The Study On The Economic Effect Of China’s Defence Spending And Its Influence Factors

As the world’s second largest defence spender and economy, the economic effect and influence factors of China’s defence spending has become an important topic of academic research at home and abroad. In the current social and economic conditions, the relationship between defence spending and economic growth is not a simple one just like the economic base and superstructure, but has all kinds of connections, so the research on the economic effect of China’s defence spending is particularly necessary. In addition, the influence factors of China’s defence spending is also an important research field of the development of China’s national defence and the allocation of national finacial resources.The main contents of this dissertation include: applying the augmented Solow model and econometric model to investigate whether there is an interaction between defence spending and economic growth in China and its direction, size and channels; whether there is the crowding-out effect between defence spending and the expenditures on culture, education, science and public service, and the administrative expenditure; whether the defence spendings of the ones which have the territory disputes with China and the international military powers will influence China’s defence spending.The possible innovations of this dissertation are mainly reflected in the following aspects: firstly, the defence strategy factors are introduced into the study of the economic effect of defence spending, and we analysis the relationship between defence strategy and economic growth in different periods and the results show that the defence strategy has a significant effect on economic growth. This dissertation introduces the administrative expenditure into the quantitative research and confirms the conclusions of qualitative analysis about the relationship between the defence spending and administrative expenditure and the crowding-out effect between defence spending and public expenditures; secondly, given the great change of the China’s economic system before and after the reform and opening-up, this dissertation introduces the unit root and cointegration tests with structure breaks to test the robustness of the variables and the long-run equilibrium relationship between China’s defence spending and economic growth and the study shows that there are structural breaks in the time series of variables. In the process of the variable causal test, the Granger causality test and impulse response function are functionally combined together; thirdly, this dissertation discusses the determining factors of China’s defence spending in the regional and international aspects. Based on the current hot issue of the South China Sea, this dissertation, for the first time, conducts the emprical study on the countries’ defence spending which have territorial sovereignty disputes over the South China Sea and the results show that the defence spending of the countries around the South China Sea which have territorial sovereignty disputes with China has no effect on China’s defence spending, and simultaneously, in the context of a powerful country, disscusses the possible interaction and effect between the defence spending of military powers and the study finds that the defence spending between major powers, especially the U.S., has a significant positive impact on China’s defence spending and there is a possibility of an arms race between the major powers.Hoping that through the study of this dissertation, the readers can make more in-depth analysis on the relationship between China’s defence spending and economic growth, make a deeper level of comprehendding on the substitution and selection nexus between ‘the butter and guns’, make a comprehensive consideration on the determinants of China’s defence spending, and this study could provide theoretical and empirical significance for the constitution of our economic development plan and the defence spending budget plan.