Chinese leaders also have undermined some market-oriented reforms by reaffirming the "dominant" role of the state in the economy, a stance that threatens to discourage private initiative and make the economy less efficient over time.
– China will up its defense spending by 11.2% in 2012 to $106.4 billion, citing its unhappiness with the US military presence in the Asia-Pacific region, reports the AP. China has made double-digit increases to its military spending in all but two of the years since the early 1990s, although this year's increase is down slightly from the 12.7% rise in 2011. Despite the seemingly dramatic rise, China's economy has also grown quickly over the past two decades, and military spending as a percentage of GDP has stayed relatively low, officially 1.3% last year. “Our defense spending is relatively low compared with other major countries,” says one Chinese official. However, security experts think China's true spending is likely much higher (the CIA estimated 4.3% of its GDP in 2006). With maritime disputes with Vietnam, Japan, and the Philippines and rough relations with India, China faces an array of security threats. “China lives in a neighborhood where it doesn’t have any natural allies or friends," a former Australian ambassador to China tells Bloomberg. “China’s got a lot of things that require a state to have military hardware for."