The China & Taiwan Update is a joint product from the Institute for the Study of War (ISW) and the American Enterprise Institute (AEI). The update supports the ISW–AEI Coalition Defense of Taiwan project, which assesses Chinese campaigns against Taiwan, examines alternative strategies for the United States and its allies to deter the Chinese Communist Party’s (CCP) aggression, and—if necessary—defeat the People’s Liberation Army. The update focuses on the CCP’s paths to controlling Taiwan and cross–Taiwan Strait developments.
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Data Cutoff: March 12, 2026
The China & Taiwan Update is a joint product from the Institute for the Study of War (ISW) and the American Enterprise Institute (AEI). The update supports the ISW–AEI Coalition Defense of Taiwan project, which assesses Chinese campaigns against Taiwan, examines alternative strategies for the United States and its allies to deter the Chinese Communist Party’s (CCP) aggression, and—if necessary—defeat the People’s Liberation Army. The update focuses on the CCP’s paths to controlling Taiwan and cross–Taiwan Strait developments.
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The PRC is increasing its defense budget at a steady rate, even as its GDP growth slows. The PRC Ministry of Finance proposed a defense budget of approximately 278 billion US dollars for 2026 during the annual “Two Sessions” legislative meeting.[i] The 2026 budget represents a 7 percent budget increase compared to 2025, but is slightly lower than the 7.2 percent yearly budget increase observed in the previous three years.[ii] The 2026 budget represents a proportional increase relative to the PRC’s GDP growth target — between 4.5 and 5 percent—the lowest growth target since 1991.[iii]
The PRC’s increased military spending amidst slowing economic growth reflects a continued commitment to PLA modernization. CCP General Secretary Xi Jinping linked the PLA’s modernization to the advancement of CCP leadership and party building in the military during a plenary session on March 7 for the PLA and People’s Armed Police (PAP).[iv] The meeting emphasized the importance of the “two establishes,” “two safeguards,” and the Central Military Commission (CMC) Chairman Responsibility System—concepts that affirm Xi as the CCP’s ultimate political and military authority and assert the PLA’s mission to uphold his leadership.[v] ISW-CDOT has reported extensively on Xi’s ongoing anti-corruption campaign that has removed many of the PLA’s highest-ranking officers, likely in an effort to centralize Xi’s authority and prevent powerful factions from challenging his leadership.[vi]
The PRC’s annual government work report used more bellicose language regarding Taiwan than in previous years. The government work report is a comprehensive overview of major PRC policies for the year ahead. The 2026 work report changed the phrase “oppose Taiwan independence” from previous versions to “crack down on Taiwan independence.”[vii] The more combative phrasing reflects the PRC’s expanding coercive efforts against Taiwan since the election of the “separatist” Taiwanese President William Lai Ching-te.
PRC policy documents often largely follow a script that contains stock phrases year to year, so small wording changes can reflect significant changes in policy direction.[viii] The adjustment in this year’s government work report follows similar changes made during other high-level Taiwan policy forums in recent years.[ix]
The draft outline of the PRC’s 15th five-year plan placed heavy emphasis on technological development and the alignment of economic and national security goals. The PRC’s five-year plans are a series of strategic blueprints that outline national and economic development targets for the next five years. The 15th five-year plan expands on the previous iteration by placing a focus on emerging technologies.[x] The PRC seeks to move beyond semiconductors and develop advanced computing, data infrastructure, and artificial intelligence (AI).[xi] The outline highlighted the need for the PRC to “seize the commanding heights” of technological development, language that the PRC often applies in military parlance to describe gaining dominance over an adversary in a certain domain.[xii] The PRC likely sees technological advancement as the decisive area of great power competition in the 21st century, which will not only drive global economic growth but also transform the nature of warfighting.
The plan’s explicit call for greater military-civil fusion and a strong focus on AI indicates that the PRC will take more active measures to achieve “intelligentization” in the military—a key modernization milestone for the PLA.[xiii] Intelligentization refers to the integration of AI and autonomous weapons into command and control (C2) systems to achieve decision-making dominance over adversaries.[xiv]
The PRC is continuing to take steps to voice its political opposition to the war in Iran by calling for de-escalation and advocating for trade routes to reopen. PRC Foreign Minister Wang Yi called for a ceasefire between the United States, Israel, and Iran on March 8 and stated that the war “should not have happened” during a press conference on the sidelines of the National People’s Congress (NPC).[xv] Wang stated that the PRC is willing to work as a mediator in the current conflict, echoing past PRC rhetoric on multiple recent conflicts.[xvi] Wang’s rhetoric against the United States and Israel on March 8 was more muted than PRC condemnations of combined force actions at the outbreak of conflict in late February, however.[xvii] Wang commented on US-PRC relations in the context of the Middle East conflict, stating that “we can choose how we want to engage” in response to a question about US President Donald Trump’s upcoming visit to the PRC.[xviii] The PRC has also taken steps to maintain ties with its other Gulf partners and urge de-escalation.[xix]
ISW-CDOT continues to observe limited to no indicators of PRC material support to Iran throughout the conflict. The Washington Post on March 9 reported that two Iranian ships left the PRC, likely carrying rocket fuel precursor chemicals bound for Iran.[xx] CNN reported on March 6 that the PRC may be preparing to provide Iran with more weapons components and financial backing, citing unnamed sources.[xxi] The PRC denied in March 2026 that it provided anti-ship cruise missiles to Iran.[xxii] The PRC has remained similarly muted in its comments on Iranian leadership succession, stating only that new Supreme Leader Mojtaba Khamenei’s appointment occurred in accordance with Iran’s constitution.[xxiii]
The PRC favors regional de-escalation and is likely prioritizing ensuring the reopening of the Strait of Hormuz. Automatic Identification System (AIS) ship tracking data shows that Strait of Hormuz ship transit dropped to near-zero since March 10, including among PRC and Hong Kong-flagged ships.[xxiv] The PRC has urged Iran to reopen the Strait, reportedly advocating for crude oil and Qatari liquefied natural gas (LNG) to pass through.[xxv] US President Donald Trump expressed a similar interest in maintaining the PRC’s oil access, offering on March 9 for the United States to accompany PRC ships transiting the Strait of Hormuz due to the US’s “good relationship with China.”[xxvi]
The PRC increased its oil stockpile prior to the outbreak of conflict in the Middle East.[xxvii] The PRC imported 15.8 percent more oil in January and February 2026 than in January and February 2025. The PRC currently maintains a strategic reserve of approximately 1.2 billion barrels.[xxviii] The PRC’s strategic reserves would likely prove instrumental in a Taiwan contingency, which could put the PRC at risk of a blockade. The PRC imports most of its oil from overseas, necessitating a substantial reserve to prepare for military actions that could compromise sea lane access.[xxix]
The PRC will likely study the conflict in Iran to inform its understanding of kinetic operations and the changing character of contemporary warfare. US officials confirmed in April 2025 that PRC officers traveled near the frontlines of the Russia-Ukraine war, likely aiming to study operational lessons.[xxx] The war in Iran may offer the PRC a similar opportunity for military learning. PRC state-owned tabloid Global Times published an article on March 2 analyzing the possible causes of the downing of US aircraft over Kuwait, including Iranian air defense.[xxxi] Multiple PRC media outlets noted the applications of AI in the US-Israeli strikes on Iran.[xxxii] One PRC firm, Jingan Technology, noted that it used AI to track indicators of US military buildup in the Middle East before the strikes occurred.[xxxiii] The PRC
