Our forecasts of defence spending are driven by two variables. One is overall GDP. The other is the percentage of GDP devoted to defence. In forecasting the latter, we give consideration to the size of defence spending as a percentage of GDP in recent years and the likely trends given, what we know about the budgetary priorities of the government of the country in question. We have assumed that there is no change to the defence spending ratio over the forecast period. At around 2％ of GDP, it is lower than it was in the early 1990s (if a little higher than it was in the late 1990s). The absolute size of China's economy, and its absolute growth, mean that defence spending is likely to be large and growing even without an increase in the ratio.
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