The Taiwanese government says it may downsize its commitment to upgrading its aging F-16 fighter jets, cutting expenditures by nearly 40 percent, with the result that the island’s air defense system looks likely to fall further behind China’s People’s Liberation Army.

In August the Obama government refused Taiwan’s request for 66 new-generation Lockheed Martin F-16C/D jet fighters to replace other elderly planes for fear of inflaming tensions between the US and China. The US then asked the Kuomintang government to spend US$5.1 billion to upgrade the aging planes.

The package offered as consolation was comprised of advanced radars, pinpoint bomb guidance systems and a feasibility study for new engines, among other punchy items. Local media however, is speculating that Taipei will refit only some aircraft, doesn't want to replace the aircrafts' engines and even wants to scrap the smart bombs.

The Taiwanese air force currently commands 327 combat-ready jet fighters. Next to the 145 F-16A/Bs procured in the 1990s are 56 French-made Mirage 2000s and 126 locally-developed Indigenous Defense Fighters of roughly the same era. It also has a few dozen F-5s built in the 1970s and 1980s for training or ocean reconnaissance. The F-5s are set to retire, as are the Mirages as maintenance issues have made the French aircraft prohibitively expensive.

The IDFs are being upgraded in batches, with the F-16A/Bs set to follow. But retrofit or not, at the end of the decade, Taiwan will have only 270 jets to seek to deter China's rapidly growing and modernizing PLA, whose budget could reach US$238.2 billion by 2015, according to the latest estimates by global research group IHS.

Without new engines for the F-16A/Bs, China's modern aircraft such as the Su-30s are too fast and too maneuverable for the Taiwanese.

A foretaste of what's in store came last June when the Taiwanese Ministry of National Defense confirmed that two Su-27 fighters crossed the Taiwan Strait's median line to chase a US spy plane, making it the first such breach in at least a decade, while six other alleged intrusions on the same day went unverified by the ministry.

There's yet another problem looming. In early February local media reported that Taipei intends to sue Paris over alleged illegal commissions and kickbacks surrounding the 1992 sale of the Mirages. Reportedly facing fines of as much as 1 billion euros, Paris could well choose to retaliate at the expense of the Mirage fleet, cutting their service life even shorter by withdrawing French technicians.

The Ma administration apparently earned similar retaliation by suing the French government over a massive scandal over Lafayette-class frigates, an arms deal which was also conducted almost two decades ago involving kickbacks, a cover-up and multiple murders.

Taipei won. The French defense company Thales since wired a court-ordered fine of US$875 million into a Taiwan government bank account, but Taiwanese lawmakers belonging to the opposition Democratic Progressive Party say the island's victory led to Paris closing down its military liaison office in Taipei, a maneuver that according to the opposition had repercussions for the maintenance of Taiwan's French-made weapon systems.

It's not only the PLA air force that will find it easier coming too close for comfort in ever shorter intervals. In early February, the Japanese Ministry of Defense stated that four Chinese missile frigates sailed through the Miyako Strait, is a 300km-wide channel between Okinawa and Miyako island east off northern Taiwan. The passage is one of the few relatively convenient ways for the PLA Navy to reach the Pacific and hence is of enormous strategic importance.

Days afterward, a Panama-flagged Chinese vessel allegedly on a spying mission made headlines by seeking shelter in the Kaohsiung harbor during bad weather. James Holmes, an associate professor at the US Naval War College told the Taipei Times the PLA Navy is familiarizing itself with the operating environment off Taiwan, including the coastal geography and underwater hydrography, experimenting with tactics for waging war there.

The Chinese intend to make use of the rugged Taiwanese eastern coast, a splendid sanctuary for small missile boats and submarines, Holmes said.

“If the Ma government remains committed to underfunding the F-16A/B upgrade program, it runs the risk of undermining the seriousness of their commitment to buy new F-16C/Ds” said Rupert Hammond-Chambers, the president of the US-Taiwan Business Council, an NGO that acts as a go-between between Taipei, Washington and the US defense industry. He indirectly confirmed the Taiwanese decision to not buy the new engines, but pointed out that it's what's the government wants, not the Taiwanese military.

“It is mostly a financial decision. The Taiwan Air Force would like it, but the money just isn't there at this time.”

James Holmes of the US Naval War College says Taipei should shift its focus from air force and army to the navy anyway.

“I hope Taiwan will develop capabilities that deter China while sidestepping areas where the island's armed forces can no longer compete, such as undersea warfare and, increasingly, surface and air-to-air combat,” Holmes said.

Holmes added that he has been pushing for a Taiwanese navy centered on small, fast attack craft. Holmes and a colleague made headlines a few years ago, advocating a defensive “porcupine strategy” that makes the idea of a cross-strait invasion unthinkable.

“If Beijing can send a coercive message through its military buildup, Taipei can reply with a deterrent message by revamping its maritime defenses. Equilibrium is then hopefully maintained,” Holmes said.

Wendell Minnick, the Taipei-based Asia bureau chief of the authoritative industry magazine Defense News said concerns that the budget cuts had grave repercussions for the island's security must be taken with a pinch of salt. It’s not clear, he said, whether Taiwan's aging F-16s could even handle the more powerful engines.

“If [the feasibility study finds it is] possible to fit them, Taiwan can then decide whether they want them or not.”

Taiwan, Minnick said, doesn’t have to buy everything immediately in the first budget plan. It can opt to procure missiles and other items at a later date.

“This is very normal. The budget announcement does not at all mean they can't afford the whole package or they don't want the whole package. Many of the items in the FMS [Foreign Military Sales] release were optional. Like a candy store where your mom tells you that you can get all the candy on the third row – but you can't really afford it all at that moment or don't see a need for it at that moment. You can come back later.”

Also in regards of the satellite-guided smart bombs, known as JDAMs, which would enable the F-16s to strike Chinese ports and coastal military installations without exposing themselves recklessly to PLA air defenses, Minnick says the Taiwanese “were offered three types of JDAMs, so they may not want all the types, or one or two types. Also, some in the US air force want foreign countries to buy a lot of a certain items because it lowers the overall price of it for themselves.”