China set to hike military spending

China appears set to substantially hike its defence budget — a move that may have been triggered by the growing tensions in the South China Sea with the U.S., and rising cost of end-of-service payments to troops.

The Hong Kong-based South China Morning Post (SCMP) quoted a source in the People’s Liberation Army (PLA) as saying that the defence budget, expected to be announced by the National People’s Congress (NPC) when it convenes for a legislative session on Saturday, could be hiked by as much as 20 per cent. In case that happens, it would be the sharpest military increase since 2007.

But scaling down the expectations, the state-run Global Times said, quoting Ni Lexiong, a Shanghai-based military analyst, that the 2016 military budget will see an “appropriate” increase to meet national defence needs without putting other countries on high alert. “I think the budget reported in the SCMP might be too high,” Mr. Ni observed.

Analysts cite two factors that may explain the anticipated military spending increase. First, the Chinese armed forces are undergoing a structural change. Nearly 300,000 personnel are expected to leave the armed forces by 2017-end, in tune with the reorganisation of the PLA around newly formed, and leaner, theatre commands.

Consequently, considerable amount of funds are required to meet the end-of-service, and retirement payments during this phase.

Further, growing tensions with the U.S. and Japan in the East and South China Seas are also significant drivers. In January, a U.S. navy missile destroyer — Curtis Wilbur — sailed within 12 nautical miles of the China-controlled Triton islands in the Paracel island chain of the South China Sea, leading to calls within China for additional military preparedness.

Tensions in S. China Sea

The U.S. Navy’s Pacific Command has asserted that it would step up the so-called “freedom of navigation missions” in international waters of the South China Sea — a move that Beijing says is provocative and a challenge to its territorial sovereignty.

Observers say that China can be expected to beef up defensive weaponry in the South China Sea. ImageSat International, a private company, has already taken images showing the deployment of eight missile launchers and a radar system at the China-administered Woody Island, also in the Paracel chain.

Tensions with Japan are also expected to trigger additional deployment of Chinese firepower in the East China Sea, where Beijing and Tokyo have a territorial dispute over Diaoyu Islands, known as the Senkaku in Japan. The friction between the two countries is reflected in the record Japanese defence budget of $41.1 billion this year.

The possibility of the deployment of the U.S. Terminal High Altitude Area Defense (THAAD) anti-missile system, following the North Korean nuclear and ballistic missile technology tests this year, add another dimension, pushing China to adopt counter-measures.