China’s defense sector is grappling with significant challenges as the revenues of the country’s top military firms dropped by 10% last year. This recent downturn sheds light on a disturbing trend. It’s a major reversal from three decades of largely unbroken annual increases in defense budgets. Revenue has taken a nosedive, especially in Asia-Oceania. As a consequence, it has become the only worldwide region where major arms producers are announcing a downward trend.
These military corporations are under the direct control of the Central Military Commission, which is China’s supreme military command organization. Despite the revenue drop, China’s military modernization efforts continue, although uncertainty looms regarding the timing and effectiveness of new capabilities. China commands the world’s biggest naval and coast guard fleets. They’re on track to deploy a highly capable new class of aircraft carrier, A2/AD, of which they’re making stunning strides in naval power.
He Weidong, China’s No. 2 general, was among eight top generals expelled from the ruling Communist Party in October due to graft charges. This anti-corruption campaign has entirely transformed arms procurement processes. Over half of the top 20 arms contracts by estimated dollar value have been delayed or withdrawn for 2024.
“A host of corruption allegations in Chinese arms procurement led to major arms contracts being postponed or canceled in 2024,” said Nan Tian, director of SIPRI’s Military Expenditure and Arms Production Program.
These are weighty complications. China’s military capabilities are nothing short of intimidating. The people of our nation do not have enough to show for all the new hypersonic missiles and nuclear weapons, as well as air and sea drones. Continued corruption purges may undermine the effectiveness and timeliness of upcoming military improvements.
Liang, deep military affairs expert, witnessed the short-term losses first. Despite all of this, he thinks the long-term outlook is still encouraging. In the medium and longer term, sustained investment in defense budgets and political commitment behind modernization will continue, albeit with some program delays, higher costs and tighter control of procurement.
The Chinese Defense Ministry has not provided immediate comments regarding the revenue declines or the impact of ongoing corruption investigations. And under President Xi Jinping’s leadership, the world’s biggest military by personnel has made modernization a priority. More importantly, he is a crucial member of the Central Military Commission.
In recent years, China has made a major push to modernize its military capabilities fueled in part by rising geopolitical tensions. The decline in revenue raises questions about how these modernization efforts will continue in light of both financial constraints and bureaucratic hurdles.