China’s real military budget has quietly become almost as big as ours

Americans are too often put at ease by the erroneous statistic that the U.S. spends “more than the next 10 countries combined” on its military.

It’s time to put a stake in the heart of this tired trope, because it is simply no longer true. A more careful examination shows Beijing’s military budget is on par with that the U.S.

In the last decade, Beijing’s self-reported defense budget has more than doubled. China also now boasts the largest navy in the world, alongside the biggest coast guard and maritime militia. It has the globe’s biggest army and sub-strategic missile force to boot. It continues to make peer-level leaps in advanced military fields of hypersonic missiles and quantum computing technologies.

Beijing must cheer our complacency at believing it could achieve such outcomes while spending just a quarter of what the U.S. spends on its military. But our new research indicates that China is plowing far more money into hard power than it professes, with a military budget that might have been as high as $711 billion in 2022.

That figure is three times Beijing’s claimed topline of $229 billion and nearly equal to the U.S. military budget for that same year. This corroborates recent findings from American spy agencies, which estimated China’s real military topline at an estimated $700 billion. 

All countries count and report their defense spending in different ways. Authoritarian nations provide little more than annual amounts to the United Nations. Since these regimes offer no transparency, they are able to choose what they disclose in order to hide investments in key military capabilities.

China’s self-reported military budget, which comes directly from the Chinese Communist Party, is no more than a lone topline figure released through state media each year. This is a far cry from the thousands of pages of public budget documentation released annually by the Pentagon —one of the most transparent military budgets in the world.

A brief examination shows why China is dead-last in transparency worldwide. Its budget excludes essential expenditures such as paramilitary organizations, funding for defense research and development, and its illegal South China Sea island building campaign.

Many experts believe China’s public defense budget does not include other military relevant expenses such as space activities, construction, and research. China’s state-sanctioned practice of military-civil fusion further blurs the lines between military and commercial investments, resulting in spending on combat power and paramilitary forces that is hidden within civilian ministries. 

Furthermore, these face-value comparisons fail to account for basic economic differences that allow for China to get more bang for its buck. Simply converting spending in Chinese yuan to U.S. dollars based on a currency exchange rate overstates American capacity if China pays significantly less for most things.

Labor costs are demonstrably cheaper in China, where soldiers are paid just one-sixteenth the wage of a U.S. Army infantryman. This is how China is able to maintain a military twice the size for a fraction of the reported cost. 

This phenomenon also extends to the purchase and operations of military weapons, including munitions, tanks, planes, and warships. Chinese advantages in shipbuilding manufacturing, cheaper access to raw materials, and the lower costs of industrial labor all allow for Beijing to reap more yield for each yuan. It is for this reason that economies are often measured on purchasing power parity in order to conduct relevant comparisons. This principle holds when paying soldiers just as much as it does when purchasing military hardware.

When adjusting China’s public defense budget to account for these trends, Beijing’s military spending balloons to $711 billion, or roughly 96 percent of the Pentagon’s $742 billion topline in that same year. This figure better explains China’s rapid military advances and reason for worry. 

Over the last 20 years, Beijing has also consistently provided its military steady, near double-digit and high single-digit growth. America’s armed forces, in contrast, have been subject to a rollercoaster of funding, with cuts from inflation and sequestration and constrained sub-inflation growth of one percent in the fiscal 2025 budget.

China’s black box of defense spending makes it difficult to accurately account for all its military spending, and public research can only go so far. The intelligence community’s estimate of China’s $700 billion in annual military expenditures needs more transparency to better convey Beijing’s military budget breakdown and inform policy debates regarding U.S. defense spending investments, gaps, and imbalances.

Thankfully, Congress mandated in last year’s defense policy bill that the Pentagon conduct a comparative study of the Chinese defense budget and publish the results. Getting to the bottom of how much Beijing spends on its military should be paramount for the US government. America’s armed forces cannot expect to keep up without knowing how fast China’s military is moving.

This is important because our military must constantly play an away game — projecting power over two oceans and across the globe to deter and defeat.

Beijing does not have to worry about balancing power and actively managing peace across three theaters of the world. China need only care only about its neighborhood in the Indo-Pacific and work to deny U.S. objectives there. This effectively means that Beijing’s defense investments go much further than those of the U.S., since they can be concentrated far more effectively in a smaller region and with more limited objectives.

To deter China or other adversaries, the U.S. military requires the capacity to get to the fight, as well as sustain and rapidly repair and resupply those in the fight. We must be capable of absorbing attrition early in a conflict and of continuing on in a protracted conflict.

China is catching up to the U.S. in defense spending, but this must not be allowed to mean it can outmatch or outlast America, should the military be called upon to fight and win in Asia.

Mackenzie Eaglen is a senior fellow at the American Enterprise Institute.