that China's Congress has very little impact on the nation's defense policy and that the defense sector is not accountable to it.  In fact, the research suggests that the United States Congress has received more detailed information about China's military capability and defense budget than China's central government.  As well, the report suggests that China's citizens would learn more about their own defense structure from reading foreign press coverage than they would from their own government.

China's spending on its military is key to the security of the region.  This is particularly the case in the South China Sea where territorial claims overlap as shown on this map:

China's lack of transparency on its defense spending and resulting high risk of corruption leads to greater instability in the region.  On top of that, recent moves by the United States Navy in the South China Sea have added to the region's growing instability. 

1 comment:

  1. Transparency International is one of the least transparent operations on earth. The simpler explanation of why China gets so much bang for its defense buck is

    1. The defense firms are state owned and profits go towards producing more arms.

    2. The defense firms are Chinese, and so are very good at taking cost and time out of their products.

    3. The defense firms manufacture in quantity. That's how they launched three nuclear submarines in one week recently.