The recently held annual session of the National People’s Congress – China’s parliament – placed a lot of emphasis on the relatively low increase in the country’s defence budget despite the leadership’s ambitious plans to modernise and reform the Peoples Liberation Army (PLA). Zhang Dejiang, chairman of the standing committee of the NPC, also took the opportunity to defend the recent counter-terrorism law, suggesting Beijing is increasingly driven by a sense of internal insecurity as opposed to external.
Zhang declared that China had “a solid legal foundation for accelerating the establishment of a national security system and taking a distinctly Chinese approach to national security.” This was seen by many in the West as a strong rebuttal of the criticism of China’s counter-terrorism law and the draft laws on cyber security and management of NGOs. Zhang, who is also a member of the politburo standing committee and is the third ranked leader in the Chinese hierarchy, said that that China was facing a complex threat from terrorism and needed to intensify its counter-terrorism activities.
The broad outcome of the NPC session was to put the legislature’s imprimatur on the annual work report of the premier, Li Keqiang as well as the 13th five year plan, which gets underway this year. As such, it approved the smaller-than-expected increase in the defence budget, and sought to flesh out its national security views through a separate chapter in the plan.
In his speech explaining the targets, President Xi Jinping noted that 6.5% growth would be needed if the Chinese were to be able to double the 2010 GDP by 2020. The plan to double GDP by 2020 – linked to the goal of building “a moderately prosperous society” by then – is one of the “twin centenary” goals of the Communist Party of China.
The challenges of achieving this, Xi noted, were dealing with China’s industrial over-capacity and the need to restructure the economy and shift it to a consumption and innovation-driven model.
The reportage of the NPC as coming from the official Chinese media is that everything is fine, all targets are being met and there will be no hard landing for the economy. External observers aren’t so sure. It will not be easy for the economy to achieve its target range of 6.5-7% growth without more stimulus, but this in turn could add to its problems, rather than resolve them. However, monetary adjustments such as increasing the budget deficit and enhanced money supply could boost growth for the short term, but the problem is with the long term.
The fact is that despite rhetoric about the “decisive role” of market forces, supply-side reforms and restructuring of the SOEs, nothing has really happened. There are no indicators in Li Keqiang’s speech that any new measures will be launched soon. But the temptation to spend its way out of its problem remains in China, as indicated by plans to build a second railway to Tibet and invest in 20 more airports.
Besides the problem of retiring and retrenching old industries and creating new jobs, are the demographic pressures. The ending of the one-child norm has not really taken off. Only 1.69 million people (15.4% of those eligible) had applied to have a second child.
Getting more bang from less buck
In his work report to the NPC, Li Keqiang also referred to the need to build up the armed forces “through political work and reform and run them by law.” China is seeking to modernise the military and make it a cutting edge force, even while maintaining the leadership of the party. Besides all-round preparedness, the effort would be to reform the military leadership and command structures and restructure the size of the force and its institutions.
On March 4, the spokesperson for the NPC, Fu Ying announced that the budget increase for defence would be between 7-8%. Finally, when the sums were done, China set its 2016 defence budget at 954 billion yuan ($146 billion), a rise of 7.6%. Last year the increase was 10.1%, so this is the lowest increase in recent years
Speaking to the PLA delegation at the NPC on March 13, Xi Jinping said that theoretical and technological innovations were at the heart of the ability of the country to upgrade its military capabilities. He wanted the PLA to imbibe a “military theory that is up-to-date, pioneering and unique.” And at the same time, the PLA needed to work to turn cutting edge military technology into effective combat capacity. To achieve this, the PLA must adopt “better management concepts, systems and procedures.”
Beyond issues like structural change and reform, Xi emphasised the quality of human resources that constituted the PLA and the need to promote talented individuals. Both were manifested by their ability to deal with theoretical issues of military art and innovation to enhance combat capacity.
The NPC session came in the wake of major structural changes at the apex level of the PLA that saw the abolition of the general departments, the creation of a general command for the army, PLA Rocket Force, the PLA Strategic Support Force and the regrouping of the seven military regions, into five theatre commands.
2016 is the year in which the PLA’s strength will be reduced by 300,000 men, indicating that there would be savings, despite some expenditure in rehabilitation, which is likely to be taken up by local authorities and SOEs.
Chinese experts like Maj Gen Luo Yuan and Chen Zhou insist there are no hidden costs in the budget, which is meant to be spent for acquisitions, restructuring the military, and training. However, expenditures like the cost of building and maintaining facilities in the South China Sea may come through other heads.
Chinese commentary emphasised the modesty of the Chinese budget in comparison to the United States, noting that while China was the second largest economy in the world, its defence expenditures were not at the same level.
The budget must also be seen in the context of Chinese arms trade. Just how these are related to the annual budget spending is not clear. In the past five years, China’s arms imports fell by 25%, and exports, though mainly in light weapons, doubled. The quality of Chinese equipment has improved in recent years and its larger products are attracting markets elsewhere. The principal recipient of Chinese military sales is Pakistan, accounting for 35% of its exports, followed by Bangladesh and Myanmar accounting for 20 and 16% respectively. All three are neighbours of India.
In its imports, China depends on foreign suppliers for large transport aircraft, helicopters and engines for aircraft vehicles and ships. Here again we need to note that India’s principal supplier, Russia, is also the largest exporter to China accounting for some 59% of Chinese imports.
A second reason for the low defence budget figure announced, perhaps, is to reassure China’s neighbours. The previous increases accompanied by greater sabre rattling in the South China Sea and the Sino-Indian border had alarmed China’s neighbours and countries like Japan, Philippines, Vietnam and India have come closer to the United States in a bid to balance Beijing’s growing clout on their borders.
A third reason could be the Chinese desire to pace their military spending with their economy. It makes sense to restrain the defence budget in a period in which the economy itself facing turbulence.
Clouds on the horizon
The NPC’s session must also be seen in the context of its inter-session work through 2015. In July 2015, it passed a broad National Security Law, which was aimed at shoring up the authority of the CPC. The law said that security had to be all-pervasive and apply in all fields, ranging from culture to education, outer space, maritime zones and cyberspace.
In late December, the NPC had passed a draconian counter-terrorism law, which made it mandatory for companies to provide technical information to assist security authorities investigating terrorism cases. The law provided China with a legal definition of terrorism, enabled Chinese forces to operate outside their borders in CT operations and cooperate in international CT efforts.
In 2016, the NPC is likely to take up a law on cybersecurity and on the management of foreign NGOs which are related to its overall drive to tighten security at home and abroad. These laws have been open for public review for the past year.
The draft 13th five year plan, released on March 5, contains an entire chapter on “building a national security system”. In an article published by a Hong Kong-based digital media company, Ding Ding, a scholar specialising in politics, noted that for the first time the “concept of general national security” was discussed in detail. This, he said is a subject that has been a project with the National Security Commission chaired by Xi. Not surprisingly, the concept is all-inclusive and virtually limitless, covering every aspect of life from politics and the military to culture, society and the economy. Within this, the “subversion” and “sabotage” heads the list even beyond terrorism and separatism. In his view, the government is more worried about domestic disorder than the usually touted threats from separatists in Tibet and Xinjiang.
Another scholar, Ryan Martinson of the US Naval War College, basing himself on the draft plan released in November, notes that the plan calls for the development of China as a “maritime power” in all its attributes, and for the country to grow a maritime economy, exploit maritime resources, protect the maritime environment and safeguard maritime rights and interests. It calls on a further geographic expansion of China’s maritime activities including develop “a system to protect overseas interests.”
As the Chinese economy slows and it seeks to shift tracks, it is in a state of heightened tension. But the centre of gravity of that tension appears to be within China, not without. As a nuclear-armed state with a powerful military, China faces no existential threat from any foreign enemy. What it appears to fear is “subversion”, “sabotage” and “the enemy within”. This is the enemy that can often manifest itself through the problems that arise from displacement and retrenchment, as well as in the case of Tibet and Xinjiang, separatism, and resistance to heavy-handedness.
Despite the challenges of internal restructuring, or perhaps because of them, China has also undertaken to assert itself in its periphery, be it the South China Sea or South Asia. This has triggered a pushback which is viewed with some alarm in Beijing.
What the developments of the past year, between the previous NPC and the current session, reveal is that China is in an increasing danger zone from the point of view of security. But the problems are more internal, than external.
Just before the NPC convened, the authorities shut the social media account of tycoon Ren Zhiqiang who had been criticising Xi Jinping’s efforts to tighten control over the media. On March 15, a reporter, Jia Jia was arrested as he was about to board a flight to Hong Kong. He was accused of being a signatory of a letter demanding the resignation of Mr Xi. In the past year human rights lawyers and publishers have faced arrest and interrogation.
Many political observers say that Xi Jinping is the most powerful general secretary since Deng was the supreme leader of the CPC. But the behaviour of the government in his charge indicates a lack of confidence or a sense of insecurity on his part. The focus of internal dissent detracts from the effort the government should be making on pushing reform. While the agenda of reforming the PLA seems to be on track, the same cannot be said of the economy.
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