CNN, 21 November 2011
By CNN National Security Producer Jennifer Rizzo

China’s ruling Communist Party is looking within for threats to its control over the country, spending more money on securing its population of over one billion than it did on its military last year, according to a new report to the U.S. Congress.

Conflicts in the Middle East with the popular Arab Spring movement have done nothing to assuage the government’s fears, according to the report from a Congressional advisory panel.

“The party has created an extensive police and surveillance network to monitor its citizens and react to any potential threat to stability,” the U.S.-China Economic and Security Review Commission stated in the report.

The 12-person expert panel, which was created in 2000 to advise Congress on the U.S. policy toward China, said when you add up spending on police, state security, armed militias, as well as courts and jails, China invested $83.5 billion in domestic security in 2010, surpassing their reported military budget of $81.2 billion. According to the report China’s domestic security budget is going up, scheduled to grow faster than military spending in the years to come.

“China doesn’t really perceive any external threat. It does recognize the possibility, but it’s not imminent,” said James Dobbins an analyst with the Rand Corporation.

Dobbins said China is more concerned about threats from within to its communist system, which has collapsed pretty much everywhere in the world but China.

“It has a huge population, a somewhat ethnically diverse population and a population with rising expectations that may not be entirely possible to meet in a difficult economic climate. They are rather worried about what will happen as their growth slows as most economists think it will,” he said.

Protests have been on the rise in China, driven by socioeconomic issues like income inequality, corruption, pollution and inflation, according to the commission. Food prices for example are up 10 percent over the past year.

Fear that the turmoil in the Middle East would incite further unrest in its own population, the Chinese government has “expanded restrictions on online information and access to communication services, reported government propaganda in domestic news outlets, restricted the freedom of foreign journalists, and arrested dissidents with little or no cause,” according to the report.

When protests began in Egypt in the beginning of the year Chinese searching the web could not complete keyword searches for terms like ‘Egypt’ or ‘Cairo,’ the commission said. The government also reported on the protests in a negative way. A front page editorial in the Beijing Daily cited the protests in the Middle East as bringing “nothing but chaos and misery to their countries”.

But Internet restrictions and media propaganda aren’t China’s only means of exerting control. China is currently working to create the largest police surveillance system in the world in Chongqing, a major city in southwest China, the commission report noted. The over 500,000 cameras would be keeping a watchful eye over the cities half million intersections, neighborhoods, and parks – that’s 400 square miles of surveillance, more than 25 percent larger than New York City.

More than 12 million cameras were installed in China this year and over 10 million cameras were put in place in 2010, according to IMS Research, a global electronics consulting firm. In comparison around 3.5 million security cameras were installed in the United States this year including the government and commercial sectors.

“We estimate that the Chinese market for video surveillance equipment (cameras and associated equipment such as lenses, monitors and video recorders) was worth around $2 billion in 2010. This estimate is only for equipment sales and does not include the cost of installing the equipment. If the installation cost is also included, the market is worth more than $3 billion,” said IMS’ Simon Harris.

“We estimate that the market has increased by more than 20% in 2011”.

The company said that by the end of last year there were 800,000 security cameras in Liaoning Province in the northeast of China, over 400,000 in Beijing, 30,000 in Tianjin, and more than 200,000 in Shanghai.

Fear of a government overthrow isn’t the only explanation for increased security spending in a growing population, said one China analyst.

“There are perfectly understandable reasons including unrest as to why spending for law enforcement would be going up in China,” said Chinese security affairs analyst Scot Tanner. “Crime has been going up in China. It’s not that surprising to me that money spent on local law enforcement and all of its aspects has been going up.”

China however claims the numbers are misleading, stating the domestic security budget includes programs not commonly thought of as security.

“In government categories, China only has budgetary funds for necessary public security, which covers, for example, public health, public transportation and construction safety,” an official of China’s Ministry of Finance told Xinhua, the official Chinese news agency. The official was not identified in the story.

China aggregates the majority of its budget and does not provide a detailed breakdown of which programs get what. And it’s not uncommon for China’s budget documents to be only a little more than 20 lines in length, according to Chinese economy expert Nicholas Lardy with the Peterson Institute for International Economics.

“There is a whole cottage industry over the years that have tried to figure out what real Chinese defense expenditures are,” he said

Those that have gone through the task he claims have found that real military expenditures are probably in the neighborhood of two to three times the amount of the disclosed expenditures.

Experts agree that its hard to do a sophisticated analysis on the opaque system because the published data is so highly aggregated.

“We don’t know what the true number is,” said China expert Jonathan Pollack. “It’s the question of what are the budgetary categories that are covered under this catchall label of stability management.”

But Pollack thinks it’s implausible to think domestic security spending surpasses China’s military budget.

“I am sure that they spend a lot on whatever this internal stability account is, but I have a hard time believing that it outstrips expenditures on national defense,” he said. “If anybody told me that they knew how much it was, I would be skeptical.”