China's official defense spending in 2004 was $25.4bn, by including factors such as PAP, space program and more weapon imports, RAND estimated the range to be $31-38bn (2003 figure, average=$34.5bn), SIPRI $35.4bn. China's GDP was $1933bn in 2004 (old number was $1650bn) according to most recent annoucement. So China's defense spending was 1.3%-1.8% of its GDP according to various estimates.
But here I have not considered one well published (but not neccessarily accurate) source, the Pentagon, estimated China's spending to be $67.49bn, based on PPP adjusted conversion into US$. Because much of China's military spending is for importing weapon from Russia, using hard currency, everyone (including RAND, SIPRI, armscontrolwonk) have rejected the PPP proxy. Pentagon, for its own agenda of securing more fund form the Congress, is the only body that stubbornly insists on the misleading PPP. Anyway, let's see how that translates in % GDP. This is from CIA's country profile for China
- GDP (PPP): $7.262 trillion (2004 est.)
- Military expenditures - dollar figure: $67.49 billion (2004)
- From the same CIA site, there is a conflicting (derived) number. It said China's "military expenditures - percent of GDP: 4.3% (2004)". This is based on a wrong calculation of dividing a PPP-adjusted number by an exchange rate valued GDP (about $1.65tn). To compare 2 numbers, you need to get the units right. What CIA/Pentagon did was like saying I am taller than Yao Ming because I am 6 feet tall and Yao is only 2.29m.
My problm with CIA's site, while it is handy, is that it also lacks some important information. e.g. if a PPP adjusted value is quoted, I should at least know what ratio it used. US State Dept or DoE use exchange rate GDP, which is a source I use more often now (worldbank and EIU are better source, but they do not have detailed demography or geography data).update: great insight from Strategic Unit