0:00 The CCP's National People's Congress opened on March 5th, and official figures show that the defense budget has increased for the fifth consecutive year by more than 7%. This year's increase, however, is the smallest in the past 5 years, but still exceeds the GDP growth target. Chinese Premier Lee Chang set the 2026 economic growth target at 4.5 to 5%. This is a downward adjustment from the previous target of around 5%. Since the start of January this year, several provinces in China have revised down their 2026 growth targets, signaling a more cautious outlook for the economy. However, analysts believe that the real growth might be much lower than the official figure, possibly even close to stagnation or negative growth. Senior political commentator Chen Po Kong says that under Xi Jinping's rule, China's
0:46 economy has been in continuous decline with chips in Venezuela and Iran, which have supplied China with cheap oil, coupled with ongoing US China trade war, the future of China's economy is increasingly uncertain. He believes that the 4.5% growth target is not credible. Chen Kong repeatedly points out that since Xi Jinping's rise to power, China has shifted from a period of high-speed growth to a long-term slump. The old model of relying on investment and exports is no longer sustainable. The real estate industry, once a pillar of the economy, has collapsed, leaving behind unfinished buildings, massive debts, and permanent damage to consumer wealth and spending. Although the official GDP growth in 2025 was reported at 5%, international observers widely question its authenticity. Indicators like electricity consumption, freight
1:32 volume, and PMI show clear signs of fatigue. Entering 2026, this downward pressure has not eased. Instead, it has worsened due to external black swan events. Venezuela and Iran, which were key suppliers of cheap oil to China, use discounted oil to support China's manufacturing sector. Now, the turmoil in both countries has completely changed China's energy landscape. As one of the largest energy consumers, China's reliance on foreign oil has exceeded 76% and its dependence on natural gas imports remains high. Rising energy import costs are directly impacting economic recovery. The ongoing US China trade war is also a long-term external pressure. The Trump administration's reimposition of high tariffs along with technology restrictions and supply chain shifts has severely damaged China's
2:19 export-driven growth model. While China's trade surplus reached a record in 2025, it was largely sustained by low-end products and reexport trade with high-end manufacturing moving out of the country. Under these dual pressures, the 2026 government work report has set the economic growth target at 4.5 to 5%. Experts believe this is merely a diplomatic way of acknowledging economic decline. In reality, China faces persistent deflation pressure, stagnation in income growth, and high unemployment rates, issues that cannot be masked by the growth target. Without strong consumer stimulation and fiscal expansion, actual growth is unlikely to meet expectations. China's defense spending budget has been a focal point of international attention lately, especially with the new announcement.
3:06 From an international perspective, the focus on China's military spending growth is largely due to its correlation with overall economic growth. While China's official GDP data has remained relatively stable, defense budget adjustments are a way to infer potential changes in China's economic policies. In the past few years, China's defense spending has increased solidly by around 7.2%. But this time it dropped to 7% which easily suggests an economic slowdown. American economist Davy J. Wong said that adjusting the defense budget in sync with GDP growth makes sense from the government's perspective. However, the defense spending growth still outpaces GDP growth, which shows that despite economic slowdown, Beijing continues to prioritize military spending. While not as obvious as North Korea's, this still reflects a military
3:52 first policy. He said the increase in defense spending reflects that the regime still sees stability as more important than economic development. Shenpong states that the CCP's aggressive military policies are inevitable. Just like North Korea, no matter how tough the economy gets, they follow a military first approach, maintaining a huge army. Although the 7% increase in China's military spending is slightly lower than previous years, the total amount is still growing. As China's military activities in the South China Sea, East China Sea, and Taiwan Strait become more frequent, global think tanks and media are paying closer attention to Beijing's defense spending. The International Institute for Strategic Studies based in London noted in its latest report that China's share of total military spending in Asia reached 44% in 2025, a significant
4:40 increase from the average of 37% between 2010 and 2020. This figure highlights China's dominant position in regional military balance, which has raised concerns among neighboring countries. Taiwanese media reported that China's defense spending is 11 times that of Taiwan, with this huge disparity directly translating into a potential threat to Taiwan security. Taiwan's mainland Affairs Council spokesperson Leang Wen said that even in the face of China's economic instability and weak consumption, Beijing is still willing to allocate a large budget for military spending. His remarks reflect Taiwan's concerns over the expansion of mainland China's military power and the international community's skepticism regarding the transparency of China's military spending. Bloomberg focused on the invisible scale of China's defense spending. A recent article pointed out
5:27 that in 2025, China reported military spending of $245 billion while the US was at 900 billion. However, the US Department of Defense estimates that Beijing's actual spending could be 40% to 90% higher than reported. If this is accurate, China's real defense budget could be close to half of America's or even higher. Analysis suggests that Beijing's budget does not fully reflect all of its military power, including spending on paramilitary forces and naval power. China's Coast Guard and other gray zone tools often used for territorial pressure are not included in the official defense budget. These hidden expenses make the true scale of China's military spending a mystery. Comparing China's defense spending to other countries further highlights its scale and influence. The Center for
6:14 Strategic and International Studies noted that in 2012, China's military spending was about 1/6th of the US's, but by 2024, it had increased to about 1/3. Currently, China's military spending is approximately five times that of Japan and nearly seven times that of South Korea. if the hidden expenses are included, this gap will only widen. While the growth of China's military budget has slowed in recent years, the overall trend remains at 7%, far higher than many developed countries. International think tanks such as the Stockholm International Peace Research Institute, CRI, have conducted in-depth analyses of China's hidden military expenditures. CRI estimates that China's actual defense spending in 2024 could reach $474 billion, higher than the official figure of $232 billion. In
7:02 comparison, the US spent $1.3 trillion on defense related matters in 2024, with China accounting for just 36% of that amount. The American Enterprise Institute, AEI, takes an even more aggressive stance, claiming that China's actual defense spending could be as high as $700 billion, close to half of the US level. The differences in calculations between China and the US include factors such as whether domestic security expenditures, veteran benefits, and civil military integration projects are included. A more concerning development is that on March 4th, Nik Asian Review pointed out that China does not include weapons research and development costs as well as military aviation expenses in its official defense budget. Over the years, international think tanks have repeatedly highlighted the structural underestimation of China's defense
7:48 budget. officially disclosed defense spending mainly covers personnel living expenses, training, maintenance costs, and some equipment procurement. However, substantial investments in core research and development such as for next generation fighter jets, strategic missiles, aircraft carrierbased planes, stealth technology, directed energy weapons, and space countermeasure capabilities are often categorized under other budget items. According to Chinese media reports, state-owned enterprises like the Aviation Industry Corporation of China and China Aerospace Corporation engage in projects under the guise of Civil Aviation or high-tech industries, securing R&D funding that actually supports China's civil military integration strategy. Military aviation expenses are especially representative. continuous improvements to the J20
8:34 series, mass production of the Y20 large transport aircraft, R&D of the carrierbased J35 fighter, batch deliveries of the Z20 series helicopters, and preliminary research for the future sixth generation fighter all require vast amounts of funding. These projects are often not directly reflected in China's defense white papers or Ministry of Finance budget reports, but are instead scattered across the R&D production funds of aviation industry groups, special funds from the Ministry of Science and Technology, and even local government contributions. Military civil integration is a core element of China's defense strategy, involving investments in cutting edge technologies such as semiconductors, artificial intelligence, quantum computing, marine technology, and aerospace technology. While these
9:20 expenditures are not included in the defense budget, they indirectly enhance China's military capabilities. In other words, these off-budget or cross expenditures mean that China's actual total military investment is far higher than publicly disclosed. Critics argue that these blurred boundaries make China's military spending appear low-key. However, Chinese officials consistently defend their defense spending as reasonable and restrained, aimed at safeguarding national sovereignty and territorial integrity, and are not aimed at expansion. CCP spokespersons emphasize that China's defense spending as a percentage of GDP is much lower than America's, which exceeds 3%. They also say that China's per capita defense spending is only a fraction of the US's. Yet, this argument fails to alleviate international concerns, especially in the Indo-acific,
10:06 where China is viewed as the primary challenger. The issue of hidden spending extends beyond the overall defense budget to specific areas of allocation. For example, expenditures on veterans benefits are seen as an important part of the defense budget, but are often shifted to administrative budgets. This further blurs the lines of military spending. The Chinese military, much like the industrial sector, now faces human rights issues, particularly in the treatment of veterans. Official figures show that China spends between 200 to 250 billion UN on veterans benefits, while the US spent 441 billion US or about 3.1 trillion yen in the same period. This means that the US spends 12 to 15 times more on veterans than China. Yet, the total US military expenditure
10:52 is only slightly more than twice of that of China, highlighting the stark differences between the two countries in terms of military welfare policies. China has 57 million veterans, the largest group in the world. But their settlement process is relatively simple. They have two main options. Local governments and state-owned enterprises offer jobs or a one-time settlement payment is provided with no further government intervention. While this system is efficient, it lacks long-term support, especially for rural veterans who often have no health care coverage, let alone benefits for their families. In contrast, the US adopts a lifelong benefit system for veterans, including health care, education, and disability allowances. US veterans healthcare benefits not only cover the veterans themselves but also extend to their
11:38 families and children with the government taking responsibility for them for life. This system is implemented through the Department of Veteran Affairs which operates 170 medical centers and over a thousand outpatient clinics serving 9 million veterans annually. The US also offers educational funding helping veterans attend university or receive further education along with housing loan guarantees and small business loans. These policies ensure comprehensive support for veterans from the end of their service until their death. Rural veterans in China often receive only a one-time compensation and no continuous support. This not only reflects differences in military spending, but also the overall level of social welfare systems. Additionally, China's military faces severe systemic corruption, which has also become a focal point for
12:23 international attention. Under Xi Jinping's leadership, over the past decade, there has been a continuous effort to purge corruption within the Chinese military. Over half of the top positions in the military have been purged, raising doubts about its combat preparedness. In January 2026, Xi Jinping's capture of Central Military Commission Vice Chairman Jong Yosa and Joint Staff Department Chief Leo Jan Lee sparked global outcry. This shows that power struggles within the CCP and military have reached an intense stage. The Central Military Commission now only consists of Xi Jinping and newly promoted vice chairman Jang Xen Ming, down from the previous seven members. The Center for Strategic and International Studies revealed that since 2022, 36 generals and lieutenant generals from the Chinese military have
13:09 been purged with 65 more officers either missing or possibly purged. If we count multiple positions being purged, 52% of the 176 highest leadership positions in the Chinese military may have been removed. The report emphasizes that the scale of this upheaval is unprecedented. In round after round of purges, many senior military officers closely connected to Xi Jinping have also been dismissed. The official narrative from the Chinese Communist Party consistently claims that these purged officers were guilty of serious corruption. However, the CCP operates in a black box, making it difficult to truly gauge the underlying motivations. Shenying Shu is a researcher at the Taiwan Institute for National Defense and Security. He explains that the lack of transparency and oversight mechanisms can lead to
13:55 various scandals. For example, while the defense budget has significantly increased in recent years, the military's equipment systems and rocket forces have undergone major purges, possibly due to high level corruption. Shen says, "With so much defense spending, it's hard to say where it's actually going. And perhaps even Xi Jinping himself finds it difficult to oversee and manage. The internal purges within the People's Liberation Army have evolved into a life or death struggle, and the cohesion and execution power of the military will suffer severe blows. International think tanks warn that while these purges may strengthen Xi Jinping's control in the short term, they could weaken the PLA's strategic deterrence and combat effectiveness in the long term. The current situation of the CCP seems to resemble the late stages of the Soviet Union. Militarily
14:40 powerful with strong military, military industry, military science, and a large army, but also facing a declining economy, weak consumer spending, and lowering living conditions. With people unemployed and hungry, the CCP is likely to follow in the footsteps of the former Soviet Union, which could ultimately bankrupt the country.
