Reports, and digital photos, getting out of China via the Internet, indicate that the modernization of the Chinese armed forces is some two years ahead of the schedules cited by most Western experts. New aircraft, ships and tanks are showing up sooner than expected, and China is spending money on more training for pilots and ship crews. Not as much training as Western forces get, but more than in the past for China. It appears that the Chinese defense budget will go up another 10-15 percent next year. This is only about half of what Japan spends, but the Japanese pay much more for personnel and equipment. This gives Japan a qualitative edge that the Chinese are trying to close. 

China also expects Europe to drop its arms embargo this Summer. This would enable China to more quickly, and cheaply, upgrade warplanes, ships and tanks with more modern, and effective, French and German electronics and weapons. European nations have been selling China hundreds of millions of dollars worth of dual use military equipment each year, but as long as the embargo is in force, explicitly military gear can only be sold under the table and smuggled in. American protests, that selling China weapons might mean the use of those weapons against American forces, has no effect on the French and Germans. Indeed, France was rather pleased when in 1986, a French Exocet anti-ship missile, fired by an Iraqi warplane, heavily damaged an American warship (by mistake, of course.)