China, explained.
A Chinese People's Liberation Army honour guard member holds a flag during a welcoming ceremony for Spain's King Felipe VI in Beijing on 12 November 2025 (Maxim Shemetov/Getty)
Can we accurately calculate China's defence spending now, and even a decade into the future?
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Solving the puzzle of China’s defence spendingSolving the puzzle of China’s defence spending
When the interested observer of Australian defence policy wishes to know what the government is spending on defence in a given year, and what it intends to spend next year, they can look through published Portfolio Budget Statements.
A chore, to be certain, but a welcome one. Though projections in forward estimates may change, the Australian public can find indications of how they may change. If they are so inclined, they can find breakdowns of how much the Department of Defence spends on each service, on maintenance, on its estate portfolio, and more. The availability of this information is very useful to those who track and analyse Canberra’s policies in this area.
For those who track China’s defence policies, however, such information is virtually impossible to find. And the information China makes available is generally considered untrustworthy.
When this century dawned, China believed it had huge amounts of ground to cover to modernise its military forces. It spent the first decade of the twenty-first century making major investments to do so.
Through its official announcements, the PRC claimed its defence budget for 2023 was US$220 billion, a 7.2% increase from the year before. The real figure, however, is likely much higher. A 2024 Pentagon report on China’s military says spending is anywhere between US$330-450 billion. A figure of US$700 billion has been thrown around the US Senate. The International Institute for Strategic Studies puts China’s 2024 defence budget at around US$235 billion, and the Stockholm International Peace Research Institute (SIPRI) offers the very precise figure of US$317.56 billion.
The issue with calculating China’s defence budget accurately is that its official figures do not include all of its “off-budget expenses” – research and development, foreign equipment purchases, military pensions and the like. Nor does it include spending on paramilitary forces such as the People’s Armed Police and the Coast Guard, which has become infamous for its provocations enforcing China’s claims in the South China Sea. It is also important to note that relative wages between the United States and China mean that, for the same investment, Beijing can employ more service-people than Washington.
All this produces many challenges, not just for getting an accurate picture of China’s military spending in any given year but also for attempting to project it forward. Thankfully, there is a healthy scholarship dedicated to accurate assessments of Beijing’s defence budget, incorporating off-budget expenses, purchasing power, and currency exchange rates. A recent essay in the Texas National Security Review takes these elements into account and proposes that China’s defence spending for 2024 was approximately US$474 billion.
Each year, the Pentagon publishes its assessment of China’s military capabilities and each year it includes China's claims about its defence budget and the percentage by which it says the budget has increased (while the 2025 iteration of this report has not yet been released, data on percentage increases is available from other sources).
Since 2001, the average year-on-year percentage increase is 10.3%. Breaking down the data further tells the story in more detail.
The most intense increases in Chinese spending occurred in the first decade or so of the twenty-first century, with an average increase from 2001 to 2014 of 12.7%. From 2015 to 2025, the average is 7%, with the steepest increase being 9.2% in 2015.
By applying the average increase over the past decade to the Texas National Security Review estimate for the 2024 defence budget and assuming this average remains constant over the next decade, we can project China’s defence spending out to 2035: US$997.7 billion.
| Year | Estimated Actual Budget (US$) |
|---|---|
| 2025 | 507,180,000 |
| 2026 | 542,682,600 |
| 2027 | 580,670,382 |
| 2028 | 621,317,309 |
| 2029 | 664,809,520 |
| 2030 | 711,346,187 |
| 2031 | 761,140,420 |
| 2032 | 814,420,249 |
| 2033 | 871,429,667 |
| 2034 | 932,429,743 |
| 2035 | 997,699,825 |
What does all this tell us?
Firstly, it shows that when this century dawned, China believed it had huge amounts of ground to cover to modernise its military forces. It spent the first decade of the twenty-first century making major investments to do so.
The issue with calculating China’s defence budget accurately is that its official figures do not include all of its “off-budget expenses”.
Secondly, it shows that while much ground was covered in the period from 2001 to 2014, Beijing clearly believes there is more to do. Budget increases may be smaller than they were, but they are still significant.
Finally, this data also tells a story that, at least monetarily, the United States will hold an advantage over China for years to come, barring major changes. The US defence budget already sits at around US$968.4 billion, according to SIPRI. By our measurements, China is a decade away from that level, and the US level will continue to rise in the meantime.
This is not to say that spending power alone is what dictates the strength of a military. God may be on the side of the big battalions, but to paraphrase the Roman poet Horace in his Epistles – first, get money; next, get strength. A contest in Asia will be settled just as much by the quality as the quantity of its big spenders.
About the author
David Vallance
David Vallance is a Research Associate in the International Security Program at the Lowy Institute.
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