China and the United States are known for spending a lot on military. Everyone knows that they invest a lot in training, developing intelligence and building new weapons.
But then, their budgets are not the same. And that is what we want to compare. Experts believe that the use of appropriate relative prices and fair economic measurement techniques has reduced the range of reasonable estimates. So, to that effect, we will discuss the differences between China’s and the United States’ military budgets.
Recent Comparison
In 2024, China’s military expenditure in PPP terms was estimated to be $541 billion. That is 59% of the US’s spending. Compared to the United States, their equipment level is only 42%.
The long and short of it is that the United States constantly matches China in military spending. But it shortchanges them in the defense sector.
As it stands, China prioritises personnel more than the US. So it comes at no surprise that they have a modern defense sector, with equipment per person constantly on a steady rise. That is why their military budget increases yearly while that is the US is almost constant.
Comparison in Prices
According to the Stockholm International Peace Research Institute (SIPRI), China’s military expenditure in 2023 was 2.096 trillion yuan. This is approximately $296 billion at market exchange rates and is smaller than the US spending of $916 billion.
Market exchange rates only explain what China’s budget would be if it were spent in the United States, so it is not a reliable way to compare. We can get a more reliable PPP comparison by classifying aggregate spending into three categories. Each component can then be converted to its dollar equivalent using an appropriate PPP price. The components include:
- Personnel
- Operations
- Equipment
The table below shows how these components are used to compare China and the US military expenditures.
| China Military Expenditure | US Military Expenditure | Assumed PPP Exchange Rate | Chinese Expenditure in USD Billions | US Expenditure in RMB Billions | |
|---|---|---|---|---|---|
| Personnel | ¥622 | $238 | 1.90 | $327 | ¥452 |
| Operations | ¥695 | $459 | 3.64 | $191 | ¥1,671 |
| Equipment | ¥779 | $219 | 8.54 | $91 | ¥1,872 |
| Total | ¥2,096 | $916 | $609 | ¥3,995 |
Comparing Modernisation
It is imperative to analyse beyond the numbers when comparing the military budget of China with that of the US. This is because the composition of the army budget plays a significant role in the country’s capabilities.
The table above shows that China has a larger personnel input than the USA. However, China’s aggregate military equipment inputs are about 42% of the US. China’s military budget has increased significantly over the years, but the country’s military still relies more on personnel than the US.
There has also been a significant growth of operations and equipment spending in China. The spending grew from 10% to 40% of the country’s military budget. Military equipment spending in China grew at 9.7% per annum, while the overall military spending grew by 5.6% per annum.
Recent studies also show that there has been a decline in US spending after 2010. Experts believe this decline is due to the drawdown of forces in Iraq and Afghanistan.
Final Words
Comparing military spending between countries like the United States and China plays a significant role in policy changes. Although the two countries spend heavily on their defence sectors, there are still concerns about the transparency of China’s budget.
This article effectively uses appropriate relative prices and fair economic measurement techniques to compare the two countries.