Chinese Premier Li Qiang on Wednesday announced a 7.5 percent increase in military spending for 2025, ostensibly due to increasing tensions with the United States and Taiwan.
Li also announced more economic stimulus spending on Wednesday to cope with “changes unseen in a century” that are “unfolding across the world at a faster pace” than ever before.
The increased military budget announced by Li was similar to spending increases from 2023, and well below the increases of over ten percent in many annual budgets over the past three decades.
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Analysts told Radio Free Asia (RFA) on Wednesday that the actual increase in defense spending could be much higher than the figure put forward by Li – possibly as high as 40 percent altogether – because China has a tendency to hide military spending in the budgets for other agencies and programs.
Li insisted that China still “resolutely opposes” any bid for independence by Taiwan, so an increased military budget was necessary to keep up pressure on the island, but he said Beijing would rather accomplish “reunification” peacefully.
For its part, Taiwan currently spends less than 3 percent of its Gross Domestic Product (GDP) on defense. The Trump administration would like to see that number tripled, and wants Japan to establish a stronger military presence in the region to deter China.
Li said more economic stimulus is needed to offset the effect of President Donald Trump’s tariffs on Chinese goods.
“An increasingly complex and severe external environment may exert a greater impact on China in areas such as trade, science, and technology,” he said.
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Li said increased stimulus spending would help China maintain a five percent economic growth target for the year, a promise foreign analysts found unrealistic. Foreign economists believe China needs major restructuring to bring its economy back to life and increase weak consumer spending, which is a good 20 percent lower than the worldwide average, but the Chinese Communist Party is reluctant to make dramatic structural changes for political reasons.
The current system puts China in the curious position of running a massive trillion-dollar trade surplus and posting high levels of economic growth, but its people enjoy few of the expected benefits. Instead, the Chinese population is perpetually unhappy with high unemployment, expressing its anxiety and lack of faith in the economy with remarkably weak consumer spending.
Chinese consumer confidence is weak enough to have caused a fit of deflation, to the tune of -0.8 percent in the last three months of 2024. The population seems more morose about losing investment and retail income than excited about consumer prices coming down.
Deflation has been especially rough on the deeply troubled property sector, as landowners find themselves unable to charge the rents they need to turn a profit on property they bought at high prices, and shop owners are unable to charge the prices they need to pay their rent.
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