Actually the Chinese military is facing drawdowns just like we are. They are converting a large number of "border forces" to paramilitary-style police units. This is primarily due to lack of money, shoddy equipment that needs to be phased out or consolidated (making less units), and reduced threat now that China is seemingly playing along on a world scale.
Not every Chinese citizen is a member of the military, and it's surprisingly less these days as they pretend they are not venturing into capitalist areas.
The Chinese military's equipment is mostly second-hand junk or copies of old Soviet equipment. Despite that, a weapon is still a weapon, and still dangerous. The Chinese military's biggest threat is its Army. They do have a Navy and an Air Force, but their Air Force lacks significant punch since most of their aircraft are old and outdated. Their Navy consists of noisy submarines and some destroyers and frigates; the surface portion has updated weapons on older hulls. Their land forces are a threat because of the numbers- while small, they are still larger than American forces. They also have a sizeable ballistic missile program that has a good range of reach.
Against those odds, you simply do not invade, especially when you don't have many close-range staging points. Another reason why we don't bitch-slap China is because they are a nuclear power, and a stabilized threat. Meaning, they know what's good for them and they know their role- while lethal, they are also not interested in anything other than reclaiming Taiwan.
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