ANNUAL REPORT

377
Japan. The exercise included amphibious armored assault vehicles,
helicopters, and special operations forces attacking a hypothetical
enemy beach. 150
China’s large defense expenditures are a major challenge for Taiwan.
China’s defense budget grew by double digits almost every
year between 2005 and 2015,* increasing the official defense spending
gap to more than $130 billion. In contrast, Taiwan’s defense
budget has grown modestly. 151 The defense budget submitted by
Taiwan’s Executive Yuan for 2016 of 321.7 billion New Taiwan Dollars
or $9.8 billion (about 2 percent of GDP) represented an
increase of 2.8 percent over the 2015 budget. 152 In 2016, China’s
announced military budget grew by single digits for the first time
since 2010 with an increase of 7.6 percent to 954.35 billion
renminbi or $146.7 billion (1.3 percent of projected GDP).† 153 The
slow growth of Taiwan’s defense budget was due to a number of
factors, including: the improvement in cross-Strait relations that
reduced the concern of some in Taiwan regarding China’s military
threat to Taiwan; growing competition for government resources,
particularly from social welfare programs; increasing government
debt; partisan political wrangling; and uncertainty about the future
of U.S. arms sales to Taiwan, particularly requested sales that Taiwan
factors into its budget but are not completed due to delays resulting
from unresolved issues on both sides. 154 In the years prior
to President Tsai’s election, the DPP promised to raise Taiwan’s defense
budget to 3 percent of GDP. 155 However, in June 2016, Taiwan
Premier Lin Chuan said the 2017 defense budget would not
reach that level due to financial constraints. 156
Faced with a growing threat from PLA modernization, Taiwan
has sought to enhance its military capabilities in part by indigenously
developing platforms and weapons systems. Advanced antiship
cruise missiles, air defense missiles, and fast attack and
stealthy catamaran-style patrol ships are among the newest platforms
and weapons systems that Taiwan has produced. Some of the
developments in Taiwan’s procurement of domestic military equipment
over the past year include the following:
• Missile corvette: Taiwan’s TUO JIANG-class catamaran-style
missile corvette is projected to enter serial production in
2018. 157 Taiwan commissioned the first ship in this class in
March 2015, and after identifying several areas in which the
ship needed improvement, has since created a new design for
serial production. 158 Taiwan may build up to 11 more ships in
the TUO JIANG-class. The new corvette has stealth features
and better range, endurance, and sea-keeping ability than Taiwan’s
other patrol ships, and it is equipped with 16 antiship
cruise missiles. 159 It also has two torpedo tubes and a towed
sonar array. 160 These features will enhance the survivability
and lethality of Taiwan’s antisurface and antisubmarine forces
in a potential cross-Strait conflict. 161
dkrause on DSKHT7XVN1PROD with USCC
* This measurement is according to China’s announced defense budgets, not actual aggregate
spending. China’s announced budget omits major defense-related expenditures, such as purchases
of advanced weapons, R&D programs, and local government support to the PLA.
† See Chapter 2, Section 1, ‘‘Year in Review: Security and Foreign Affairs,’’ for more information
on China’s defense budget.
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