In June 2023, Sen. Dan Sullivan of Alaska warned Congress that China’s military was catching up to America’s faster than previously imagined.
The US intelligence community, the Republican senator said, estimated that Beijing spent an equivalent of $700 billion on its defense budget in 2022 — more than triple its reported topline of $229 billion.
Sullivan’s legislative push to dig further into the matter came amid renewed interest in China’s true military budget, with think tanks and observers running their own analyses of Beijing’s coffers.
A new report published Monday by the Washington-based American Enterprise Institute seeks to break down how the US might have internally reached that $700 billion estimation for 2022.
The report’s author, Mackenzie Eaglen, writes that the Chinese budget is worth about $711 billion when weighed against America’s, slightly higher than the one quoted in June by Sullivan.
That makes Beijing’s spending in 2022 “nearly equal” to the US defense budget of about $740 billion that year, wrote Eaglen, a senior fellow at AEI.
“Considering that the Pentagon has labeled China the ‘pacing challenge,’ this revelation should cause concern,” Eaglen wrote.
She mostly pieced together the new figure by comparing older Chinese budget reports and spending breakdowns, extrapolating them onto the $229 billion Beijing announced.
That’s because Chinese spending reports are kept tightly under wraps. Most US observers haven’t been able to pin the $700 billion on hard evidence.
Understanding $711 billion
Notably, the $711 billion estimate listed by Eaglen doesn’t mean that China is spending that exact amount of money on defense. Rather, it describes the purchasing power of its military budget compared to America’s, especially considering lower wage and material costs in China.
Based on a 2020 Chinese report to the United Nations, Eaglen wrote that China’s 2022 military spending was likely divided into three major categories: equipment, training and maintenance, and personnel.
With purchasing power parity factored in, China likely spent the US equivalent of $135 billion instead of $85 billion on equipment and $121 billion instead of $76 billion on training and maintenance, the report said.
But the biggest jump comes from Eaglen’s estimation of Chinese military wages, which typically aren’t publicly recorded.
“Labor costs are demonstrably cheaper in China, where soldiers are paid just one-sixteenth the wage of a US Army infantryman,” Eaglen wrote in an opinion piece for The Hill.
In her report, she compared the average wages of US and Chinese government workers and found that the former are paid 4.31 times as much as their counterparts in China.
Using that factor, Eaglen wrote that it’s highly likely China’s spending on personnel that year was worth $293 billion of US military spending.
Then there’s research and development, which the US said China doesn’t account for in its military budget announcements. Eaglen estimated that China spent about $45 billion on R&D, based on the country saying it spent that amount on research in “nondisclosed agencies.”
The rest of the total budget comes from significant expenses listed by China as non-military, but ones that Eaglen argued should be considered defense spending.
She wrote that one such expense was $45 billion for maintaining the People’s Armed Police, a paramilitary organization focused on internal security but tasked with bolstering the People’s Liberation Army’s ranks in times of crisis.
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Another $45 billion was spent on retirement, military pensions, and demobilization, $2 billion on China’s Coast Guard, and $21 billion on space forces — which Eaglen calculated for growth based on an official 2013 Chinese budget of $10.8 billion for space.
“Equal defense spending between the United States and China plays to Beijing’s benefit,” Eaglen wrote, noting that the US defense budget is spread across various theaters worldwide while China focuses on only one region.
The researcher called on the US to provide transparency on its findings about China’s military spending power, citing concerns that the “American public is too often at ease in believing the US military remains ahead of all its competitors.”
US military spending is also often cited as higher than the actual defense budget. Some estimates for 2023 are as high as $1.4 trillion when factoring in costs like veterans affairs spending, homeland security, security for international affairs, and interest accrued from debt.
Meanwhile, the US in March passed a bill allocating $825 billion to the American defense budget in 2024, the smallest proportion of its GDP since World War II. In the same month, China announced a military budget of $231 billion for the year.