Beijing expands defense funds

On track to reach $360 billion a year by 2020

By Christopher Bodeen, ASSOCIATED PRESS | Saturday, August 2, 2008

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BEIJING | China's defense spending is on track to reach $360 billion a year by 2020 if annual increases continue at their current pace, an analyst with the Jane's defense consulting firm said Friday.

That figure is still dwarfed by U.S. military spending, which amounted to $547 billion last year, but would represent a significant increase over Beijing's current official budget of about $59 billion.

China's publicly announced spending is roughly on a level with total military expenditure by Britain last year, and slightly higher than that of France. Some analysts think total spending might be significantly higher because the official budget doesn't include funding for weapons programs.

On average, China's military spending has jumped by 15.5 percent each year over of the past 14 years, powering China's arms industry and making the country less dependent on Russian imports, Jane's analyst Matthew Smith said in a telephone interview.

"Our forecast shows no decline in spending," Mr. Smith said. And China's goal is to "reinvent" the People's Liberation Army by 2020.

China's officially declared defense spending jumped 17.6 percent, the 18th double-digit percentage increase in 19 years. The spending has drawn calls from Washington and Tokyo for Beijing to explain the reasons for the buildup and how it was spending the money.

China has said its intentions are not aggressive, and that increases were needed to pay for higher oil prices and boost salaries of the 2.3 million-member army.

China bought almost $3.5 billion in weaponry from Russia in 2006, but that figure fell by 62 percent last year, according to the Stockholm International Peace Research Institute, a leading monitor of the global arms trade.

Mr. Smith said that came as a result of Chinese advances in arms production and Russia's reluctance to part with its most cutting-edge technology.

U.S. and European companies meanwhile have trailed in military exports to China because of legal restrictions at home and a U.S. policy aimed at deterring the sales, Mr. Smith said. Washington has banned the trade of weaponry and technology with military applications since the bloody crackdown on demonstrators for democracy in Beijing's Tiananmen Square in 1989.

As China's arms industry grows, the country will likely step up exports as a low-cost alternative to Russian or Western weapons suppliers, Mr. Smith said.

Especially in Africa, Chinese arms sales often serve to forge links with countries that have large oil and gas stocks that Beijing has aggressively sought to fuel its booming economy, he said.

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