Taiwan plans sharp defence spending rise for 2027

Taiwan’s cabinet is set to increase defence spending by around 16 per cent in 2027, marking the first time that the island's total security-related expenditure will surpass NT$1 trillion. This allocation, which will exceed NT$1.1 trillion or approximately US$34 billion when broader defence-related spending is included, is expected to be unveiled on August 20.

Covering the armed forces, coast guard, veterans, and special military programs, this spending surge aims to maintain Taiwan's defence expenditure above 3 per cent of its GDP, continuing a trend initiated by President Lai Ching-te. The increase is driven by Beijing's sustained pressure and China's growing military capabilities across the Taiwan Strait.

Lai has set a goal of reaching 5 per cent of GDP for defence spending by 2030, emphasizing the need for stronger self-defense amidst rapid Chinese military expansion. The policy also addresses Washington's request for Taipei to assume a greater financial responsibility for deterring potential attacks. The spending expansion coincides with annual Han Kuang exercises, involving large-scale simulations of various threats, and underscores Taiwan's focus on asymmetric capabilities, including drones, mobile missile launchers, and dispersed command systems.

Military exercises have incorporated lessons from recent conflicts, highlighting the effectiveness of unmanned systems in challenging traditional military assets. While Taiwan has been procuring arms, ammunition, drones, missile systems, and naval platforms from both domestic sources and the United States, political opposition within the legislature has challenged certain aspects of President Lai's military programme, leading to a modest US$25 billion increase in defence spending that was approved in May.

The cabinet's proposal, to be submitted to parliament, will face scrutiny due to these political disagreements. China considers Taiwan a part of its territory and has not excluded the use of force to achieve reunification, while Taiwan maintains its stance of non-recognition of Beijing's sovereignty claim. Ongoing Chinese military activities and exercises, coupled with China's steadily rising defence budget, highlight the escalating tensions between the two sides.