According to Foreign Policy, People's Republic of China is bui9lding world's largest military with an annual military budget of $103.9 billion (2005 estimate).
Between 2002 and 2006, China purchased over $14.6 billion in arms. Between 2001 and 2005, China increased its annual military budget by nearly 126 percent. In addition to buying a few destroyers and submarines from Russia, China has also been developing its own nuclear-powered submarines that can fire off nuclear ballistic missiles. At its current rate of military expansion, China could have the world's largest navy by 2020. Earlier this year, the Chinese also performed an unannounced test of a new antisatellite missile that drew fierce criticism from the United States and the international community.
The People's Liberation Army (PLA), with 2.25 million active-duty members, is the largest army in the world. But as large as its active-duty forces are, the Chinese military has decreased in size in the past two decades by more than 1.6 million soldiers. The reduction has allowed the Chinese military to use its increased budget to focus on training, leaving the force smaller and more professional.
The Taiwan Strait. China is determined to use its new wealth to modernize its armed forces, and a possible battle with the United States over Taiwan is the main motivating factor. (Source: foreignpolicy.com, Nov 25, 2007).