Asia Defense | Security | East Asia

Despite a Supposedly Defensive Policy, China’s Military Budget Rises Fast

China’s sustained higher defense spending has altered the military balance in the region.

China’s military budget increases keep painting a picture that’s inconsistent with the country’s claims to a defensive policy.

The rise for 2026 would be 7.0 percent, Chinese Premier Li Qiang told the annual meeting of the parliament, the National People’s Congress, earlier this month. The country would spend 1.9 trillion yuan (roughly $275 billion) on defense, he said.

This is only marginally lower than the 7.2 percent for each of the past three years and consistent with a slowing in annual GDP growth to between 4.5 and 5.0 percent. (The GDP and budget growth rates aren’t directly comparable, because fiscal numbers aren’t adjusted for inflation.)

It should be noted that the official level of defense spending is generally not accepted as accurate. External analysts give considerably higher figures that include, for example, research and development that the armed forces don’t pay for. Many analysts don’t believe, despite Beijing’s claims, that only 1.5 percent of GDP goes to the armed forces.

China has often had double-digit increases in its defense spending: 10.7 percent in 2013, 12.2 percent in 2014, 10.1 percent in 2015. Declines in the rate of growth since then have coincided with slower GDP expansion.

This still leaves China’s neighbors facing enormous military power on their doorsteps. China’s sustained higher defense spending has altered the military balance in the region and pushed many countries in the region to respond. They will not stop. Chinese defense spending is promoting an arms race.

Another issue is lack of transparency, particularly the purpose of such consistently large defense budgets.

This adds to existing concerns. China has used grey-zone tactics, some with its maritime militia and coast guard, to intimidate neighbors in the South China Sea. As ASPI’s Pressure Points project details, China has systematically used a variety of non-kinetic, close-proximity, and unsafe encounters in an effort to coerce neighboring states without using force directly.

Further, China’s militarization of the South China Sea – especially in the Paracel and Spratly islands, including setting up of military bases and intelligence and surveillance posts – shows the gap between China’s rhetoric and reality.

The Chinese government’s Xinhua News Agency maintains that “adjusting defense budgets to meet national security demands is a sovereign right” and that the country’s military spending is merely to “safeguard its sovereignty, security, and development interests.” But China also claims “it is the only major country in the world to enshrine ‘peaceful development’ explicitly in the Constitution and the charter of the governing party” – a statement that China’s actions render meaningless.

Japan has been a consistent critic of China’s military opacity. Defense Minister Koizumi Shinjiro in December last year faulted China for just this. In particular, China’s unexpected and rapid nuclear expansion is a problem, with Yoshida Yoshihide, former chief of staff of the joint staff of the Japan Self-Defense Forces, indicating a “very strong sense of crisis when China is expected to reach nuclear parity with the U.S. by the mid-2030s.”

Australia, too, remains concerned about China’s lack of transparency around its military build-up and defense spending, with Defense Minister Richard Marles demanding “strategic transparency and strategic reassurance from China.” Lack of transparency is made worse by reports about China preparing for a military invasion of Taiwan in 2027. Moreover, China’s redefinition of national security in a May 2025 white paper on national security also encourages greater concern about China’s behavior. Because China now defines national security in more global terms, we can expect a bigger role for the armed forces in meeting China’s national-security objectives worldwide.

Finally, China’s continued military build-up will compel other countries in the region to respond with their own capability development. For instance, Japan will spend more than 9 trillion yen (around $56.5 billion) on defense in 2026, in part for counter-strike capabilities and coastal defense. The budget includes 970 billion yen (about $608 million) for stand-off missiles and 177 billion yen (about $1.1 billion) for indigenously developed and upgraded Type-12 surface-to-ship missiles with a range of 1,000 km. Japan is also reported to have earmarked 100 billion yen (about $627 million) for a variety of uncrewed vehicles for surveillance and defense.

Smaller countries in the Indo-Pacific may not be in a position to engage in an arms build-up of such a scale, despite recognizing their security vulnerabilities. Their anxiety will rise and may prompt them to search for new security partnerships, as Vietnam is doing already. Such new partnerships, in turn, will further create insecurities in China. This cycle will continue as long as China refuses to address regional concerns about both its defense spending and, even more so, its opacity about the purpose of this growing budget.

This article was originally published in ASPI’s The Strategist.

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China’s military budget increases keep painting a picture that’s inconsistent with the country’s claims to a defensive policy.

The rise for 2026 would be 7.0 percent, Chinese Premier Li Qiang told the annual meeting of the parliament, the National People’s Congress, earlier this month. The country would spend 1.9 trillion yuan (roughly $275 billion) on defense, he said.

This is only marginally lower than the 7.2 percent for each of the past three years and consistent with a slowing in annual GDP growth to between 4.5 and 5.0 percent. (The GDP and budget growth rates aren’t directly comparable, because fiscal numbers aren’t adjusted for inflation.)

It should be noted that the official level of defense spending is generally not accepted as accurate. External analysts give considerably higher figures that include, for example, research and development that the armed forces don’t pay for. Many analysts don’t believe, despite Beijing’s claims, that only 1.5 percent of GDP goes to the armed forces.

China has often had double-digit increases in its defense spending: 10.7 percent in 2013, 12.2 percent in 2014, 10.1 percent in 2015. Declines in the rate of growth since then have coincided with slower GDP expansion.

This still leaves China’s neighbors facing enormous military power on their doorsteps. China’s sustained higher defense spending has altered the military balance in the region and pushed many countries in the region to respond. They will not stop. Chinese defense spending is promoting an arms race.

Another issue is lack of transparency, particularly the purpose of such consistently large defense budgets.

This adds to existing concerns. China has used grey-zone tactics, some with its maritime militia and coast guard, to intimidate neighbors in the South China Sea. As ASPI’s Pressure Points project details, China has systematically used a variety of non-kinetic, close-proximity, and unsafe encounters in an effort to coerce neighboring states without using force directly.

Further, China’s militarization of the South China Sea – especially in the Paracel and Spratly islands, including setting up of military bases and intelligence and surveillance posts – shows the gap between China’s rhetoric and reality.

The Chinese government’s Xinhua News Agency maintains that “adjusting defense budgets to meet national security demands is a sovereign right” and that the country’s military spending is merely to “safeguard its sovereignty, security, and development interests.” But China also claims “it is the only major country in the world to enshrine ‘peaceful development’ explicitly in the Constitution and the charter of the governing party” – a statement that China’s actions render meaningless.

Japan has been a consistent critic of China’s military opacity. Defense Minister Koizumi Shinjiro in December last year faulted China for just this. In particular, China’s unexpected and rapid nuclear expansion is a problem, with Yoshida Yoshihide, former chief of staff of the joint staff of the Japan Self-Defense Forces, indicating a “very strong sense of crisis when China is expected to reach nuclear parity with the U.S. by the mid-2030s.”

Australia, too, remains concerned about China’s lack of transparency around its military build-up and defense spending, with Defense Minister Richard Marles demanding “strategic transparency and strategic reassurance from China.” Lack of transparency is made worse by reports about China preparing for a military invasion of Taiwan in 2027. Moreover, China’s redefinition of national security in a May 2025 white paper on national security also encourages greater concern about China’s behavior. Because China now defines national security in more global terms, we can expect a bigger role for the armed forces in meeting China’s national-security objectives worldwide.

Finally, China’s continued military build-up will compel other countries in the region to respond with their own capability development. For instance, Japan will spend more than 9 trillion yen (around $56.5 billion) on defense in 2026, in part for counter-strike capabilities and coastal defense. The budget includes 970 billion yen (about $608 million) for stand-off missiles and 177 billion yen (about $1.1 billion) for indigenously developed and upgraded Type-12 surface-to-ship missiles with a range of 1,000 km. Japan is also reported to have earmarked 100 billion yen (about $627 million) for a variety of uncrewed vehicles for surveillance and defense.

Smaller countries in the Indo-Pacific may not be in a position to engage in an arms build-up of such a scale, despite recognizing their security vulnerabilities. Their anxiety will rise and may prompt them to search for new security partnerships, as Vietnam is doing already. Such new partnerships, in turn, will further create insecurities in China. This cycle will continue as long as China refuses to address regional concerns about both its defense spending and, even more so, its opacity about the purpose of this growing budget.

This article was originally published in ASPI’s The Strategist.

Rajeswari Pillai Rajagopalan

Dr. Rajeswari (Raji) Pillai Rajagopalan is the Resident Senior Fellow at the Australian Strategic Policy Institute (ASPI) in Canberra, Australia.

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