In this paper I discuss China’s real defence budget over 20 years to look at real growth over time, the changing composition, and the real spending gap between China and the USA.

Down the published paper here,

I find that: (i) China’s has dramatically closed the gap and defense purchasing power is 59% of the USA; (ii) real personnel inputs have declined over time, but; (iii) real equipment spending has grown at a massive 10% per year since 2000.

I also show that the USA has managed to maintain the gap in recent years, although it achieves this only by spending a much larger fraction of its GDP on defence.

China’s defense forces are still relatively labour intensive, but there has been a massive shift in its composition with rapidly growth in equipment per person.

The results reconcile the increasing disparate accounts of China’s military rise, and particularly the divide between defense budget data and descriptive narratives of China’s military modernization.