Military Industrial Electronics Empowering New Quality Combat Capability: The Core Driving Force of the PLA's Modernization Efforts

March 2026 marks the comprehensive launch of China's "14th Five-Year Plan," entering a critical phase in the modernization of the People's Liberation Army (PLA). At a routine press conference on March 18, Defense Ministry spokesperson Jiang Bin emphasized that the entire military will fully leverage the unique advantages of political military building, uniting efforts to promote the steady and far-reaching modernization of national defense and the military. In this strategic context, the military electronics industry is becoming the core driving force for cultivating new combat capabilities and achieving the intelligent transformation of the military.

The announcement of China's defense spending budget for 2026 has once again attracted international attention. According to publicly available information from the Ministry of Defense, China's defense spending has long accounted for less than 1.5% of GDP, significantly lower than that of military powers like the United States, and also below the world average and NATO countries, where military expenditures generally exceed 2% of GDP. This reasonable and moderate growth reflects a profound shift in the modernization of the Chinese military from a "quantity-based" model to a "quality and efficiency-based" model, with the military electronics industry serving as the core technical support for this transformation.

According to an industry research report released by AVIC Securities in March 2026, the military electronics sector performed impressively in 2025, with the AVIC Securities military electronics index significantly outperforming both the defense industry index and the broader market. This market performance is not coincidental; it reflects the increasingly prominent strategic position of military electronics in the PLA's modernization efforts. The report points out that the development of the military electronics industry in 2026 has multiple core supports: the cultivation of new combat capabilities drives the expansion of demand for intelligent and unmanned military electronics, with sustained growth in demand for military chips, high-end sensors, and other fields.

The cultivation of new combat capabilities has become a key term in the PLA's modernization efforts. During the plenary meeting of the delegation of the PLA and the Armed Police Force at the Fourth Session of the 14th National People's Congress, President Xi put forward clear requirements regarding the completion of the modernization goals and tasks for national defense and the military during the "14th Five-Year Plan" period. A notice from the General Office of the Central Military Commission emphasized the need to focus on preparing for war, insisting on leading training with combat and promoting combat through training, and accelerating the integration of system combat capabilities. This strategic deployment places higher demands on the military electronics industry—not only to achieve breakthroughs in technology but also to form overall combat capabilities in system integration and practical application.

On the technical level, the technological iteration of core enterprises is driving leapfrog development in the PLA's equipment system. In the field of military chips, domestic substitution and process innovation are breaking overseas monopolies, with new-generation products becoming the core driving force for profits. Technological breakthroughs in high-end sensors, optical communication, laser communication, and other fields provide a solid foundation for the construction of the PLA's information-based combat system. Unverified reports circulating online about the J-20 testing a mysterious light pole missile and the sixth batch of the 054A major modification entering service reflect the ongoing advancement of the PLA's equipment upgrades and the public's high interest in advanced weapon systems.

Military intelligence has become a core trend in global military transformation, with the comprehensive application of AI technology in actual combat reshaping the nature of warfare. China's technological advancements in intelligent computing chips, electronic countermeasure systems, and other fields provide technical possibilities for the PLA's intelligent transformation. The rotation characteristics of the military industry sector were significant in 2025, with military trade, controllable nuclear fusion, and commercial aerospace leading the way, while military electronics, as the core link between technology and equipment, fully benefited from the expansion of the large military market. This market rotation reflects a profound shift in the PLA's equipment system from single-platform competition to systematic and networked combat capabilities.

The development at the industrial level is also noteworthy. The expansion of corporate private placements has initiated a new cycle, with capacity release matching downstream structural incremental demand. The capacity layout and order fulfillment of listed companies have laid a solid industrial foundation for the industry's development. The promotion of the generalization of military-civilian standards breaks down barriers between military and civilian use, facilitating the two-way flow of elements and supporting the high-quality development of the large military industry. Areas such as low-altitude safety construction, commercial aerospace networking, and large aircraft localization further open up application space and market boundaries for military electronics, driving industry demand towards higher-end and higher value-added directions.

It is worth noting that the advancement of the PLA's modernization is not merely about increasing the quantity of equipment but places greater emphasis on enhancing systematic combat capabilities. The Defense Ministry spokesperson emphasized the need to "strengthen realistic military training and accelerate the integration of system combat capabilities," clarifying the future development direction. Military electronics plays a "nerve center" role in this process—from command and control systems to precision-guided weapons, from electronic countermeasures to cyber offense and defense, every combat link relies on the support of advanced electronic systems.

From a valuation perspective, the current valuation of the military electronics sector is at a historical high, and the industry has entered a stage of valuation reshaping. Commercial aerospace has become an important symbol of valuation reshaping, with the driving logic shifting from valuation repair to the expansion of growth boundaries and the re-evaluation of industrial value. Fields related to intelligentization, domestic substitution of software, and new combat capabilities in new domains have become the core growth directions for the military electronics industry in the future. This change in valuation reflects the market's profound understanding of the long-term and systematic nature of the PLA's modernization efforts.

In terms of the international environment, the Japanese Chief Cabinet Secretary's questioning of China's defense spending has provoked a strong response from the Ministry of Defense. Jiang Bin pointed out that Japan's defense budget has increased for 14 consecutive years, with a growth rate exceeding 60% in the past five years, and defense spending as a percentage of GDP reaching 2%, with the per capita defense expenditure of Japanese citizens being more than three times that of China. The Japanese side is striving to break through the constraints of the "Peace Constitution," developing offensive weapon systems far beyond the scope of "defensive-only" policies. This intensification of geopolitical competition objectively provides stronger strategic support and market demand for the development of China's military electronics industry.

Another important dimension of the PLA's modernization is the deepening of military-civilian integration. This year, over 700 units of the entire military will organize more than 2,100 open house activities, from the Army's heroic units like "Liu Laozhuang Company" and "Yang Gensi Company" to the Navy's main battle ships, the Air Force's "Zhuhai Airshow," and the Rocket Force's missile camps and Armed Police Force military skills demonstrations. These open activities not only enhance national defense awareness among the public but also build a platform for military electronics enterprises to connect with social resources.

Looking ahead, the military electronics industry faces both opportunities and challenges. On one hand, strategic demands such as the cultivation of new combat capabilities, the transformation of military intelligence, and the upgrading of equipment systems provide broad space for industry development; on the other hand, issues such as core technology breakthroughs, supply chain security, and cost control still require continuous breakthroughs. From the development trend in 2026, with the comprehensive advancement of the "14th Five-Year Plan," the military electronics industry is expected to achieve new breakthroughs in multiple dimensions such as domestic substitution, technological innovation, and capacity release, providing solid technical support for the PLA to achieve its centenary goal and to promote the high-quality modernization of national defense and the military.

The steady advancement of the modernization of the Chinese military is essentially a systematic project. Political military building ensures direction, reform strengthens the military and optimizes structure, science and technology enhance military capabilities, talent solidifies the foundation, and rule of law standardizes operations—in this grand system, the military electronics industry is both the core carrier of strengthening the military through science and technology and a key link connecting various subsystems. In 2026, as the cultivation of new combat capabilities enters a deep-water zone, the military electronics industry will undoubtedly play an even more critical role in the PLA's modernization efforts.