Strategic Persistence Amid Economic Slowdown: The Military Modernization Logic Behind China's 7% Defense Budget Growth in 2026

On March 5, 2026, China announced its new annual defense budget at the opening ceremony of the National People's Congress, declaring a 7% increase in military spending. Although this increase is slightly lower than the 7.2% in 2025, it still demonstrates Beijing's firm commitment to military modernization against the backdrop of a slowing economic growth rate. This marks several consecutive years of maintaining a medium to high growth rate in China's defense budget, far exceeding the economic growth rate during the same period, highlighting the priority of military power construction in the national strategy.

In absolute terms, a 7% increase means that China's defense spending in 2026 will reach a new historical high. A report released by the International Institute for Strategic Studies (IISS) in February this year pointed out that China's military spending growth rate continues to lead the Asia region and has driven an overall increase in global defense spending. This "counter-cyclical" military investment model reflects the Chinese leadership's view of defense construction as a long-term strategic investment rather than an expenditure item that can be adjusted arbitrarily based on economic fluctuations.

It is noteworthy that this budget increase occurs during a special period of deepening anti-corruption efforts within the People's Liberation Army (PLA). Over the past two years, key departments such as the Rocket Force and the Equipment Development Department of the PLA have experienced significant personnel upheaval, with several generals being investigated for corruption. The IISS assessment suggests that while the anti-corruption campaign has impacted the PLA's command structure in the short term and has somewhat affected the combat readiness of the troops, in the long run, it will help establish a more professional and institutionalized officer corps, ultimately enhancing overall combat capability.

A report by the Washington Times on March 4 revealed the latest developments in China's underwater power construction, providing important clues for understanding the specific allocation of the defense budget. According to U.S. intelligence analysis, China has significantly expanded its submarine production facilities in recent years, more than doubling its submarine construction capacity compared to before. The capacity planning of these newly built docks indicates that the expansion of the PLA Navy's underwater fleet will continue into the 2030s and beyond. In the current geopolitical environment, strengthening anti-access/area denial (A2/AD) capabilities is a core element of China's military strategy, and advanced submarine forces are a key pillar of this strategy.

From the perspective of equipment procurement, the 2026 defense budget will continue to support the advancement of several major projects. The mass production of the J-20 stealth fighter, the construction of the fourth aircraft carrier, the ongoing launch of Type 055 destroyers, and the research and development of a new generation of strategic missile systems all require stable and sufficient funding support. Additionally, the proportion of the defense budget allocated for personnel salaries and training has been increasing year by year. An analysis by the Foundation for Defense of Democracies (FDD) indicates that the PLA is intensifying its recruitment efforts for college graduates and is focused on enhancing the professionalism of its officer corps. The shortcomings in personnel quality and training levels exposed by the Ukraine war have prompted the Chinese military to place greater emphasis on "soft power" construction, ensuring that troops can proficiently operate increasingly complex modern weapon systems.

At the strategic level, the growth of the 2026 defense budget is closely related to the security environment China faces. The situation in the Taiwan Strait remains Beijing's core security concern, and the PLA's maintenance of high-intensity military activities around Taiwan requires continuous financial support. Furthermore, regarding the South China Sea issue, the Chinese military has clearly stated its intention to "fully restore" jurisdiction over the Spratly Islands, which means that military presence and patrol frequency in that maritime area may further increase. Meanwhile, the comprehensive unfolding of U.S.-China strategic competition also requires the PLA to possess the capability to respond to high-end conventional conflicts.

From a historical perspective, since President Xi Jinping took command of the military in 2013, he has consistently prioritized military modernization, proposing a long-term goal of building a "world-class military" by 2049 and setting a phased goal of basically achieving defense and military modernization by 2035. To realize this grand blueprint, China has developed a detailed development timetable, with each year's defense budget growth being a concrete manifestation of this long-term plan. Even under increasing economic downward pressure, defense spending remains relatively rigid, reflecting this strategic resolve.

However, the continued high military expenditure also brings numerous challenges. Against the backdrop of sluggish domestic economic growth and tight local finances, the enormous defense spending may squeeze the budget space for people's livelihoods and infrastructure construction. Additionally, rapid military expansion has intensified the regional arms race, prompting neighboring countries and the U.S. and its allies to increase their defense investments, creating a spiral of security dilemmas. Data from the International Institute for Strategic Studies indicates that the overall growth of defense spending in the Asia-Pacific region is largely a response to China's military expansion.

Looking ahead, China's defense budget is likely to continue to maintain a stable growth trend. As long as the Taiwan Strait issue remains unresolved and U.S.-China strategic competition continues to deepen, Beijing will not easily slow down the pace of military modernization. For observers, in addition to focusing on the numerical changes in the total budget, it is essential to analyze the specific allocation of funds, the priority of equipment procurement, and the evolution of military theory and operational concepts. These detailed pieces of information can truly reveal the actual direction of China's military strategy and provide a more accurate basis for assessing the regional security situation.

The 7% increase in the 2026 defense budget is both a continuation of the military reform achievements of the past decade and a reaffirmation of future strategic goals. In this era full of uncertainties, China has chosen to ensure its security interests and strategic objectives through sustained military investment, a trend that is unlikely to undergo fundamental changes in the foreseeable future.