China, like many nations with super-power aspirations, feels the need for regional domination. As the Malaysian Airplane incident has exposed, China has less control over the Far East would like. The way China has attempted to control the often chaotic region is through over-whelming military dominance. However, China is quickly learning that they might not be able to sustain the enormous military needed for regional supremacy.
The problem facing China is combination of an overestimate coupled with irresponsible spending. First, we will examine the overestimate. China expected to experience GDP growth of 7.5% for the fiscal year of 2014. This 7.5% growth rate was extended into government calculations and China’s military was given permission to increase spending at that rate. This alone would cause significant finical issues for the government as already experts doubt China will achieve the 7.5% rate they predict. So, even if the military had spent within their constraints the government would not have likely been able to cover the cost. In reality, the problem facing China is much more serious as military spending has increased to $131.6 billion dollars, a 12.2% bump from 2013. The military rationalized overspending by saying inflation is responsible for 5.8% spending over budget. The experts dispel this claim as China is likely to experience little to now inflation of the yuan this year. The combination of overly optimistic economic forecasting and overspending in the military have put China in a delicate situation and sound fiscal policy will be needed to right the ship.