March 18, 2011:
Taiwan is reducing its troop strength by 9,200 this year. This is part of a Taiwanese plan to reduce personnel strength 25 percent over the next few years, and eliminate conscription. These reforms would give Taiwan an armed forces that is about 12-15 percent the size of China's, but more capable man-for-man. Taiwanese defense efforts are mostly about defending the island nation from Chinese invasion. At the same time, most of the increased Chinese spending goes towards improving personnel, to close the quality gap with Taiwan, and Western nations.
Taiwan is maintaining defense spending at 2.7 percent of GDP, which comes to about $10 billion a year. China is spending more than ten times as much money. China, however, has many other things to pay for (nuclear weapons, ballistic missiles, defending borders with Russia and several countries in the south.) The Chinese Navy, in particular, has a growing number of priority chores in protecting vital Chinese shipping lanes (for raw materials from Africa, the Middle East and Australia) and exports to everywhere.
But Chinese defense spending has more than doubled in the last decade. This has triggered an arms race with its neighbors. Russia just announced a new military upgrade program that would increase defense spending by a third, and devote over half a trillion dollars in the next decade to buying new equipment. Japan, already possessing the most modern armed forces in the region, is increasing spending to expand it. A decade ago, China and Japan spent about the same on defense, but now China spends more than twice as much. Even India is alarmed. Spending only 30-40 percent as much as China does, the Indian generals and admirals are demanding more money to cope with China. India and China are actually devoting a lot of their additional spending to just bringing their troops up to date. Both nations have lots of gear that was new in the 1960s and 1970s. They don't expect to be as up-to-date as the U.S., which spends over $500 billion a year, but there's plenty of newer, much better, and often quite inexpensive stuff to be had.
The perceived "Chinese threat" has persuaded neighbors to play down disputes and develop better military ties with neighbors. Such is the case with Russia and Japan, who still have a bitter dispute over ownership of the Kuril islands. Same with Japan and South Korea, who have a lot of bad history to keep them apart, but a growing Chinese military threat to overcome all that. Same deal with Taiwan, Vietnam and India. China has only been able to buy friends in Myanmar (an impoverished police state), North Korea (a very impoverished police state) and Pakistan (a corrupt and impoverished occasional democracy). China would like to upgrade in the allies department, but communist police states remain scary neighbors.