The Dynamic Economic Analysis On Defense Spending And Economic Growth Nonlinear System In China

Defense is an important supporting force for defending state sovereignty and opposing the interference. What are the factors that affect the defense expenditure? What is the structural hierarchy between them? What is the relation between defense expenditure and economic growth? Firstly, based on literature review and expert consultation, we analyzed in the view of the demand and supply of defense expenditure to find the influencing factors of defense expenditure scale and their relation. Then, we used the ISM model method to analysis the hierarchical structure among these factors and draw the conclusion that the development strategy of national economy, international security environment, peripheral security environment, inflation, population scale, population structure and arms race are the most basic factors which affect the defense expenditure. Meanwhile, according to the complex relationship between DE and GDP, this paper establishes a Differential dynamic model and draw the conclusion that DE / GDP = 0.02070922 was taken as critical value. When the rate is over the critical vale, DE will hinder economic development. On the contrary, DE will promote economic development. DE = 823.937994 was taken as critical value. When the rate is over the critical vale, GDP will promote the increase of DE. On the contrary, DE will hinder the increase of DE. The point E1(2324.61, 198535.84) can keep a long-term equilibrium. Meanwhile, the proportion of defense expenditure to GDP is 1.17%. This conclusion matches many scholars’ research results that the value should be in the range of 1%-3%. And refuting the “China threat” that western countries preach. Finally, According to harmonious development of defense expenditure and economic growth, this paper puts forward some suggestions. Firstly, the government should ensure the rapid and stable economic development; keep rational growth of defense expenditure. Secondly, the government should establish mechanism to settle dispute and deal with crisis, and creating good external environment. Thirdly, the government should optimize structure of defense expenditure. Fourthly the government should develop dual-use technology to realize leaping development of Army-civilian integration.