Fighter jets roared over Taipei on Saturday morning, and two Chinook helicopters dangled giant Taiwan flags beneath their rotors as they crossed the sky above the Presidential Office. Minutes later, President Lai Ching-te stepped to the podium for his National Day address and gave the military build-up its official rationale: “Our aim by increasing investment in national defence is not to provoke, rather, it is to deter war.”
The numbers are the largest in Taiwan’s history. Lai’s government has earmarked a record NT$1.1 trillion — about US$34.5 billion — in defence spending for 2027, more than three per cent of GDP. It builds on an earlier commitment he made last year: to raise military spending to 3.32 per cent of GDP in 2026, with a stated goal of crossing 5 per cent before 2030.
Here is the argument underneath the budget, and it is worth taking seriously: deterrence is not about winning a war with China. Nobody in Taipei believes Taiwan can outspend the People’s Liberation Army, which is adding stealth fighters, aircraft carriers and vast missile stockpiles. Deterrence is about making the cost of an attack high enough, and the outcome uncertain enough, that Beijing keeps choosing not to move. As Lai put it in the same speech: “We are strengthening our self-defence not to abandon dialogue, but to ensure that dialogue can take place on the basis of parity and dignity.”
The pressure Taiwan is answering
Lai pointed to what he called China’s “military and grey-zone activities in an attempt to alter the status quo across the Taiwan Strait” — the warplanes circling the island, the naval patrols, the cyber operations and disinformation campaigns that never quite become a war but never quite stop. Grey-zone pressure is designed to exhaust a smaller democracy without ever giving it a clean justification to fight back. A bigger defence budget is Taipei’s way of answering that campaign in the only currency Beijing respects: hard power.
Beijing’s answer
Beijing answered within hours, and its reply shows why deterrence is such a hard sell. China’s Taiwan Affairs Office said Lai’s speech “disregards facts, distorts the truth, misleads the public, and reveals ulterior motives”, accused him of clinging to “Taiwan independence” separatist thinking, and restated its position that “there is only one China in the world, and Taiwan is part of China”.
This is the trap at the heart of deterrence: every defensive move Taiwan makes gets read in Beijing as provocation, which Beijing then cites as the reason for more pressure, which Taiwan then cites as the reason for more spending. Lai tried to cut through it directly — “We do not seek hegemony, nor do we seek to dominate others” — but the cycle is structural, not rhetorical. “Peace cannot rely solely on wishes,” he said, “and tolerance cannot become a pretext for aggressors to encroach ever further.”
The American audience
There is a second audience for this budget, and it sits in Washington. Taiwan’s 23 million people live under constant threat, but the island’s ultimate backer is the United States — and American support has to be earned repeatedly. Lai welcomed talks between the US and China in his speech, but insisted “there must be respect for the right of the people of Taiwan to exist”. A record defence budget is also a signal to the White House that Taipei is serious about its own defence, which makes it politically easier for Washington to keep supplying the weapons that make deterrence credible. Officials in both capitals keep repeating that US policy on Taiwan has not changed under Donald Trump — but Taipei clearly prefers not to test that claim with a thin budget.
So this is the wager: spend unprecedented sums to raise the price of invasion, keep Washington engaged, and force Beijing to calculate rather than act — while hoping that the very build-up meant to prevent a war does not become the pretext for one. “Taiwan cherishes peace,” Lai said, “but we will not give up our freedom.” On Saturday, in front of the Presidential Office, that stopped being a slogan and started being a budget.
One Comment