China’s national defense expenditure has shown a steady double-digit rate of increase since 1989, while at the same time has consistently lacked transparency. However, there has been little discussion of the standards by which this (lack of) transparency is being measured. Details of the scope and the breakdown of China’s national defense expenditure have not been clarified. Moreover, it is difficult not only to evaluate whether China’s increase in defense expenditure is ‘moderate’, as the Chinese government insists, but also to reach an objective judgment on whether it is ‘proper and reasonable’.
Although it has been pointed out that ‘there is a lack of transparency and credibility’, why does the Chinese government keep denying this and insist that China’s officially published national defense expenditure figures are ‘proper and reasonable’? It may be because China’s definition of ‘national defense expenditure’ is in itself different from the definition used by the global community.
The present study aims to show that two different concepts, namely ‘national defense expenditure’ and ‘military expenditure’, exist in the People’s Liberation Army (PLA)’s accounting system, based on data related to the financial affairs of China’s armed forces, and to specify the definition and scope of both concepts.
First, the definition and scope of ‘military expenditure’ is compared with that provided by international organizations, research institutions, and previous studies. Second, this study aims to provide a clear definition and scope of China’s national defense expenditure based on previous studies. I also use these studies to confirm the Chinese government’s official definition and scope of ‘national defense expenditure’. Third, the definition of ‘national defense expenditure’ and ‘military expenditure’ is clarified from the accounting system used by the PLA to manage its military financial matters.
As a result, the following three points become clear. (1) In the classification of expenses in the military financial affairs accounting system, two different concepts exist: ‘national defense expenditure’ and ‘military expenditure’. ‘Military expenditure’ is a concept created for subsuming ‘national defense expenditure’. (2) ‘Military expenditure’ is composed of not only ‘military forces budget expenditure’ but also items such as ‘national defense department research and experimentation expenses’, ‘armed police force budget expenditure’, and ‘off-budget expenditure’. (3) If we wish to compare China’s military expenditure with that of other countries, we should use the term ‘military expenditure’ to cover expenses that are incurred on such items as armed police budgetary funds and non-budgetary funds, etc., which are not included in the published ‘national defense expenditure’ figures.
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