by Jeremy Rutherfurd

Created on: March 05, 2007   Last Updated: November 18, 2009

China announced in March that it is going to increase military spending by nearly 18 percent in 2007, according to Xinhua, the nation's official news agency. This marks the sharpest rise in such outlays in a decade.

China's defense spending has become a cause for worry in the region in recent years, with officials in Taiwan, India and Japan especially concerned. The United States too has complained, asking Beijing to be more transparent about its military expenditures.

With an economy developing at break-neck speed and a populace becoming wealthier and increasingly assertive, it's easy to view China's rise with alarm and even dread.

There is increasing talk of China "eclipsing" the United States. Some even warn that the People's Liberation Army (PLA) will soon be a serious threat to the world.

To get a clearer picture of the true state of affairs, let's take a closer look at China's military.

Defense Spending

No one outside the Chinese government knows for sure how much is actually spent on the nation's military. This is because Beijing purposely hides much of its defense outlays in other parts of the budget.

Military analysts can make an educated guess, however, and most say that China's real defense spending is two to four times what is officially stated. Beijing has announced an outlay of 351 billion yuan, or about US$45 billion for 2007, which means the real defense budget could be as high as US$180 billion.

This is no small amount, and certainly shouldn't be ignored. It's more than four times Japan's defense budget, almost nine times India's and multiples of what Taiwan is spending. (Hence their concern.)

In fact, even if you use Beijing's official figures, China has the second largest military budget in the world. (Russia is in third place.)

As alarming as this may seem, however, bear in mind that the United States plans to spend US$532.8 billion on its military this year, almost three times that of China, assuming the highest estimates of the Chinese defense budget are true.

How are Americans able to spend so much? Because the United States is a US$13 trillion economy, while China's is closer to US$2.5 trillion in size. (2006 figures, per the official exchange rate, according the CIA's World Factbook).

Remember that the next time someone tells you that China will soon displace the United States.

Weapons Systems

With more money to spend, China's armed forces have been working hard to upgrade their weapons systems, and for good reason: many of their planes,

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