The Pentagon released its annual report on the military developments in the People’s Republic of China, and the big news is the escalation of spending seen from Beijing. Titled “Military Power of the People’s Republic of China“ [fixed link — Ed], the report outlines a major expansion in appropriations. It also admits that the Pentagon has no clear idea of China’s overall strategy, or even if they have one:

On March 4, 2007, Beijing announced a 17.8 percent increase in its military budget to approximately $45 billion. This number was later revised by the PRC State Council to $45.99 billion, a 19.47 percent increase from 2006. The announced 2007 military budget continues a trend of official annual budget increases that surpass growth of the overall economy. Analysis of PRC budget data and International Monetary Fund (IMF) GDP data for the period of 1996 to 2006 show average annual defense budget growth of 11.8 percent (inflation adjusted) compared with average annual GDP growth of 9.2 percent (inflation adjusted).

China’s 2006 Defense White Paper states that between 1990 and 2005 the defense budget rew by an average of 9.6 percent, while China’s DP over the same period grew in constant prices an average of 9.7 percent yearly, according to the IMF. The 1996-2006 data are a more useful measure, however, as they cover the period following the 1995 and 1996 Taiwan Strait crises and incorporate the 9th and 10th Five Year Plan periods (1996-2000 and 2001-2005, respectively), which more fully reflect the post-Persian Gulf War reinvigoration of the PLA modernization drive.

The difference between the announced military budget and the actual spending on national security issues is presumed to be around a factor of three. The US believes that the both the low estimate and high estimate of actual spending would make China far and away the biggest spender in the region, dwarfing the budgets of Russia and Japan, and perhaps surpassing them in combination. The data on this is murky, but China has shown progress in modernizing some very expensive systems:

• Land- and sea-based nuclear missiles
• Domestic production of short- and medium-range ballistic missiles
• Advanced submarines and their systems, in both attack and “boomer” types
• Purchases of advanced Russian aircraft
• Air defense systems, especially long-range mobile systems
• A series of advanced Russian surface-fleet ships of all kinds

So what are the Chinese up to? No one at the Pentagon can quite figure it out. Their modernization appears focused on air defense and their navy, both in surface and submarine systems. They have improved these systems rapidly over the last four years. That seems to indicate more of a defense than an offense, but the naval systems directly threaten American strength, especially in the Pacific.

Fortunately, it looks as though China has not focused on building the most offense-oriented system of a modern navy: an aircraft carrier. They have talked openly of building their first modern aircraft carrier, but analysts believe them to be at least seven years away from producing one on their own. That could change, especially with their increasing closeness to Russian shipbuilders, and rumors swirled that China could spend billions on Russian naval aircraft soon. So far, though, that has not come to pass.

The DoD presumes that the primary motivation for Chinese military strategy remains the protection of the ruling regime. That could explain the focus on protection and modernization, along with some real efforts to promote professionalism throughout all of the services. That should not give us comfort for the long term, however. A China with a fully modernized military, build on professionalism and efficiency, will present a formidable threat to Western interests in the Pacific.