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Budget Expenditures

The PRC's first domestic space launch took place just two months after Japan's first mission in 1970, and since then the paths of these two Asian countries have been remarkably similar. Like Japan, during the Cold War the PRC averaged only a few missions each year and had developed the means to reach both LEO (including sun synchronous missions) and GEO. However, the PRC launched relatively few scientific satellites and has accumulated extensive experience with recoverable spacecraft.

Through the 1990s financial details of China's military and civilian space programs were considered state secrets. Moreover, the Chinese governmental budget structure, like that of the former Soviet Union, was not amenable to such specific accountings. The Chinese annual budget for civil space activities, including research and development, launch vehicle and satellite production, and launch site tests, was estimaged to have averaged 1.4-1.5 billion Yuan. Actual launch and satellite control operations were financed separately (References 64-66).

Meaningful figures for historical or projected spending on the Chinese space program are virtually impossible to obtain. In 1992 a Chinese official evaluated the budget of the Chinese space program at only 0.035 per cent of GNP in 1987, compared with 0.52 per cent in the USA. This would correspond to about $150 million - a suspiciously small figure, even taking into account the differences in purchasing power parities between China and elsewhere. However, in the same year, the Western European Union estimated that China's annual expenditure on space research and development (including defence) was in the region of $3 billion. The US estimates that China spent some $1.35 billion a year on space, of which $0.5 billion is directed towards civilian R&D and $0.8 billion to military space activities but it should be remembered that these figures are only estimates.

Space Daily reported October 12, 2006 that the annual Chinese space budget exceeded two billion dollars. Jeffrey Logan, an analyst with the US Congressional Research Service, wrote in 2007 that "China’s spending on space is growing, although details are often not available. The CNSA reports to have a budget about one-tenth the size of NASA’s. Western experts estimate Chinese space spending at $1.4-2.2 billion per year, on par with France and Japan. Chinese budget opacity, the dual-use nature of most space technology, and currency conversion difficulties make direct comparisons uncertain."

These numbers would seem to significantly under-estimate the level of effort of the Chinese space program. Although Chinese companies evidently enjoy significant cost advantages relative to their Western counterparts in lower-end manufactured goods, it is not evident that this advantage extends to higher end aerospace goods. Initial fears that Chinese space launch vehicles would dominate the international launch market due to drastic price advantages proved unfounded. And the Chinese entry into the regional passenger jet market is not expected to be priced significantly lower than similar offerings from other countries.

Over the five year period 2003 through 2007, China conducted 36 launches, while the United States conducted 100, the EU conducted 22, and Japan only 13. The US government spends about $60 billion each year on space according to the Space Foundation [with a NASA budget of about $17 billion and almost all the rest being defense and intelligence], the European Space Agency budget was running about €3 billion [about US$4 billion] while Japan's space expenditurs were running about 300 billion yen [about US$3 billion]. In each case, some of the launches were non-governmental commercial spacecraft, the budgets for which are not including in these government budgets.

A very simplistic calculation dividing total government budget by total launches would suggest a Chinese space budget about one third that of the United States, or about $20 billion, about one and one-half that of Europe, or about $6 billion, or nearly three times that of Japan, or about $10 billion. Taken together, these very rough order of magnitude calculations suggest an annual Chinse space budget of about $10 billion. This number would appear to be calculated on an official exchange rate (OER) basis. The "actual" number might be double this about on a purchasing power parity (PPP) basis. PPP exchange rates are the value of goods and services produced in another country valued at prices prevailing in the United States.

Purchasing power parity (PPP) exchange rates are the value of goods and services produced in the country valued at prices prevailing in the United States. This is the measure most economists prefer when looking at per-capita welfare and when comparing living conditions or use of resources across countries. The measure is difficult to compute, as a US dollar value has to be assigned to all goods and services in the country regardless of whether these goods and services have a direct equivalent in the United States (for example, the value of an ox-cart or non-US military equipment). For many developing countries, PPP-based measures are multiples of the official exchange rate (OER) measure. The difference between the OER- and PPP-denominated values for most of the weathly industrialized countries are generally much smaller.

In 2010, China had a national record of 15 space launches. As a comparison, the United States had 14 launches in 2010. Russia had 31, and Europe had eight. These numbers include government as well as commercial launches. All of China’s launches were for domestic programs, including space-based intelligence, surveillance, reconnaissance, navigation, meteorology, and communications satellite constellations. In most cases, the Chinse spacecraft were smaller, less massive, and presumably less expensive than their American counterparts. But estimates that would place Chinese space spending at thirty times less than that of the United States [$2 billion versus $60 billion] clearly misrespresent the actual situation.

Given the differences in the structure of the American and Chinese economies, an apples to apples comparison of space budgets is neither possible nor particularly meaningful. The American space budget is the result of multipe arms length transactions, and reflects the prices required to induce aerospace industry and workers to work on the space program as opposed to other activities. The Chinese space "budget" is an artificial construct in a command economy in which "prices" and thus budgets, are the result of arbitrary administrative decisions. The Chinese "budget" is further distorted by various subsidies that are difficult for outside observers [and probably the Chinse themselves] to track or assess.

The Chinese government owns or controls of the means of production, and the government controls the allocation of resources and the price and output decisions of enterprises. A non-market economy [NME, pronounced "enemy"] country does not operate on market principles of cost or pricing structures, and sales of merchandise in such a country do not reflect the fair value of the merchandise. Non-market economies do not allocate resources according to traditional market concepts of supply and demand, thereby making determinations of fair market values and prices almost impossible. Comparable prices and costs from similarly situated third countries can be substituted for the non-market economy to determine fair market value.

When joining the World Trade Organization [WTO], China agreed that other WTO members could use third-country information to calculate normal values in antidumping actions against Chinese companies. Specifically, China’s WTO accession agreement provides that in determining price comparability in antidumping investigations WTO members may use “a methodology that is not based on a strict comparison with domestic prices or costs in China.” However, the accession agreement also specifies that this provision will expire 15 years after the date of the agreement—that is, by the end of 2016.

But the surrogate methodology proved difficult to apply because there were occasions when there was no available surrogate. Therefore, it was necessary to devise an alternative methodology to use when an appropriate surrogate could not be located. The alternative “factors of production” approach required that the amount of each factor input be taken from a market economy country considered to be at a comparable stage of economic development.

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Page last modified: 23-12-2013 17:09:28 ZULU