When China recently announced its 2025 defence budget of $245 billion, concerns were raised in India, as always, about it being too large and threatening to our national security. Most concerns, however, are limited to academic discourse on the statistical figures as Chinese defence budgeting processes and systems are quite opaque. While Western scholars have made some serious attempts in last two decades to de-encrypt and demystify the budgetary secrets in China, Indian scholars lag behind in their knowledge-building endeavours about China’s defence budgeting processes and rely on one-sided and often manipulated figures from the West.
Three sources dominate
The primary inferences on Chinese defence budget are still being in-sourced from three reputed annual publications with variable assessments: the annual report on ‘military and security developments involving the People’s Republic of China’ published by the US Department of Defence; the annual fact sheet on ‘trends in world military expenditure’ published by the Stockholm International Peace Research Institute (SIPRI); and the Military Balance published every year by the London-based International Institute of Strategic Studies (IISS).
Against the official defence budget of $236 billion in 2024, the US report in December 2024 put the figures at $330 to 450 billion. According to this report, China spends at least 40 to 90 percent more than officially stated figures. Unfortunately, this robs the US report of some credibility since the variation is beyond tolerance limit and shows inability of even most accurate defence budget modelling in making an accurate analysis about China’s defence expenditure.
According to the SIPRI fact sheet, China spent $296 billion in 2023 whereas official figures for that year was $224 billion. The Military Balance, in its 2025 edition, puts China’s 2024 defence budget at $476.7 billion on purchasing power parity (PPP) basis. Therefore, there is no consensus about the correct Chinese defence expenditure.
India falls into a cognitive information trap
The domestic write-ups and news stories in India become readymade victims of a cognitive information trap where we keep feeding on Western narratives on budgetary figures. For instance, we create a monster of the Chinese defence budget being three to four times larger than India’s own defence budget. In the process, we forget that China is at least three times larger than India. It shares land borders with 14 countries. All oceanic neighbours are at loggerheads with China due to unresolved territorial differences or China’s aggressive instincts. Most of these countries spend a pittance on defence even while standing up to Chinese shenanigans. China’s defence budget is four times higher than Japan and 15 times higher than Taiwan. These countries do not panic. It is debatable if we should panic instead of researching more on China’s defence finance and military modernisation.
There are many defence finance lessons from China’s empirical experiences that could be taken up for project-based studies to strengthen India’s own defence finance ecosystem.
Takeaways from China’s experience
First, at a time when the defence strategy, including procurements, are in excess of funding and lead to consequential vulnerabilities on many fronts, China comes across as a role model. The Chinese kept defence modernisation as one of their last areas of emphasis when they harped upon ‘four modernisations programme’ in 1979. For almost two decades, defence budgetary allocations grew at a very slow pace, allowing larger allocation of GDP to critical sectors of economy.
Very few countries can take such bold decisions. Today, despite their single-digit growth proclamations, the Chinese are perhaps increasing their defence budget in double digits on a year-to-year basis. This is possible due to the large base of the economy.
Second, China also cut down its military by more than 50 percent when it came to shedding the extra manpower. That has allowed the People’s Liberation Army (PLA) to transit from a ‘people’s war’ strategy to ‘war under informationized conditions’ with enhanced combat capability. Very few countries will have that kind of courage and conviction to go for such manpower shedding – certainly not vibrant democracies. That also accounts for high revenue expenditure in the armed forces of democratic countries. While China is building ships, aircrafts and almost all items for modern military usage, democratic countries are stuck in managing resources for manpower management.
Third, after a brief period of defence reforms under Jiang Zemin and Hu Jintao, China seems to have gone back to dark ages under President Xi Jinping. Defence white papers are no more being published; defence budget transparency is again slipping and perhaps we are back to square one again where we are having doubt after doubt about the Chinese defence budget in particular and military modernisation trends in general. Unfortunately, we have not come across any Indian scholarly attempts to study the regressive trends under Xi Jinping. Perhaps, we are waiting for the West to guide us again!
Relying on Western narratives is counterproductive
In becoming blind adherents to western publications and knowledge dissemination, we are in danger of being diverted to wrong directions. The West, for example, is obsessed with a possible Chinese attack on Taiwan or an impending Sino–US military competition. All publications are focused on the American defensive strategy against China on Taiwan front. Pray, how is that going to help India’s cause? We would benefit from intelligence and academic revelations on Chinese military buildup in Tibet, area that remains sketchy in our cognitive mapping.
China is an autocratic set-up. Therefore, its defence budget would remain non-transparent to a significant level and it would continue to overspend in coming days, perhaps to reach a competitive level to the US, the largest military spender. Most importantly, it would not give up its aggressive strategic instincts, as we saw in Doklam and Galwan. Therefore, a long–term solution lies in having an independent data analysis center on China’s defence budget and processes to develop an indigenous perspective. Perhaps, there lies a solution to China’s budgetary monster popping up on an annual basis.
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