BEIJING - It was more than many in Asia and the Pacific were hoping to see, but was also less than in the past - and it possibly shows a trend for the future. China on March 4 announced it would boost military spending by 11.2% in 2012, describing its first defense budget since United States President Barack Obama promoted a policy of bolstering the American presence in the region, in non-hostile terms.

The new official budget for the People's Liberation Army (PLA) will be 670.3 billion yuan (US$110 billion), after a 12.7% increase last year and a near-unbroken string of double-digit rises reaching back two decades. In 2010, the PLA announced an increase of only 7.5%. Unofficial estimates reckon the increases to be much higher. But the official newspaper for the foreign audience, China Daily, took the pains to show an overall decrease of the Chinese military spending.

The latest official budget shrinks the increase by 1.5% compared to last year, while the complex calculations of the China Daily show a decrease, and in so doing aim at achieving two goals: to signal to Asia-Pacific countries, which are growing concerned about China's military might, that PLA expenditures could be drastically reduced in the future; and at the same time, since the increase is still quite significant, to pays political dues to the military establishment during the year of leadership succession from Hu Jintao to Xi Jinping.

The PLA represents the single largest political asset in the party. Deng Xiaoping for years had no major role in the government or the Chinese Communist Party, but was chairman of the military commission. After him, both Jiang Zemin and Hu Jintao wore three major hats together; head of state, general secretary of the party, and chairman of the military commission.

In 2002, Jiang gave up the first two posts, but retained for two more years the military commission leadership, proof that he was still the paramount leader in China. In October, at the 18th Party Congress, China should have its second peaceful transition of power with the one from Hu to Xi, which follows that of Jiang to Hu. In this transition, when many things have yet to be decided, nobody can afford to antagonize the PLA. And the PLA wants money for its weapons and its people, as money, besides being money, is power in the party and in China.

This, in a way, goes beyond the normal military logic of many countries, where militaries seek more money for their aggrandizement. It is part of the current logic of power in China. Jiang in the 1990s was the first party chief who had no combat experience and no great familiarity with the military. Before him, Deng drastically reduced the military budget to open up resources to grow the civilian economy, and in the early 1980s, he cut down PLA forces by one third.

In return for this, Deng allowed the military to seek business on its own, start companies, make money, be capitalist, and de facto not be interested in military affairs.

However, with the crackdown on the Tiananmen movement, the military were brought back to the political frontline. They were asked to move against the students and take sides in the power struggle at the top, which brought about the political demise of former party chief Zhao Ziyang. At the 14th Party Congress in 1992, the powerful military faction headed by Yang Shangkun was toppled, and Deng conferred all the power on Jiang, while putting general Liu Huaqing, then formerly retired, in the Standing Committee of the Politburo. Liu was to back Jiang in his hold of power, which at the beginning was not too firm.

Around the 15th Party Congress, in 1997, another major break took place between the army and the party. Two elements brought this split about. The first was the PLA involvement in a major smuggling scandal in Xiamen, and the other was the reform of the state-owned enterprises (SOE). The Xiamen scandal occurred when China was negotiating its entry into the World Trade Organization (WTO).

The official line was of resistance, but then a group of Chinese scholars produced a study proving that if China were to cut back on smuggling, it could achieve the tariff targets to get into the WTO, and it would actually increase its total income from customs. In other words, smuggling in China, conducted mainly with the support of the army, was costing the government more than the tariff cuts requested by the United States.

Moreover, for China's economy to become more efficient, China needed to reform its SOEs, making them fully commercial and separate from their old ministries. In this way, in a few years, the military had to shed all its companies and drastically reform its internal procurement system.

It meant that the military stopped making money for itself, had to officially cease being a capitalist enterprise, and thus had to get money from the state. As a further sign of the demilitarization of politics, there has been no soldier on the Standing Committee of the Politburo since the 15th Party Congress. In return, the military got the green light to increase its budget and proceed with a long-delayed program of modernization.

Over a decade later, the PLA has become the second-largest military in the world, in line with its economic power. But this stronger military is not increasing China鈥檚 international standing; it is conversely undermining China's position in the region and the world as it multiplies fears of a "yellow peril" invading the world with its products and soldiers.

Not only does China not affirm its power through the military (for a wide number of reasons), but China may also find it more difficult to conduct simple business, such as mergers and acquisitions, because of the military shadow. Every M&A conducted because of a normal interest becomes suspicious: is it an act of military invasion? Is it part of a convoluted Chinese plot to conquer the world?

If this were so, now would be the time for the asymmetric strategy expounded by Qiao Liang and Wang Xiangsui in their 1999 book War Beyond Limits (Chao Xian Zhan). That is, to acquire a greater military voice and greater political credibility in the world, China should conceive a complex strategy - a simple vertical military increase is just counterproductive. It only multiplies fears and reactions that start with the military but cover all kinds of Chinese activities at home and abroad: any purchase of a mine or factory abroad and any crackdown on turmoil could become evidence of China's conquering spirit.

Moreover, competition with the United States in space [1] and on Internet security is heating up. In these two fields, crucial for future security (through the ''conquest'' of the Internet or space I can make your weapons follow my commands, or I can block all your weapons' systems), China is not lagging far behind the US, so Beijing should have no real fear of being attacked and easily beaten by America.

This logic is simple enough to be grasped by all generals, and this should be reason enough to decrease military spending and seek a major dialogue with the US on transparency and military collaborations. But, as we saw, the purely military-strategic element is only part of the story. There is also the part about domestic politics. Money is power everywhere - and in the PLA, as well - and what does the PLA want in China in return for giving up part of its money and present power?

This is a general question, which then goes down to the various factions of the PLA, as the army is not totally united. The recent alleged offensive of general Liu Yuan against his colleague Gu Junshan, who fell accused of corruption, proves that in-fighting in the military is no less cruel than among civilians. But unless the PLA fails to find a new model to balance its power within the party, its internal logic (more power - more money) will prevail over the external logic (more money for the PLA - more trouble for China).

The answer will not be found in the coming days but over the next few months, when the political balance leading to the party congress this autumn will require different factions to take into consideration the military vote. We shall see who in the military will win: those who are after the money or the ones more broadly in favor of a new, more sophisticated strategy for China.

Note:
1. See, for instance, Moore, Gregory (2011). An International Relations Perspective on the Science, Politics, and Potential of an Extraterrestrial Sino-US Arms Race. Asian Perspective, 35, 643-658.  (2012-03-07 Asia Times)