Chapter IV Defense Expenditure and Defense Assets China manages and uses its defense funds, ensures the procurement and
supply of its military equipment and materials, and protects its defense assets
in conformity with legal provisions and in accordance with the needs of national
defense building and the requirements of the socialist market
economy. Table 1: Percentage of China¡¯s Annual Defense Expenditure in Its GDP (1997-2003) Year 1997 1998 1999 2000 2001 2002 2003 Percentage 1.09 1.19 1.31 1.35 1.48 1.62 1.63 Chart 1: Comparison Between the Growth Rate of China¡¯s Defense Expenditure and That of Its State Financial Expenditure (1995-2003) Chart 2: Comparison of the Defense Expenditures of Some Countries
Defense
Expenditure
Pursuant to The National Defense Law, the Chinese
government follows the guiding principle of the coordinated development of
national defense and economy. Based on the economic development and revenue
growth, it has continued to increase its defense expenditure moderately so as to
keep up with the changes in the demands of national defense. China's GDP in 2002
and 2003 was 10,517.234 billion yuan and 11,725.194 billion yuan respectively.
Its defense expenditure in 2002 and 2003 was 170.778 billion yuan and 190.787
billion yuan respectively. Its defense budget for 2004 is 211.701 billion
yuan.
The increased part of China's defense expenditure has primarily
been used for the following purposes: (1) Increase of the salaries and
allowances of the military personnel. It is necessary to raise the salaries and
allowances of the military personnel in step with the socio-economic development
and the per-capita income rise of urban and rural residents. In the light of the
unified wage adjustment policy for the personnel of state organs, China has
raised the salary rates of officers, civil cadres and non-commissioned officers;
the allowances of conscripts and cadets under the supply system; and the
pensions of the retired. (2) Further improvement of the social insurance system
for servicemen. In December 2003, the Provisional Measures on Social Insurance
for Unemployed Accompanying Spouses of PLA Servicemen was formulated, to
guarantee their basic living standard and provide them with social insurance
subsidies. (3) Support for the structural and organizational reform of the
military. China once again downsizes its military by 200,000, and has to
increase the expenses on the resettlement of the discharged surplus personnel
accordingly. (4) Increased investment in the development of high-caliber talents
in the military. The PLA has established and refined an incentive mechanism for
talented people, improved conditions in military educational institutions, and
entrusted non-military colleges and universities with the education of qualified
personnel, so as to ensure the achievement of the PLA's Strategic Project for
Talented People. (5) Moderate increase of equipment expenses. This is aimed at
promoting the leapfrog development of weaponry and equipment, and stepping up
preparations for military struggle.
In the past two years, the
percentages of China's annual defense expenditure to its GDP and to the state
financial expenditure in the same period have remained basically stable. For
most of the years since the 1990s, the growth rate of China's defense
expenditure has been lower than that of the state financial
expenditure.
The absolute amount of China's defense expenditure
has long been lower than those of some major Western countries, and the
proportion to the GDP and state financial expenditure has also been relatively
low. In 2003, China's defense expenditure amounted to only 5.69 percent of that
of the United States, 56.78 percent of that of Japan, 37.07 percent of that of
the United Kingdom, and75.94 percent of that of France.
The
management of China's defense funds has become more transparent and
standardized, and its cost-effectiveness has been steadily improving. The
budgeting reform for defense expenditure has been further deepened, and a new
defense budgeting system established, which introduces the zero-base budgeting
method and united budgeting system. The budget adjustment and control function
has been strengthened, and the input direction and amount of defense funds
optimized. The tendering and bidding system for the procurement of defense
materials, projects and services has been improved, and the scope of centralized
payment extended.
in 2003 and 2004 (unit: billion US dollars)
Note 1: Statistics in the charts are sourced from the national defense reports, financial reports and other government reports published by the said countries.
Note 2:The average exchange rate in 2003 was US$ 1.0 ¡Ö RMB 8.2770. On Nov. 20, 2004, US$ 1.0 ¡Ö RMB 8.2765.
Table 2: The Percentages of the Defense Expenditures in the GDP and
Financial Expenditures of Some Countries in 2003
Country |
USA |
Russia |
UK |
France |
Japan |
China |
Defense expend. as % of GDP |
3.60 |
2.64 |
3.11 |
2.22 |
0.99 |
1.63 |
Defense expend. as % of financial expenditure |
16.20 |
14.69 |
8.10 |
11.00 |
6.06 |
7.74 |
Chart 3: China¡¯s Defense Expenditure, 2003 by Proportion(unit: RMB billion yuan)
Military Order Placement and
Procurement
China practices a state ordering system to
guarantee the procurement and provision of weapons, equipment and military
materials. The General Armaments Department is responsible for the procurement
of weaponry and equipment while the General Logistics Department is in charge of
the procurement of military materials.
In October 2002, the CMC
promulgated the Regulations on the Armaments Procurement of the PLA. In December
2003, the General Armaments Department issued relevant provisions, including the
Provisions on the Management of Armaments Procurement Plans, the Provisions on
the Management of Armaments Procurement Contracts, the Provisions on the
Management of Armaments Procurement Modes and Procedures, the Provisions on the
Management of the Examination of the Qualifications of Armaments Manufacturing
Units and the Provisions on the Management of the Centralized Procurement of
Armaments of the Same Kind. All these regulations and provisions constitute a
new statutory system for the procurement of armaments. In recent years, the
procurement of armaments has followed the basic principles of the government
procurement system, gradually pulled down the sectional barriers in military
industry, introduced the mechanism of competition and supported state-owned
enterprises outside the military industry and private high-tech enterprises to
enter the market of military products. The procurement mode has been in an
accelerating transition from procurement at designated enterprises to multiple
ways of procurement such as open bidding, invited bidding, competitive
bargaining and inquiry procurement. This has raised the overall
cost-effectiveness of armaments procurement and ensured the procurement at
reasonable prices of weapons and equipment advanced in performance, superior in
quality and complete as a set. The procurement of military computers and network
devices, vehicle chassis, generating sets, shelters, and other types of
general-purpose equipment has changed from separate to centralized procurement
at the PLA level.
Since February 2002, in accordance with the Overall
Plan for Deepening the Reform in the Procurement of Military Materials, Projects
and Services approved for distribution by the CMC, the General Logistics
Department has promulgated in succession the Provisions on the Management of the
Procurement of Military Materials, the Provisions on the Management of Inviting
Tenders for Military Materials, the Provisions on the Management of Procurement
Contracts for Military Materials, the Provisions on the Management of the Price
Review Work of Procurement Agencies of Military Materials, the Provisional
Measures for the Management of Centralized Procurement Payment of Military
Materials, Projects and Services, and the Provisions on Auditing the Procurement
of Military Materials, Projects and Services. Following the basic principles of
government procurement and taking into consideration the actual conditions of
the building and management of the armed forces, the PLA has adopted in an
all-round way a mode of procurement of military materials which focuses mainly
on hierarchical management and centralized procurement. This mode has improved
the operational mechanism of proper division of labor and mutual restraint among
the departments in charge of funds, planning and procurement, and raised the
level of standardization, specialization and informationalization in the
procurement of materials as well as the cost-effectiveness resulting from
large-scale procurement. Now procured in a centralized way are more than1,000
kinds of materials in 24 categories needed in the development, training,
scientific research and daily life of the armed forces. Procurement items
included in the annual budget are procured through public bidding if their
procurement value exceeds the quota. The quota prescribed by the General
Logistics Department is 500,000 yuan or more.
Protection of Defense Assets
Defense assets
are funds, land and other resources which the state has directly invested in or
appropriated for the building of the armed forces, defense scientific research
and production and other aspects of defense construction. They also include the
resultant weaponry and equipment, installations and facilities, materials and
technological achievements used for defense purposes. The defense assets
possessed, used and managed by the PLA in accordance with the law belong to the
PLA's state-owned assets. The state has promulgated the National Defense Law of
the PRC, the Law of the PRC on Protecting Military Facilities, and the
Implementation Measures for the Law of the PRC on Protecting Military
Facilities. The PLA has formulated more than 30 rules and regulations on the
management of its state-owned assets, such as the Provisions on the Management
of the State-Owned Assets of the PLA. This has put the work of protecting
defense assets on the legal track.
The people's governments and
military organs at all levels jointly protect military facilities and safeguard
national defense interests. Under the leadership of the State Council and the
CMC, the General Staff Headquarters is in charge of the work of protecting
military facilities throughout the country. The headquarters of the military
area commands are in charge of the work of protecting military facilities within
their areas of responsibility. In the areas where there are military facilities,
the local governments at and above the county level and the relevant military
organs stationed there jointly set up military facility protection committees,
with their administrative offices established in the provincial commands
(garrison commands), sub-commands (garrison commands) and the people's armed
forces departments of counties, autonomous counties, cities and municipal
districts.
Following the guiding principle of providing categorized
protection and ensuring the safety of key facilities, the state designates
military forbidden zones and military restricted zones as a way to protect
military facilities, and also takes appropriate measures to protect military
facilities outside such zones. Protected by law are works for military
operations, airspace clearance around military airports, military communication
and power transmission lines, military oil and water pipelines, electromagnetic
environments of fixed military radio installations, frontier defense
installations and military survey marks.
Under the General
Logistics Department is the Bureau of PLA's State-Owned Assets Management in
charge of the management of the PLA's state-owned assets. The PLA's state-owned
assets are managed under the system of unified leadership and hierarchical
responsibility. The logistics organ at each level is responsible for management
of the state-owned assets at its own level. In recent years, the PLA has adopted
a management method of property inspection and registration and physical assets
valuation and accounting, and instituted a system of property right
registration, assets assessment and assets reporting, thus effectively
standardizing the management of the PLA's state-owned assets and ensuring their
safety, integrity, appropriate allocation and effective use.
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