China’s Military Rise: Two decades of catch up with the USA

Despite growing concerns over China’s military build-up and modernization there have been few attempts to understand the growth of China’s defence budget, its comparative size or composition. Available estimates of China’s military spending range implausibly from one quarter of the USA to near parity and, since the end of the Cold War, no statistical agencies or defence departments have reported international comparisons of real defence spending.

This talk uses economic data and measurement techniques to infer the real size and growth of China’s defence spending. China’s defence budget is found to be 60 percent larger than widely used market exchange rate estimates, and equal to 59 percent of the USA’s defence budget. China’s military is much more labour intensive than the USA but has also had a massive increase in Equipment per person, with real military Equipment spending growing at 10 percent per annum since 2010. This rise is consistent with descriptive accounts of China’s rapid military modernization.

Professor Peter Robertson is a Professor of Economics and Dean of the Business School at the University of Western Australia. His research focuses on economic growth, international trade, economic history and defence economics. He is known for his research on trade and inequality, the Lucas puzzle, the middle-income trap and the measurement of real military spending. Peter also serves as an expert consultant to the Productivity Commission and to the Department of Innovation, Industry, Science and Research and the Australian Research Council. His career spans two decades in academia and government, having held positions at The Productivity Commission, Melbourne and The University of New South Wales. He has held visiting positions at The University of British Columbia, Rutgers University, University of Otago and St Antony’s College Oxford. Peter has published widely on the interactions between economic growth, economic development, international trade and international relations.