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 remained stable and grew in coordination with the increase of government expenditure.

China applies strict mechanisms of fiscal allocation and budget management on its defense expenditure. It pursues a level of defense spending that is demand-oriented, planning-led and consistent with its capacity. It endeavors to strengthen unified management, coordinate existing and incremental expenditure, gradually practice cost-effectiveness management, and steadily press ahead with reform that is centered on efficacy and efficiency. To improve and strengthen budget management, China's armed forces are extending reform of the centralized collection and payment of military funds, accelerating standardization in relation to defense expenditure, and improving the management of assets and funds.

Comparison of Defense Expenditure in the International Context

Among countries ranking high in defense expenditure in 2017, China's share of defense expenditure in GDP and government expenditure, as well as per capita and per-serviceperson defense spending, are all at a relatively low level.

China has become the world's second largest economy. The fact that China's defense expenditure ranks second in the world is determined by the demands of its national defense, the size of its economy, and the defensive nature of its national defense policy. In terms of total spending, China's defense expenditure in 2017 was less than a quarter of that of the US.

As a percentage of GDP, from 2012 to 2017, China's average defense expenditure was about 1.3%. Comparative figures were: the US about 3.5%, Russia 4.4%, India 2.5%, the UK 2.0%, France 2.3%, Japan 1.0%, and Germany 1.2%. China ranks 6th among these countries in terms of defense expenditure as a percentage of GDP on average and is the lowest among the permanent members of the UN Security Council (UNSC).