The news last week that China surpassed Japan as the world’s second largest economy (after the US) coincided with the annual report the US department of defense presents to the US Congress, on Military and Security Developments Involving the People’s Republic of China, 2010. The report highlights China’s expanding military prowess and its No. 2 ranking in terms of military expenditure (again after the US). This happenstance reflects the direct correlation between China’s growing economic strength and its increasing military might and holds important lessons for many countries, notably India.
Though China outranked Japan as the No. 2 economy a decade ago in purchasing power parity terms, by attaining this new economic ranking— higher gross domestic product (GDP) in absolute terms—China has regained the pre-eminent position it held in the 1820s when it was by far the world’s biggest economy and accounted for 30% of global GDP. Despite the formidable size of its economy then, China was outgunned and outmanoeuvred within 20 years by Britain during the Opium Wars of the 1840s primarily on account of the sorry state of its defence preparedness and technological backwardness.
This is one of the lessons that the modern mandarins of Beijing have imbibed; their defence budgets reflect this learning.
While China may have learnt from history, it will face significant challenges in maintaining its hard-earned economic and military positions. On the economic front, China’s annual GDP of around $5 trillion is still one-third of the US’ $14 trillion. It is well nigh impossible that China will be able to sustain double-digit growth rates in the coming years, especially given the increasing competition for scarcer resources. Besides, any effort to build another $14 trillion economy may be simply unsustainable in ecological and environmental terms. Indeed, the only way that China is likely to attain the top rank is if the US economy were to shrink dramatically, which despite the current recession is not a foregone conclusion.
In the military arena, China has prudently pegged its defence spending at a very affordable annual average of around 1.4% of GDP. While the official Chinese defence budget is pegged at around $80 billion, the US report estimates it to be around $150 billion, but also acknowledges that the burden of the defence budget on the economy is “negligible”. Yet even this higher figure dwarfs in comparison with the towering US defence budget of over $650 billion.
Given this vast disparity, Chinese planners have wisely selected three areas for modernization: “informationization”, which is understood to be a greater focus on new technologies, particularly related to cyber warfare; missiles and space technology; and extended-range power projection capabilities in the Pacific and Indian oceans and beyond. Though some of these capabilities and the related “anti-access and area-denial strategies” are already in evidence (see Borderline, “Accommodating China’s political clout on the global stage”, Mint, 27 January), the US report also notes that “China’s ability to sustain power at a distance, today, remains limited”. This is particularly true in the case of aircraft carriers and extended operations at sea where the US and even India have a clear edge over China.
The three key lessons for India are: First, to sustain its economic growth to surpass China as the No. 2 economy and regain the pre-eminent position it held in the 1500s. Given that India’s GDP is just over $1.25 trillion, about one-fourth of China’s, this is a daunting challenge.
Second, to ensure a sustainable defence budget (which does not burden the economy) while also being selective of the key areas for military modernization. As long as the economy continues to grow, this should be manageable.
Third, perhaps the most important lesson is to seek to create a cooperative security arrangement, particularly involving China, so that the prospect of war is eliminated. This might prove to be the most ambitious challenge of them all.
W Pal Sidhu is vice-president of programmes at the EastWest Institute, New York. He writes on strategic affairs every fortnight.
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