Friday, September 4, 2015

Missing from Beijing's military spectacle: price tag

Massive parade puts top-grade weaponry on display at time of economic, financial pain in China

Jeremy Page, Wall Street Journal
3 September 2015
BEIJING – One glaring omission in China’s World War II Victory Day parade will be the price tag for all the weaponry sweeping through Beijing’s Tiananmen Square.
China’s government doesn’t say what it spends on developing and importing arms, let alone individual weapons such as the DF-26 ballistic missile and the J-15 aircraft-carrier-based fighter jet. Those are among the top-grade weapons systems state media have said are likely to roll and fly by Chinese leaders, visiting dignitaries and TV cameras at Thursday’s parade.
What’s clear, according to many military experts, is that a slowing economy, an anemic stock market, a weaker currency and rising labor costs are likely to alter the political and financial calculus of Chinese military spending over the coming years.
If China continues to ring-fence military spending, despite the economic slowdown, it could eat into outlays in other areas, such as health and education, presenting the leadership with tough choices it isn’t used to making, those experts said.
“In the last couple of decades, that ‘guns or butter’ dilemma hasn’t existed,” said Sam Perlo-Freeman, who leads research on military expenditure at the Stockholm International Peace Research Institute.
“If you have a significantly worse economic situation for more than just a year, you start to get those tough choices,” he said. “Are you going to be able to afford, and have the technological resources, to develop submarines, carriers and stealth aircraft all at the same time?”
Nearly a quarter-century of annual increases in military spending has transformed China’s military from an ill-equipped, land-based force to a modern one capable of operating as far afield as the Mediterranean – and increasingly challenging U.S. military dominance in Asia.
China’s military spending is likely to continue to grow faster than the economy in the next five years, especially given President Xi Jinping’s need for political support from the military and his ambitions to project power globally, some experts said.
IHS Janes, a defense information provider, said Wednesday that China’s annual military spending is projected to reach $260 billion by 2020, almost double that in 2010, with its combined military spending over this decade totaling almost $2 trillion.
Many defense experts say that China’s published defense budget doesn’t include costs for all research and development expenses and arms imports, and that real spending may be around 50% higher. The lack of transparency makes estimating costs of individual weapons programs difficult, and China likely faces the same problems of overruns and waste as many Western nations do, perhaps more so, given the lack of public oversight and competition.
China’s military has been a focus of Mr. Xi’s sweeping anticorruption campaign, with at least 30 generals detained, and its General Armaments Department said this year it was reforming its procurement system to combat graft and waste.
China’s government says its military spending is far lower than that of the U.S. and that increases are necessary to pay for rising personnel costs, as well as the weaponry needed to defend its expanding national interests.
“The growth of defense spending is in line with economic and social development as well as defense demands,” foreign ministry spokeswoman Hua Chunying said Wednesday.
In developing the People’s Liberation Army, or PLA, China first focused on acquiring relatively cheap weapons such as short-range missiles that enable asymmetric competition with the U.S., particularly over the island of Taiwan. Over the past decade, priorities have expanded to develop a broad range of sophisticated arms designed to challenge the U.S. more directly, from a growing fleet of nuclear attack submarines to stealth fighters.
“Today, and as shown by the parade, the PLA and defense industry is pursuing a wide array of defense programs, the most of any country today and comparable to what took place during the U.S.-Soviet Cold War,” said Tai Ming Cheung, an expert on China’s military at the University of California, San Diego.
The parade, according to state media, is likely to include attack helicopters, drones and a range of ballistic missiles, such as the DF-26, which has sufficient range to hit a U.S. naval base in Guam, just under 2,000 miles from China’s shores
Behind the display, China’s arms industry faces structural constraints, including a shortage of highly trained personnel and high-end manufacturing capabilities, limiting
the number of programs it can tackle at any one time, said Mr. Tai and other experts.
“The defense economy almost certainly suffers from enormous inefficiencies, although this is kept well-hidden,” he said.
China turned to develop many of its own weapons after the U.S. and European countries imposed an arms embargo after a military crackdown on pro-democracy protesters around Tiananmen Square in 1989. Beijing has also turned to Russia, which has sold China billions of dollars’ worth of arms since the Soviet collapse.
But Moscow has dragged its feet on providing much of the sophisticated technology Beijing now requires, partly due to concerns that it will be cloned in China. Russian officials say the J-11B fighter jets in the parade are a copy of the SU-27, which a cash-strapped Kremlin sold China in the 1990s. Chinese officials say the aircraft contains mostly Chinese technology.
If the economy slows further, state-run arms makers might get a short-term funding boost, as they did when the government unleashed a massive stimulus to stave off the global financial crisis in 2008. Over the medium term, the leadership is likely to press arms makers to improve efficiency and increase exports – an increasingly important engine of growth.
One goal of the parade is to promote defense exports, although the primary aim is to present an image of national strength to a domestic audience, some analysts and diplomats said. Dignitaries from Africa, South America and Central Asia – potential buyers – will be in the reviewing stand.
“It is a useful way to let the world know that all these systems are now Chinese,” said Jack Midgley, a director of Deloitte Consulting’s defense consulting practice. The prospective customers, he said, are countries which “for the most part want lower technology systems, and that is where the Chinese have the competitive advantage.”

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