While we scrimp on defence China prepares for war with everything from a huge nuclear arsenal to a vast, mysterious network of bunkers its population could use to survive an all-out atomic conflict

Superpower China is running out of steam. As delegates from across the vast country assembled last week for the National People's Congress [NPC], the Communist Party's rubber-stamp parliament, Beijing's economic resurgence is in trouble.

The global recession triggered by the pandemic has hit China harder than almost anywhere else. World demand for its products, from high-end electronics to cheap plasticware, has slumped.

Investors have pulled out as supply chains are 'de-risked' to reduce dependence on Chinese imports. And many factories have been caught out by over-production and left with massive stocks that can't be sold.

Population decline means Beijing's astonishingly ambitious national building schemes, with entire cities of skyscrapers springing up where villages once stood, will not now be needed. With millions of new-build homes standing empty, property prices have crashed.

Meanwhile, thanks to the fluctuations of a market economy, China's once-booming middle classes are experiencing a mass recession and trying to cope with a cost-of-living crisis – something this country has not suffered in living memory.

Despite cries tot he contrary, Beijing 's economic resurgence seems to be in trouble

One major source of economic strength continues to thrive, however: China's military machine

Opening the NPC on Tuesday, Li said defence spending will increase by 7.2 per cent this year

Married couples have responded by deciding not to have children, a trend that only exacerbates China's OAP problem. In ten years, China will have more pensioners than there are people in the US – and since the state pension is negligible, they will be largely reliant on personal savings.

But because the Chinese love to gamble, broad swathes of the middle classes invest their nest eggs in the stock market... and this too has taken a battering recently.

Any one of these factors alone might not have been catastrophic. China's economy – for which its leaders are targeting an optimistic 5 per cent growth this year – was predicted until recently to overtake the US to become the world's wealthiest country, and the dominant force of the 21st Century.

Its economy might have withstood a global downturn, a lockdown, a demographic shift or a property slump. But all these things together could prove overwhelming.

Already the signs from the NPC point to uncertainty and rising panic. The event, a bogus parliamentary session to confirm what the ruling Communist Party has already decided, brings together the various ethnic groups, from Han Chinese to Tibetans, Uyghurs, Mongolians, Manchurians and others.

Official photographs depicted smiling representatives in ethnic costumes. But, in an unexpected move, Chinese and foreign reporters were told there would be no press conference by the Premier at the close of proceedings – for the first time in three decades.

Since 1993, this question-and-answer session has been broadcast live, treated as an important shop window to attract overseas trade. It was traditionally headed by the Premier, China's deputy leader under the President, who wields dictatorial power.

Last year, current Premier Li Qiang took the questions for the first time, but his decision not to do so again is being portrayed as 'an act of loyalty' to President Xi Jinping.

While the West has been scaling back its military spending in favour of welfare and healthcare, President Xi Jinping (pictured) has been building artificial islands as naval bases and airfields

More than 100 nuclear missiles with multiple warheads have already been built and armed, with production expected to exceed 500 by the end of this decade, if not sooner

For the rest of the world, even an economically stalled China could be that most dangerous of creatures: a wounded dragon in a mood to lash out

The reality is that it signals an even greater transfer of power to the autocratic head of state and a shift to a more insular economy. China has decided, it appears, to pay less lip service to the rest of the world.

One major source of economic strength continues to thrive, however: China's military machine. Opening the NPC on Tuesday, Li said defence spending will increase by 7.2 per cent this year. Beijing excels at taking the long-term view and Xi will see two advantages in pouring state wealth into defence.

First, all of that money will be spent in China, creating jobs and improving living standards. Second, China's international clout will be increased by its burgeoning army, navy and missile arsenals – at a time when most of the West, not least Britain, is scrimping on its defence spending.

The US cannot match the pace of building in the shipyards of Shanghai, which have already turned out two new aircraft carriers with a third expected to begin sea trials soon.

The latest vessel, the Fujian, features catapults to launch heavy, fixed-wing aircraft with immense bomb payloads. These shipyards are also building a new type of amphibious assault vessel, and many roll-on, roll-off ferries, which could have a dual purpose – transporting cars in peacetime, and armoured assault vehicles in the event of an attack on a neighbour, such as Taiwan.

While the West has been scaling back its military spending in favour of welfare and healthcare, China has been building artificial islands as naval bases and airfields. Less obvious but more ominous, it has also been digging a vast network of tunnels and bunkers that make the Hamas warrens in Gaza look like holes scooped by children in a sandpit.

The Chinese tunnels stretch for hundreds of miles and their plans are so closely guarded that Western intelligence agencies have little idea what is down there.

Domestic spies in the pay of the West, who have attempted to smuggle out information, have been caught and executed.

President Xi Jinping is busy investing in China's military while its economy flounders

Military body-building also gives China greater influence over Russia's gangster government and Putin (pictured) 

Beijing could confront US President Joe Biden with a harsh choice in the run-up to November's election: stand up to China or back off from confrontation 

Most alarming of all is the build-up of nuclear missiles. Throughout the Cold War, though China has been a nuclear power from the mid-1960s, its atomic arsenal was limited. By the fall of the Berlin Wall in 1989, the People's Liberation Army had only 30 or 40 long-range nuclear missiles – because that, it believed, was more than enough. As President Deng Xiaoping chillingly taunted American journalists: 'How many Los Angeles can you afford to lose?'

That policy has changed. More than 100 nuclear missiles with multiple warheads have already been built and armed, with production expected to exceed 500 by the end of this decade, if not sooner.

The obvious implication is that President Xi is willing to use them as a threat, most probably against America, to increase China's influence and ward off US intervention. But that also implies Beijing is prepared, if necessary, to provoke armageddon.

Could it be that, thanks to the mysterious underworld of tunnels and bunkers, Xi thinks that some remnant of Chinese civilisation could survive all-out nuclear war?

Taiwan could be his immediate target. China has always refused to recognise this island state's independence. Invasion and overthrow would be a massive military undertaking, one made much easier if America could be cowed into inaction.

Beijing could confront US President Joe Biden with a harsh choice in the run-up to November's election: stand up to China and face grim military and economic consequences, or back off from confrontation and see America's world role weaken dramatically.

Military body-building also gives China greater influence over Russia's gangster government and its other huge neighbour, India. Both Russia and Iran need to sell their sanctioned oil and gas to China, which uses their raw materials to stay independent of the US and its energy allies.

Such a dramatic change of direction, turning away from the outside world and stoking the industrial military complex, is possible because Chinese society is essentially obedient to its leaders. Their middle class does not share the tradition of liberty, democracy and freedom of choice that is second nature in the West.

China's cities are so highly technological that every individual is watched and tracked, as a matter of course.

Break even a minor rule in remote Xinjiang or central Nanjing, such as crossing the road without waiting for a green light, and your face can be flashed up on to an electronic billboard for all to see – along with your name and ID number. That's a powerful incentive to obey the authorities – so is the traumatic memory of genocidal and chaotic slaughter under the Communist Party's first dictator, Chairman Mao.

Ultimately, whether the economy is booming or flailing, the 1.4 billion people of China will probably fall in behind their leader for fear of worse.

For the rest of the world, even an economically stalled China could be that most dangerous of creatures: a wounded dragon in a mood to lash out.

Mark Almond is director of the Crisis Research Institute, Oxford