A Prudent Response to Chinese Military Modernization

This post was co-written with Bill French.

The War in Iraq has ended. Osama bin Laden is dead. NATO is looking at a 2014 date for significantly reducing its operations in Afghanistan. A ten-year period of uncontrolled US defense spending has come to an end.

Yet some conservatives are looking to continue the era of massive military spending increases. Among their arguments, the most substantial is that growing Chinese military power must be met by higher US defense expenditures. Most notably, during a major foreign policy speech at the Citadel Military College, Mitt Romney cited the possibility of a future Chinese military superpower going down a "darker path" to help justify increasing defense spending from its current levels to 4 percent of GDP, an increase of over $100 billion. The American Enterprise Institute, among other conservative think tanks, appears to be clearing the ground work for such policies. For example, in July -- when US defense cuts were anticipated but had yet to be decided -- AEI scholar Dan Blumenthal warned Congress that rising Chinese military power threatened to induce American "strategic insolvency" without further "expensive investment" in the DoD.

The United States finds itself at an historical crossroads, faced both with the tasks of reducing military spending in order help alleviate its massive deficits and to address the changing international environment which includes a rising power. To be sure, the buildup of the People's Liberation Army (PLA) does pose a strategic challenge. But analysis of US and Chinese military spending and capabilities shows that the US can successfully address the PLA buildup while simultaneously addressing the current imbalance between military and deficit priorities. Consequently, the United States has more prudent, affordable options. This is good news because the old, unsustainable solution of increasing military spending regardless of the nation's fiscal situation is no longer acceptable in today's budgetary environment.

Budgetary Basics

Those alarmed by rising Chinese military power are quick to point to the rapidly increasing PLA budget. Despite the fact that the US still outspends China by a large margin on defense, this concern cannot be dismissed: at first glance, China seems in recent years to have made considerable progress in closing the military spending gap with the United States. According to data compiled from recent Department of Defense annual reports, Chinese defense spending has increased by 54 percent during 2006-2010. During that same period, US core defense spending rose by 'only' 27 percent, excluding the costs of the wars in Iraq and Afghanistan. Thus, in the past half-decade, Chinese military expenditures have increased 27 percentage points more than that of the United States.

While this number certainly warrants concern, increases in the Chinese military budget are less significant than they might appear for a number of critical reasons. Because Chinese increases were made from a much lower base budget, the spending gap between the two militaries has actually widened in favor of the United States. The Department of Defense estimates that Chinese military expenditures were $105 billion in 2006, while the US spent $419 billion on defense, a gap of $314 billion. In 2010, US military spending increased to $533.8 billion while Chinese military spending increased to only $160billion, a gap of $373.8 billion -- nearly $60 billion greater than the gap in 2006.

But not all military spending is of equal use-value. Significant portions of Chinese military increases have been dedicated to maintaining personnel for its all-volunteer force rather than new war fighting capabilities. The 2011 Chinese National Defense White Paper claims that "personnel expenses" -- salaries, living conditions, insurance, improved health care, education, and so on -- are a significant reason for recent budgetary increases. An independent analysis conducted by the Jamestown Foundation finds that these claims are "accurate," noting there were "large pay raises" in 2006, 2008 and 2011, including a 40 percent increase to non-commissioned officer's salary and benefits.

It can be expected that costly increases in PLA personnel expenditure will continue. In order to maintain an all volunteer force, the standard of living within the PLA must keep some pace with the rising standard of living throughout the country. Therefore, expected rises in standard of living may be used as a general indicator of future personnel cost increases in the PLA budget. The IMF projects that Chinese GDP per capita income will increase 40 percent during 2011-2016, as compared to a projected increase of only 15 percent for the US. As Chinese GDP per capita rises, the PLA will be compelled to increase its investment in standard of living at a greater rate than will the US, limiting the availability of funding increases for war fighting capabilities.

Future Constraints

The PLA budget is not appropriated in a vacuum free from constraints. Expensive, non-military Chinese government obligations will increasingly compete with the military for funds, a factor which may limit the size of future increases for the PLA. As argued below, while the Chinese military may continue to enjoy spending spikes, perhaps even this next year to make up for recent low increases, the general trend will likely be towards smaller increases than the largest of those in the recent past.

First, economic growth and urbanization for a developing society such as China necessitate high levels of infrastructure spending. The country currently spends around 9 percent of its GDP on infrastructure projects and in 2008 began a two year $586 billion infrastructure program. This spending has already demonstrated the ability to effect PLA funding. In 2009, the military budget increase dropped to 7.5 percent, nearly half of the previous year. While PLA budgetary increases have since recovered slightly to just under 13 percent, they remain significantly below the 17.6 percent increase in 2008 and the nearly 20 percent increase in 2007.

Second, China is also experiencing an escalating and costly internal stability crisis. As the 2011US-China Commission Report documents, annual incidents of unrest or protest have increased from 8,700 in 1998 to over 120,000 in 2008. A major factor driving unrest is growing income inequality, which has more than doubled in the past twenty years. In that time, China's Gini coefficient -- a measure of wealth inequality from 0 to 1 where 0 is perfect equality and 1 means a single individual owns all the wealth -- has increased from 0.215 to 0.490. In the context of an authoritarian regime like China, where unrest threatens the rule of the Communist Party, such instability is an existential concern of the state and must be controlled. Indeed, as the Commission notes, China has developed a sophisticated and expensive internal security apparatus to contain dissent, costing $83.5 billion in 2010 alone. That same year, the Chinese government increased funding for internal security by 13.8 percent versus a 12.7 percent increase for the PLA.

Finally, and perhaps most importantly, the Chinese economy is beginning to slow. The Chinese State Research Center has just announced that it anticipates 2012 growth of less than 9 percent and between 7 and 8 percent through 2017. As a result, Chinese policy elites have expressed concern about managing "social stability," undoubtedly thinking about the economy's reduced ability to absorb huge numbers of college graduates, generate jobs for a roaming population of 100 million or more unemployed, and cope with persistently high inflation. With slower economic growth, fewer funding increases will be available to the government generally and to the PLA in particular as domestic priorities demand investment, especially social welfare and internal security to avert greater instability.

PLA Capabilities

While current and future budgetary constraints help to mitigate excessive fear over the PLA, there is no doubt that the Chinese military has made substantial gains over the past twenty-plus years. The DoD estimates that over the past decade, the Chinese military has modernized 25-55 percent of its forces, depending on the type of forces in question. But as modernization continues, it is the goals of PLA modernization that are most worrisome.

At the operational level, PLA modernization is not intended to create a military equal to that of the United States' outright. Instead, the PLA aims to develop a robust 'anti-access and area denial' (A2/AD) capability vis-à-vis technologically superior opponents. The purpose of A2/AD operations is to deny the US or other technologically superior militaries' unfettered access to the Western Pacific where Chinese core national interests are at stake, including Taiwan and territorial claims in the South China Sea.

To develop this capability, the PLA has invested heavily in anti-satellite weapons, ballistic missiles, cyber warfare, a growing fleet of submarines and the development of its J-20 stealth fighter. Though these weapon systems, PLA strategists hope to have the ability to degrade superior US C4ISR (command, control, communications, computer, intelligence, surveillance and reconnaissance), ideally rendering the US military "dumb, deaf and blind" while simultaneously disrupting or shutting down US bases in the region, including aircraft carriers.

A Prudent Response

There is no question that the growing capabilities of the Chinese military require a response. However, given that the US-Chinese military spending gap has widened in favor of the United States and there are major factors constraining the size of future PLA budgetary increases, the conservative calls to raise US military spending are misguided. This is especially true because as Admiral Mullen, former Chairman of the Joint Chiefs of Staff, has pointed out: our burgeoning Federal deficit is the greatest threat to national security.

There are four criteria for a prudent response to the Chinese military buildup: it must address Chinese A2/AD capabilities, it must be affordable, it must emphasize diplomacy and it must minimize the risk of fostering a zero-sum Sino-American security relationship.

First, countering the PLA A2/AD strategy is necessary to maintain a favorable balance of power in the region. Failure to do so would forfeit key American military advantages and make war in East Asia more likely. In 2011, the Pentagon opened an office dedicated to overcoming potential adversaries' A2/AD capabilities. The primary task of the office is to formulate and implement a new operation concept called "AirSea Battle" as a way of guiding the Air Force and Navy to counter the nature of threats discussed above.

While the DoD has not released further details, the Center for Strategic and Budgetary Analysis (CSBA) -- an independent think tank with close ties to the Defense Department -- has released a detailed report on AirSea Battle. The report includes detailed recommendations, such as enhancing electronic and cyber warfare capabilities, backup communication systems, submersible drones, ballistic missile defenses, developing new long range strike systems and training the US military to operate in C4ISR degraded environments.

Second, implementing a serious version of AirSea Battle, whether that outlined by the CSBA or otherwise, must be done affordably. To be sure, this will require smart choices and compromising on some other defense concerns, at least for now. An appropriate starting place is to reassess the need for some of the Pentagon's currently planned procurements. For instance, even the CSBA has noted that in addressing PLA gains, purchases of the F-35 Joint Strike Fighter -- the most expensive weapons program in history with a total projected cost exceeding $1 trillion, according to GAO -- can be reduced and procurement of a new generation of aircraft carriers -- the Ford Class -- can be slowed.

The F-35, of which the military plans to buy nearly 2,500 units, has too short of a range to be useful in the expansive Western Pacific. Its limited range cannot be extended without using external fuel tanks that sacrifice the stealth of the aircraft, and hence a major portion of its expensive advantage, or by relying on a vulnerable mid-air refueling tanker fleet.

Regarding the Ford Class carriers, such multi-billion dollar vessels are vulnerable to PLA anti-shipping capabilities, especially the DF-21 anti-shipping ballistic missile designed specifically to destroy US carriers from a distance of 1,800 kilometers with conventional warheads. Investing heavily in the Ford Class would not only play into strengths of the PLA but would be redundant for a Navy that already possesses 11 aircraft carriers.

Instead, the United States can upgrade and redeploy its current systems. For example, upon learning that the Chinese J-20 stealth fighter was ahead of its development schedule, the Air Force responded by upgrading the radars on some of its F-15 fleet -- aircraft which have a combat record of over 100-to-0 -- as an effective countermeasure. Similar frugal but smart upgrades on other weapon systems should be explored as AirSea Battle is developed. In response to the growing PLA ballistic missiles that threaten US ships and bases, advanced PATRIOT PAC-3 and AEGIS Standard-3 anti-ballistic missiles systems can be deployed to the region in greater numbers and further supplied to our allies there.

Third, smart diplomacy must be used to effect Chinese military and foreign policy calculations, especially those involving the use of force. As evidenced by President Obama's recent diplomatic offensive during the APEC/ASEAN summits, the US can set the diplomatic agenda in the region and deepen partnerships with East Asian countries which are intimidated by China's rise. The move also saw the US-Australian alliance expanded by an agreement for US Marines and air forces to be stationed there. Economically, the trip involved President Obama moving towards joining the Trans-Pacific Partnership free trade area of up to 11 countries, including Japan. By developing a comprehensive diplomatic strategy in the region, as Secretary Clinton has begun to do, the US can bolster its influence, lead other countries to play an appropriate role in addressing PLA gains, and do so while benefiting the American economy. The result is an economic benefit while giving the Chinese disincentives to behave aggressively.

Finally, a frugal military response and smart diplomacy helps to minimize the risk of the Sino-US security relationship from becoming zero-sum. If such a relationship were to develop between the United States and the world's second largest, fastest growing economy, the costs for both sides could be enormous, both financially and geopolitically. Avoiding such folly must be a serious goal of any US strategy.

The decisions currently facing this nation are difficult but manageable. Responding to increasing Chinese military power while allowing US defense expenditures to be reduced to appropriate levels will be a challenge. But the stakes are too high to reflexively respond to the ideas of some conservatives. We owe it to ourselves and the world to find new pathways to security and prosperity. And that approach has some precedent: it was adopted by conservative presidents like Eisenhower, Nixon, and H.W. Bush when large budget deficits made it necessary to reduce defense spending despite apocalyptic claims of Soviet military dominance.