China boosts defense spending amid military modernization

Chinese soldiers dressed as ushers stand guard after the opening session of the National People’s Congress in the Great Hall of the People in Beijing on Monday, during which China unveiled a massive increase in defense spending. (AFP).
Updated 06 March 2018

China boosts defense spending amid military modernization

BEIJING: China on Monday unveiled its largest rise in defense spending in three years, setting a target of 8.1 percent growth and fueling an ambitious military modernization program amid rising concerns over its security.
The 2018 defense budget will be 1.11 trillion yuan ($175 billion), according to a report issued at the opening of China’s annual meeting of parliament.
The defense spending figure is closely watched around the world for clues to China’s strategic intentions as it develops new military capabilities, including stealth fighters, aircraft carriers and anti-satellite missiles.
China will “advance all aspects of military training and war preparedness, and firmly and resolvedly safeguard national sovereignty, security, and development interests,” Premier Li Keqiang told the opening session in an address.
“Faced with profound changes in the national security environment the absolute leadership of the military by the ruling Communist Party must be observed, and the unity between the government and the military, and the people and the military, must always be ‘strong as stone,’” he said.
Li also said China had basically completed efforts to cut back the size of its armed forces by 300,000, a move President Xi Jinping announced in 2015 to improve efficiency that had caused unease in the ranks.
The 2018 defense spending increase comes as China’s economic growth expanded 6.9 percent last year, the first acceleration in annual growth since 2010. But China kept its 2018 economic growth target at around 6.5 percent, said Li, the same as in 2017, despite exceeding that year’s target.
Last year, defense spending was set to increase by just 7 percent, to 1.044 trillion yuan ($164.60 billion), or about one-quarter of the proposed US defense spending for the year. In 2016, it grew by 7.6 percent.
“The pace and scale of this build-up is really dramatic. It is extremely alarming for Australia and many other countries in the region,” said Sam Roggeveen, a visiting fellow at the Strategic and Defense Studies Center of the Australian National University in Canberra.
“There is every indication that China wants to expand what it will call defense capabilities in the South China Sea. I expect eventually we will see warships and aircraft there regularly, if not based there permanently. What is unclear, however, is whether the US will want to rise to that challenge.”
China does not provide a breakdown of how it allocates its defense budget, leading neighbors and other military powers to complain that Beijing’s lack of transparency has added to regional tension.
Diplomats said China’s defense numbers probably underestimate true military spending for the People’s Liberation Army, the world’s largest armed forces, which are in the midst of an impressive modernization program overseen by Xi.
One senior Asia diplomat, speaking before the announcement, said the real rise would probably be at least double what China revealed, considering its efforts to build up the industrial military complex and deepen military-civilian integration.
“Some spending will be hidden in civilian spending,” said the diplomat, speaking on condition of anonymity.
China’s military build-up has rattled the nerves of its neighbors, particularly because of its increasingly assertive stance in territorial disputes in the East and South China Seas and over Taiwan, which Beijing claims as its own.
“We would like to see China be more transparent about its defense policy, including spending and the direction of its military power,” Japan’s Chief Cabinet Secretary Yoshihide Suga told a regular briefing.
Tung Li-wen, a professor at Taiwan’s Central Police University, said: “This poses a direct threat to Taiwan, as well as a global threat.”
With worries about potential disputes with the US in the region, China’s military had mounted what defense sources and diplomats viewed as a lobbying campaign for more spending.
In an article on its website, China’s Defense Ministry cited Chen Zhou, a researcher at the Academy of Military Science, as saying the spending increase was “reasonable” and “sustainable,” and that there were no “hidden military funds.”
US President Donald Trump has proposed a military budget that is the largest since 2011 and focused on beefing up the US’ nuclear defenses and countering the growing strength of China and Russia.
The proposal, part of Trump’s budget request for the US government, would provide the Pentagon with $617 billion and an additional $69 billion to fund ongoing wars in fiscal year 2019. That is $74 billion more than in the previous fiscal year’s budget.
Vice Foreign Minister Zhang Yesui on Sunday said China’s “moderate” defense spending rises in the past few years were less than other major countries and would not threaten anyone.


OPEC sees small 2020 oil deficit even before latest supply cut

Updated 12 December 2019

OPEC sees small 2020 oil deficit even before latest supply cut

  • OPEC keeps its 2020 economic and oil demand growth forecasts steady and is more upbeat about the outlook

LONDON: OPEC on Wednesday pointed to a small deficit in the oil market next year due to restraint by Saudi Arabia even before the latest supply pact with other producers takes effect, suggesting a tighter market than previously thought.

In a monthly report, OPEC said demand for its crude will average 29.58 million barrels per day (bpd) next year. OPEC pumped less oil in November than the average 2020 requirement, having in previous months supplied more.

The report retreats further from OPEC’s initial projection of a 2020 supply glut as output from rival producers such as US shale has grown more slowly than expected. This will give a tailwind to efforts by OPEC and partners led by Russia to support the market next year.

OPEC kept its 2020 economic and oil demand growth forecasts steady and was more upbeat about the outlook.

“On the positive side, the global trade slowdown has likely bottomed out, and now the negative trend in industrial production seen in 2019 is expected to reverse in 2020,” the report said.

Oil prices were steady after the report’s release, trading near $64 a barrel, below the level some OPEC officials have said
they favor.

The Organization of the Petroleum Exporting Countries, Russia and other producers, a group known as OPEC+, have since Jan. 1 implemented a deal to cut output by 1.2 million bpd to support the market. At meetings last week, OPEC+ agreed to a further cut of 500,000 bpd from Jan. 1 2020.

The report showed OPEC production falling even before the new deal takes effect.

In November, OPEC output fell by 193,000 bpd to 29.55 million bpd, according to figures the group collects from secondary sources, as Saudi Arabia cut supply.

Saudi Arabia told OPEC it made an even bigger cut in supply of over 400,000 bpd last month. The Kingdom had boosted production in October after attacks on its oil facilities in September briefly more than halved output.

The November production rate suggests there would be a 2020 deficit of 30,000 bpd if OPEC kept pumping the same amount and other factors remained equal, less than the 70,000 bpd surplus implied in November’s report and an excess of over 500,000 bpd seen in July. OPEC and its partners have been limiting supply since 2017, helping to revive prices by clearing a glut that built up in 2014 to 2016. But higher prices have also boosted US shale and other rival supplies.

In the report, OPEC said non-OPEC supply will grow by 2.17 million bpd in 2020, unchanged from the previous forecast but 270,000 less than initially thought in July as shale has not grown as quickly as first thought.

“In 2020, non-OPEC supply is expected to see a continued slowdown in growth on the back of decreased investment and lower drilling activities in US tight oil,” OPEC said, using another term for shale.