Editor's Foreword

column C, data are converted into US dollars using
a combination of both market exchange and PPP
rates. Not surprisingly, this methodology dramatically
boosts the apparent size of Chinese military
spending and partly explains the wide range of
spending estimates often referred to in the media.
In the ����s, the difference between the official
budget and true military spending in China was
considerable. In those days China’s armed forces
received significant additional funds from their own
business activities, and China’s defence industry
received massive government subsidies. During the
past decade, however, as the official budget has risen
by more than ��% per year, the likely gap between
the official budget and true spending has narrowed
considerably. Whatever the true extent of China’s
military-related spending – and the Chinese govern-
East Asia and Australasia
393
ment continues to insist that no spending exists
outside of the official budget – the continued finetuning
of differing methodologies to determine a
definitive figure, particularly one expressed in US
dollars, is becoming a less revealing exercise than in
the past.
Note: The use of PPP rates is a valid tool when comparing
macroeconomic data, such as GDP, between countries at
different stages of development. However, no specific PPP
rate exists for the military sector, and its use for this purpose
should be treated with caution. Furthermore, there is no
definitive guide as to which elements of military spending
should be calculated using the limited PPP rates available.
The figures presented here are only intended to illustrate a
range of possible outcomes depending on which input variables
are used.
East Asia and
Australasia