China unswervingly pursues a path of peaceful development and a defense policy which is purely defensive in nature. China adheres to the principle of coordinated development of national defense and economy. In line with the demands of national defense and economic development, China decides on the size of defense expenditure in an appropriate way, and manages and uses its defense funds in accordance with the law.

With the development of national economy and society, the increase of China's defense expenditure has been kept at a reasonable and appropriate level. In recent years, the share of China's annual defense expenditure in its GDP has remained relatively steady, while that in overall state financial expenditure has been moderately decreased. In the past two years, the increase in China's defense expenditure has primarily been used for the following purposes: (1) Improving support conditions for the troops: Along with the economic and social development and the improvement of people's living standards, the PLA has adjusted servicemen's salaries and allowances, increased funding for education and training, water and electricity supplies and heating, upgraded logistics support for grass-roots units in a comprehensive and coordinated way, and improved the on-duty, training and living conditions of border and coastal defense forces and units in remote areas and harsh environments. (2) Accomplishing diversified military tasks: China has increased investment in improving MOOTW capabilities, in supporting earthquake rescue and disaster relief operations, in escort operations in the Gulf of Aden and waters off Somalia, in flood control and emergency rescue operations, and in international rescue operations. (3) Pushing forward the Revolution in Military Affairs (RMA) with Chinese characteristics. In view of the upward trend in purchasing prices and maintenance costs, China has moderately increased the funds for high-tech weaponry and equipment and their supporting facilities.

China continuously increases the transparency of its defense expenditure. China has been reporting on its national defense in a white paper several times since 1998, introducing in detail the budgets and uses of its defense expenditure. On 31 March 2011, China issued the seventh white paper on national defense. China's annual defense expenditure budget, which is part of national financial budget draft, is submitted to the National People's Congress for examination and approval. This procedure is completely open and transparent.

Chinese Government reports to the United Nations Standardized Instrument for Reporting Military Expenditures and the UN Register of Conventional Arms, constructively participates in the Group of Government Experts meeting to review the operational and further development of the United Nations Standardized Instrument for Reporting Military Expenditures, which demonstrates that China is committed to further enhancing its military transparency and improving mutual trust with other countries in the military field.