China's 2026 Defense Budget Increases by 7%: Accelerated Intelligent Transformation and Deepening of the "Three Integration" Strategy

In March 2026, during the fourth session of the 14th National People's Congress, the Chinese government proposed a defense budget draft of 1.91 trillion yuan (approximately 276.9 billion USD), representing a year-on-year increase of 7%. Although this growth continues the trend of stable increases in China's defense spending in recent years, the strategic transformation signals it reflects are worthy of high attention from the international defense community.

According to statements made by Colonel Zhang Xiaogang, spokesperson for the PLA delegation during the Two Sessions, the formulation of the 2026 defense budget comprehensively considers the national security situation, development needs, the synchronization requirements of military modernization and national overall modernization, as well as the strategic timeline to "achieve the centenary goal of building a strong military on schedule." This indicates that the Chinese military is at a critical development juncture: transitioning from mechanization and informatization to a comprehensive transformation towards intelligentization.

**"Integration of Three Transformations": Accelerating from Concept to Practice**

The path of China's military modernization can be summarized as the "integration of three transformations": the coordinated development of mechanization, informatization, and intelligentization. If the past two decades saw the Chinese military primarily complete mechanization (acquiring modern ships, tanks, and aircraft) and the initial construction of an informatization network (connecting various platforms and sensors through data links and digital communication networks), then in the current and next decade, intelligentization will become the core driving force.

Colonel Zhang Xiaogang clearly pointed out that the new budget will mainly be used to "promote the integrated development of mechanization, informatization, and intelligentization," "upgrade joint combat systems and traditional combat forces," "advance the systematic, practical, and large-scale construction of new domain and new quality combat forces," and "develop advanced combat capabilities." Behind these statements lies a clear strategic logic: the PLA is shifting from platform-centric warfare to system confrontation warfare, with artificial intelligence technology being the key to achieving this transformation.

**Artificial Intelligence: The Core Engine of PLA Modernization**

According to a recent research report released by the Center for Security and Emerging Technologies (CSET) at Georgetown University, an analysis of thousands of publicly released PLA procurement documents over the past three years clearly shows the Chinese military's ambitions and execution capabilities in the field of AI. These documents indicate that the PLA is engaged in large-scale prototype development of AI capabilities, covering various areas such as unmanned combat vehicle operation, network attack detection and response, maritime target tracking, and land, sea, air, and space target identification and strike.

More notably, the PLA is developing systems capable of ingesting, analyzing, and enhancing vast amounts of data to improve tactical and strategic decision-making capabilities, while also researching deepfake image and video generation tools for disinformation activities. This indicates that the Chinese military is not only pursuing technological applications of AI but is also building a rapid AI development ecosystem that spans from research to frontline combat.

In terms of specific applications, the PLA's AI experiments cover several key areas. Swarm technology for unmanned systems can identify, track, and coordinate attacks on enemy targets; various robotic platforms (including robotic dogs and humanoid robots) are under development; AI decision support systems aim to help commanders understand and anticipate enemy actions; AI tools in the cyber and information warfare domain are used for automated intrusion detection, enhancing communication resilience, and conducting cognitive warfare; in space and maritime domains, the PLA is developing satellite strike algorithms and anti-satellite weapons, as well as various autonomous underwater vehicles.

It is particularly noteworthy that many procurement documents indicate relatively short development cycles, making rapid and relatively low-cost experimentation possible. The Chinese government is also encouraging domestic technology companies to convert civilian products into defense applications through subsidies, tax incentives, and other means, allowing the PLA to fully leverage China's commercial technological advantages in areas such as intelligent manufacturing, robotics, and battery technology.

**US-China Military AI Competition: Similarities and Differences**

From publicly available information, some of the PLA's AI development concepts bear similarities to major projects of the US Department of Defense. For example, the US plans to procure thousands of low-cost, expendable drones through the "Replicator Initiative," while the PLA is also procuring a large number of small, inexpensive drones for future conflicts. The PLA's concept of a joint all-domain command and control system is strikingly similar to the US Department of Defense's Joint All-Domain Command and Control (JADC2) initiative, which uses AI and computer networks to connect command centers, forces, and weapon systems across different military branches.

However, there are also significant differences between the two countries in terms of military applications of AI. The US military focuses on AI-assisted decision-making primarily in operational planning and troop management, such as the Defense Innovation Unit's Thunderforge joint operational planning project and Palantir's Maven intelligence system. In addition to developing similar capabilities, the PLA is also developing AI systems for tracking international news, identifying foreign public political views, predicting social unrest, and manipulating enemy perceptions and decisions.

In terms of the balance of human-machine collaboration, the philosophies of the two countries may also differ. The US military requires AI systems to include "appropriate levels of human judgment," executed by trained and experienced personnel. In contrast, the PLA may lean towards using AI decision support systems to compensate for the relative lack of experience among its officer corps. However, this over-reliance on computer-generated analysis could lead to misinterpretations of military and diplomatic signals, resulting in inappropriate military decisions.

**"14th Five-Year Plan": Strategic Goals for 2030**

The 2026 defense budget will also promote the formulation and implementation of the military's "14th Five-Year Plan" (2026-2030) and advance major defense projects. This means that the Chinese military is preparing for 2027 (the centenary of the military's founding) and 2030 (a significant milestone for military modernization set by Xi Jinping).

According to publicly available information, the PLA's priorities during this phase include: accelerating the research and development of advanced weaponry, promoting defense technology innovation, speeding up the establishment of a modern logistics system, deepening political rectification, advancing practical training, and improving talent cultivation. The realization of these goals relies on stable financial support.

It is worth noting that although China's 2026 defense budget reaches 276.9 billion USD, there remains a significant gap compared to the US military budget for fiscal year 2026 (expected to exceed 850 billion USD). However, considering China's labor costs, procurement costs, and industrial production efficiency, the actual purchasing power may be higher than the nominal figures. More importantly, the growth of China's defense budget is continuous and strategic, rather than a short-term action.

**Strategic Insights: The Long-term and Complex Nature of Technological Competition**

From the 2026 defense budget and related policy signals, several strategic trends are noteworthy. First, the modernization of the Chinese military is shifting from quantity expansion to quality enhancement, from platform construction to system capability building. Second, AI and other emerging technologies are becoming the core driving forces of military modernization, rather than merely auxiliary tools. Third, the military-civil fusion strategy enables China to rapidly convert commercial technology into military capabilities, which is particularly important in rapidly developing fields such as AI and unmanned systems.

For the US and its allies, the breadth and speed of China's military applications of AI warrant serious attention. While the US still maintains advantages in computing power, technical talent, and combat experience, these advantages are not unassailable. As the Georgetown University research report points out, China's rapid prototype development and experimentation will accelerate its learning and improvement, thereby keeping the gap with the US military relatively small.

Looking ahead, the military technology competition between the US and China will be a long-term and complex game. In rapidly evolving fields like AI, technological advantages may be hard-won but fleeting. This requires both sides to find a balance between rapid innovation, responsible experimentation, and prudent commercial cooperation, while establishing norms through diplomatic channels and unofficial dialogues to manage the potential misjudgments and instability risks that AI applications in the military domain may bring.