China's 2016 defense budget to slow in line with economy

China's 2016 defense budget to slow in line with economy


BEIJING (Reuters) - China's defense budget this year is likely to rise at its slowest pace since 2010, in line with the decelerating economy and by a much lower figure than had been expected in military and diplomatic circles.

Fu Ying, spokeswoman for China's parliament, said the figure would increase by about seven to eight percent from 2015, following a nearly unbroken two-decade run of double-digit budget increases.

China's military build-up has rattled nerves around the region, particularly because China has taken an increasingly assertive stance in its territorial disputes in the East and South China Seas.

Fu told a news conference the defense budget would be released on Saturday, when the annual session of China's largely rubber-stamp legislative body opens.

It will be the first single-digit rise in spending since 2010, when the military budget logged a 7.5 percent increase.

Defense spending last year was budgeted to rise 10.1 percent to 886.9 billion yuan ($135.39 billion), which still only represents about a quarter of that of the United States.

The U.S. Defense Department budget for 2016 is $573 billion.

China's leaders have routinely sought to justify military modernization by linking defense spending to rapid GDP growth. But growth of 6.9 percent last year was the slowest in 25 years, and a further slowdown is widely expected in 2016.

"One simple reason for the lower increase is that double-digit growth is now harder to sustain," said Bonji Obara of the Tokyo Foundation think-tank and a former military attaché at Japan's embassy in Beijing.

"But another reason is that China's anti-corruption campaign means less money is being siphoned off and spending has become more efficient," he added, referring to President Xi Jinping's vigorous efforts to root out graft.

The defense budget had been widely expected in military and diplomatic circles to log another double-digit increase.

Fu said the budget was based on national defense needs, the state of China's economy and the performance of its fiscal revenues.

China's official Xinhua news agency said the slower pace of the increase reflected both economic realities and Beijing's determination to pursue peace, but noted it still face complex security threats, including from terrorism, and would not let down its guard.

"There are many reasons for China not to be able to sleep without worries," it said in a commentary.

China has been repeatedly criticized for a lack of openness in its defense spending and its intentions.

"China needs to be transparent and explain its military spending to the international community," Japanese Defence Minister Gen Nakatani said in Tokyo ahead of Fu's announcement.

"It's crucial that China does not upset the regional balance and that it firmly contributes to international stability."

James Curran of the University of Sydney said this year's defense numbers - which still represent a hefty rise - would add to anxiety among U.S. allies and Washington about Xi's intentions.

"There are provocative actions in the South China Sea, and this announcement on top of that is only going to increase concerns about what this means for the region and intensify the idea of a regional arms race."

Xi is seeking to drag the People's Liberation Army into the modern age, cutting 300,000 jobs and revamping its Cold War-era command structure.

However, the reforms have run into opposition from soldiers and officers worried about job security.

Beijing is also feeling public pressure to show it can protect its claims to the South China Sea after the United States began conducting "freedom of navigation" operations near islands where China has been carrying out controversial reclamation work and stationing advanced weapons.

Fu said the United States was militarizing the South China Sea with constant deployments of ships and aircraft.

"Our expansion and building of islands and reefs in the South China Sea is really necessary, and the Chinese people all support it," she said.

If the United States continues to boost its military presence in the region, China will have to build more islands and deploy more weapons, the influential state-run Global Times said in an editorial.

"If two nuclear powerhouses engage in a competition to test each other's willpower, the whole world will face the repercussions," it said.

While Beijing keeps secret the details of its military spending, experts have said additional funding would probably go towards beefing up the navy with anti-submarine ships and developing aircraft carriers beyond a sole vessel in operation.

China last year confirmed it was building its second carrier.

(Additional reporting by Megha Rajagopalan, Nobuhiro Kubo in TOKYO and Colin Packham in SYDNEY; Editing by Clarence Fernandez and Nick Macfie)