In the same week that China formalised its largest-ever defence budget in yuan terms, its top diplomat stood before the world’s press and described the American military campaign in Iran as a war that should never have happened. The juxtaposition — steady military investment alongside public criticism of the conflict that has pushed global oil prices to their highest point since 2022 — captures the dual posture Beijing is attempting to maintain as the world order it has long sought to reshape accelerates its fragmentation without China having fired a single shot.
The Budget: Numbers That Frame Everything
The Chinese government proposed a defence budget of 1.91 trillion yuan — approximately $276.9 billion — for the 2026 fiscal year, a 7 per cent year-on-year increase, according to the draft budget report submitted to the National People’s Congress on March 5. If approved by lawmakers, the allocation will maintain single-digit growth for an 11th consecutive year since 2016, and will represent the lowest percentage increase since the 2021 fiscal year, when the legislature approved a 6.8 per cent raise. CBT News
Although the increase represents the slowest rise in five years, it still exceeds China’s projected economic growth target of 4.5 to 5 per cent, highlighting Beijing’s sustained emphasis on military development even as economic growth moderates. Premier Li Qiang outlined the policy rationale alongside the broader government work report: the new budget would help improve combat readiness and accelerate the development of what he described as “advanced combat capabilities,” strengthening China’s ability to safeguard its sovereignty and strategic interests. Gurutrade
The official figure, as with every previous year’s announcement, comes with a structural qualification from Western analysts. According to the US Department of Defense’s 2025 report to Congress on China’s military, Beijing spent between $304 billion and $377 billion on defence in 2024 — approximately 32 to 63 per cent higher than its officially announced budget of $231 billion for that year, due to off-budget items that the official figures do not capture. The Stockholm International Peace Research Institute estimated China’s defence spending in 2025 at around $296 billion when including items excluded from official reporting.
The 2026 allocation accounts for approximately 1.3 per cent of China’s projected gross domestic product — a proportion consistent with recent years and below the 1.5 per cent level cited in Chinese official statements as a measure of restraint. For comparison, the United States has approved a defence budget of over $900 billion for 2026, with some proposals suggesting the 2027 figure could approach $1.5 trillion. China accounts for nearly 44 per cent of Asia’s total defence spending, up from an average of approximately 37 per cent during the previous decade, according to the International Institute for Strategic Studies.
Wang Yi’s Diplomacy: Five Principles and a Strategic Pivot
Two days after the defence budget was submitted, Foreign Minister Wang Yi appeared before press on the NPC sidelines and delivered the most consequential diplomatic statement of the annual session. It was directed not at the legislature but at every government watching to see how Beijing would position itself as Washington and Tehran fought.
Wang said China’s position could be summarised in one message: bring about a ceasefire and end hostilities. He invoked ancient Chinese wisdom — “weapons are ominous tools, and should not be used without discretion” — before outlining five principles: respect for national sovereignty, including Iran’s; rejection of the use of force as a tool of policy; non-interference in the internal affairs of Middle Eastern states; promotion of political settlement through dialogue; and a call for major powers to play a constructive rather than destabilising role.
Wang explicitly called on the US and Israel to respect the sovereignty, security, and territorial integrity of Iran and other countries in the Gulf region. He described the law of the jungle as something the world “cannot revert to” — a formulation that was understood by every diplomat in the room as a direct reference to the American military campaign. NPR’s China correspondent noted, however, that China is not impartial in this conflict: Beijing is more strategically aligned with Iran than with the US or Israel, and buys large amounts of Iranian oil, supplies that have been disrupted by the Strait blockade. Atlasinstitute
CNN’s reporting from the briefing noted that Wang struck a notably confident tone compared to the same annual press conference one year earlier, when he had warned Washington against a “two-faced approach” to China. In 2026, the message was more assured: Beijing had “largely weathered” Trump’s tariff attacks and, as Wang framed it, had validated its strategy while elevating its global standing as the American president triggered upheaval around the world. “China has provided the most precious source of stability and certainty for a turbulent world, becoming an irreplaceable anchor amid global chaos,” Wang said — a statement as much directed at European capitals as at Washington. Republic World
The Xi-Trump Summit: Still On, Still Uncertain
Wang offered a positive signal that an expected meeting between President Donald Trump and Chinese leader Xi Jinping at the end of March might still proceed, despite the war. Wang did not confirm a specific date but said China is open to dialogue with the United States and that the world cannot afford for the two largest economies to engage in conflict. MarketScreener
Asked directly by CNN whether the US-Israeli strikes on Iran would affect the planned summit, Wang replied: “What is needed now is for both sides to make thorough preparations, foster a conducive environment, manage existing differences, and eliminate unnecessary interference. China and the United States are both major powers, and neither can change the other — but we can change the way we interact.” The answer neither confirmed nor denied the trip. It was the diplomatic equivalent of a door held slightly open.
The Strategic Context Neither Side Is Stating Directly
The combination of China’s steady defence budget increase, Wang Yi’s five-point ceasefire framework, and the signals about the Xi-Trump summit amount to a coherent strategic posture that Beijing has not needed to announce explicitly: the instability generated by Washington’s military action in West Asia is, from China’s perspective, a demonstration of American overreach that vindicates Beijing’s long-standing critique of unilateral force. China does not need to intervene militarily to benefit from the narrative.
A parade of traditionally close US allies — French President Macron, British Prime Minister Starmer, and German Chancellor Merz — have visited Beijing over the past few months, a development Wang acknowledged with a pointed observation: “an increasing number of insightful figures in Europe recognise that China is not a competitor, but a global partner.” The statement was as much a reading of where European governments are moving as it was a diplomatic pleasantry. Republic World
The defence budget of $277 billion — steady, predictable, and growing faster than the economy it serves — is the material foundation beneath all of it. China is not rushing. It is building.
All defence budget figures are sourced directly from the Ministry of Finance draft budget report as distributed at the NPC opening session on March 5, 2026, reported by China Daily, Global Times, CNBC, The Defense News, and Modern Diplomacy. Wang Yi’s five-point position on the Iran conflict is sourced from his press conference on March 8, 2026, via the Ministry of Foreign Affairs of the People’s Republic of China official transcript, corroborated by NPR, CNN, The Express Tribune, and GlobalSecurity.org. Off-budget spending estimates are sourced from the US Department of Defense’s 2025 China military report and SIPRI. All figures are as of March 10, 2026.
