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China's Xi Announces Military Cuts

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China's Xi Announces Military Cuts

China is celebrating the 70th anniversary of its "triumph" in World War II with an ostentatious show of military power and, naturally, a loud rhetorical signal about how the state is cutting its army in the name of world peace.

Wait, what?


The irony of the announcement by China's President Xi Jinping that the military would be culling its standing army down to 2 million soldiers (with half of them serving as the nascent National Guard) is that it came amid a backdrop of marching soldiers with assault rifles complete with bayonets, scores of fighter jets flying overhead, and enormous ballistic missiles being glorified through the streets of Tiananmen Square. The reduction in the standing army means China will cut some 300,000 positions from the People's Liberation Army (PLA).

Although this marks the 4th instance since 1980 that the Chinese Ministry of National Defense has decided to cut the size of its military, Thursday's announcement by President Xi is more than a year in the making. The move comes as part of a larger program of modernizing the Chinese military, which is still largely based on the Soviet models adopted in the 1950s.

Cleared for release by Joint Staff Public AffairsWhile China has progressively been reducing the size of the PLA since it reached its peak size in 1951 (over 6 million), the current plan represents the most extensive set of military reforms in the People’s Republic in many years. The cuts in the number of infantry soldiers will not, however, translate into a reduction in the country’s overall military spending: there is still the matter of updating the equipment, training, and organization structure of the defense ministry. China is moving toward a more Western-style hierarchy, with separate divisions for the army, navy, air force, and incipient National Guard. (Up to now, their military has been broken into a more confusing set of 7 separate departments.) The cuts also won’t bump the PLA from the top spot as the world’s largest army.

Strategy Overhaul

In addition to updating and modernizing its military operations, China seems to be pivoting from a land-based, defensive strategy for its military to one more focused on naval supremacy. From the birth of the Communist regime in China through the 1970s, domestic defense from outside forces was of greater concern; today, the optimal strategy seems to center around securing a dominant position in all of China’s surrounding waters.


While China is intermittently in disputes with its nationalist cousins in Taiwan (or, as they are often known, Chinese Taipei) in the South China Sea, there is also a long-standing conflict between the People’s Republic and their rivals in Japan. Both countries have yet to resolve overlapping claims in the East China Sea. The Chinese have also been aggressive in building landing strips and naval outposts on uninhabited atolls (really, glorified hunks of rock that jut from beneath the water) off of its coastal areas. Beyond these tiny islands not necessarily belonging to China, other powers in the region are wary of the build-up of Chinese naval presence, taken as an act intended to stoke tensions with China’s neighbors.

Although President Xi reiterated that China has no interest in expansion or regional hegemony, its rivals in the Asian sphere are not so easily convinced. Officials have agreed to a summit with leaders from Japan and South Korea, who both have seen their stock markets fall in tandem with the beleaguered Shanghai Composite index; investors have fled Japan’s equities market, leaving the benchmark Nikkei 225 index 12% lower in a matter of just 2 weeks.

Another component of the military shake-up has been the dismissal of senior generals and military officials who do not fall in line with President Xi’s platform. This fits snugly into the broader “anti-corruption” campaign that has allowed Xi to truly consolidate his power as the undisputed leader of the world’s most populous nation.

About the Author

Everett Millman

Everett Millman

Analyst, Commodities and Finance
Managing Editor

Everett has been the head content writer and market analyst at Gainesville Coins since 2013. He has a background in History and is deeply interested in how gold and silver have historically fit into the financial system.

In addition to blogging, Everett's work has been featured in CoinWeek, Advisor Perspectives, Wealth Management, Activist Post, and has been referenced by the Washington Post.

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