Tuesday, March 6, 2012

China Announces Defense Budget: Beijing Sets 7.5 Per Cent GDP Target

China has announced it will increase defense spending by 11.2 per cent in 2012, for the first time taking its annual military expenditure beyond $100 billion as it puts in place plans to modernize its Army against the backdrop of an uncertain regional environment.
The planned defense budget was announced in Beijing on Sunday as 670.274 billion yuan ($106.39 billion), an increase of 67.604 billion yuan over the expenditure in 2011 and an 11.2 per cent year-on-year rise.
The present hike will bring official outlays on the People's Liberation Army (PLA) to 670.3 billion yuan ($110 billion) for 2012, after a 12.7 per cent increase in 2011 and a near-unbroken string of double-digit rises across two decades.
The rise in military spending was in keeping with the growth in the Gross Domestic Product (GDP) and fiscal expenditure. The spending as a share of GDP was only 1.28 per cent, lower than many countries including the United States and the United Kingdom. “where it exceeds 2 per cent.”
Double-Digit Percentage Rise
It, however, remains unclear how China's neighbors will perceive the double-digit percentage rise, with several countries, from Japan to those involved in disputes over the South China Sea, having expressed concerns in recent months over the rise in military spending.
The defense budget grew by 12.7 per cent last year to $91 billion, though spending grew by a lower than expected 7.5 per cent in 2010, the first time in two decades that the increase was a single-digit figure on account of the global financial crisis.
China's spending in 2012 will exceed what India spent last year by three times — India's defense expenditure was reported at $36 billion in the 2011-12 budget.
In addition, the specified military spending, which many western analysts say is far higher than the official version, China in 2011 spent over $100 billion on internal security. The hike in China's defense budget, which is now almost triple of the Indian defense spending, may impact New Delhi's military expenditure.
India had allocated $ 36.04 billion for defense in 2011, which represented an 11.59 per cent growth over the 2010 budget.
US President Barack Obama has sought to reassure Asian allies that the United States will stay a key player in the area, and the Pentagon has said it will "rebalance toward the Asia-Pacific region".
Obama's proposed budget for the fiscal year of 2013 calls for a Pentagon base budget of $525.4 billion, about $5.1 billion less than approved for 2012.
Beijing has sought to balance long-standing wariness about US intentions with steady relations with Washington, especially as both governments focus on domestic politics this year, when Obama faces a re-election fight and China's ruling Communist Party undergoes a leadership handover.
But the US "pivot" has fanned unease in China, with some PLA officers calling it an effort to fence in their country and frustrate Beijing's territorial claims.
GDP Growth
China has set its growth target for 2012 at a lower-than-expected 7.5 per cent, in an indication that its focus during a crucial transition year would be on maintaining stability and achieving more balanced growth.
The 7.5 per cent target is the first in eight years that has fallen below 8 per cent, long seen by Chinese officials as the minimum level of growth needed to maintain internal stability. The Chinese economy does, usually, exceed the annual targets set by the government, and is expected to surpass the 8 per cent figure this year as well. The economy grew by 9.2 per cent in 2011, down from 10.4 per cent in 2010.
Asian neighbors, however, have been nervous about Beijing's expanding military, and this latest double-digit rise could reinforce disquiet in Japan, India, Southeast Asia and self-ruled Taiwan, which China considers part of its territory. Japan and China have locked horns over islands each claims in the East China Sea; Vietnam, the Philippines and other nations have challenged Beijing over claims to swathes of the South China Sea that could be rich in oil and gas.
It was understood that China has been constructing an aircraft carrier, although the timing of its deployment is not known. It was believed that China was also developing stealth fighters, all these programs made people wonder what the assumption behind such military modernization was about.
The growth trajectory of China's military modernization, as evident from the country's latest defense budget, has attracted much attention across the Asia Pacific region. This followed the expression of concern, in some regional circles, over some of China's recent “military manoeuvres.”

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