China is increasing its military budget 12.7 percent this year, compared to a 7.5 percent bump last year. This means that the official defense budget is $91 billion. Like other communist nations, the Chinese keep a lot of military stuff outside the defense budget, so their actual defense spending is closer to $150 billion. Chinese defense spending has more than doubled in the last decade. This has triggered an arms race with its neighbors. Russia just announced a new military upgrade program that would increase defense spending by a third, and devote over 600 billion dollars in the next decade to buying new equipment. Japan, already possessing the most modern armed forces in the region, is increasing spending to maintain their qualitative edge. A decade ago, China and Japan spent about the same on defense, but now China spends more than twice as much. Even India is alarmed. Spending only 30 percent as much as China does, the Indian generals and admirals are demanding more money to cope with China. India and China are actually devoting a lot of their additional spending to just bringing their troops up to date. Both nations have lots of gear that was new in the 1960s and 1970s. They don't expect to be as up-to-date as the U.S., which spends over $500 million a year, but there's plenty of newer, much better, and often quite inexpensive equipment to be had.
Meanwhile, the big mystery is figuring what the Chinese military up to with all this spending? This question's been rattling around inside intelligence agencies, and among diplomats, for the last decade. Once this sort of thing hits the mass media, however, things get a bit distorted. For example, what alarms Americans most frequently is how the U.S. is being demonized by the Chinese military leadership. Chinese politicians speak in more friendly terms, while tolerating the bellicose attitudes of their generals and admirals. The politicians refuse to rein in the aggressive attitudes of their military commanders. China experts counsel that the rants from the military are mainly to build morale within the ranks, and make it easier for the politicians to reduce corruption in the armed forces. This corruption is an old, old problem in China. It's been reduced in the last two decades, but is still there, in a big way. By whipping up this fervor for dealing with a major war, it becomes unpatriotic (for many, but not all, officers) to steal and connive. But to outsiders, it looks like the Chinese are preparing for something ominous. This is reinforced by the increasingly aggressive Chinese attitudes towards its neighbors over ownership of uninhabited islands (often just rock outcroppings only visible at low tide). Outright possession of these islets gives the owner possession of nearby oil or natural gas deposits. Something worth fighting for, and that's what worries neighbors when it comes to China's growing naval strength.
Inside China, military analysts decry the sorry state of military leadership, training and doctrine. It's easier to build new weapons than it is to train and maintain troops capable of using them effectively. The Chinese are more concerned with that. Meanwhile, the U.S. Department of Defense wants to portray China as a formidable foe, in order to justify a large defense budget. This is a pattern that developed during the Cold War, and continues. China has replaced Russia as the arch-foe. While the U.S. still pays attention to the defense of Taiwan, Chinese military power is seen expanding farther and farther into the Pacific and Asia.
Just how real is Chinese military power? Technically, a lot of Chinese gear is well built. This we know by observing how China has absorbed Western (including Russian) technology over the last sixty years. They can build good stuff (if you have an iPhone or iPod, you are using Chinese built, or at least assembled, tech). China is still learning how to invent, design and build many of the iPhone/iPod components. Chinese have the talent and persistence to acquire the needed management and technical skills. It takes time, and Chinese leaders like to take the long view. That means realizing that current Chinese armed forces are not so good. Peacetime soldiers in general, and Chinese ones in particular, develop a lot of bad habits, that translates into defeats early in a war. But in a world with nuclear weapons, the old Chinese strategy of fighting a long war and grinding down a superior (man-for-man) force, no longer works. If you use conventional forces, you strike first and fast, then call for peace talks before the nukes are employed. This situation does not work to China's advantage. Chinese generals are going through the motions of creating a well trained and led army, like many Western nations have, but are making very slow progress. Meanwhile, the Americans are particularly admired, with all their practical training methods and combat proven NCOs and officers. China still has far too much corruption in their military establishment, and too little initiative and original thinking, to create a force that can match the Americans. Going through the motions may work in peace time, but not once the shooting starts.
China insists that it's growing military power is for defense only. That makes sense, as a lot of money is going into the navy, which protects the imports (mainly of food and raw materials) and exports (of manufactured goods) that are driving the unprecedented economic growth. The Chinese try to explain away the military buildup opposite Taiwan as political theater. This may be true, for a failed attempt to take Taiwan by force would not only disrupt the economy (and create a lot of unhappy Chinese), but would be a major failure by the government. Dictatorships cannot survive too many such failures, or too many angry citizens. So it makes sense that the Chinese military growth is largely for defense. But those large defensive forces can also be used to bully or intimidate neighbors, which is what the neighbors are worried about.