Trends in Military Spending of China and Four ASEAN Countries: A Time Series Analysis Approach

Abstract

One of the most evident signs of China’s rise in the global arena has been represented by the growth of China’s military spending since the early 1990s. While the expansion and modernization of the People’s Liberation Army (PLA) cannot pose an immediate threat to U.S. power projection across the globe, it is undeniable that it is perceived as a threat to the regional stability. In particular, the South China Sea represents a future possible theater of a military confrontation between China and ASEAN countries that have claims or partial claims over those waters and adjacent islands. While China remains the biggest biggest spender in the Asian region and the country’s military spending exceeds the military budget of the other main countries in the region combined, data on military expenditure show that ASEAN countries have been attempting to boost their military in the recent years. The current study attempts to investigate the arms race among those countries: Using time series analysis, the study analyzes the temporal relationship between the increase of China’s defense spending and the increase of military spending by ASEAN countries that have territorial claims in the region. The findings of our study do not support the claim that such temporal relationship exists. We argue that bilateral trade relationships between China and ASEAN countries and reliance on military support from the U.S. in the region could partially explain the insignificant relationship.