Ch. 6: Crouching Tiger Serialization

Some Sobering Military Budget Math

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Question: Who spends more on their military?

1.     China

2.     The United States

Given our focus on the possible dangers of China’s rapid military buildup, you may, dear detectives, be tempted to answer “China” to this question.  Please resist any such temptation.

While China is swiftly expanding its military capabilities, the United States still far outspends China when it comes to two important metrics: total spending and spending as a percent of Gross Domestic Product or GDP. 

On the total spending front, while China’s reported annual military expenditures are rapidly heading beyond $200 billion, the United States still spends more than three times that amount.[i]  At the same time, over the last ten years, China’s military spending has consumed only about 2% of its GDP annually while the US number is closer to 4%.[ii]

Wow!  Who is the warmonger here? 

In fact, the argument that “America vastly outspends China” is frequently used to discount any possibility of an emerging China threat.  It is an argument, however, that must be tempered by more than a few critical considerations.

First and foremost, any direct comparison of total military expenditures is, in and of itself, likely to be highly misleading.  While the US military must project its force all globally, China focuses primarily on regional force projection in Asia.

To put this in a weapons context, American taxpayers may foot the bill for ten active aircraft carriers.   However, only several of these flattops are ever on patrol in the Asian theater at any one time.

As a second consideration, one dollar of defense spending in China goes much farther than one dollar of defense in the United States.  Just why is this so?

For starters, Chinese military personnel earn wages and benefits far less than their American counterparts.  In addition, it is demonstrably cheaper for China’s factories to churn out weapons systems – and it is not just cheap labor driving this production cost advantage.  It’s also the lack of any meaningful environmental controls or worker protections – yes, the air and water in China are filthy and the factories are very dangerous, but it is a lot cheaper to produce.[iii]

As an added boost to China’s cost advantage, there is also this uncomfortable truth: China does not have to spend anywhere near as much on military research and development for new weapons systems.  One key reason is the vaunted ability of Chinese hackers to steal the latest weapons designs from both the Pentagon and private sector defense contractors.  Another reason is that China quite illegally reverse engineers much of the foreign technology it buys..

On this reverse engineering front, Russia, not America, has been China’s biggest victim.  After Russia sold China its vaunted Sukhoi-27 fighter, China proceeded to clone it – and then immediately began selling discounted versions of the jet on the world market, squeezing Russian sales.[iv] In an LOL moment, when China was accused of also cloning the Sukhoi-33 aircraft carrier-based fighter, China’s defense was that its J-15 clone was better.  That’s indeed true – and that’s one of the problems facing opponents.  China not only can steal foreign technology; it can improve upon it as well.

For all these reasons, it would be wrong to derive much comfort from the fact that Chinese military expenditures appear to fall far below that of America.  This is particularly true since the spending trend lines are likely to cross in the not too distant future as China’s GDP growth continues to significantly outpace that of the United States and as America’s economy continues to perform below historical levels.

In fact, once one looks more deeply at the defense expenditures puzzle, it should not be reassuring at all that China is using much less of its GDP each year to successfully grow its military.  Indeed, the economic ease with which China’s military is rapidly expanding raises this next – and quite sobering – question:

Will China eventually be able to do to America what America did to Kaiser Germany in World War I, Nazi Germany and Imperial Japan in World War II, and the Soviet Union during the Cold War?  That is, will China be able to use its superior manufacturing might to defeat America on the battlefield?