Economic Growth and Military Spending in China

Abstract

The relationship between economic growth and military spending in China is examined. An empirical model of China's military spending is introduced that is consistent with economic and international political science theories. The findings reveal a positive relationship between military spending and economic growth. The results are suggestive of the view that China is on the way to becoming the dominant regional power in Asia. Results further indicate that while China's military spending is affected by the military spending of India and Russia, it is not affected by that of Japan or the United States. Long-term forecasts made employing the empirical military spending model for China introduced in this paper, conditional on the assumptions made about the future values of the explanatory variables and the empirical model employed indicate that China is likely to be the dominant regional power in Asia.