China’s National People’s Congress announced another increase in defence spending over the weekend, with large investments in military modernisation.

The congress rubber stamps the decisions of the Chinese Communist Party and the Politburo Standing Committee, where the real power lies.

At the very top is President Xi Jinping, who is emerging as the most powerful Paramount Leader since Mao Zedong. The congress is held once a year to approve, not challenge, decisions that occur within the Politburo Standing Committee, led by Xi.

These meetings are a time for the Chinese leadership to report on progress made towards achieving key national policy objectives. This year we’re seeing a focus on ensuring party discipline and loyalty to the rule of Xi, amid a crackdown on corruption throughout China’s political and financial systems.

This is occurring as China’s economic growth slows, worrying markets and investors as to whether the “China Dream” of national rejuvenation towards a rich economy and strong army is really achievable.

Last year China raised its defence spending 10.1 per cent to 886.9 billion yuan ($181bn), marking the 26th year of sustained double-digit increases in Chinese military spending since 1989, and the fourth consecutive year where defence spending will outpace GDP growth.

This year the growth in defence spending is 7.6 per cent, a slower pace of growth than expected, largely due to strengthening economic headwinds and demographic challenges that are slowing the growth of the Chinese economy to a “new normal” below 7 per cent GDP, resulting in cuts of two million jobs from China’s industrial sector. For the first time in many years, Beijing is beginning to have to think about balancing “guns vs butter”, and the Chinese government is determined to build comprehensive national power, which is sustainable. This amount of spending would take the Chinese military budget to $197bn, amounting to 1.3 per cent of GDP, compared to $US600bn ($805bn) and 3.1 per cent GDP for the US. The Stockholm International Peace Research Institute estimates that China’s actual military spending is more than 50 per cent above the declared figure, and there is a significant lack of defence transparency on how China spends money on military forces.

China perceives a more challenging security environment in relation to increasing tensions in the South China Sea and East China Sea, and greater uncertainty over cross-strait relations with the recent electoral victory of Taiwan’s Democratic Progressive Party under president-elect Tsai Ing-wen.

Much of this increased defence spending will go towards sustaining the rapid military modernisation of the People’s Liberation Army, including its navy, air force and rocket forces. This modernisation is seeing the PLA reduced by 300,000 and greater focus on building “information warfare” capabilities across the full spectrum of Chinese military capabilities.

This is designed to enable China to better challenge US strategic primacy in Asia and lay the basis for an expansion of Chinese military capability for projecting power to support key strategic investment in the “one belt and one road” initiatives. 

This sustained spending on military modernisation raises the prospect that China will continue to modernise at a rate that’s narrowing the military-technological gap with the US, and its key allies in Asia, including Australia.

This could see greater development of Chinese air and naval capabilities designed to project power and presence into our neighbourhood as part of securing Beijing’s strategic interests along the 21st-century maritime silk road that traverses the Indian Ocean.

This process is already under way, with China dispatching naval forces into the Indian Ocean on a more regular basis since 2008 and establishing greater access to Indian Ocean ports and facilities.

Australia’s new defence white paper has addressed the growing military power of China, particularly as it affects the Indo-Pacific. It finds that Chinese defence spending will be roughly equal to that of the US by 2035. The traditional military-technological edge that Australia has enjoyed will significantly diminish in coming years.

The weekend announcement by China on double-digit growth in defence spending, with significant increases in air and naval power projection capabilities, shows Beijing is determined to protect its interests beyond its immediate maritime and air approaches in East Asia.

The latest defence white paper’s planning assumptions on how long it will take Australia to introduce key new capabilities into service may be overtaken by rapidly growing Chinese military power and presence.

As China spends more on its military and boosts capability for operations in disputed areas such as the South China Sea, or to project forces further afield, the risk of an accelerating security dilemma will contribute to reactive moves by China’s neighbours, generating the possibility of an arms race.

Once under way, an arms race would be difficult to turn off, as states that feel threatened by China’s growing military power, and lack of defence transparency, will be forced to respond.

We must plan for an uncertain future that may increase risks beyond those suggested in the Turnbull government’s recent defence white paper.

Malcolm Davis is a senior analyst at The Australian Strategic Policy Institute.

Originally published on The Australian