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Inside China's $132 Billion Military Budget

China's growing military budget is only second to the United States. By Lily Kuo

China’s newly announced 802.2 billion yuan ($131.57 billion) defense budget certainly makes an impression, especially when it’s accompanied by the government’s muscular assertion that peace in the region can only be “maintained by strength,” and a promise that China’s military would respond to all provocations.

The new military spending figures are a 12.2% boost from the year before. This is the third year in a row that military spending increases have  outstripped overall economic growth, and China’s military budget is now second only to the US’s massive outlay—which is bigger than the next nine countries’ military budgets combined, although it is shrinking a bit.

“This is worrying news for China’s neighbors, particularly for Japan,” Rory Medcalf, a security analyst at the Lowy Institute in Sydney told Reuters . Some analysts argue that China’s spending is even more aggressive than Beijing admits—they estimate it reached $240 billion last year, almost twice the official figure.

IHS Jane, a defense consultancy, projects Chinese military spending will reach $159.6 billion by 2015 —and will surpass all of Western Europe by 2024.

Perhaps more worrying for China’s Asian neighbors, several of them caught up in territorial and historical disputes, is China’s intent to increase the People’s Liberation Army ability to project military power across the region. Chinese premier Li Keqiang, in announcing the budget, said spending would focus on “ new and high-technology weapons and equipment” and enhancing “border, coastal, and air defenses.”

All of that, though, should be taken with a more than a grain of salt. China’s military is beset by all kinds of problems. “As a military that has not fought a war for 30 years, the People’s Liberation Army has reached a stage in which its biggest danger and No. 1 foe is corruption,” wrote former Chinese colonel Liu Mingfu in 2012.

While there’s no credible estimates of how much of the budget is siphoned off, the recent crackdown has offered up a plum example of how badly funds were being misused. Last month, police raided the home of Lieutenant General Gu Junshan, the former deputy head of the People’s Liberation Army’s logistics department, who resigned over allegations of corruption in 2012. Police removed four truckloads of items from the general’s house, including a statue of Mao Zedong made out of pure gold, a gold wash basin, a gold model boat, and crates of the luxury Chinese liquor Maotai. He reportedly owned 10 homes in downtown central Beijing.

The Chinese military’s weakness may make it more dangerous. Easton argues that China is investing in unconventional weapons to compensate for its lack of experience and technological edge, including cyber warfare and over 1,600 ballistic and cruise missiles that the US and Russia have outlawed since 1987.

“Experienced combat veterans almost never act this way,” Easton writes. “Indeed, history shows that military commanders that have gone to war are significantly less hawkish [afterward] than their inexperienced counterparts. Lacking the somber wisdom that comes from combat experience, today’s PLA is all hawk and no dove.”