Measuring Hard Power: China's Economic Growth and Military Capacity
37 Pages Posted: 2 Apr 2015 Last revised: 3 Apr 2015
Date Written: February 26, 2015
China’s rapid economic growth is facilitating massive increases in its military spending and causing increased security concerns in Asia and the Western pacific. But there is uncertainty over how large China’s military spending is relative to other countries, or how fast it is growing in real terms. We address this issue by deriving a relative military cost (RMC) price index based on the relative unit costs of inputs. We find that China’s real military spending is much larger than suggested by exchange rate comparisons, and even larger than standard purchasing power parity comparisons. We also find, however, that the real growth of China’s military spending has been smaller than conventionally thought. This is due to rapidly growing wages in China and the large share of personnel in China’s military budget.
Keywords: China, International Comparisons, International Security, Military spending
JEL Classification: H56; O53; F5; C43
Suggested Citation: Suggested Citation