China now has “the largest navy in the world, with an overall battle force of approximately 350 ships and submarines including over 130 major surface combatants” states the U.S. Department of Defense’s 2020 annual report. The size of the PRC’s fleet is much bigger than 293 ships the US operates. The report furthers that the Chinese fleet is not only quantitatively better, states the U.S. Department of Defense’s 2020 annual report its getting better qualitatively too.
But here is the thing- Ships at sea are a costly affair to maintain. Even without the expensive weapons’ suit onboard ships need to undergo refurbishing and refits almost one every year if not more.
The total budget for US navy budget for current year is 162 Billion USD. Officially total Chinese Budget is 1.27 trillion yuan (US$178 billion) for all three services.
So the big question is – where will China find enough money to fund its maintenance cost in future?
China just created a big problem for 2040s
One of the worst things that a military planner can do is to expand military hardware in a relatively very small amount of time. Much of China’s fleet is less than five years old. The entire expansion funded by the glorious years of Chinese economic expansion. Now that the times are tough China will have a different problem altogether.
Starting next year China will have to invest exponentially on maintenance of a fleet it hardly needs and then the entire fleet will find itself out of useful age in next two decades. As China starts to roll out carriers and start to organise carrier-groups we believe that just the maintenance cost of the grand PLA-Navy will be upward of 80 Billion USD by 2025. The costs should go upwards of 110 Billion USD by 2030.
By 2040, Chinese Navy would need at least 300 Billion Dollars annually to maintain and replace its aging fleet.
Unlike US, China simply can’t fund it
For last six decades US has been funding her military might with public debts – basically Feds printing more dollars with a promise to earn it later. Since the world works on US-Dollars, no one has a problem.
The Chinese simply cannot do it. The country still needs to earn US dollars before it can spend it. Chinese Yuan is not as big a currency as USD. Nations – except directly dealing with China hardly ever use it.
China is trying… hard…
China is trying its best to get CNY to be part of international trade for almost a decade. The US’ trade war took winds out of CNY’s sail. USD with a backup of Euro remains the undisputed king of international trade. On top of that a consistent fall in Beijing’s exports and worldwide slowdown on account of Covid-19 do not bear anything good for China.
Then there is the OBOR
OBOR is a giant debt fueled project. International government take loans from Chinese Banks, invest the money back into Chinese companies and labour to execute them. The problem is that almost all of them are now looking at a default on their payments.
And then there is the Navy
The Navy – to maintain the its fighting prowess needs all the money it can get. At present Xi is ensuring the flow, but the treasury is going to run dry pretty sure. All China’s opponents need to do is to wait it a little longer and the PRC may crash in from its own weight. The fact is that China tried to emulate US without understanding the role of US’ treasury.
