BMI View: China's defence industry and military are currently undergoing substantial changes on the back of President Xi Jingping's sweeping reform and modernisation agenda. The promotion of greater civil-military integration will spur military industrial innovation and expand the technological capabilities of the domestic defence sector; however, we note that this process will be slow, and that the country will continue to look to import more technologically advanced equipment throughout our forecast period. Owing to rising regional tensions emanating from the South and East China seas disputes, we expect defence expenditure levels to remain high on a global comparison in 2016 and beyond - with spending being directed mainly towards the country's cyberwarfare, naval and air forces - despite an overall slowdown in the country's economic growth. In 2016, we expect defence spending to stand at 1.9% of GDP, reaching USD216.4bn (CNY1.44trn).
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