Modernizing China's Military Opportunities and Constraints

by Crane, Keith

• ISBN13: 9780833036988
• ISBN10: 083303698X
• Format: Paperback
• Copyright: 2005-03-15
• Publisher: RAND Corporation

Summary

Projects future growth in chinese defense expenditures, evaluates the current and likely future capabilities of China's defense industries, and compares likely future defense expenditure levels with recent expenditures by the United States and the U.S. Air Force.

Table of Contents

Preface	iii
Figures	xi
Tables	xiii
Summary	xv
Acknowledgments	xxix
Acronyms and Abbreviations	xxxi
Introduction	1	(8)
Will China Become a Serious Military Threat in the Western Pacific?	1	(3)
Purpose of This Study	4	(1)
Outline of the Book	5	(4)
The Chinese Economy	9	(42)
Introduction	9	(1)
The Current Size of the Chinese Economy	9	(8)
China's Economy Compared to That of the United States	9	(3)
Dollar Estimates of the Size of the Chinese Economy	12	(4)
Measures of GDP and Military Spending	16	(1)
Chinese Economic Growth	17	(1)
Overall Determinants of Chinese Economic Growth	17	(1)
Sources of and Constraints on Future Economic Growth: The Rural Economy	18	(17)
Declining Rates of Growth in Agricultural Output	18	(2)
Widening Differences Between Rural and Urban Incomes	20	(1)
Financial Difficulties of the Town and Village Enterprises	21	(2)
The Service Sector: Current and Future Source of Employment	23	(1)
Will Industry Remain the Driver of Economic Growth?	24	(2)
Foreign Direct Investment: A Diminishing Driver of Growth	26	(3)
Exports Will Become Less of a Factor in Growth	29	(2)
Balance-of-Payments Pressures Are Unlikely to Constrain Economic Growth	31	(2)
Threats to Growth from the Financial System	33	(2)
The Impact of Demographic Changes on the Chinese Economy	35	(4)
Urbanization and Internal Migration	35	(1)
The Aging of China	36	(2)
Aging and the Military	38	(1)
Future Economic Growth	39	(2)
Biases in Chinese Statistics on Economic Growth	39	(2)
Prospects for Growth Through 2025	41	(10)
Key Factors Affecting Future Growth in China	41	(3)
Projections of Growth in GDP	44	(7)
Government Revenues and Expenditures	51	(40)
Introduction	51	(2)
Information About China's Budget	52	(1)
China's Budgetary Policy History	53	(10)
The Pre-Reform System	53	(3)
Reform and Taxation	56	(7)
Tax Revenues	63	(2)
Division Between Central and Local Governments	63	(1)
Detailed Sources of Central Government Revenues	64	(1)
Local Government Revenues	65	(3)
The Large and Vital Role of Extra-Budgetary Revenues	68	(3)
Government Expenditures	71	(11)
The Central-Local Division of Responsibilities	71	(4)
Local Expenditures	75	(4)
National-Level Expenditures	79	(3)
Hidden Budgetary Problems	82	(3)
Liabilities Not Included in Central Government Debt	82	(3)
Assets	85	(3)
China's Government Balance Sheet	88	(1)
Broader Conclusions	88	(3)
China's Military Expenditures	91	(44)
Introduction	91	(3)
Why We Should Care	91	(1)
Approach	92	(2)
Organization of This Chapter	94	(1)
Structure and Process of Chinese Military Budgeting	94	(6)
Introduction	94	(1)
Key Budget Organizations	95	(2)
The Military Budgeting Process	97	(3)
Changes in the Military Budgeting Process	100	(1)
The Official PLA Budget: What Can It Tell Us?	100	(11)
What Do We Know? What Don't We Know?	100	(1)
Definitions: What Does the Official Budget Include? What Is Excluded?	101	(2)
The Official Budget Numbers	103	(5)
Creative Approaches to the Official Numbers	108	(3)
Extrabudgetary Revenue, PLA Inc., and Divestiture	111	(13)
Estimating Actual Chinese Military Expenditure: A Bridge Too Far?	124	(11)
The Empirical Challenge	124	(1)
Data Challenges and the PPP Debate	125	(1)
How Do We Fill in the Gaps?	126	(1)
Foreign Arms Purchases	126	(1)
Provincial Spending on National Defense	127	(1)
Paramilitaries	128	(2)
Revenue from Arms Sales	130	(1)
Bounding Other Categories of Indirect Funding	130	(2)
A Notional Full Budget	132	(3)
China's Defense Industry	135	(56)
Capabilities and Future Prospects	135	(3)
The Changing Shape of China's Defense Industrial Complex, 1980--1998	138	(6)
Explaining the Defense Industry's Poor Performance	144	(2)
Weaknesses of Past Reforms	146	(4)
Explaining the Soviet Paradox	150	(4)
New Progress in Defense Reform: The 1998 Defense Industry Restructuring and Beyond	154	(21)
Beijing's New Strategy for Improving Defense Industrial Capabilities	154	(3)
The Goals of the 1998--1999 Reforms	157	(3)
Organizational Reforms	160	(13)
Constraints on China's Defense Industry Reform	173	(2)
Assessing Defense Industry Capabilities	175	(12)
Aviation Industry	176	(4)
Shipbuilding Industry	180	(3)
Information Technology	183	(2)
Missile Industry	185	(2)
Future Prospects of China's Defense Industry	187	(4)
PLA Threat Perceptions and Force Planning	191	(14)
PLA Threat Perceptions and the International Security Environment	192	(6)
Analyzing and Interpreting PLA Threat Perceptions	198	(2)
PLA Force Structure and Military Modernization	200	(5)
Future Expenditures on the Military	205	(34)
Introduction	205	(1)
The Future Composition of Government Expenditures	206	(12)
Future Expenditures on Education and Health	207	(3)
Future Expenditures on Pensions	210	(4)
Future Costs of Servicing Government Debt Stemming from Unfunded Liabilities	214	(1)
Projections of Government Expenditures on Pensions, Education, Health, and Government Debt Service	215	(1)
Other Costs	216	(1)
Income Equalization: Transfers of Resources from Richer to Poorer Regions	217	(1)
Future Growth in Total Government Expenditures	218	(5)
Future Chinese Military Expenditures	223	(10)
What Might These Future Military Expenditures Buy?	233	(6)
Conclusions and Indicators	239	(16)
Will China Have the Resources to Become a Serious Military Threat to the United States?	239	(9)
Growth in Resources	239	(2)
Budgetary Pressures	241	(2)
Current Military Budgets	243	(1)
China's Defense Industries	243	(3)
Future Military Budgets	246	(2)
How Can We Tell if China Is Straying from the Projected Course?	248	(7)
Indicators of Economic Growth	249	(2)
Budget Indicators	251	(1)
Indicators of Improvements in the Defense Industries	252	(1)
Indicators of Changes in Military Spending	253	(2)
Bibliography	255