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China's defence budget grows, but not just to deter rivals

Updated: Sep 15, 2021

1. Introduction: China’s defence budget increases in 2021

The plenary sessions of the National People’s Assembly and of the Chinese People’s Political Consultative Conference took place from 4 to 11 March in Beijing. They are collectively called the “two sessions” and are China’s most important political event. During them, the leadership reviewed the government's work in the previous year and set goals for 2021 and beyond.

One of the most important decision was the amount of the military spending in 2021, which regularly attracts the attention of the diplomatic and military circles. According to the provisional budget presented by the Ministry of Finance, the amount of military outlays will increase by 6.8% in 2021, totalling approximately RMB 1,267,992 ($ 209 billion), or 1.3% of China's nominal GDP. The People's Republic remains the second state by military spending, behind the United States. According to the spokesman of the National Assembly of the People Zhang Yesui, this “increase in defence spending is needed to safeguard our sovereignty and development interests, fulfil China's international responsibility and obligations, and promote the transformation of the Chinese military with Chinese characteristics.”

Given the sensitivity of the subject, it is interesting to examine what are the factors leading to the constant growth of the defence budget.This growth is not necessarily due exclusively to external factors,since internal politics plays a key role as well.

2. China’s defence budget

The 2021 budget shows an overall figure of defence spending, but does not detail the individual items.These are disclosed only occasionally and at the discretion of the Ministry of Defence in publications such as white papers. For example, the 2019 white paper reported the amount of expenses for personnel; for training and maintenance and for equipment in the period 2010-2017.

It is noteworthy that the defence budget does not include all military outlays. In particular, three types of expenses are excluded: commercial and industrial ones; those dedicated to research and development of cutting-hedge military technologies; those dedicated to programs managed directly by the Central Military Commission. Examples of the first group are government subsidies to the defence industry; mobilisation funds; revenues from sales of land owned by the armed forces or from surplus crops produced by certain units; bonuses for the enlistment of university students; operating costs of the provincial military bases.

Figure 1 - China’s defence budget: official figure (continuous line) and SIPRI estimate (dashed line) in billions of Yuan at current prices. Source: SIPRI

The second category includes funds for the research and development of advanced military technologies, such as the space program, anti-satellite systems and quantum information research. These are key items, probably amounting to as much as between 14 and 31 billion dollars. Their importance is reiterated by the 14th five-year plan, which provides an innovation-based strategy for the People's Liberation Army (PLA). The third category includes military spending for programs which fall directly under the responsibility of the Central Military Commission of the Communist Party of China, the highest military authority. In particular, expenses for the Armed People'sPolice (PAP) and the Chinese Coast Guard (CCG) are of great importance. The former is a paramilitary force, whose main task in peacetime is to ensure internal stability. However, it can easily be deployed to carry out military actions in the event of armed conflicts. In addition, PAP plays an increasingly important role in foreign policy in Central Asian countries such as Afghanistan and Tajikistan, particularly in the field of counter-terrorism.

The CCG was created in 2018 and placed under the direct command of the PAP. It is a de facto second navy, well equipped and crucial in supporting Chinese territorial claims in the South China Sea and East China Sea. That is why Japan has repeatedly expressed its concerns, most recently after the approval of the Chinese Coast Guard Act, which authorizes the CCG to take all necessary measures,including the use of force,to defend waters under its jurisdiction, should the need arise.

3. The Importance to Spend More: The Military of the Party

It is now important to examine what are the factors that lead to a constant increase in the defence budget. The immediate answer is that it is due to the increasingly unstable international environment and the growing rivalry between Beijing and the medium and large powers. One could therefore argue that an improvement in the relations between regional actors and the People's Republic and between the latter and the United States could lead to a decrease in military spending.

However, other factors play a crucial role in pushing Beijing to allocate more and more funds to the military. In fact, Chinese calculations are not based solely on diplomatic rivalries, as it is demonstrated by the fact that the defence budget continued to grow even in the 1990s and early 2000s, when the Cold War was over and the international environment was not hostile to Beijing. Besides the external reasons, we must add three other domestic factors:the relations between the Communist Party of China (CPC) and the PLA, the political ideology and the Taiwan question.

The PLA is the military of the CPC, before being the military of the People's Republic. Western observers often tend to neglect this aspect, which nonetheless is crucial. In fact, the PLA is perhaps the best guarantee for the CCP's retention of power.This is a truth that Communist leaders bear in mind since the Sixth Plenum of the Sixth Congress of the CCP in 1927, when Mao Zedong explained:

“Every Communist must grasp the truth, "Political power grows out of the barrel of a gun."Our principle is that the Partycommands the gun, and the gun must never be allowed to command the Party” (Mao Zedong,Selected Works of Mao Tse-tung,Vol. II, pp. 224-225)

The work of Political Commissioners (政治 委员) provides further evidence of how much importance the CPC attaches to its control over the PLA. Their duties include propaganda and promotion of the CPC's political doctrine within the PLA, in order to ensure that the ideology of political leadership is known and respected within the barracks.

The role of the PLA as the military of the CPC has also been repeatedly stressed by Xi Jinping and is one of the pillars of the "Xi Jinping's thinkingon strengthening the military" (习近平强军思想)- that is, the Chinese leader's vision on how to reform the PLA- in order to make it stronger and increasingly loyal to the CPC. To this end, the National Defence Law was amended in December 2020, aligning the relevant legislation with Xi Jinping's program. Party discipline within the PLA has been further consolidated, for example by adding to Article 59 the warning that troops must be loyal to the Party.

4. “A prosperous country with a powerful military”

Allocating funds for the military does not only require political resolve. It also requires an effort of the population, which will have to agree to dedicate resources to military programs instead of other sectors. It is therefore necessary an ad hoc political ideology which, even if not shared by the totality of the population, justifies this choice and makes the required efforts acceptable.

The CPC has endeavoured to shape this ideology, drawing by various sources rangingfrom traditional culture, to Marxism-Leninism, to the Western political tradition. For example, Beijing maintains that it is necessary to have a strong army to achieve the goal of the "Great Rejuvenation of the Chinese Nation", so as to achieve the ideal of a "prosperous country and a strong army" (富国强军), an expression that goes back to the period of the Warring States (V-IIIcentury BC).

Xi Jinping's Thoughton Diplomacy” (习近平外交思想) is consistent with the Marxist-Leninist theory. Beijing approaches its diplomatic relations with other major Powers through a Leninist perspective, transposing the struggle between capitalists and proletarians into the international environment. In this way, the international arena becomes the theatre of competition between rising Powers, namely the People's Republic, and the established Powers, that is the United States. The aims of this competition are many, such as gaining influence, resources or capital.

Furthermore, Chinese strategists support the strengthening of the PLA by drawing on the Western diplomatic tradition. It is not uncommon for them to emphasise that it is US military power, even more than the liberal international system, that allows the United States to retain its role as a leading country. Thus, the PLA represents the guarantee that what happened during the "Century of humiliation" (百年国耻, 1839-1949), will never happen again.

5. The Taiwan question

Beijing has always been clear that it is not possible to complete the process of national rejuvenation without national reunification. The return of Taiwan under the control of the People's Republic is an internal matter for Beijing. In other words, China will not be satisfied until it achieves reunification with the island of Taiwan.

However, there are 2 main obstacles: Sino-Taiwanese relations and Sino-American relations. In the work report presented at the two sessions, the Chinese government reaffirmed its resolve to carry out a peaceful reunification with the rebel island, committing itself to promoting exchanges between the island and the Continent. At the same time, Taiwanese are warned that Beijing will remain highly vigilant and discourage any activity that promotes Taiwan’s independence.

Nevertheless, only 5.1% of the Taiwanese citizens is in favour of reunification: the lowest value ever recorded. There is no doubt that the events in Hong Kong have contributed to diminishing the support of the citizens of the island towards China, as they fear they will suffer the same fate of the former British colony.

At the same time, Taiwan is a key element in the American strategy to contain Chinese maritime expansion in the Pacific Ocean. Consequently, since Beijing has never ruled out the use of force as a last resort, China would have to be ready to standup to US military power,should a conflict arise. That is why the PLA remains a fundamental component in the Chinese political project.

6. How far will China's defence budget grow?

We can expect that China’s defence spending will continue to grow in line with its GDP in the coming years. The white paper of the Chinese Ministry of Defence published in 2019 is clear: the PLA will have to continue its efforts of mechanization and informatisation. Furthermore, the 14th five-year plan reaffirms the Party's intention to "build a powerful military by 2027", the centenary year of the founding of the PLA. This adds to the 2 objectives of "making the PLA a modern force by 2035" and transforming it into "a world-class army" by 2049.

To reach these goals, intense financial and organizational efforts are needed. In particular, 3 conditions must be met. First, China’s economy must continue to grow. To this end, China has to address the problem of a rapidly aging population, as the percentage of the population above 65 is expected to rise from 9.5% to 27.5% by 2050. This means that Beijing will need to allocate more funds to the health sector and social security, while the workforce will shrink. Therefore, Beijing's military ambitions can only be met if the Chinese government manages to carry out a timely reform of its economy.

Other challenges will be the efficient allocation of resources and the innovation in the defence sector. As for the first, reforms to reduce waste, such as improving the procurement system, will be essential. On the other hand, the ability to innovate will be necessary to produce increasingly sophisticated weapons, capable of guaranteeing parity with the main powers. To this aim, the People's Republic has launched a programme of military-civil fusion (军民 融合), in order to create synergies between the public and private sectors and between security strategies and social and economic progress.

7. Conclusion: convincing Beijing to cut military spending will be difficult…

Foreign governments should bear in mind all these factors in order to adapt their foreign policy towards Beijing. In fact, if the geopolitical rivalries and the real or perceived threats of the People's Republic are at the basis of Chinese military considerations, it is essential to understand how these facts are interpreted by the Chinese State-Party.

While a decrease in geopolitical rivalries is always desirable, when negotiating a possible reduction in military spending with China other governments should be aware that their negotiating power is limited by factors that partly escape their influence, such as the reality that the PLA belongs to the Party, Beijing’s peculiar political ideology and the Taiwan issue.


China defence budget- Nicolò Rizzo
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