China's defense budget was reported as 3 times smaller than America's, but 2 analysts say the Pentagon is underselling Beijing's true military strength

• The Pentagon's report on China's military makes Beijing seem weaker than it is, two analysts said.
• The 2023 report said China's defense budget is about $230 billion, compared to the US' $889 billion.

Beijing's military spending and threat are likely far higher than portrayed by the Pentagon, which recently reported figures that indicate China's defense budget was nearly four times smaller than America's, two US analysts said on Monday.

The Pentagon's annual report to Congress, published in October 2023, covered military developments in China in 2022 and reported that Beijing spent $230 billion that year on defense.

Much of that spending was put toward strengthening its ability to take Taiwan by force, the report said, with aggressive expansions to its navy, air force, and nuclear arsenal.

Meanwhile, Congress in December approved $886 billion in funding for the US military, or about 3.85 times more than the reported figure for China's budget in 2022.

But anyone thinking this means China's military is four times smaller than the US would be missing several key factors, wrote Robert Peters and Wilson Beaver, researchers at the Allison Center for National Security run by conservative think tank The Heritage Foundation.

"As the paper acknowledges, China's real defense budget is likely far higher: European think tanks have estimated that real Chinese defense spending is at least 30-40% higher than the official budget," Peters and Beaver wrote in the military news site RealClearDefense.

Peters and Beaver wrote that the Pentagon's assessment failed to account for China's military research spending.

Such a sum would be significant, they wrote, given the amount that the US spends for this purpose. The Defense Department requested $145 billion for research, development, and testing in 2024.

China also operates a "civil-military fusion" strategy, which allows its military to access intellectual property and technology from its civilian sectors freely.

"Confusingly, the report does not attempt to account for either of these significant considerations in its treatment of China's defense budget topline," Peters and Beaver wrote.

China can pay its soldiers a lot less

And China's higher spending power means a smaller budget can go a lot further, they added.

For one, Beijing pays its soldiers a lot less than the US does, the researchers wrote. Chinese recruits earn a reported $108 per month, per an oft-cited report by The Economist in 2021, or 16 times lower than the $1,900 salary for US recruits.

Peters and Beaver estimated that in general, "Chinese military personnel earn only about one-fourth what American servicemembers do."

"Simply put, defense spending goes a lot further in China than it does in the United States, because labor and material costs are lower in China," the researchers wrote.

China's true military spending has drawn renewed attention after Sen. Dan Sullivan of Alaska said in September that internal US assessments indicate Beijing's annual defense budget is $700 billion, compared to Beijing's announced $224 billion for 2023.

James Stavridis, former supreme allied commander for the National Atlantic Treaty Organization, said in September that if China's budget was truly $700 billion, it is growing quickly and would account for around 4% of the country's GDP.

"That trajectory alone is concerning," Stavridis wrote for Bloomberg.

China's reported GDP for 2023 was around $17.8 trillion. The US spends around 3.5% of its GDP on its military.

"We should avoid overreacting to what seems to be this more accurate data of China's military push," Stavridis wrote.

"But the first step is for the Pentagon to talk about it, and not just in Washington's halls of power," he added.

Peters and Beaver urged the same, warning of a "massive disconnect between the US government's sense of the threat posed by China's military spending and the public perception of it."

"Because as worrying as this report is, it almost certainly underestimates the threat posed by China," they wrote.

The Pentagon's press office did not immediately respond to a request for comment sent outside regular business hours by Business Insider.