China unswervingly pursues a path of peaceful development and a defense policy which is purely defensive in nature. China does not pose a military threat to any other country. China has insisted that defense development should be both subordinated to and in the service of the country's overall economic development, and that the former should be coordinated with the latter. As a result, defense expenditure has always been kept at a reasonable and appropriate level.

In the past two years, the increased part of China's defense expenditure has primarily been used for the following purposes: (1) Increasing the salaries and benefits of servicemen. Along with the rise of the income of civil servants and the living standards of both urban and rural residents, China has increased the relevant allowances and subsidies of servicemen to ensure the parallel improvement of their living standards. (2) Compensating for price rises. With the rise of the prices of food, building materials, fuel, etc., China has accordingly increased the boarding subsidies and other funds closely related to servicemen's life as well as the expenses on education, training, petroleum, oils and lubricants for the armed forces, and improved the working and living conditions of border and coastal defense forces, units in remote and tough areas, and grass-roots units. (3) Pushing forward the revolution in military affairs. China has augmented the input into military informationization and moderately increased the funds for equipment and supporting facilities, so as to raise the defense capabilities in conditions of informationization.

The proportion of China's defense expenditure in GDP remains lower than those of some major countries. In 2008, the share of defense expenditure in GDP of China was 1.39 percent, while that of the United States was 3.38 percent, that of the United Kingdom 2.48 percent, that of France 1.57 percent, and that of India 2.38 percent.

China's defense expenditure is transparent. China's annual defense expenditure budget is incorporated into national financial budget draft, which is submitted to the National People's Congress for examination and approval. This procedure is completely open and transparent.

According to relevant UN General Assembly resolutions, the Chinese Government decided, from 2007, to report annually to the Secretary-General of the UN basic data of its military expenditures for the latest fiscal year. In 2008, China explained the main uses of its military expenditures in its report for the first time, which demonstrates once again that China is committed to further enhancing its military transparency and improving mutual trust with other countries in the military field. In 2009, China submitted annual report on its military expenditures to the UN once again.