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III. Maintaining a Low Level of
Defence Spending

China has consistently stressed rationally scaled expenditure on defence.The costs of defence are appropriately allocated based on the nation'sfinancial capacities, while retaining the premise of overall balance. Keyareas are guaranteed attention, funds are rationally used and strict economypractised so as to ensure maximum benefit and be sure that the minimumrequirements for national defence work are met within the limited budget.Since the initiation of the reform and opening policy, China has placedwork in defence in a position subordinate to and in service of overallnational economic construction. Relatively major reapportionments and reductionshave been made so as to strictly control defence spending.

China has consistently adopted a serious-minded attitude towards themanagement of spending on defence. A complete administrative and regulatorysystem tightly geared to the principles of strict control, strict managementand strict supervision has been established and fine tuned. China's defencebudget and final accounts are examined and approved by the National People'sCongress and must be strictly implemented once approved. The state andmilitary auditing departments examine and supervise defence appropriationsand the results thereby produced so as to ensure that defence expenditureis strictly implemented and rationally used.

In 1994, China's expenditure on national defence totalled 55.071 billionRMB yuan; 34.09 percent (18.774 billion yuan) was spent on livingexpenses, principally on salaries, food and uniforms; 34.22 percent (18.845billion yuan) was spent on maintenance of activities, principally militarytraining, construction and maintenance of facilities, water, electricityand heating; 31.69 percent (17.452 billion yuan) was spent on equipment,including research, test, purchase, maintenance, transportation and storage.Thus, maintenance-type activities absorb the largest portion of the defencebudget. Moreover, of this expenditure, in addition to that spent to ensurethe personnel's living and normal activities a considerable sum, nearly3.7 billion yuan, is spent to fund activities associated with social welfare,such as pensions for retired officers and schools and kindergartens forchildren of military personnel.

Plain living and hard working is the people's army's fine tradition.The PLA economizes by frequently inventorying warehouses to make the bestuse of stored goods and repairing rather than replacing old facilitiesand equipment. In addition, in so far as is within its capacity it joinsin agricultural, sideline and industrial production and engages in business.These activities are primarily undertaken to provide employment for thefamilies of military personnel, to improve life culturally and materiallyin grass-roots units and to support the nation's overall economic construction.

China's expenditure on national defence has consistently been kept ata low level necessary to ensure that the requirements for national securityare met. Between 1979 and 1994 defence spending increased 6.22 percentannually in absolute terms. Over that same period, the general retail priceindex of commodities increased 7.7 percent annually. During these sixteenyears an expenditure of 581.294 billion yuan would have been needed tomaintain the 1979 level of defence spending. However, only 71.65 percentof this figure, 416.499 billion yuan, was appropriated. Expenditure onpersonnel's living expenses was increased by a large margin to keep upwith the spiralling costs of living. In recent years, increases in annualdefence spending have for the most part simply matched price increasesor gone to ensure the standard of living of personnel.

China has a fairly low level of defence spending compared with thatannounced by other countries. It spent only US$ 6.39 billion on defencein 1994 (calculated at the average annual exchange rate of the RMB yuanto the US dollar), 2.3 percent that spent by the United States, 18.3 percentthat by Britain, 18.6 percent that by France and 13.9 percent that by Japan.Per capita defence spending by that year was only US$ 5.36.

China's spending on defence is low in relative terms as well as absoluteterms. In 1979, defence expenditure in China accounted for 5.6 percentof the gross domestic product (GDP); in 1994, 1.3 percent. This may becompared with 4.2 percent in the United States, 3.6 percent in Britainand 3.18 percent in France. Again, in 1979, defence accounted for 18.5percent of total expenditure by the Chinese government; in 1994, 9.5 percent.In the United States this figure stood at 18.9 percent, in Britain 9.64percent and in France 13.6 percent.

As these facts make clear, China has a pattern of low expenditure ondefence. As long as there is no serious threat to the nation's sovereigntyor security, China will not increase its defence spending substantiallyor by a large margin. It will never threaten or invade any other country.