China accounts for more than a third of the world's 'secret' military spending

Over the past decade, China’s military spending has more than quadrupled, making it the second-largest defence spender in the world behind the US.

But Beijing might be spending a lot more on its military than it’s putting in the books.

Transparency International (TI), an organisation that monitors corruption around the world, published a report on November 4th that found China accounted for nearly a third of the world’s off-ledger defence spending.

Tehmina Abbas, who is in charge of methodology for TI in the United Kingdom, told Business Insider by email that secretive defence spending is defined “as military expenditure where no meaningful details are released either to the public or parliament.” Chinese military budgeting transparency has a lot of room for improvement: “All of China’s defence budget falls into this category — even ‘on budget’ spending is secretive, with no meaningful detail given to the public or [National People’s Congress].”

China spent $US216 billion on defence in 2014, according to the Stockholm International Peace Research Institute, whose data was the basis of the TI study. This number includes both reported and off-book spending.

In 2014, China reported a military budget of $US132 billion — meaning the People’s Republic could be spending about $US84 billion without public or even intra-governmental disclosure.

That’s a huge amount of unaccountable military spending. It’s a total that outstrips the annual federal budget of Malaysia, a country with a population of over 30 million people.

“There are substantial off-budget military expenses, including expenses for strategic forces, foreign acquisitions, military R&D, and China’s paramilitary forces,” TI researches wrote in the report detailing military corruption around the world. “In the 1990’s the [People’s Liberation Army’s] own economic activities provided revenue that was also used to fund illicit activities — smuggling, prostitution, non-registered businesses.”

The military’s expenditures and cash flows were seldom effectively audited, either. “These expenses are controlled internally by the Central Military Commission without any transparency on the exact processes followed,” the report continued. “Although in theory, China’s defence policy is supervised by the National People’s Congress, the assessor described their impact as “minuscule.”

China’s government reported that its 2015 military budget was $US145 billion — a 10% increase over the previous year, a slight decrease in the average growth rate over the previous decade.

Despite the growth in China’s military spending, it’s still a far cry from the US’s $US610 billion military budget in 2014.

Chinese leaders have demonstrated increased recognition that the military has a corruption problem. Chinese president Xi Jinping introduced a new anti-graft campaign in 2014, which ousted high-ranking military officers, including a former vice-chairman of the Central Military Commission.

Though China’s central government ordered China’s military to divest from its commercial holdings in 1998, the People’s Liberation Army still maintains interests in industries including telecommunications and hotels. These commercial interests could be a source of the military’s off-the-book funds.

“The expenses for China’s paramilitary forces, and the People’s Liberation Army (PLA)’s own revenue created by its corporations, and the allocation of these funds remain undefined,” TI researchers wrote.

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