Dennis Blasko is a Senior Research Scientist in China Studies for CNA Analysis & Solutions.

Senior Research Scientist, China Studies
Senior Research Scientist, China Studies

For most of the past decade, organisations and individuals estimating China's 'actual' or 'true' defence-related spending have included research and development funds provided to the Chinese civilian defence industries for military R&D as one of multiple sources of income that should be considered in order to have a more complete accounting of the amount of money available for military modernisation.

Many estimates, such as the series of US Department of Defense annual reports to Congress on the Chinese military, identify this military R&D as a source of extra-budgetary funding but do not provide a dollar figure or indicate how much it adds in percentage terms to the defence budget. The Military Balance, produced by the International Institute for Strategic Studies, has attempted to itemise several sources of extra-budgetary funding, with the most detailed explanation found in its 2006 volume. In 2013, The Military Balance stated that figures suggest 'Chinese military research, development, and acquisition (RDA) spending is at least 50% higher than official figures.'

The Interpreter's interview with Associate Professor Tai Ming Cheung from the University of California adds some numbers for consideration of this issue.

He begins by acknowledging the lack of available data, then states that, in the past, assumptions were that '5% of overall defense spending' was devoted to military R&D, but that this figure may be 'closer to 8 to 10%', making it the second in the world in military R&D. Using this 8-10% figure and the announced Chinese defense budget of 720.2 billion yuan for 2013, at today’s exchange rate in dollar figures these numbers yield a range of some $9.4 to $11.7 billion for total Chinese military R&D.

For the sake of comparison, according to the US Department of Defense budget submission for 2014, total RDT&E is nearly $73 billion in 2013, with a request for over $67 billion in 2014. While Chinese military R&D funds are certainly growing, they still have far to go to match the amounts devoted to US efforts.

Though we can be precise about the level of US funding on this and most other budget elements, we must remember that we are only estimating Chinese figures, due to the lack of detail from the Chinese Government, which consistently denies any extra-budgetary sources of funding available to the forces. If a Chinese official were asked about these R&D funds used for military purposes by the civilian defense industries, likely he would say 'Yes, there may be some, but they are not part of the defense budget.' For Beijing, the operative term is 'not part of the defense budget.'

Photo courtesy of China Defense Blog.