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other is the econometric analysis (Hao Wanlu & Sun Zhaobin, 2007[6]). Hao Wanlu
and Sun Zhaobin (2007) analyzed the relationship of defense expenditures among
China and other countries, and got the conclusion that China's defense expenditures
were lower than the equilibrium level under the circumstance of military game among
China and foreign countries. Concerning with the ratios comparison, the existent litera-
tures used the traditional ratios, such as the absolute scale of defense expenditures,
the ratio of defense expenditures to GDP, the ratio of defense expenditures to public
expenditures.
The level of defense expenditures is determined by safety demand and capacity of
economy supply. The exclusive angle of military competition overlooked the limits of
economy. Those traditional ratios analysis ignored the difference among economic bod-
ies, such as public financial systems, multi-objects of government and so on. That igno-
rance deduced incorrect evaluation about the appropriate of defense spending one nation.
Thus, this paper establishes a system of various ratios from the view of combining
military competition with economic capacity, in order to analyze Chinese defense ex-
penditures since 1978. In addition, we evaluate the defense expenditures under the cir-
cumstance of multi-objects of governance and forecast the possibility of the growth of
defense expenditures in the future.
2 Method of Analyzing Defense Expenditures
2.1 Theory about Demand and Supply of Defense
The fundamental reason for defense is the awareness of outside threat. Defense pro-
vides safety for nation. If there is no alternative safeguard method, the more threat one
nation is aware of, the more demand for defense.
Concerning the methods of safeguard, different theories of international relationship
hold different opinions. Realists think that international society is in a state of anarchy.
The competition among nations is a zero-game. Each nation pursues its relative power,
but not the absolute power. Military power is an important part of comprehensive na-
tional strength, the growth of other nations' military power is equal to the decline of
domestic defense capacity. Furthermore, because of the state of anarchy, the relative
power based on military capacity is more helpful than diplomacy to ensure the national
benefits. Thus, realist's basic judgment about anarchy state deduces that other nations'
defense expenditures determine domestic defense expenditures. In the meanwhile, neo-
liberal school thinks that the reality of economic relationship among nations and the
development of international systems can bring out win-win result. Thus, the interna-
tional co-operation can substitute defense to some extent to improve the safety. Con-
structivism thinks that culture, religion, ideology and etc. are all parts of national
strength. The difference of culture is one source of international conflict. It is possible
to resolve the international conflict by formation of the common culture.
There is no consensus of theory about the solution to international conflict. How-
ever, few nations and districts hold zero defense spending. Thus, even if the realism
couldn't explain all the behaviors of nation, it is rather persuasive to explain the
demand for defense. Based on that, it is meaningful that we compare some nations'
defense spending in the same period, which will lead to the evaluation of level of do-
mestic defense spending.
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