This paper attempts to understand how and why China has been portrayed as the primary military threat in Taiwanese security discourse through an examination of offense-defense theory. It is based on the premise that those events or factors that one identifies as dangerous come to be defined as such only through an interpretation of their various dimensions of dangerousness. The paper first introduces the protracted debate among the Democratic Progressive Party (DPP) government, the “pan-Blue” opposition parties, and U.S. officials and analysts over the 2004 special defense budget controversy. In defense of its arms procurement program, the Chen Shui-bian administration resorted to a particular mode of interpreting danger; that is, it considered that the military balance across the Taiwan Strait had been shifting in China’s favor and thus it was imperative to address the imbalance through deploying the weapons systems provided by Washington. The paper then explores the underlying assumption of that pervasive interpretation in the official articulation of Chinese military threat in Taiwan and the United States, which holds that offensive advantages make war more likely— a principal hypothesis of offense-defense theory. Rather than questioning the methodological ambiguities around the definition and measurement of the “offense-defense balance,” the paper argues that it is precisely these ambiguities that make China’s threat image in Taiwan possible. The special budget case indicates how Taiwan’s defense policy is better understood as a political practice central to the constitution, production, and maintenance of a peace-loving Taiwanese identity, contrary to the belligerent Chinese, than as an instrument to build and maintain a capable defense posture against potential attacks from the mainland.