Taiwan's cabinet will propose a 16 per cent annual rise in defence spending for 2027 which will for the first time exceed TW$1 trillion ($31 billion), the official Central News Agency reported on Sunday, as Taipei bolsters its military.
The move will come as China, which views democratically governed Taiwan as its own territory, has ramped up military and political pressure over the past few years to assert its claims, which Taipei strongly rejects.
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China refuses to talk to Lai, saying he is a "separatist". He says only Taiwan's people can decide their future. Taiwan is currently in the middle of its annual Han Kuang military exercises.
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The proposed budget of more than TW$1.1 trillion, to be unveiled on August 20, includes funding for the coast guard, veterans and special projects, and will - like this year - exceed three per cent of gross domestic product, the Central News Agency said.
Detailed figures await the final cabinet meeting, it added.
Taiwan's government has made military modernisation a key policy platform and has repeatedly pledged to spend more on its defences, including developing made-in-Taiwan submarines, given the rising threat from China.
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China's military operates almost daily around Taiwan, and holds periodic war games, the last in late December.
China is also rapidly modernising its armed forces, with new aircraft carriers, stealth fighter jets and missiles. In March, China unveiled a rise of 7% [two percentage points higher than the official economic growth rate] in this year's defence spending, to CNY1.91 trillion ($283.08 billion).
[This rate is similar to recent trends, following nominal increases of 7% in 2022, and 7.2% in 2023, 2024 and 2025. This growth rate, however, does not account for inflation. Furthermore, it represents only the central government defence budget and does not include local militia funding.]
This upward trend, above and beyond the GDP growth targets, shows that defence remains one of the main policy priorities of the Chinese government. In the current economic context, the defence budget is likely financed in part by a growing budget deficit, according to an analysis.
As China’s overall central general expenditures will grow faster than expected revenue, the budget deficit is projected to be RMB230bn (USD32.4bn) higher than in 2025 and will be financed through treasury bonds.
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It sucks that we need this. There are so many better things Taiwan could be investing in. But, considering the circumstances, it’s hard to argue that it isn’t necessary. I’ll be surprised if the pro-China party let it get through.