Hong Kong: On March 5, during the 14th National People's Congress, China revealed its defense budget for 2025, which reflects a year-on-year increase of 7.2%. Notably, this growth rate mirrors that of the previous two years, as Chairman Xi Jinping emphasizes the advancement of the People's Liberation Army (PLA).
The budget for 2025 is set at CNY1.784665 trillion, approximately USD249 billion, as disclosed on the first day of the Third Annual Session, a formal meeting of China's legislative body. China continues to hold the position of the world's second-largest military spender, following the United States.
John Culver, a former national intelligence officer and retired CIA analyst, insightfully remarked: "Beijing establishes its defense budget increase targets for each five-year cycle, making adjustments for inflation or urgent needs as required. From 2001 until the onset of the global financial crisis, they aimed for a budget doubling every five years, achieving this goal with remarkable precision. Since 2010, the target has shifted to a doubling every decade. The announced budget figures are determined from the top down rather than from the bottom up. For instance, in 2014, the budget was RMB808 billion, while in 2024, it is projected to be RMB1,670 billion."
The 2,977 delegates of the National People's Congress unanimously approved this budget along with other national expenditure plans of the Chinese Communist Party (CCP). The Two Sessions, held annually, is the closest event to a festive occasion in China's otherwise serious political landscape. It commenced on March 5 and is scheduled to conclude on March 11.
This year's budget serves as a clear indication that the era of double-digit percentage increases in defense spending is firmly in the past. For the tenth consecutive year, growth in defense expenditures has remained in the single digits. Meanwhile, China's economy is striving to maintain stability, with a projected gross domestic product (GDP) growth of 5% for the upcoming year, consistent with expectations from the previous two years. The 7.2% increase in defense spending means that it constitutes less than 1.5% of GDP.
Lou Qinjian, the spokesperson for the Third Session of the 14th National People's Congress, proudly noted that China has managed to keep its defense spending as a percentage of GDP below 1.5% for many years, a figure that is lower than the global average. However, a critical question arises regarding the true extent of China's defense expenditures. It is essential to approach Chinese claims with caution, as data from the Chinese Communist Party often requires careful examination. The official defense budget does not account for significant funding directed towards related areas, such as the military-operated space program, defense mobilization resources, operational costs for provincial military bases, military pensions and benefits, and civilian or dual-use research and development. Additionally, it excludes substantial paramilitary forces like the People's Armed Police and the China Coast Guard, which play a vital role in supporting the People's Liberation Army (PLA).
The Stockholm International Peace Research Institute has estimated that China's actual defense budget for 2023 is 37% higher than what has been publicly announced, while the UK-based International Institute of Strategic Studies has calculated it to be 42% higher than Beijing's reported figures. Nevertheless, the exact magnitude of the gap between China's declared and actual defense spending remains uncertain. In 2023, the Pentagon assessed that Beijing's true expenditures could be 30-40% greater than the official figures suggest.
Senior Colonel Wu Qian, spokesperson for China's Ministry of National Defense (MND), deflected responsibility for the rise in global defense spending by criticizing the United States' military expenditures as "concerning" to the international community. He stated, "The United States should take the lead in reducing its nuclear arsenal and military spending, truly embodying the principle of 'America First' in this context."
A report from Xinhua reiterated familiar assertions, claiming, "China adheres to a defensive national defense policy, with military spending primarily aimed at safeguarding its sovereignty, security, and developmental interests. China's growth enhances global peace efforts, and the nation will never pursue hegemony or engage in expansionism, regardless of its level of development."
The state-run outlet further noted, "As China assumes a more significant role on the world stage, its military has taken on increased responsibilities in providing public security goods to the international community. Over the years, Chinese military personnel have actively participated in international humanitarian aid and disaster relief operations, making substantial contributions to global stability." Xinhua highlighted that over the past three decades, more than 50,000 peacekeepers have been deployed to over 20 countries, making China the largest contributor among the five permanent members of the UN Security Council.
The sum of USD 249 billion, when contextualized, surpasses the combined defense budgets of the next 22 countries in the Indo-Pacific region, including significant spenders like India, Japan, South Korea, Australia, and Taiwan. What are the allocations for this budget? The details remain largely undisclosed, but Wu from the Ministry of National Defense indicated that the increased funding will primarily focus on developing new-domain forces with advanced combat capabilities. It will also enhance systems for reconnaissance, early warning, joint strikes, battlefield support, and integrated logistics. Furthermore, investments will be made to improve military training under realistic scenarios and to advance national defense and military reforms.
Wu emphasized that the Chinese military is confronted with significant challenges in protecting national sovereignty and territorial integrity. He claimed that China is navigating one of the most intricate peripheral security landscapes globally, and the People's Liberation Army (PLA) is committed to achieving the objectives set for its centenary in 2027. He stated that it is crucial for the PLA to accelerate the development of a world-class military force, asserting, "We must ensure that we meet our goals with strong performance on schedule."
A substantial portion of the budget is allocated to nuclear weapons, and satellite imagery suggests that the PLA Navy is constructing what is likely its fourth aircraft carrier in Dalian, which may be China's first nuclear-powered carrier.
In his government work report, Premier Li Qiang assured party members that the PLA would enhance military training and combat readiness to effectively safeguard China's sovereignty, security, and developmental interests.
In his speech to Congress, Xi emphasized the importance of enhancing collaborative civil-military initiatives and establishing a robust oversight mechanism to combat corruption. State media reported that Xi advocated for the rapid advancement of new combat capabilities, urging improvements in response times and the swift adaptation of advanced technologies.
This year signifies the conclusion of China's 14th Five-Year Plan (2021-2025), which encompasses military advancements. As per state media, Xi "called for bolstering confidence, confronting challenges directly, and fulfilling the high-quality development requirements to meet established objectives and deadlines." He stressed the need for a military development approach that is "high-quality, efficient, cost-effective, and sustainable," ensuring that its results endure both in time and in real combat scenarios.
Previously, Premier Li stated that the Chinese Communist Party (CCP) favors a peaceful resolution to the Taiwan "issue," while firmly opposing any moves by Taiwan towards formal independence and the support of foreign allies. This assertion is somewhat contentious, as there is little current advocacy for such independence, yet it aligns with the CCP's narrative to escalate tensions. Li further remarked, "We will steadfastly promote the cause of China's reunification and collaborate with our compatriots in Taiwan to achieve the noble goal of rejuvenating the Chinese nation."
Taiwan's President Lai Ching-te maintains that the future of Taiwan should be determined solely by its people, rejecting any imposition of Beijing's agenda. While Lai has expressed a willingness to engage in discussions with China, Beijing dismisses him as a "separatist." Overall, the tone regarding Taiwan in this year's government work report from China has remained largely unchanged.
Taiwan, understandably concerned about the United States' withdrawal of support for Ukraine, which leaves it vulnerable to Russian aggression, can no longer count on American backing. In response, Taipei is planning to increase its defense budget due to the "rapidly evolving international landscape and the rising threats from adversaries," stated Taiwanese Defense Minister Wellington Li-Hsiung Koo.
In a somewhat ironic twist, both Li and President Donald Trump delivered their respective State of the Union addresses on the same day. During his speech, Trump mentioned China six times in relation to perceived trade injustices and tariffs, yet he did not identify it as a strategic threat.
Conversely, Ryan Hass, Director of the John L. Thornton China Center at the Brookings Institution, interpreted Premier Li Qiang's work report as a call for confidence in China's trajectory. He highlighted steady advancements in China's economic growth and improvements in citizens' well-being. The central theme of Li's address was that the Chinese Communist Party (CCP) would pursue progress while maintaining stability. The Premier committed to initiatives aimed at bolstering the Chinese economy in the upcoming year, including more proactive fiscal policies, accommodating monetary policies, enhanced support for consumption, and increased investment in education and scientific research to foster innovation.
Notably, Li did not directly mention the United States, although he alluded to "hegemonism and power politics." American tariffs were also absent from the premier's address. It appears that Beijing is calmly preparing for an impending trade conflict. Hass remarked, "Beijing seems focused on readying itself for the challenging times ahead. Both parties appear to be exercising patience and working to strengthen their positions as they prepare for a meeting between Trump and Xi in the coming months, where the two leaders will outline the future direction, priorities, and ambitions of their relationship."
In other regions, however, there was a notable escalation in rhetoric. The Chinese Foreign Ministry and its Embassy in the United States issued a stark warning: "If the US desires war—be it a tariff war, a trade war, or any other form of conflict—we are prepared to fight to the end." This assertive statement followed the imposition of 20% tariffs on Chinese goods by the United States. In response, Beijing announced reciprocal tariffs ranging from 10% to 15% on select American imports, set to take effect on March 10. The Chinese Foreign Ministry emphasized via Twitter, "We are not intimidated. Bullying tactics will not succeed against us. Coercion, pressure, or threats are not effective methods for engaging with China."
Grant Newsham, a Senior Research Fellow at the Japan Forum for Strategic Studies, commented on Beijing's perspective: "[China] perceives this as a 'zero-sum game.' Whatever advantages China can secure, it will pursue without making concessions, viewing this as a decisive struggle. Xi has articulated this notion. A careful reading of his speeches, both oral and written, reveals that he believes the Chinese system cannot coexist with the American system. One must prevail over the other. He has labeled the United States and its principles—particularly those concerning freedom and human rights—as 'the enemy,' elements that must be eradicated."
Concerns are mounting regarding the increasing power of the People's Liberation Army (PLA). Recently, China conducted live-fire exercises in the Tasman Sea, situated between Australia and New Zealand. Following this, three Chinese warships nearly completed a full circumnavigation of Australia before entering the Indian Ocean. China's assertiveness in the South China Sea has led to tensions with the Philippines and Vietnam. Additionally, the PLA's pressure on Taiwan remains relentless. These actions starkly contrast China's statements made during the Third Annual Session, where it claimed that its "development enhances global forces for peace" and asserted that it would never pursue hegemony or engage in expansionist policies.
