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  • Joel Wuthnow
    • Feb 29
    • 17 min read

Getting to World Class: Can China’s Military Persevere?


Wuthnow CLM Issue 79 March 2024
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PLA soldiers
Can the People’s Liberation Army (PLA) achieve its ambitious modernization goals in an era of economic stagnation? Fewer national resources for procurement combined with technological restrictions imposed by the United States and temptations to use force in regional disputes could all hinder modernization timelines that extend through 2049. Nevertheless, gloomy assessments are premature. This essay argues that the PLA will probably stay on track. China’s overall defense burden is far smaller than that of the Soviets during the Cold War or that of the U.S. today, meaning that funding will continue to flow. The impact of U.S. restrictions on the PLA will be diminished by domestic innovation and inconsistent participation by U.S. partners. Additionally, China’s leaders have generally followed a military strategy that encourages a focus on long-term modernization priorities and avoidance of strategic distractions. Consequently, Beijing will probably not see the PLA as a diminishing asset that must be used during this decade, and competitive strategies to weaken China’s military might from the outside are likely unrealistic.

China’s growth rates may have peaked, but is the same true of China’s military potential? Xi Jinping’s recent rhetoric does not betray a crisis of confidence. At the National People’s Congress last March, Xi told delegates that the party will build the People’s Liberation Army (PLA) “into a great wall of steel that effectively safeguards national sovereignty, security, and development interests.”[1] The previous fall, at the 20th Party Congress, Xi stressed the party’s goal of transforming the PLA into “world-class forces” by midcentury.[2] Nevertheless, several complications stand in the way between rhetoric and reality. China’s economic growth is slowing, which could induce belt-tightening in the PLA; the United States is collaborating with its allies to limit China’s access to critical technology; and temptations to use force against territorial rivals or Taiwan could lead to a debacle that throws China off the course of its planned military modernization.


Policymakers, however, should not assume that these complications will be decisive. Chinese military budgets appear sustainable, accounting for a far smaller burden on the economy than those that the Soviets faced during the Cold War or even that which the United States faces today. U.S. policy to deprive China of critical technology will be weakened by domestic Chinese innovation and inconsistent participation by other countries. Party leaders since Mao have rarely been tempted into strategic distractions: Xi has generally followed the prescriptions of his own military strategy to focus on long-term priorities. If this view is correct, then Beijing will not be hasty to use force and the military will not be regarded as a diminishing asset that must be used now.[3] Moreover, strategies to derail PLA modernization—or simply any hopes that an accumulation of negative economic trends will exhaust the military—are probably unrealistic. The PLA faces various vulnerabilities and may not prevail in a war, but it is likely to be able to achieve its modernization plans.


PLA, Interrupted?


China’s leaders have promoted an ambitious vision of military modernization through midcentury, but success will depend on whether the party—and its army—can overcome several obstacles. Successful modernization will continue trends over the past two decades, and especially since Xi took the helm in 2012. In the most recent examples, the Department of Defense’s 2023 China Military Power Report notes that the army added a long-range artillery system; the Navy expanded from 340 to 370 ships, including the launch of a third aircraft carrier; the number of modern fighters grew from 800 to 1300; and the number of nuclear warheads rose from about 400 to 500, supported by new delivery systems.[4] Other new capabilities are slated to come online in the next few years, including a new ballistic missile submarine, strategic bomber, long-range tanker, “beyond visual range air-to-air missiles,” hundreds of additional nuclear warheads, and possibly a conventionally armed ICBM.[5]  Official budgets in support of these programs doubled during the last decade, reaching $223 billion in 2023.


The party’s military development strategy guides the pursuit of new capabilities. The current strategy, announced in 2020, contains milestones for 2027, by which date the PLA has been told to “accelerate the integration of mechanization, informatization, and intelligentization”; referring to the fielding of artificial intelligence and other cutting-edge technology; [6] for 2035 (“comprehensively advancing the modernization of military theory, organizations, personnel, and weapons and equipment”); and for 2049 (“fully transforming the people’s armed forces into world-class forces”).[7] These goals are phrased ambiguously, providing the PLA latitude to develop its own internal agendas and timelines,[8] but in the view of PLA analysts, the basic goal is that “the capabilities of the PLA will be on par with those of the world’s elite armed forces including, and perhaps especially, those of the United States.”[9] The PLA might not seek the same global force posture as the U.S. military, but it aspires to achieve capabilities at the forefront of military technology.[10]


Regardless of how the army chooses to define “world-class forces,” pursuing an ambitious modernization plan will require that China’s leaders navigate three challenges. The first is whether the acquisition of advanced capabilities can be sustained in an era of economic stagnation. Economists generally agree that the combination of low birth rates, a smaller working-age population, low returns on new investments, increasing government debts, and the impacts of climate change will slow China’s growth, potentially settling in the 2–3 percent range by the 2030s.[11] Stagnating economic growth could limit government revenue and force difficult choices about  how much to spend on a modern military versus how much to spend on other economic and social priorities (including internal security).[12]


The second challenge concerns reduced access to foreign technology in an era of strategic competition. The Biden administration has already taken steps to limit China’s access to advanced technology in dual-use areas, such as semiconductors, quantum computing, and artificial intelligence, which are key to the PLA’s mandate to integrate “intelligentized” systems by 2027. Relevant U.S. steps include banning Chinese firms from investing in Silicon Valley, tightening export controls, and restricting U.S. tech companies from investing in targeted sectors in China. If the PLA is not able to acquire this technology from domestic innovations or from countries that choose not to follow the U.S. lead, its military modernization might suffer.


Finally, Beijing might commit strategic blunders that will limit its ability to achieve its own plans. Michael Beckley notes that other countries that were in China’s position in the past often suffered from a combination of growing overseas interests and hubris that resulted in national exhaustion: “Beset by slowing growth, but still armed with formidable capabilities, leaders of peaking powers may prefer to step on toes abroad rather than impose belt-tightening at home.”[13] Beijing might also be more willing to escalate territorial disputes close to China, or like the great powers before them, it might become entangled in conflicts farther from home. Such moves would create new financial and operational burdens on the military, diverting resources and attention away from long-term programs. In sum, slowing growth, restrictive U.S. policies, or temptations to use force might all stand in the way between the PLA and its hopes to field “world-class forces.”


Economic Stagnation


A closer look at these factors suggests that predictions of stalled PLA modernization are premature. The first challenge China’s leaders will face is how to sustain military budgets during a period of slowing growth.[14] Indeed, as elsewhere, there is a tight correlation between GDP growth and military spending in China.[15] As growth has leveled off over the last decade, annual increases in military spending have also declined (see figure below). However, the single-digit spending increases were sufficient to support China’s robust military modernization during the last decade and this will likely continue into the decade ahead. [16] Moreover, like Russia, the PLA also benefits from greater purchasing power than does the United States—more units of “products,” such as guns or military officers, can be purchased for an equivalent sum.[17] Even a skeptical analysis of the role of purchasing power parity acknowledges that the PLA likely derives an additional $100 billion in value beyond the official accounts.[18]


Figure: China’s Defense Budget Growth and Relative Burdens

China’s Defense Budget Growth and Relative Burdens

Source: Chinese official statistical yearbooks (1989–2022)


China’s defense spending may also be sustained because it represents only a small fraction of economic activity. During the Cold War, there were intense debates about how much of the Soviet economy went to the military, with estimates ranging from 8–17 percent in the 1980s; the U.S. intelligence community supported the higher estimates.[19] In the same decade, the United States devoted about 6 percent of its GDP to the military.[20] By contrast, during the last decade China’s defense spending has represented only about 1.3 percent of GDP.[21] A more accurate estimate would add defense expenditures not listed in the official budget, such as research and development expenses and expenditures for the People’s Armed Police, which SIPRI estimates to have been $56 billion in 2019.[22] Yet even including these expenses, China’s defense burden is only about 2 percent, far less than the current U.S. figure (3.5 percent). Beijing, in other words, is far from spending itself into the ground.


China is not spending an excessive share of government revenue on its military. In the mid- 1980s, Moscow and Washington allocated roughly 50 percent and 25 percent of central government expenditures to the military, respectively.[23] Even today, the U.S. Department of Defense accounts for about 12 percent of the federal budget. The situation in Russia is far worse, with recent estimates suggesting that Putin is spending about one-third of national coffers on the military.[24] By contrast, in the last decade Beijing has allocated only about 5–6 percent of government spending to the military, which itself represents a decline from the 1990s, when the figure was roughly 9–10 percent. Even using the higher SIPRI estimate, the figure is only about 7 percent. Assuming similar ratios and modest growth, the party will continue to be able to raise military budgets while addressing other priorities, such as social spending.


The party might also shift its spending priorities. If economic challenges mount, military modernization could be kept apace by increasing the share of GDP or government expenditures devoted to the PLA—and likely with a burden far less than what Moscow and Washington faced during the Cold War. This would be politically justifiable if the security environment were to deteriorate, a case the party is already making.[25] As one Chinese academic notes, “If national defense funds are insufficient, China can cut funds from other projects appropriately based on their importance to fill the gap in defense spending.”[26] Moreover, moving funds between accounts would not encounter the same political complications that take place in the West, where guns vs. butter debates and local interests loom large. Similarly, the party could conduct another downsizing and mothball older platforms to free up resources, though limits on new procurement spending will be created by rising personnel, training, and maintenance expenses.[27]


A final reason not to overstate the implications of economic headwinds for the PLA concerns improvements in resource management. China today is better able to leverage civilian capabilities for military purposes than it was a decade ago. This is key to its strategy to control costs.[28] A 2013 PLA Daily article notes that countries, such as the United States, the UK, Germany, and Japan, rely on civilian information systems, logistics, and manufacturing to support military requirements while reducing defense burdens.[29] The PLA has similarly designed a “military-civil fusion” strategy, with Xi personally involved in its execution.[30] One example of its success is the mobilization of civilian ships and aircraft to support military operations, thus reducing the services’ need to purchase and maintain large transport fleets.[31] The PLA also relies on civilian technology without necessarily paying the R&D costs.


Complementing a greater reliance on civilian capabilities is a more mature planning and budgeting process. Prior to Xi, authority over military spending was mostly concentrated in the scandal-prone General Logistics Department (GLD). As part of an organizational reform that began in 2015, financial responsibilities were divided between the Central Military Commission’s Logistics Support Department, whose Financial Bureau prepares the annual budget; the Audit Office, which conducts financial reviews; and accounting and resource management centers located throughout the PLA. PLA scholars liken this to a U.S.-style Planning, Programming, Budgeting, and Execution (PPBE) process “with Chinese characteristics.”[32] Meanwhile, Xi removed several former officials implicated in corruption scandals, a number of whom were associated with the procurement system.[33]


Skeptics will note that graft is still rife in the PLA. A decade after launching his anti-corruption campaign, Xi was forced to remove his defense minister and the Rocket Force leadership under a cloud of corruption.[34] Perhaps mismanagement will continue to hobble the PLA’s modernization goals, especially as its budgets continue to grow. However, this constraint should not be exaggerated. First, previous corruption did not prevent the PLA from achieving tangible progress across various domains, including those referenced in the 2023 China Military Power Report. Second, there is no reason to believe that corruption puts China at a unique disadvantage compared with the United States, where the “Fat Leonard” scandal resulted in charges against seventeen senior navy officials. Finally, it is likely that Xi’s anti-corruption campaign has allowed inspectors to identify scandals more quickly and has reduced the level of corruption.[35]   


Technological Blockade


A second problem for the leadership is to maintain access to critical technology. Chinese strategists argue that the Biden administration’s policy of limiting China’s access to semiconductors and other dual-use technologies through export controls and investment restrictions is part of a larger containment strategy focused on stalling China’s military ascendancy while preserving U.S. advantages.[36] Given the bipartisan Congressional commitment to strategic competition as well as the bipartisan commitment among the leading presidential contenders, Chinese analysts are not optimistic that U.S. pressure will abate in the next few years. The stakes in this competition could be enormous. If the PLA is unable to shield itself from disruptions in critical foreign imports and to integrate advanced microchips, artificial intelligence, and other “intelligentized” systems into the force, it could face diminished prospects on the battlefield, especially in areas such as sensing, decision-making, and communications.[37]


However, there are three reasons why the PLA can cope with reduced access to foreign technology. First, China has strengthened its defense industrial base in recent years, reflecting the party’s emphasis on technological self-sufficiency.[38] No longer reliant on Russia, Ukraine, France, and other suppliers for most systems, the PLA is “now almost completely self-sufficient in arms production,” with higher budget shares going to domestic research, development, and production.[39] Improvements in domestic capacity are apparent even in areas where the PLA has struggled. A key example is jet engines—foreign scholars have often pointed to China’s reliance on imported engines as a sign of domestic weakness.[40] Yet the fielding of the WS-10, and the more recent WS-15, turbofan engines on J-20 fighters indicates that the Chinese aerospace industry has begun to overcome these constraints.[41]


Second, China has improved its ability to innovate in dual-use areas. Although it lacks firm intellectual property rights and some advantages of the U.S. system, it has benefited from other features, including massive state-directed funding, overseas talent recruitment,[42] and leadership attention and determination. Graham Allison and Eric Schmidt assess that “from facial recognition and fintech to drones and 5G, China is not just catching up. In many cases, it has already overtaken the United States to become the world’s undisputed No. 1.”[43] Attempts to foster “military-civil fusion” have also produced results, especially in “drones, robotics, launch vehicles, and microsats.”[44] In the area most intensively targeted by recent U.S. restrictions, China has had some success in producing advanced (i.e., 7nm) microchips, even if it cannot yet produce them at scale.[45] Indeed, the key limits on domestic fabrication of the most advanced chips needed for next-generation weapons may be more financial than technical;[46] new funding in this area suggests that the party is placing its priority on catching up.[47]


Third, there are limits to the scope of foreign restrictions toward China. Chinese analysts contend that the most severe weakness in a U.S. containment strategy is the unwillingness of Asian and European allies to jeopardize market opportunities in China—in many cases, China continues to rank as a leading export and import destination.[48] Thus, while the Biden administration has had some victories in convincing its allies to adopt targeted restrictions in high-tech exports, it has allowed South Korea and Taiwan to continue producing less-sophisticated microchips in China.[49] In addition, China has increased its strategic technological partnership with Russia. This includes joint ventures in nanotechnology, biotechnology, and artificial intelligence,[50] and Moscow continues to provide China with top-tier military equipment in niche areas, such as S-400 air defenses.[51] Such cooperation, along with China’s domestic innovation, diminishes the impact of the restrictive U.S. policies.


Costly Decisions


A final challenge is to avoid conflicts that exhaust resources and divert attention. Although under Xi China has been labeled “assertive,” it has opted not to escalate its territorial disputes beyond the threshold of lethal violence.[52] Internationally, China has refrained from entering into alliances that might require that it take sides in foreign wars. This caution reflects a preference for stability and efforts to avoid foreign entanglements, thus allowing Beijing to focus on economic growth, to control costs, and to maintain an “independent” foreign policy.[53] Nevertheless, the combination of economic stagnation and confidence in a stronger military might inspire leaders to make bolder decisions.[54] With less to lose, why not force an eviction of the Filipino or Vietnamese marines who occupy contested areas in the South China Sea, for instance?


Such temptations, however, conflict with Chinese military strategy prescriptions to avoid strategic distractions. In PLA analyses, Mao is credited with focusing on dominant strategic problems while avoiding being drawn into conflicts elsewhere.[55] In his strategic thinking, Mao identified a “main strategic direction” (主要战略方向) that determines where military forces should be most ready to fight, with less priority on other theaters. After the Korean War, anticipating further conflict with the United States, Mao established the PLA’s “main strategic direction” in the Northeast; this shifted to the north-central region following the Sino-U.S. rapprochement and the Soviet buildup in the early 1970s. Avoiding conflicts in other regions, or limiting military conflict to brief punitive campaigns (as with India in 1962), can be explained by a pragmatic strategic prioritization—first things must come first.


After the Cold War, China’s leaders shifted the “main strategic direction” to the Southeast. Not only did they no longer fear a Soviet attack but they also identified deterring Taiwan independence as a new major challenge. In a January 1993 speech explaining the shift, Jiang Zemin said that the “focus of military struggle” will be on “preventing Taiwan independence, thus safeguarding national sovereignty and territorial integrity.”[56] U.S. intervention in the 1995–96 Taiwan Strait crisis, coupled with China’s fears of U.S. intentions that followed the accidental U.S. bombing of China’s Belgrade embassy in 1999, meant that the PLA would also have to plan on countering U.S. intervention in any Taiwan conflict.[57]


Despite growing overseas interests, the PLA has continued to focus on Taiwan. Updates to Jiang’s 1993 military strategy, adopted by Hu Jintao in 2004 and by Xi in 2014 and 2019, have retained the Southeast as the “main strategic direction,” though Xi has warned that challenges in other theaters should not be ignored.[58] There is no evidence that China has moved toward something similar to the simultaneous-war constructs that informed U.S. and Soviet planning during the Cold War period. U.S. revelations that Xi has tasked the PLA with preparing for a cross-Strait conflict by 2027 support the argument that his attention remains fixed on the “main strategic direction.”[59] Chinese assessments that the Lai presidency will further Taiwan’s movements toward de facto independence, combined with a perception of U.S. support for Taiwan’s permanent separation from the mainland, are likely to strengthen this preoccupation.


A focus on preparations for conflict with Taiwan will reduce any appetite for military adventurism elsewhere. Although the PLA and paramilitary forces might press China’s claims in the South and East China Seas, as well as across the Sino-Indian border, they likely will avoid escalating those conflicts (even if, as the recent Sino-Filipino standoff over Second Thomas Shoal suggests, China conducts aggressive maneuvers just below the level of lethal violence, such as use of water cannons or ramming foreign vessels).[60] China will likely also limit its overseas military presence, continuing to invest primarily in civilian ports, as opposed to large bases,[61] that can service naval ships, and it will abstain from participating in others’ wars, such as Russia’s conflict in Ukraine or the Iranian proxy wars.[62] Restraint, in this light, is not the result of a benign foreign policy, as Chinese diplomats might claim, but rather the product of a system designed to set priorities.  


The key question is whether a war with Taiwan will derail China’s long-term modernization agenda. U.S. commentary, supported by analysis that a stronger military is providing Xi new options,[63] sees a cross-Strait conflict occurring sometime during this decade. Even though this scenario has been at the forefront of China’s strategy, Beijing will be less likely to initiate a conflict if the price includes other goals linked with “national rejuvenation” by the 2049 centennial, including building up a prosperous economy, cleaning up the environment to provide a higher standard of living for Chinese citizens, and fielding “world-class forces.”[64] Conflict will be more likely if Chinese leaders believe that such a price will not need to be paid. For instance, steps to reduce exposure to international sanctions might boost confidence that China will be able to avoid the punishment that Russia experienced following its invasion of Ukraine.[65]


Militarily, a war is more likely if Beijing assesses that Washington will not intervene. As Thomas Christensen argued in 2001, the PLA does not need to prepare for all-out war with the United States, but it needs asymmetric systems, such as long-range precision missiles, to complicate the deployment of U.S. forces during a crisis.[66] Those conventional systems remain key to China’s approach, but in 2022, Xi resurrected a Jiang-era idea that the PLA also needs a “strong system of strategic deterrent forces,” based on nuclear weapons and other strategic systems, to deter Washington from entering into a war.[67] Chinese analysts were encouraged that the nuclear threat helped deter direct NATO involvement in Ukraine.[68] One PLA scholar writes that the combination of a nuclear threat, geographic distance, lack of vital interests, and U.S. war-weariness helps explain why Ukraine has remained a proxy conflict.[69] If Beijing becomes convinced that similar conditions will prevail in Asia and that the party’s broader ambitions will not need to be sacrificed, a war might be tolerable. Entertaining the idea that a war can be waged at a low cost might imperil China’s military modernization, but to date there is little evidence that Xi has come to share Putin’s brash overconfidence.[70]   


Implications


Rather than slouching toward obsolescence, the PLA will likely be able to overcome major obstacles as it builds up “world-class forces.” Its budgets do not place undue stress on the economy and tighter resource management will improve efficiency. Domestic innovation and limits on foreign restrictions will keep the technological pipeline flowing. A strategy of prioritizing conflicts and acting only when ready will reduce any temptation to use force—unless Xi is misled into war optimism.[71] If the party succeeds, the results could be worth the wait: China will be perceived as a dominant military power, signaling great power status;[72] a PLA with top-tier capabilities will shape the security environment by deterring others from pursuing their own territorial ambitions and potentially will convince Washington that the risks of intervention in a future crisis are too great; and Xi’s successors will take credit for overseeing a major achievement, which might be a way to preserve the party’s legitimacy as the economy slows.


An optimistic view of China’s military prospects suggests that conflict in the near term might be less likely than anticipated. U.S. scholars have argued that mounting long-term problems, including slowing growth and an aging population, might increase China’s willingness to fight while it still perceives a relative advantage—the 2020s may be a “dangerous decade” for Taiwan and other rivals.[73] Yet this logic does not apply well to perceptions of the military balance. An ability to circumvent economic, technological, and strategic roadblocks works against the argument that China’s leaders believe they are facing a closing window of opportunity. Confidence about their long-term prospects complements Chinese writings that view the United States as an exhausted hegemon whose own overtaxed budgets, political gridlock, and overcommitted forces are reducing its competitiveness.[74] Instead of promoting rash decisions to “use it or lose it,” these assessments are more likely to underscore a sense of strategic patience.


The policy implications for the United States are not encouraging. A competitive strategy to drain China’s resources would be hobbled by China’s relatively low defense burden and its rise as a technological innovator. Revelation of U.S. advances in new missiles or other advanced capabilities would probably spur China to divert resources to counter-invest, but its ability to increase military budgets or reprioritize spending means that the system would not experience the same kind of strain that the Soviets faced during the arms race in the 1980s. Attempts to restrict China’s access to advanced semiconductors might have some implications for “intelligentization,” but they would be diluted by China’s own innovations, conflicted motives by U.S. allies and partners, and the growing Sino-Russian technological partnership. It would also be folly to assume that China’s leaders might be tempted into rash decisions to use force with India, Japan, or other rivals that might derail its long-term aspirations.


Beijing will face resource constraints that require making choices between different acquisition programs and rising near-term costs will constrain long-term procurement.[75] The PLA also has various weaknesses that might impede its effectiveness if a war were to occur. Those include the lack of experience in modern joint operations, an organizational culture that prefers micromanagement over delegated authority, distrust between party leaders and the army, and vulnerability to highly capable defensive weapons of the sort that were used with devastating effects during the opening phases of the Ukraine war.[76] Further efforts to examine and exploit those vulnerabilities should continue. But anticipating that China’s military power has peaked, or can be exhausted through competitive strategies, probably will prove to be a mirage.


About the Contributor

Joel Wuthnow is Senior Research Fellow at the Institute for National Strategic Studies of the U.S. National Defense University (NDU) in Washington, DC. He also serves as Adjunct Professor at the Edmund A. Walsh School of Foreign Service of Georgetown University. Dr. Wuthnow’s latest books and monographs include Gray Dragons: Assessing China’s Senior Military Leadership (INSS China Strategic Perspectives 16, September 2022), Crossing the Strait: China’s Military Prepares for War with Taiwan (NDU Press, 2022, lead editor), and The PLA Beyond Borders: Chinese Military Operations in Regional and Global Context (NDU Press, 2021, lead editor).


The views expressed in this paper are only the author’s, and not those of the National Defense University, the Department of Defense, or the U.S. government.

Photo credit: Public domain, via Wikimedia Commons

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