The modernisation of Chinese defence policy was launched as a result of the lessons learned from the first Gulf War in 1990-91. At the operational level it is largely influenced by the Taiwan factor, and at the strategic level by the ambitions of the People’s Republic of China to become a global and regional power. The budgetary resources allocated to defence by the Chinese government are certainly impressive, but should be seen in the context of the magnitude of the task of modernising a manpower-heavy defence establishment that is technologically a long way behind modern armed forces. It is essential to develop a dialogue with China which encourages transparency and cooperation, so as to head off the emergence of a ‘threat’ from a PLA whose modernisation is both legitimate and inevitable.