China's defense expenditure mainly comprises expenses for personnel, training and maintenance, and equipment. Expenses for personnel and training and maintenance account for two thirds of the defense expenditure.

In 2007, the defense expenditure was used to cover the expenses of the active force (343.439 billion yuan), the reserve force (3.693 billion yuan) and the militia (8.359 billion yuan). China's defense budget for 2008 was 417.769 billion yuan.

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 RMA. 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 Chinese government has established defense expenditure reporting and publishing mechanisms. Since 1978 the Chinese government has submitted a financial budget report to the NPC and published the total amount of the defense budget each year. The relevant data of China's defense expenditure has been made public in the China Economy Yearbook since 1981, and in the China Finance Yearbook since 1992. And since 1995 the composition and main purposes of China's defense expenditure have been published in the form of government white papers.

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