A recent analysis by researchers and journalists at War On The Rocks has sparked widespread interest and controversy over China’s hidden military spending and misjudgments.
Some reports put China’s defense budget at around $700 billion, roughly comparable to the U.S. budget. However, most independent estimates tend to inflate these figures. More accurate data based on purchasing power parity (PPP) shows China’s actual defense budget in 2024 to be about $474 billion, well below the reported $700 billion but higher than the official budget of $232 billion.
The main problem with the estimates is that they take into account spending categories that are not included in the U.S. military budget, such as spending on internal security or research programs. Using PPP for some categories, such as military salaries, can also produce misleading results, making it appear that China is spending more than it actually is. While PPP can be useful for estimating personnel and construction costs, for high-tech projects, such as weapons development, it makes more sense to use market exchange rates.
China’s purchasing power for capital-intensive equipment is declining, according to the latest World Bank data. This indicates that China has to spend more to acquire technologically sophisticated assets. This is an important observation for the United States, as erroneous overestimations of Chinese spending could lead to an overreaction or misallocation of the U.S. military budget.
Misunderstanding Chinese spending patterns could also lead to a distorted perception of the balance of military power and an unnecessary escalation of tensions between countries.
Previously, Cursor reported on China’s new information warfare strategy around the world.
