Weapons of Mass Destruction (WMD)

DATE=3/6/2001

TYPE=CORRESPONDENT REPORT

NUMBER=2-273333

TITLE=CHINA-DEFENSE SPENDING -L

BYLINE=LETA HONG FINCHER

DATELINE=BEIJING

CONTENT=

VOICED AT:

INTRO: China has announced it is increasing its defense spending by almost 18 percent this year in an effort to modernize its military forces. As Beijing Correspondent Leta Hong Fincher reports, this is the largest increase in more than a decade.

TEXT: Finance Minister Xiang Huaicheng says that China will spend more than 17 billion dollars on defense this year, an increase of almost 18 percent. Last year China increased its military spending by nearly 13 percent.

/// XIANG ACT IN CHINESE, UP AND UNDER ///

Mr. Xiang told delegates of the National People's Congress Tuesday that the increase would go mainly to raising salaries of its military personnel and to develop a force equipped for the high-tech battlefield. In presenting China's 2001 budget, he said more defense spending is needed to adapt to what he called drastic changes in the military situation of the world.

But analysts say that China's official figures on defense spending represent only a portion of the country's real military budget. Jean-Pierre Cabestan, head of the French Center for Contemporary Research on China in Hong Kong, says that China's actual defense spending could be

anywhere from two to five times more than publicly disclosed.

/// CABESTAN ACT 1 ///

It is always very hard to estimate in a very accurate way how much money is given to the military. Because what we see, the budget which is given by the Chinese authorities, is the one which is mainly aimed at financing the everyday life of the soldiers and officers in the military, rather than financing investments and research and big weapon contracts.

/// END ACT ///

This year's increase in the defense budget is substantially higher than any other increase in more than a decade. Although the actual amount spent on defense cannot be known for sure, analysts say that the move shows that the government wants to make defense spending more of a priority in its overall budget.

The new budget may also reflect how far China has come in moving to professionalize its armed forces by divesting it of its previous commercial holdings. The army must now rely solely on the government for its funding.

Mr. Cabestan says that the new budget reflects too, China's continuing concerns about Taiwan. Beijing continues to urge Taipei to enter political negotiations about reunification, but has never renounced its right to use force to recover the island.

/// CABESTAN ACT 2 ///

I think this increase is also sending a signal to the Taiwan and to the United States, that actually nothing has been solved and even if China says that it prefers peaceful reunification with Taiwan, it is keen to keep up its military pressure on Taiwan.

/// END ACT ///

Beijing has repeatedly criticized the United States for its attempts to deploy a missile defense system, which China sees as a threat to its limited nuclear deterrent, and to its ability to pressure Taiwan. Next month the US Congress is to decide what kind of weapons to sell Taiwan, which wants Aegis class destroyers, Apache

helicopters and submarines. (signed)

NEB/HK/LHF/JO/PLM