China Power (CSIS)

The article examines trade chokepoints in the South China Sea and notes its initial publication on the ChinaPower Project.

The article 'Troubled Straits: Analyzing Trade Chokepoints in the South China Sea' examines strategic trade routes in the region. It is authored by Brian Hart, Matthew P. Funaiole, David Peng, Jasper Verschuur, Bonny Lin, and Leon Li, and published by the ChinaPower Project.

An Iran war beginning February 28, 2026 has disrupted the Strait of Hormuz and created significant economic shocks for China, the world's second-largest economy. Major impacts include reduced demand for Chinese exports as global economies contract, energy supply disruptions (one-third of China's crude oil transits the strait), supply chain challenges, and threats to Chinese investments in the Middle East region.

Xi Jinping has conducted extensive purges of China's People's Liberation Army (PLA) since 2012, with a second major wave beginning around 2023 that has been far more extensive than previously understood. The CSIS China Power Project database documents over 100 senior PLA officers who have been purged or potentially purged since 2022, including six CMC members. These purges have significantly decimated the PLA's high command structure.

China's robotics sector is experiencing rapid growth, exemplified by the Chang'An Automobile Digital Intelligence Factory in Chongqing, which operates over 2,000 robots and produces cars 20% cheaper than traditional methods. This automation wave is boosting China's manufacturing competitiveness and global market position while potentially challenging U.S. manufacturing revitalization and creating economic pressures for developing nations.

China significantly increased military activities across the Indo-Pacific in 2025, conducting record-breaking operations in the Taiwan Strait and South China Sea while expanding far-seas training beyond the First Island Chain. The PLA sustained higher operational tempo around Taiwan following President William Lai's inauguration, conducted two large-scale exercises, and demonstrated unprecedented capabilities including simultaneous aircraft carrier operations in the Pacific.

A CSIS survey of 79 U.S. experts reveals mixed assessments of U.S.-China relations entering 2026, with only 26% believing relations are more stable than a year ago despite late 2025 trade agreements between Presidents Trump and Xi. Experts are divided on whether China views the U.S. as a strategic competitor or adversary, with significant uncertainty surrounding the durability of recent diplomatic agreements.

China commissioned its third aircraft carrier, the Fujian, on November 5, 2025, marking a significant advancement in its naval capabilities. The Fujian features an electromagnetic catapult launch system (EMALS) and displaces 80,000 tonnes, making it more advanced than China's previous carriers but still lagging behind U.S. nuclear-powered carriers in certain aspects.

China released its 2026 government budget projecting RMB 24.1 trillion in revenue and RMB 30 trillion in expenditure, resulting in an official deficit of RMB 5.9 trillion. Defense spending was set at RMB 1.9 trillion with a 7 percent increase, while actual military spending is estimated to be 30-40 percent higher than official figures. The budget reflects China's fiscal situation worsening despite spending increases in defense, foreign affairs, science, technology, and social welfare.

China and Russia maintain deep military ties centered on arms sales and joint exercises, though they have avoided a formal alliance. Russian military aid has been crucial to modernizing China's PLA, but tensions exist over Chinese technology theft and decreasing reliance on Russian weapons. The relationship's military dimension has evolved from the Soviet Union's massive support during the Korean War to contemporary strategic cooperation.

The article argues that concerns about China's ownership of U.S. debt are based on misconceptions about sovereign debt dynamics. China's debt holdings provide minimal economic leverage over the U.S., as the debt is widely held globally and China itself relies on these holdings to manage its currency exchange rate.

China's official defense spending announcement of $276.7 billion for 2026 masks significantly higher actual military expenditures estimated by independent organizations at $313.7-$325 billion. The lack of transparency in Chinese defense budget reporting and the divergence between official figures and external estimates makes it difficult to accurately assess China's true military capabilities.