How Much Will China Spend on Defense & 'Economic Strength'?

A glimpse into the Chinese government’s ambitious economic, foreign policy, and defense goals was offered at the start of the week as China’s “Two Sessions” meeting kicked off with a report by Premier Li Qiang.

A Chinese government work report submitted on Tuesday to the national legislature embraced ambitious targets ranging from determination to solidify economic recovery to upholding international fairness and justice while meeting the needs of military modernization in the face of global challenges.

The concurrent annual March meeting of the legislature, the National People's Congress, and political advisory body, the Chinese People's Political Consultative Conference (CPPCC), is typically one of China's biggest political events of the year. As on previous occasions, it laid out a roadmap for the year built around the Asian giant’s economic and social development needs, along with the external security environment.

Screenshot of chart showing China's defense spending.

© Photo : Chinese Ministry of Finance

Defense Spending

China is boosting its defense spending for 2024 by 7.2 percent, according to a Finance Ministry report. The defense budget worth 1.66 trillion yuan ($231.4 billion) was unveiled in the draft budget report issued at the opening of the second session of the 14th National People's Congress (NPC).

Speaking on Tuesday, Chinese Premier Li Qiang underscored that in line with China's national defense strategy, the country will “comprehensively strengthen military training and combat readiness,” and “firmly safeguard national sovereignty, security, and development interests.”

He added that in 2023, China “made achievements in national defense,” and this year there will be “critical steps to meet the century goals of the PLA [People’s Liberation Army] and speed up the implementation of defense projects.”

Li stressed that the People's Republic of China (PRC) is committed to an independent foreign policy of peace, and a “win-win” strategy of opening up, determined to engage with the international community to achieve reform of the global governance system.

“I wish to stress that compared with major military powers, such as the United States, China’s defense spending is quite low, whether as a percentage of GDP or total budget, or in terms of per citizen or per service member expenditure,” Lou Qinjian, spokesperson for the second session of the 14th NPC, said at a press conference on Monday.

He added that China, in order to safeguard sovereignty and security, has "maintained reasonable and steady growth of its defense spending, consistent with its sound and steady economic and social development, to promote synchronized growth of defense capability and economic strength.”

Economic Expansion Target

The Chinese premier unveiled the key economic goals, saying that this year’s GDP target would be set at "around 5 percent," and vowed to “transform the growth model.”

"Achieving this year's target will not be easy, so we need to maintain policy focus, work harder, and mobilize the concerted efforts of all concerned," Li said.

The ratio of deficit to gross domestic product (GDP) has been set at three percent for 2024, with the government deficit to rise 180 billion yuan from the 2023 budget figure.

China's Gross Domestic Product grew by 5.2 percent in 2023, surpassing the initial target of around five percent, the report said. It was added that the country contributes around 30 percent to world economic growth.

The country's urban jobless rate is set at around 5.5 percent, aiming to create around 12 million new jobs, and inflation at around three percent.

Li said that China has boosted development in science and technology, with urban residents now making up 66.2 percent of the population. According to the premier, a stable, transparent, and predictable policy environment will be created for enterprises and will put the focus on “communicating with the market.”

Among other details, plans were unveiled to issue ultra-long-term special treasury bonds for several years to fund major national strategies, with the first issue to be worth one trillion yuan ($139 billion).

Expanding domestic demand, promoting steady growth in consumer spending, and a year-long program to boost consumption were also highlighted as targets for 2024.

Li added that the government planned to provide broader access to private investors in areas such as telecommunications and medical services, while expanding foreign trade, including cross-border e-commerce. Plans were announced to “completely scrap” the threshold for foreign investment in the manufacturing sector.

China’s goal is also to ensure national food security to guarantee that the country’s food supply is “firmly in our own hands.”

Screenshot of Global Times graphic.

© Photo : Global Times

Tech Promises

China pledged to become self-reliant in spheres ranging from AI to chipmaking in the face of US-driven attempts to contain its development. The country has invested heavily in industrial and consumer research and development in recent years, with R&D as a percentage of GDP hitting around 2.5 percent in 2022.

The country will seek to modernize the industrial system and develop new quality productive forces at a faster pace, the government work report stated. The government will raise R&D spending by about 10 percent, with the report singling out industrial and supply chain upgrade, and enhanced focus on future-oriented industries such as biomanufacturing, quantum technology, hydrogen power, commercial spaceflight, and development of the digital economy.

Furthermore, an AI Plus initiative is to be launched, aimed at enhancing national artificial intelligence research and application. AI Plus is to aid in-depth integration of AI and real economy.

The country is also intent on consolidating its leading position in industries such as intelligent connected new-energy vehicles, the report said.