China's Defense Budget Grows 7% in 2026: Sticking to the Path of Military Modernization Amid Economic Headwinds

On March 5, 2026, during the "Two Sessions" in Beijing, it was announced that the national defense budget for 2026 will increase by 7%, reaching approximately 1.91 trillion yuan (about 277 billion USD). Although this increase is slightly slower than the 7.2% growth in 2025, it still significantly exceeds the economic growth target of 4.5%-5%, highlighting China's prioritization of military development amid escalating regional tensions and global strategic competition. This budget level allows China to maintain its position as the second-largest military spender in the world, with its share of total military spending in Asia rising from 37% in the 2010s to the current 44%.

The People's Liberation Army currently has about 2 million active-duty personnel, making it the largest standing army in the world. Among them, the army has approximately 960,000 personnel, while the navy, air force, and rocket force continue to expand in specialized positions. There are about 510,000 reservists, and when including paramilitary forces such as the People's Armed Police, the total military strength exceeds 3 million. This vast manpower base supports an ambitious modernization plan: achieving key milestones by 2027 (the centenary of the army's founding), achieving "comprehensive modernization" by 2035, and building a "world-class" military by 2049 (the centenary of the founding of the country). After experiencing double-digit growth in the early 2000s, recent years have seen budget increases stabilize around 7%, ensuring continued investment across various fields.

In the naval domain, the People's Liberation Army Navy has become the largest naval force in the world in terms of the number of vessels, with over 370 combat ships (including submarines, destroyers, and auxiliary vessels). It is projected to reach 395 ships by 2025 and 435 ships by 2030. Recent developments include the commissioning of the 003-type aircraft carrier "Fujian," equipped with an electromagnetic catapult system, and advancements in next-generation platforms such as the 076-type amphibious assault ship (designed for drone operations). The fleet is now equipped with more multi-role vessels featuring advanced missile and electronic warfare systems, significantly enhancing its blue-water operational capabilities, allowing for long-term deployments beyond the first island chain in the Western Pacific and around Australia. Analysts point out that China plans to add 6 more aircraft carriers by 2035, bringing the total to 9, which would make its carrier fleet second only to that of the United States.

In terms of air power, the People's Liberation Army Air Force operates over 3,200 combat aircraft, including a growing number of fifth-generation J-20 stealth fighters (with hundreds already in service). Upgrade priorities include the development of the H-20 stealth bomber (capable of nuclear and conventional strike missions), new medium- to long-range stealth platforms, and advanced refueling aircraft like the Y-20U. The integration of unmanned systems and the development of AI-enhanced combat capabilities further bolster long-range delivery capabilities. Military observers believe that the mass production of the J-20 marks a significant breakthrough for China's aviation industry in stealth technology and advanced avionics systems, narrowing the technological gap with the U.S. Air Force.

Regarding missile and rocket forces, the scale of the People's Liberation Army Rocket Force has expanded dramatically, with a nuclear warhead stockpile exceeding 600, expected to reach 1,500 by 2035. Conventional capabilities include thousands of ballistic and cruise missiles, hypersonic weapons, and new equipment such as the improved Dongfeng series intercontinental ballistic missiles. Both accuracy and range have significantly improved, posing threats to regional and long-range targets. The latest Pentagon report emphasizes that the rapid expansion of China's nuclear arsenal represents a "historic military expansion," raising deep concerns among the U.S. and its allies regarding regional strategic balance.

The space and cyber domains are priority development areas for specialized forces under the Central Military Commission (restructured in 2024). China has deployed thousands of military satellites for surveillance and positioning, with a surge in launch frequency and continuous advancements in anti-space systems capabilities. Cyber capabilities support offensive operations, already evident in espionage activities targeting critical infrastructure. Western intelligence agencies report that investments by the PLA's Strategic Support Force in space situational awareness and cyber warfare are changing the nature of future warfare, particularly within the framework of the "localized war under informatization" concept.

These efforts reflect Beijing's emphasis on maintaining sovereignty, especially regarding Taiwan and the South China Sea, with naval exercises being strengthened and territorial claims firmly upheld. Premier Li Qiang emphasized the need to enhance strategic capabilities to counter "separatist forces" and external interference. On March 7, President Xi Jinping delivered an important speech at the plenary meeting of the National People's Congress delegation of the PLA and the Armed Police, stressing the need to "fully leverage the unique advantages of enhancing political loyalty" and calling for "steady and sustained advancement of national defense and military modernization." Xi warned, "There can be no disloyal individuals in the army, nor can there be corrupt elements," indicating that the anti-corruption campaign will be pursued resolutely. He also pointed out that at the start of the "14th Five-Year Plan," strict supervisory rules must be established to closely monitor key areas such as the flow of funds, the exercise of power, and quality control.

However, the official budget may underestimate actual expenditures—analysts estimate that if off-budget items such as R&D, space programs, and paramilitary expenses are included, the real figure could be between 330 billion to 540 billion USD or higher, due to limited transparency. This ongoing military buildup is closely monitored by the U.S. and neighboring countries, continuing to reshape the balance of power in the Indo-Pacific region and impacting regional stability and global security dynamics.

Notably, despite downward pressure on the Chinese economy, the continued growth of the defense budget indicates that Beijing views military modernization as a strategic priority. This policy choice reflects the Chinese leadership's assessment of the international security environment: rising risks of regional conflict, intensifying great power competition, and the necessity to ensure the continuous development of military capabilities to safeguard national core interests. In the long run, this trend will have profound implications for the military balance in the Asia-Pacific region, with other countries also adjusting their defense policies and military deployments accordingly.