By AFP and Focus | 2026-03-06

BEIJING -- China has announced a 7% increase in its defense budget for 2026, pressing ahead with military modernization despite a slowing economy and rising concern among neighbors over Beijing's actions around Taiwan and in the South China Sea.

Beijing plans to spend 1.9096 trillion CNY ($276.8 billion) on defense, according to a report published at the opening of the annual "Two Sessions" parliamentary meeting on March 5. Premier Li Qiang told delegates China would strengthen the military and "carry out major defense-related projects" over the next five years.

The latest increase keeps China's official military spending at about one-third of that of the United States, but analysts said the budget points to continued investment in salaries, training, maneuvers around Taiwan, cyberwarfare capabilities and advanced weapon purchases.

Military modernization

Jack Burnham, writing for the Foundation for Defense of Democracies, said the budget announcement "highlights Beijing's efforts to accelerate its initiatives to modernize the People's Liberation Army (PLA) despite growing official recognition of the country's economic headwinds." The increase outpaced China's newly announced economic growth target for the coming fiscal year, he said.

The spending plan comes as the PLA seeks to complete its initial modernization phase by the end of this year, marking the force's centenary, said Burnham. This effort focuses on upgrading equipment, enhancing joint operations and training personnel for increasingly complex combat missions.

The same budget document, he noted, pledged greater state investment in quantum computing, brain-computer interfaces and artificial intelligence (AI), which remain key to the PLA's modernization drive. Those efforts are aimed at pairing "mechanization" with "intelligentization," or the integration of AI into new equipment and command systems, he said.

The increase marks a degree of continuity as Beijing pursues a sweeping anti-graft purge of the PLA, which included the ousting of top general Zhang Youxia in January. The PLA must strengthen its capabilities, military commentator Song Zhongping, a former Chinese army instructor, said, to "fully restore" Chinese jurisdiction over the disputed Spratly Islands, a chain of reefs and atolls in the South China Sea that might contain vast natural resources and is also claimed by the Philippines.

The United States remains the world's biggest military spender, shelling out $997 billion in 2024, according to the Stockholm International Peace Research Institute (SIPRI)

China has maintained annual defense spending growth of about 7% to 8% since 2016. But its military budget as a share of GDP remains relatively modest, standing at 1.7% in 2024, compared with 3.4% for the United States and 7.1% for Russia, according to SIPRI.

"That is proportional to its economy and legitimate defense needs," said Niklas Swanstrom, director of the Stockholm-based Institute for Security and Development Policy.

China says its defense policy is solely aimed at protecting its territory, which it says includes self-ruled Taiwan. It has one military base abroad, in Djibouti, compared with the several hundred operated by the United States.

Regional impact

"However, the absolute spending level (second globally) and rapid capability development concern neighbors," Swanstrom told AFP.

China's military buildup has fueled an arms race in Asia and pushed some countries, especially those with territorial disputes with Beijing, closer to Washington.

In Taiwan, President Lai Ching-te pledges to raise military spending in response to Beijing, which has not ruled out using force to take control of the island.

China now has 11 times Taiwan's defense budget, said Liang Wen-chieh, deputy minister of Taiwan's Mainland Affairs Council.

"That is precisely why Taiwan must accelerate its efforts. Even if we cannot advance at the same pace, we still need to work hard to catch up," Liang said.

The Philippines has granted the United States access to more military bases, while Japan approved a record $58 billion defense budget in December for the coming fiscal year.

The United States still holds major military advantages over China, James Char, a Chinese military specialist at Nanyang Technological University in Singapore, said.

"The US remains the world's first-class armed forces both in terms of its military hardware and the hard operational experience of its personnel," he added.

But analysts said the balance would look very different in a conflict closer to China's shores, including in the Taiwan Strait. In such a war, "Most critically, neither side could 'win' meaningfully," said Swanstrom.

"Economic devastation, casualties and nuclear escalation risks would be catastrophic for all parties."