Following American intelligence reports saying last year that China is vastly underreporting its military budget, new research has crunched numbers and determined the country's defense spending could rival that of the United States.
Beijing's reported defense spending has ticked upward by 6.6 percent to 7.5 percent over the past five years, totaling less than one-third the defense budgets approved by Congress.
However, "accounting for economic adjustments and estimating reasonable but uncounted expenditures, the buying power of China's 2022 military budget balloons to an estimated $711 billion—triple Beijing's claimed topline and nearly equal with the United States' military budget that same year ($742 billion)," Washington, D.C.-based think tank the American Enterprise Institute (AEI) wrote in a report released last month.
Dubbed a "pacing threat" by the Pentagon, China has been using its growing war chest to modernize its military in recent years. The People's Liberation Army Navy (PLAN) has surpassed U.S. Navy in terms of warship count (but not tonnage), developed its fifth-generation fighter jets and stealth bombers, and ramped up its stockpiles of nuclear warheads and ballistic missiles.
"The American public is too often at ease in believing the U.S. military remains ahead of all its competitors, with misleading statistics erroneously illustrating that the United States' defense spending dwarfs that of the next 10 countries combined," the report said.
Newsweek reached out to the U.S. Department of Defense and Chinese Foreign Ministry with written requests for comment.
To arrive at its $711 billion estimate, the think tank took into account the difference in buying power between the China and the U.S. as well military-oriented expenditures not included in Beijing's budget.
In contrast to the detail-heavy defense budgets the U.S. Department of Defense makes public each year, China reports only a single nominal figure, which sometimes breaks down into training and maintenance, personnel and equipment.
AEI looked at the percentage of funding earmarked for each of these three categories in the last such report China submitted to the United Nations in 2020. The think tank then extrapolated the proportions to the topline China reported in 2022—$229 billion—and adjusted the figures for purchasing power parity (PPP) and wage disparities between U.S. and Chinese government workers.
But these adjustments are only part of the picture. The report also pointed to the China's many hidden expenditures that contribute to its military might, spanning R&D, dual-use technology like satellites, veteran retirement pay, and various quasi-military organizations.
These include the paramilitary People's Armed Police (PAP), which handles internal state security. Another example is the China Coast Guard, a force more than 150-ships strong that is deployed—often alongside navy maritime militia vessels—to project power in contested areas of the South and East China Seas.
AEI calculated the PAP's 2022 budget to be $45.2 billion after adjusting a 2017 International Institute for Strategic Studies estimate.
The think tank did the same with the Stockholm International Peace Research Institute's (SIPRI) estimated 2019 budget for the coast guard, determining this to be roughly $2.1 billion three years later.
In 2023, SIPRI researchers estimated China's true defense budget to be $292 billion—higher than that reported by Beijing, but far lower than AEI's figure.
The PRC's published military budget does not include details of expenditure breakouts, including R&D and foreign weapons procurement. In 2022, China's actual military-related spending could be significantly higher than its officially announced defense budget. Actual PRC military expenses are difficult to calculate, largely due to the PRC's lack of transparency. United Kingdom and Europe-based think tanks estimate that the PRC's actual 2022 defense budget is at least 30-40 percent higher than the PRC's announced budget.
"In 2022, the Peoples' Republic of China announced that its official annual military budget would increase by 7.1 percent, continuing more than 20 years of annual defense spending increases and sustaining its position as the second-largest military spender in the world," a Pentagon spokesperson told Newsweek.
"The PRC's published military budget omits several major categories of expenditures, and its actual military-related spending is significantly higher than what it states in its official budget."
John Culver, retired CIA analyst and national intelligence officer for East Asia, took issue with the AEI estimate.
"As someone who prepared estimates of PLA spending for 30 years... If the customer [U.S. government, Congress] wants the biggest possible number, you can apply sketchy PPP magic or do cost replacement," he wrote on X, formerly Twitter.
"Such an exercise isn't to understand China's resource commitment to the PLA, but to create fodder for domestic political reasons. There's no huge secret PLA budget. They likely really spend less than 2 percent of [their] GDP."
Culver added that the China's military prowess is not "hidden in a safe." It's already a "modern and lethal force described in great detail by Western governments and independent analysts."
"Equal defense spending between the United States and China plays to Beijing's benefit," the AEI report said. "As a global power, the United States must balance competing priorities in the Indo-Pacific and elsewhere, which spreads Washington's budget thinly across multiple theaters. Meanwhile, each yuan China invests in its military directly builds its regional combat power in Asia."
Unlike the U.S. military, spread thin across hundreds of bases worldwide, China's is concentrated in the Asia-Pacific. This gives it a numerical advantage in the event of a conflict with the U.S.—over Beijing-claimed Taiwan, for instance. U.S. officials believe Chinese President Xi Jinping has ordered his military to be capable of invading the democratic island by 2027.
Update 5/3/24, 1:27 p.m. ET: This article has been updated with comments from the U.S. Department of Defense and John Culver.
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Newsweek is committed to challenging conventional wisdom and finding connections in the search for common ground.
About the writer
Micah McCartney is a reporter for Newsweek based in Taipei, Taiwan. He covers U.S.-China relations, East Asian and Southeast Asian ... Read more
