China has announced a significant increase in its defense budget for 2025, raising its military expenditure by 7.2% to an estimated $246 billion. The decision came amid growing competition with the United States and escalating tensions in the Taiwan Strait.

According to Chinese state media, the new defense budget amounts to approximately 1.784665 trillion yuan ($246 billion) and was presented as part of the draft budget report at the opening session of the 14th National People’s Congress (NPC). The increase matches the budget hikes in both 2023 and 2024.

While Western observers note that China’s military spending has grown at a single-digit rate for the past decade, some analysts suggest this may indicate an economic slowdown. However, Chinese military experts argue that the steady increase aligns with the country’s economic expansion and GDP growth.

The increase in defence spending is largely driven by China’s strategic military ambitions, particularly its efforts to counter US influence in the Asia-Pacific region. Both nations have been ramping up their military capabilities, investing in cutting-edge weaponry, and expanding their global presence in preparation for potential confrontations.

A key focus of China's military spending is its preparedness for a possible conflict over Taiwan. Beijing considers Taiwan a breakaway province that must eventually be reunified with the mainland—by force if necessary. Addressing the budget increase on March 5, Chinese Premier Li Qiang reiterated Beijing’s firm opposition to pro-independence forces in Taiwan and their foreign supporters, an implicit reference to the United States and its allies.

“We will firmly advance the cause of China’s reunification and work with our fellow Chinese in Taiwan to realise the glorious cause of the rejuvenation of the Chinese nation,” Li stated.

The budget announcement follows comments from Wang Huning, China’s chief official overseeing Taiwan affairs, who on February 26 called for China to "shape the inevitable reunification of the motherland." Days later, the People’s Liberation Army (PLA) launched an unexpected round of live-fire drills near Taiwan’s southwest coast, a move seen as a direct warning to Taipei.

China’s reported military budget may not reflect its true defense spending, experts warn. The country has been rapidly modernising its military, investing in advanced technology and increasing the production of state-of-the-art equipment.

China has made significant progress in developing next-generation military assets, including the J-35A stealth fighter, the third aircraft carrier Fujian, and the Type 076 amphibious assault ship Sichuan. Reports suggest that the J-35A will enter mass production in 2025, while the Fujian is expected to become fully operational. Additionally, China is advancing its stealth bomber program with the development of the H-20 and is already working on a fourth aircraft carrier.

Song Zhongping, a Chinese military expert, emphasised that continuous military exercises and troop training require substantial financial resources. “The PLA must increase its battle readiness to handle future crises in the South China Sea and the Taiwan Strait,” Song told state media.

China's defense expansion aligns with President Xi Jinping’s broader goal of full military modernisation by 2035. The country is heavily investing in hypersonic weapons, artificial intelligence, quantum computing, and autonomous military systems, positioning itself as a leading global military power.

Despite the official figures, many analysts argue that China’s actual defence spending is significantly higher. Air Marshal Anil Chopra, a veteran of the Indian Air Force, previously noted in EurAsian Times that China strategically conceals parts of its military expenditure.

“China is well known for having significant defence spending outside the officially announced defense budget,” Chopra wrote. He pointed out that China operates the world’s largest navy, continues to expand its fleet of J-20 stealth fighters, and is developing strategic military infrastructure in the South China Sea and the Himalayas.

Critics argue that China uses various financial loopholes to obscure its true military expenditures. The Pentagon and affiliated think tanks claim that China does not include spending on military research and development (R&D), paramilitary forces and certain operational costs in its defence budget. Additionally, many defense-related projects are categorised under civilian initiatives, such as infrastructure development and state-run technology programs.

According to some estimates, nearly half of China’s central government R&D budget—approximately $50 billion—is allocated to military-related projects. Furthermore, expenditures related to space programs, cyber warfare units and China’s paramilitary maritime forces are not included in the official defence budget.

In response to China’s military expansion, several neighbouring countries, including Japan, the Philippines, and Taiwan, have also increased their defence budgets.

Taiwan, which faces the most direct threat from China, has pledged to boost its military spending. Taiwanese Defence Minister Wellington Koi stated that the island is ramping up its defence budget to counter “escalating threats from adversaries and the rapidly changing international situation.”

The United States, Taiwan’s primary arms supplier, has been pressuring Taipei to allocate more resources to its military. During his Senate confirmation hearing on March 4, Elbridge Colby, nominated as Under Secretary of Defense for Policy in the Trump administration, criticised Taiwan’s defence spending levels.

“They should be more like 10% [of GDP], or at least something in that ballpark, really focused on their defence,” Colby told the Senate Armed Services Committee. He warned that Taiwan must take greater responsibility for its security to prevent a conflict with China.

Despite the US officially recognising 'One China' policy, Washington continues to supply Taiwan with advanced weapons and military support, viewing the island’s defence as a critical element of US national security. “Losing Taiwan would be a disaster for American interests,” Colby added.

As China continues its military buildup, regional actors, including Taiwan, Japan, and the Philippines, are responding with their own defense spending hikes. The global power struggle between Beijing and Washington is expected to intensify in the coming years, shaping the geopolitical landscape of the Asia-Pacific region and beyond.