China to increase military expenditure (thanks Uncle Sam)

Not surprising…

China said Sunday it would boost its defense spending by 11.2% in 2012, slightly less than last year’s increase but still enough to aggravate the concerns that have prompted the U.S. to refocus its defense policy on the Asian-Pacific region.

So how much will that military budget add up to? That’d be $106.4 billion US dollars.

To put that in a little more perspective, China currently holds more than $1.2 trillion of US debt. Interest payments on America’s $15.2 trillion of debt amounted to $454 billion in 2011.

Thus, interest payments to China would have been around $30 billion (454/15) that year. For the same 12 month period, the Chinese military budget was $91.5 billion.

That’s the US effectively financing one third of China’s military in 2011. And remember that’s just with interest payments. The principal on the debt isn’t going down.

With no end in sight to increasing US debt, and the likelyhood China will continue to buy at least some of it – with ever increasing interest rates – no wonder China is so well positioned to continue double-digit increases in its military expenditure… courtesy to a sizeable extent of the US taxpayer.

I’m not sure there has ever been a case in world history whereby one superpower has funded so much of a rival superpower’s military.

PS The idea of US debt interest payments funding the Chinese military has been bandied about before. I decided to have a look at the numbers myself.

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